Debt industry split over consumer protection bill

Debt Protection Bill

Debt Industry Split Over Consumer Protection Bill


June 6, 2013 5:18 PM by Ashley Csanady


A major consumer protection bill before the legislature has garnered a lot of attention for its efforts to crack down on door-to-door water heater sales.

Bill 55, Stronger Protections for Ontario Consumers Act, was up for debate again Thursday morning as MPPs focused on door-to-door salespeople. (Tory MPP Frank Klees gave an impassioned speech defending the practice and detailing his own sales experience.)

But Bill 55 contains many other important consumer protections measures, including new restrictions on companies that offer debt settlement services, sometimes called credit counselling services. The industry seeks to help debtors get out from under their liabilities and come to an agreement with their creditors.

If passed, the legislation would require more disclosure, ban misleading advertising and put a cap on fees charged, among other changes. But the industry is divided over the bill, split along fault lines between the for-profit and not for- profit side of the marketplace.

Credit counsellors are often not-for-profit entities that receive some funding from charities such as the United Way and sometimes couple services with other forms of family, financial and personal counselling. Many of these groups are also closely tied to banks, credit card companies and other lending institutions. Board members from banks sometimes sit on these companies’ boards.

“These companies work for the credit card companies, not the consumer,” said Richard Cooper, chair of the Canadian Association of Debt Assistance, a recently created lobby group for the for-profit side of the industry.

He spoke at a Queen’s Park press conference on Wednesday to push for changes to Bill 55 to make sure the non-profit and for-profit sides of the industry are treated equally.

“Ontario shouldn’t repeat the mistake made in some other provinces whereby consumer protection legislation exempts credit counselling service providers,” Cooper said, referring to Alberta and Manitoba.

The province says it won’t make that mistake. “Bill 55, if passed, will regulate all companies or entities that offer debt settlement services in Ontario, whether they are a for-profit or a non-profit enterprise,” Bryan Leblanc, spokesman for Minister of Consumer Services Tracy MacCharles, said in an email.

Even if the law covers both sides, controversy and confusion remain about who does a better job for consumers.

CADA welcomes many of the proposed changes, Cooper said, adding that unscrupulous firms from south of the border have given his industry a bad name.

Because the non-profit industry is tied to creditors, Cooper said, the private companies are the only ones that really fight for consumers and often get them much better settlements. The proposed cap on upfront fees could gut his side of the industry if the bill isn’t amended, he warned.

Henrietta Ross, CEO and executive director of the Canadian Association of Credit Counselling Services, which represents the non-profit side of the industry, said the for-profit side is predatory and hurts people at their most desperate.

“Unsuspecting consumers can be left with more debt, less money and a bad credit rating as debt settlement companies obfuscate around issues and fail to negotiate settlements while pocketing huge up-front fees,” Ross said in an email to QP Briefing upon the bill’s introduction. “Consumer complaints about these services are mounting with these consumers increasingly coming to credit counselling services for help.”

The Ontario Association of Solvency and Restructuring Professionals, which represents bankruptcy trustees, doesn’t see much value in any form of debt settlement.

Only federally licensed bankruptcy trustees can actually stop collection calls, and despite common perception, a large majority of their cases don’t result in bankruptcy at all, said board member Jordan Rumanek. About 60 per cent of debtors who come to his family firm end up settling their debt with a proposal to creditors, he said.

“What we believe is happening right now is that the debt settlement companies are operating in such a way that I’m not allowed to operate,” Rumanek said, referring to misleading ads and promised cure-alls.

“No other business would be taking money without doing work.”

Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.  

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