In recent years, we have seen a surge in both Canadian and American firms that claim to guarantee results, but in the end leave the indebted consumer with more debt and empty results.
The Ministry of Consumer Services has proposed new regulations (Bill 55) for managing consumer debt that will affect the way current debt settlement firms do business. The intention is to protect indebted consumers from up-front fees and negative results by sketchy debt settlement companies.
The proposed regulations of Bill 55, as they pertain to Debt Settlement contract guidelines, full disclosure of services, refund and cancellation policies, penalties for false advertising and unsubstantiated guarantees, and especially the elimination of joint bank accounts are long overdue and welcomed by consumers and responsible debt relief firms.
However, there is much room for development regarding the proposed rule stating debt settlement services operators would only be paid for actual results rather than efforts to obtain results. The proposed rule would not allow any fees until a specific settlement offer is accepted by the debtor and the debtor’s creditor, and at least one payment is made under that agreed settlement. At first glance, this part appears to be a reasonable failsafe to ensure that consumers are not paying for empty promises. However, upon closer review, it is clear that this section will serve to unduly and unfairly empower creditors over consumers. The rule, as it is currently written, demands that the creditor must be satisfied with a payment arrangement prior to any firm being able to charge a fee to represent consumers. There are many consumers who simply cannot afford to repay creditors to their “satisfaction”. What happens then? Are they forced to claim bankruptcy without any other option?
What is to stand in the way of creditors rejecting all proposed offers from certain debt relief firms? The result would essentially put these firms out of business. It is no secret that non-profit credit counselling firms earn creditor financial support by negotiating maximum debt repayment results in favor of the creditor. If creditors eliminate all firms that are not non-profit, it will afford all non-profit credit counselling full control over the debt relief market; further maximizing creditor control over consumers. We believe this is not fair to consumers.
Furthermore, this rule would eliminate the ability for a consumer to choose a firm that can provide alternate solutions and is prepared to protect their rights, challenge the legality of contracts, present legal arguments based on the Consumer Protection Act and other legislation, and ensure the consumer is being fully represented throughout the process.
“That’s ridiculous”, responded Gail Vaz-Oxlade when Ed Portelli, President of OCCA Consumer Debt Relief discussed this issue on NEWSTALK 1010’s The Late Shift. “Are you surprised that lenders turned around and done this?” No surprise at all agrees Portelli. Essentially the lenders set the rules when they lend the money and now they are proposing that only one of their agents can help a consumer in case of trouble. The majority of consumers did not intend to default and want to pay back as much as they can. The fact is, “A lot of people need help (with debt) regardless of the reason, and there should be several models (available) people can choose from. You can’t say it’s up to the creditor to decide who is allowed to work in this industry and who is not.”
“There is a general sense”, says Vaz-Oxlade, “that if there is credit counselling out there then everything’s fine, you don’t have to worry about it, but when credit counselling in Toronto took money from Money Mart to sponsor Credit Education Week one year they lost respect in my mind.” Agreed Gail. By taking money from creditors, non-profit credit counseling firms are more motivated to please the creditor versus the consumer when it comes to negotiating repayments.
Ultimately, Gail agrees “Creditors shouldn’t have that ability to tell who gets to help (consumers in debt)”. We’d like to know what you think. Please share your thoughts on this issue in the comment section below.
Spread the word so more consumers clearly understand the impacts of the new regulations in Bill 55. If you have any questions about Bill 55 or would like to know more about how it will affect Canadian consumers looking for debt relief, call us OCCA Consumer Debt Relief at 1-855-873-6222; or email us at info@occa.ca.
To listen to the full NEWSTALK1010 interview between Gail Vaz-Oxlade and Ed Portelli, please visit http://www.newstalk1010.com/shows/gailvazoxlade.aspx March 17..
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