CMB MAGAZINE cmba-achc.ca fall 2016 | 31
debtservices
Settling Up
Recently introduced regulations around debt-settlement services
need to take greater consideration of a mortgage broker's role
BY SAMANTHA GALE,
CMBA EXECUTIVE DIRECTOR
Y
ou may have seen
advertisements for debt-
settlement services in which a
company promises to solve a client's debt
crisis, perhaps making the inconceivable claim of reducing it by
as much as 70 per cent. Not surprisingly, there are problems: Such
firms tend to charge a rather hey upfront fee and, according to
the Credit Counselling Society, the "success rate of for-profit
debt settlement companies is less than 10 per cent."
1
Concern about the need to regulate the ever-growing
number of debt-settlement companies has escalated in
Canada over the last decade, so much so that provincial
governments have sprung into action to pass legislation
designed to curb some of the industry's abusive practices.
Ontario enacted debt-settlement licensing legislation
in 2015 and British Columbia followed suit in April of
this year. e legislation bans advance fees, caps service
charges to 10 per cent of the debt and entitles debtors to
cancel a contract without penalty.
Specifically, in Ontario, the Collection and Debt
Settlement Services Act (CDSSA) has created a new
definition for the activity of "debt settlement services."
Under the CDSSA, only registered collection agencies
and collectors are permitted to engage in debt-settlement
services. A new definition of "debt-settlement services" has been
created, which means offering or undertaking to act for a debtor in
arrangements or negotiations with the debtor's creditors, or receiving
money from a debtor for distribution to the debtor's creditors, where
the services are provided in consideration of a fee, commission or other
remuneration that is payable by the debtor. Persons are prohibited from
carrying on the business of a collection agency or acting as a collector
unless the person is registered under the CDSSA.
