Debt Settlement bill needs to set rates: OAIRP – November 14, 2013
By Ashley Csanady
A sweeping consumer protection bill would crack down on predatory debt settlement companies, but one arm of the industry worries the legislation as written doesn’t go far enough.
Bill 55, the stronger protection for Ontario consumers act1, is in the midst of a heated committee process, where its proposed measures to crack down on door-to-door water heater sales have stirred controversy2. Public hearings on the bill have wrapped up and clause-by-clause consideration of the bill began in committee last week. The debt-settlement schedules have already been passed with relatively few changes.
That concerns the Ontario Association of Insolvency and Restructuring Professionals (OAIRP), which has long supported the bill, but fears it will leave loopholes open for predatory practices.
The group of federally-licensed bankruptcy trustees is especially keen on changes to disallow settlement firms from charging upfront fees; however, it would have like to see the bill amended to legislate those rates and ensure they are calculated based on payments and not the client’s total debt.
“I just want it regulated at a reasonable percentage, based on what the other provinces (Manitoba and Alberta have similar legislation) have already done and based on payment, and not debt,” Jordan Rumanek, who sits on the OAIRP board, said in an interview. He added he is a huge proponent of the bill overall, it could just be stronger.
He’s a bankruptcy trustee who is federally licensed and whose practice falls under very stringent regulation. His and other trustees’ practices have long competed with the unlicensed, unregulated and sometimes unethical debt-settlement companies ─ which are also split on how to regulate the industry3.
Bill 55 intends to ban those firms from misleading advertising, collecting upfront fees and increase transparency for clients. Those are all good moves, but after committee failed to amend the bill to set rates for those fees, Rumanek said “I’m going to try again come regulation time.”
In essence, he’d like to see fees for debt settlement capped somewhere between 10 and 15 per cent, as is the case in other jurisdictions. And he wants to ensure that’s calculated based off the clients’ monthly payments and not total debt, as the latter would allow unethical firms to advise them to rack up their debt before settling it.
And the government plans to look into just that should the bill pass into law. Ministry of Consumer Services spokesperson Bryan Leblanc said regulation is a better place to set fees than legislation as the former is easier to amend quickly. He also said the discussion of how those rates would be calculated and based off what would be had when the time to draft those regulations rolls around.
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