Debt Collection Agency Services in Canada
There are essentially 2 types of collection agency services in Canada including:
- Commercial Debt Collection (B2B)
- Consumer Debt Collection
Some agencies can also be a hybrid of the two. Hybrid agencies can be useful, but generally specialization is best.
Consumer – If you are owed money by Canadian customers (consumers or people), then we recommend retaining a Canadian consumer debt collection agency.
Commercial (B2B) – If your debtors are businesses, then a Canadian commercial debt collection agency is your best option.
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Canadian Consumer Debt Collection Laws
Canadian debt collection laws stipulate that consumer debt collectors offering collection agency services in Canada must be licensed by each province where your customers are located. Licensed consumer collection agencies must maintain separate clients’ trust accounts and post a bond or insurance with each provincial jurisdiction.
In the event the Canadian collection agency goes out of business, the bond is in place to secure the creditor’s money; which may be held in the trust account. Be sure to ask for copies of their licenses when performing your due diligence.
Consumer debt collection agencies should also maintain the ability to report to both Equifax and Transunion consumer reporting companies.
To enhance Canadian collection agency’s recovery, we recommend supplying your customers’ date of birth. The date of birth information ensures that your collection account is accurately reporting to the consumer’s credit report.
If your company is foreign to Canada or not registered to do business in Canada, then Canadian collection agencies cannot report your debt against the Canadian debtor’s credit file.
Canadian Commercial Debt Collection Laws
Commercial or B2B Canadian collection agency services in Canada seem to be hardly regulated at all when compared to their consumer colleagues. This simply means that Canadian commercial collection agencies do not require licensing in most provinces. See our blog entitled, How Canadian Collection Agencies Are Governed.
Commercial debt collection agencies can co-mingle operating money and clients trust money together in one bank account. And, unlike consumer collection firms, Commercial collection agencies in Canada are not required to maintain bank accounts in several provinces.
While this lack of regulation is perfectly legal, we recommend using a licensed collection agency service in Canada that can provide an added level of security for your trust money.
Take Your Time Vetting A Collection Agency
Collection agency services in Canada can vary greatly depending upon the agency’s experience.
When selecting a third-party debt collection agency, ask for demonstrated experience collecting receivables similar to yours. Interview the Collections Manager to make sure they understand your business.
Consumer collection agency collectors can be fully trained in one year. However, a top-level commercial collector can take up to ten years to have experienced all the nuances of commercial collections and unique creditor business models.
In summary, even though collection agency services in Canada are readily accessible, we caution you to take the time to understand your liabilities when hiring a third-party collection agency. Perform your due diligence just as you would if you were hiring another employee.
Canadian collection agencies work for you and represent your brand in the marketplace. Proper selection and communication should result in lengthy and mutually profitable business relationships.
About PCM Corp
Since 2005, our mandate has always been to help our clients to responsibly collect on debt. Debt collection improves cash flow and can go a long way in helping you to successfully manage your receivables.