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Comparison-Collecting Debt in Canada vs US Comparison-Collecting Debt in Canada vs US
Friday, March 1, 2024
Comparison-Collecting Debt in Canada vs US
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Comparison-Collecting Debt in Canada vs United States
Collecting Debt in Canada vs. Collecting Debt in the United States

There are numerous laws and regulations governing debt collection in Canada and the United States. As with each country there are always exceptions so the differences described below are based on generalities. There are also major differences in the legal systems as the US is a republic while Canada has a parliamentary system.

There are also a lot of similarities and with Canada's close proximity and longstanding friendly relations, it is not unusual for US companies to overlook that Canada is a foreign country. Proper export trade credit policies should be followed.

1. Debt Collection Regulations

Canada-Debt Collection Regulations
Only a first party lender, debt buyer or lawyer can collect money in Canada. Otherwise you have to be licensed as a Collection agency provincially to collect Consumer OR Commercial debt. Agencies are subject to provincial laws Office of Consumer Affairs provides helpful tips and information on how to deal with collection agencies.
United States-Debt Collection Regulations
United States
The Fair Debt Collection Practices Act (FDCPA) establishes a number of rules and guidelines federally to prohibit abusive practices by aggressive debt collectors in the United States. The Act sets out what collectors may or may not legally do in their efforts to collect a bad debt. Collection agencies are licensed at the state level to collect consumer debt. In general agencies can collect commercial debt anywhere in the states.
2. Statute of limitations

Canada  Statute of limitations
A deb t becomes uncollectable or is permanently written off 6 years after last recognition of the debt. (Payment, $0.01 or otherwise) This means that the account can no longer be sued. NOTE: In the provinces of Alberta and Ontario the limitations on litigating is 2 years after last recognition of the debt (Payment, $0.01 or otherwise). In these 2 provinces you can still report on the debtors credit file but you can't sue them. In the case of legal files the limitation can extend to 10 years and in some cases can be renewed for another 10 years
United States  Statute of limitations
United States
In General deb t becomes uncollectable or is permanently written off 6 years after last recognition of the debt. (Payment, $0.01 or otherwise) In the case of legal files the limitation can extend. Varies State to State and type of debt. Click here for a State comparison.
3. Credit Reporting

Canada Credit Reporting
In Canada a debt can be reported on a debtor credit file for 6 years, except the Province of Manitoba, which is 5 years. After 6 years the debt "drops off" their file. In Canada the Privacy Act also effects Credit Reporting regulations. For example: In Canada you cannot pull a credit file unless you have a waiver (usually contained in a credit app, contract or agreement) giving permission to have their credit investigated. Some provinces audit for abuses and there is a major problem if a credit bureau was pulled without a waiver.
United States Credit Reporting
United States
Governed by FACTA Click Here to view PDF

Users and furnishers of consumer data should be familiar with: Click Here

Each state has it's own rules relating to statutes of limitations concerning debts. When a business is unable to meet its financial obligations, the question may arise as to whether commercial debts are reportable on a consumer's credit report. The answer is fact specific, which may depend on many variables such as the structure of the business or the terms of the contract. The FCRA doesn't directly address the question, so one must examine its definition of "consumer report" and what constitutes reportable information.
4. Bonding

Canada Bonding
Canadian agencies MUST post a client's trust bond in each province in which they do business. The bond amount is reviewed annually based upon the agency's audited financial statements.
United States Bonding
United States
Some states require a client's trust bond to be posted while others do not.
5. Trust Accounts

Canada Trust Accounts
Several provinces require that agencies maintain a client's trust account with a financial institution located within that province.
United States Trust Accounts
United States
Certain states allow agency owners to co-mingle clients trust and operating funds in a single bank account.
6. Exams

Canada Exams
BC, ON, and NB require agency owners and in some case agency collection staff to pass an examination prior to licensing.
United States Exams
United States
Some states require agency owner and licensed managers to pass examinations while the majority do not.
7. Red Tape

Canada Red Tape
Canadian agencies are subject to a yearly audit by an arms-length certified auditor and constant red tape like prior to licensing, agencies must submit for approval the collection letters they intend to use.
United States Red Tape
United States
Starting a collection business in the U.S. is reasonable with moderate red tape.
Did you know?
  • The credit reporting limitation for reporting a debt (from date of last payment) in the Province of Manitoba (MB) is only 5 years

  • In the Province of British Columbia (BC) a creditor can garnishee a debtor's bank account, receivables or other monies owed to the debtor PRIOR to Judgment providing certain criteria is met

  • In Manitoba a collection agency is not permitted to use any form, including any generic collection letter that the Manitoba licensing administrator deems unacceptable.

  • In the Yukon BEFORE communicating with Yukon residents a collection agency must hold a valid collection agency license issued under the Yukon Consumers Protection Act.

  • Is your Agency licensed in Ontario? Click Here

  • In Saskatchewan a collection agency shall not commence or continue a lawsuit for the recovery of a debt in the name of a collection agent as plaintiff unless the collection agency has purchased the debt for valuable consideration and the debtor has received notice of the sale of his account.

  • In the Province of British Columbia (BC) a personal guarantee on a credit application MUST be clearly identified as a personal guarantee to be valid

  • In the Province of Alberta (AB) a personal guarantee MUST be notarized or sworn before a Commissioner of Oaths to be valid

Did you know?
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