How Long Does Collections Stay on My Credit Report?
Also keep in mind that just because a lender or agency loses the ability to pursue you legally for a debt, the debt doesn’t automatically disappear. The debt will remain on your credit reports for 6-7 years from the date of last activity (e.g. when you paid, used, or acknowledged the debt). Your debt will also survive in the computer system of the creditor, making it difficult or impossible to deal with that lender or service provider again in the near future.
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Can a Collection Agency Take You to Court?
Yes, a collection agency can take you to court over a debt if it is within the statute of limitation and if they have the legal authority to do so. In addition, if the debt is still legally enforceable and negotiations to repay it fail, the agency may choose to file a claim in court to obtain a judgement requiring repayment.
Once a court judgment is obtained, the agency may be able to enforce it through wage garnishment, seizing funds from bank accounts, or placing liens on property. Provincial laws determine how these actions can be carried out and what exemptions may apply, so understanding your rights and options is important if you are facing potential legal action.
What To Do When You Get a Notice of Claim
Can Debt Collectors Garnish Your Wages?
In Canada, a collection agency cannot garnish your wages simply by contacting you. However, if a collector takes legal action and obtains a court judgement, they may be able to enforce repayment through wage garnishment. If they do take legal action, you will receive official communication from a courthouse. The rules and exemptions vary by province, and some types of income are protected. If you do receive a notice of claim or legal action, you must respond by the deadline given in the letter. It is best to talk to an accredited credit counsellor and seek legal advice.
Can Debt Collection Companies Charge Interest?
People often wonder if collection companies charge interest on a debt. The answer is yes, but the amount depends on if they are collecting on behalf of the original creditor or if the collection company bought the debt. When they are collecting for the original creditor, the interest accrues at the interest rate charged by the original creditor. This rate is disclosed in your cost of borrowing and credit disclosure documents that you received when you borrowed the money or took on the new credit card.
If the collection agency bought the debt, they may charge a higher rate of interest according to their policies, as long as they stay below the legal limit. Debt collectors are not allowed to invent additional charges, so it’s important to read the terms and conditions of your contracts to see what fees and interest may apply to your debts.
How Do I Pay a Collection Agency?
Many Canadians ask, ‘How do I pay a collection agency if I owe a debt?” A debt collector will encourage you to make your payment quickly, so before making any payment, it’s a good idea to speak with one of our credit counsellors for free to review all your options and understand all of the pros and cons with different payment choices.
If you decide to pay a collection agency directly, it’s important to have them confirm in writing ahead of time who the original account holder is because you don’t want to end up paying someone else’s debt, that they have the legal right to collect for the debt, how much is owed, and if you make a settlement, that it will be reported as ‘paid in full’ to both of the credit bureau companies once the payment has been processed. Taking these steps helps protect you from errors, overpayment, or inaccurate reporting and allows you to verify what you were told should a mistake need to be corrected.
Wrapping Up the FAQs About Collection Agencies and How to Get Help
Dealing with debt collectors and collection agencies can be stressful, but understanding your rights and responsibilities can make the process more manageable. If you have questions about your options or need guidance on how to handle communicating with debt collection agencies, we have a comprehensive guide and sample letter templates that most people find really helpful. If you have more questions, reach out to us and we’ll be happy to provide free, confidential support tailored to your situation. With the right information, you can take control of your finances and resolve your debts in a safe and informed way.
Related: Stop Collection Calls & Creditor Harassment
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