Know the rules for credit counsellors and debt settlement companies

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Debt and Consumer Rights - Debt and money problems
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Consumer Measures Committee
CLEO (Community Legal Education Ontario / Éducation juridique communautaire Ontario)

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Can I get out of a debt settlement or credit counselling agreement?
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Know the rules for credit counsellors and debt settlement companies

Debt settlement companies and credit counsellors must follow certain rules. These rules are found in Ontario’s Collection and Debt Settlement Services Act. The Act helps protect consumers from bad business practices.

These rules say that credit counselling services and debt settlement companies:

  • can’t charge up-front fees for repayment plans, except for a $50 set-up charge
  • can charge you a maximum of 15% of any payments you make to your debt settlement plan (for example, if you make payments of $100 each, they can’t charge more than $15 for each payment)
  • can’t begin collecting fees until they have an agreement with your creditors, and have made payments to them
  • must give you 10 days to cancel the contract for any reason, including if you change your mind. This is called a cooling-off period.

 It is important to understand your contract and to talk to your creditors. Although the rules give you some protection, some companies might still try to take advantage of you.

Other rules non-profit credit counsellors must follow

Non-profit credit counsellors are always listed as a member of Credit Counselling Canada or the Ontario Association of Credit Counselling Services. If they are not listed on one of these sites, they are most likely not a non-profit credit counsellor.

Non-profit credit counsellors have to follow a code of ethics. This means that there are rules they have to follow in order to keep your best interests in mind. For example, non-profit credit counsellors can’t have a conflict of interest when helping you.

A conflict of interest is when a person or company gets a benefit from helping both sides. For example, if a debt settlement company is acting for you and your creditor, both you and the creditor may be paying them a fee to settle the same debt.

Non-profit credit counsellors also can’t make a profit from helping you. They can charge a fee for their services in order to cover their costs. Most non-profit credit counsellors get donations from community organizations and credit card companies to help fund them.

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Consumer Protection Ontario
Reviewed: March 24, 2017

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