Consumer Alert: Debt Settlement
While complaints and inquiries about companies that offer debt settlement services have been decreasing, most complaints continue to focus on misrepresentation and failure by a provider to deliver the promised service.
Services may be marketed as "debt settlement", "debt management", "debt arrangement", "debt reduction", or "debt consolidation." Providers may tell you that they can reduce the amount of debt you owe your creditors.
Important tips when dealing with a debt settlement services provider
Don't be pressured:
- take the time you need to understand the contract, including the fine print
- read the "what you need to know" cover page that must accompany your debt settlement or debt repayment contract
- if you don't understand something, don't agree to it and don't sign anything. Ask for clarification. What matters is what is written down in the contract not what you are told over the phone or verbally in a meeting
- you also have 10 days in which to change your mind if you decide to cancel your debt settlement services contract
Watch out for exaggerated or false claims:
- remember, your creditors may not agree to reduce any of your debts, let alone reduce them by 50 per cent or more
- claims that working with a debt settlement provider will not negatively affect your consumer report (e.g. credit file, credit rating)
- claims that the program is approved by, or a part of, a government program. The provincial government does not approve debt settlement programs
- debt settlement providers cannot stop collection agencies and creditors from contacting you about the money you owe
Be wary of large up-front fees and service contract amounts:
- debt settlement providers are prohibited from charging fees until a debtor begins making payments to creditors, other than a one-time fee of no more than $50 where the debt is repaid in installments. They are also limited in the total amount of fees they can charge
Under the Collections and Debt Settlement Services Act, you have the right:
- to be informed: the act requires clear, comprehensible and prominent disclosure of key details in contracts
- to be free from false, misleading or deceptive representations
- to approve or reject any changes in the contracts once it has been made. And if the contract is amended, you get a new 10-day cooling-off period
- to cancel a contract within the first year if the contract does not meet all the requirements of Act. If this is the case, you may be entitled to a refund of the money you paid under the contract
Contact us if you have questions or concerns about debt settlement providers.