The return of an old collection agency trick
The Government of Ontario tracks the top 10 consumer complaints. Year after year complaints about collection agencies comes first by a staggering margin. Collection agencies most likely obtain this dubious distinction partially through pursuing debtors who legitimately owe money but feel upset by the process and partially through their aggressive and, in some case, dubious tactics.
Borderline unethical and, sometimes, often illegal behavior often arises when a collection agency is engaged in debt buying collections work. Debt buying is the practice of purchasing delinquent or bad accounts from creditors. The debts are typically unsecured and for rather modest amounts of money- think unpaid utility bills, cellphone bills, buy now pay large sundry items etc. With the economy dipping in 2008-2009, a lot of accounts went uncollected and sold to collection agencies on pennies on the dollar. At that acquisition cost, a collection agency collecting with even a modest 10-25% collection rate is doing well. Thus, debt buying collection work is back and there are two things to watch for lest you become prey to some old tricks.
The first old trick relies upon ignorance of the law. Many debts bought could be several years old. However, what some collection agencies are doing is calling about old debts and, subject to often aggressive tactics, creditors pays PFO money (“p” stands for “please”, “o” stands for “off” and “F” stands for- well, use your imagination) to settle the claim.
The issue is old debts may not be legally collectible. The legal concept of a statute of limitations refers to the maximum period of time in which a legal proceeding can be initiated. Once past that period, the party who wishes to begin a legal claim is barred from doing so (subject to some exemptions). The statute of limitations varies according to the type of action contemplated (civil, criminal, against a government or individual) and the jurisdiction of the parties; in Ontario, since 2004, the statute of limitations is generally 2 years (subject to exceptions).
But what some collection agencies are doing is calling about debts which exceed the statute of limitations (if the collection agency has a large call centre making calls to many jurisdiction, this whole issue gets blurred even more since a call center in Alabama may not know or care about the laws of British Columbia). Ignorant of this fact, creditors often cave and give up a legal protection which was theirs by right. The morale of the story is to seek qualified legal advice if someone is calling about an old debt.
The second trick may not be a trick per se but just a functioning of our modern out-sourced economy. In some instance, a collection agency may be calling a creditor who declared bankruptcy between the incurring the debt and the debt buying collection call. However, since the collection agency bought a large number of delinquent debts, the seller may not have included their notes that the debt has been settled through bankruptcy (this is analogous to the situation facing some lenders foreclosing on many American properties; the mortgages were re-packaged and sold so many times it is unclear who the original lender was and where the paperwork went. All anyone has is an account number and the monies owing). Again, the collection agency may be chasing what they legally cannot collect or has already been settled. The morale of the story being if you declare bankruptcy be sure to keep your bankruptcy papers in good order for many years after you are discharged.
The key is not to panic if on the receiving end of the call. Ask for evidence of the claim. Seek qualified legal advice about your rights. Be aware of what collection agencies can and cannot do to collect an outstanding claim. Proceed in as painless a manner possible to deal with collection agencies. Good luck.