Adopting the Harmonized List of Prohibited Collection Practices
Update on Public Comment on Proposals

The Ministry of Government Services would like to thank all those who took the time to review and submit comments on the proposals to adopt the harmonized prohibited practices and address additional concerns.

The original proposal may be viewed here

The official comment period ended July 4, 2005.

This update sets out key issues raised during the public comment period, particularly those raised by more than one comment or which were accompanied by empirical data to support a position. The Ministry's response and proposed direction is then also set out.

Respondents have raised five key issues, including the two issues identified in the initial proposal:

• Frequency of Contact;
• NSF Charges;
• Cell Phones and the Harmonized Practices;
• Place of Employment Contact and the Harmonized Practices; and
• Other Concerns with the Harmonized Practices.

Some other issues were raised that are beyond the scope of this consultation on regulation reform, concerning issues such as who is subject to the Collection Agencies Act .

Please note that the directions under discussion will only become law if amendments are made to regulations under the Collection Agencies Act and approved by the Lieutenant Governor in Council. Until such amendments are made, the current regulation remains in force.

Frequency of Contact

Respondents' comments focused on two broad areas: the concept of using a numerical limit on contact and, if using such a limit, how to measure contact.

With respect to using a numerical limit at all, industry respondents generally opposed this approach but indicated a willingness to work with it. Some opponents were concerned that harassment issues were really a problem centred with one or two agencies or the use of specific technologies and thus a broad rule was not in their view an appropriately proportionate response.

Other respondents generally favoured this approach as providing a “bright line”, and in some instances called for a lower number or otherwise more restrictive way of measuring contact.

With respect to how to measure contact, several issues were identified, primarily concerning what sorts of contacts should count. Many in the industry preferred that the only contacts to be restricted be contacts of the actual debtor (“right party contacts”). The industry emphasized the constructive importance of actual conversation with a debtor. Other respondents supported including messages of a substantive nature, and some favoured including all contacts of any sort.

There was some concern the proposal included calls to locate the debtor in the limited frequency of call.

Ministry Response:

With adjustment, the Ministry believes a numerical limit on contacts remains a useful “bright line” requirement to address its number one subject of consumer complaint. The Ministry reviewed complaint data to confirm that harassment complaints concerning overly frequent contact are not isolated to only “one or two” agencies, being distributed across a number of different collection agencies. This review also found that although dialling and message technology was apparent in many complaints it was not so overwhelmingly so that a measure targeting this technology alone would be sufficient.

The Ministry proposes to proceed with a limit of three contacts per seven days, unless the debtor consents to additional contact.

This would be implemented as follows:

Contact Measured Per Account

Contacts are proposed to be counted on a “per account” basis. For debtors, this means that a collection agency can't require a debtor to discuss a particular debt more than three times in seven days. However, the debtor may be contacted separately about debts to different creditors.

Prerequisite of Live Contact with Debtor

The numerical limit would only commence applying with a collector's first live contact with the actual debtor. A debtor could not simply avoid ever speaking to the collection agency and still receive this provision's benefit. Until live contact is established, the numerical limit on the number of contacts would not apply. The general standards against harassment through excessively frequent contact would continue to apply.

Nature of Contacts and Messages Included

The Ministry proposes that as of the first actual live contact with the debtor, a limit of three contacts in any seven-day period would apply.

Once live contact is established, then with that contact the limit of three contacts in any seven day period would apply. Additional contact s beyond the three would be permitted with the debtor's consent. The following would then be considered contacts for the purpose of this limit :

• All live communication with the debtor;
• All messages to the debtor that are sufficient to permit the debtor to return contact.

Thus the following sort of message or communication would not count, “Can I speak with Bob, oh, do you know when Bob will be in? Thanks I'll try him then.”

An example of a message would count is, “Please tell Bob to call Carl Jones at 555-555-5555.”

Conventional letter post would not be included in the count.

Contacts to various parties to locate the debtor would not be covered by this rule as it applies only to communications to the debtor and only once live contact with debtor has been established.

Consent to More Frequent Contact Revocable

The consent to contact beyond three times per seven days would be revocable. This consent would have to be given to the collection agency and could not simply be part of a standard contract term or waiver.

NSF Charges

Respondents ranged from some who viewed the proposal as overly restrictive to others who agreed in principle with the proposal and made technical comments. Most responses were of the latter sort.

It was noted that in accepting cheques without a formal contract, a business might require the cheque writer to assure that there would be sufficient funds on deposit to cover the cheque and note that NSF fees would be applicable. This does not represent disclosure in the body of a formal contract, which was the proposal's implicit requirement, but is an agreement respecting NSF fees made in the course of the original transaction.

It was noted there are sources of legal authority to charge NSF fees other than contracts. For example, the Tenant Protection Act authorizes NSF charges in landlord-tenant payments.

Ministry Response:

The proposal that NSF fees should be permitted, but subject to limits, should be adopted with recognition that the original obligation to pay NSF fees arises in a variety of ways and not only through formal written agreements.

Thus, the basis of a chargeable NSF fee should be clarified to apply broadly as “having been established in the original transaction”.

In addition to being authorized in an original transaction, an NSF charge should be collectable if authorized at law.

Cell Phones and the Harmonized Practices

Collection agencies expressed concerns that a strict reading of Item 5 in the Harmonization Agreement (cost of communication) means a collector could not call a cell phone ( since a consumer pays for use) . A collector might and also may accidentally contact the consumer at work if calling a cell phone and thus violate prohibition on contact at place of employment, Item 3 of Harmonization Agreement (prohibition on contact at place of employment ) since the collector doesn't know where the debtor is at the time of the call a debtor's location in this case.

Ministry Response:

Other provinces are also reviewing this concern and an emerging view of some provinces is that if a consumer has no known conventional landline, a collector should be able to call a cell phone. The alternative of eliminating all phone contact if a landline is not known does not appear reasonable.

The Ministry proposes that if a consumer is contacted on a cell phone and advises of a landline number by which they can be reached, then the collector should cease calling the cell phone number except by permission.

The Ministry also proposes that a collector should not be held responsible for contacting a debtor, via their cell phone, at their place of employment if the collector was not aware of the debtor's hours of work. If a consumer is contacted at work they should be able to require termination of that contact and advise the collector of the hours they can be called outside work (but see the discussion of the contact at work restriction below).

Variations of the Harmonized Practices

Collector and creditor respondents made a number of requests for deviations from the Harmonization Agreement, of varying magnitude. These respondents were concerned that the Harmonization Agreement's provisions overall effect would be to impair their ability to recover legitimate debts.

Examples of concerns relating to the Harmonization Agreement included the following requests:

• When a debtor invokes the protection of Item 12(b) of the Agreement, requiring that further communication be to their lawyer, require the debtor provide their lawyer's phone number as well as address.
• In addition to the one contact of an employer allowed under Item 2 of the Harmonization Agreement, allow one more employer contact when a collection has failed and creditor is deciding if it's worth suing (e.g., verifying debtor has employment).
• With respect to Item 12(c), if a debtor invokes “I dispute this debt, sue me, and stop collection activity”, require the debtor to indicate the basis of dispute (e.g., it wasn't me, I already paid etc.).
• Do not allow a debtor to ever force contact to be “written only” - this would mean never implementing Item 12(a) of the Agreement.

Ministry Response:

As indicated, most of these suggestions deviate from the Harmonization Agreement to varying degrees.

The first item, that a debtor who is advising that further contact should be through their legal counsel provide not only the name but the phone number for that counsel, has been adopted in the Northwest Territories' implementation of the Agreement. Given that names are not unique and the debtor can reasonably be expected to know their lawyer's phone number, this appears a reasonable adjustment for Ontario to also make. Subject to the views of other jurisdictions, the Ministry proposes to make this adjustment and require both address and phone number be provided for the lawyer in this instance .

The other matters represent more significant departures from the Harmonization Agreement that the Ministry is not prepared to consider unless other jurisdictions would also agree to consider them, effectively meaning the Harmonization Agreement would be changed. The Ministry will raise these issues with its counterparts across Canada to determine the views of other jurisdictions.

Place of Employment Contact and the Harmonized Practices

Some collectors and creditors claim the proposed limits on contacting debtors at work contained in Item 3 of the Harmonization Agreement restrict a key point of contact and represent the most debilitating aspect of the Agreement in terms of their potential effectiveness.

One agency provided data to support an argument that such a rule may reduce recoveries to creditors by one third, based on its experiences in different Canadian jurisdictions with and without this rule at present.

Ministry Response:

This provision is a substantive component of the Harmonization Agreement and has already received considerable debate. Ontario cannot waive application of this rule without deviating from the Harmonization Agreement.

Balanced against the desire to implement the Harmonization Agreement is the concern that reduced recovery to creditors of the magnitude suggested is not desirable. To date, only one firm has presented empirical evidence on this point and thus this evidence is not conclusive. Possibly this firm's experience is unique to it. The Ministry considers it prudent to allow others to provide evidence as to whether this firm's experience is typical.

The Ministry is giving the collection industry and creditors a chance to provide data on the impact that place of employment restrictions on contact have on recoveries to creditors. There are jurisdictions in Canada with such a rule currently in place. Thus data on any effect such rules have on creditor recoveries should already exist. It appears to the Ministry that major creditors and nationally operating collection agencies would have empirical data that could substantiate a significant adverse effect if such data exists.

If such data is provided and corroborates or supplements the claim of significant negative impact on credit recovery attributable to a place of employment restriction, then Ontario would raise this issue with other jurisdictions for discussion.

The Ministry proposes that it will not proceed with this element of the agreement pending the outcome of this opportunity for further input and any discussion with other jurisdictions that may follow.

Those wishing to respond to this opportunity should submit information (by February 17, 2006).

To be considered for this purpose, information must be provided on the basis that it is not considered commercially sensitive and may be disclosed by the Ministry. The Ministry is not prepared to raise this issue with other jurisdictions without being able to cite public grounds for reconsideration of the issue.

In the meantime, the Ministry still considers it advisable to proceed with implementation of other portions of the Harmonization Agreement and the above proposals, and anticipates seeing these proposals adopted into law in the coming months.

Next Steps

To provide data regarding the effects of an employment-place-of-contact restriction or other comments, please submit to:

Collection Agencies Prohibited Practices Consultation
Policy Branch, Ministry of Government Services
250 Yonge Street, 35th Floor
Toronto, ON M5A 4L1

Or by fax:

(416) 326-8885

Or by e-mail to:

mailto:consultations@mgs.gov.on.ca

Subject Line: Collection Agencies Prohibited Practices Consultation

To receive full consideration, further comments should be received by February 17, 2006.

Please note that this is a public consultation.

All comments received will be considered public and may be used by the ministry to help evaluate and revise the proposals. This may involve disclosing some or all comments or materials, or summaries of them, to other interested parties during and after the consultation.

Any personal information in submissions, such as names and contact details (i.e. home addresses and phone numbers, personal email addresses, etc.) - in addition to any other information that could be used to identify an individual will not be disclosed without prior consent.

However, records created by individuals acting in a professional capacity (e.g., on behalf of a group, association, business, commercial enterprise, etc.) may be disclosed, unless your covering letter states that such disclosure would be harmful and/or prejudicial. You should note, that there is a specific test established in the Freedom of Information and Protection of Privacy Act which applies to information submitted on behalf of an organization which will determine whether such information can be released to a requestor under that Act.

If you have any questions about this consultation or how any element of your submission may be used or disclosed, please contact:

The Freedom of Information and Privacy Coordinator
Ministry of Government Services
(416) 326-8470.