What is a Delinquent Account?

A borrower's account becomes delinquent when the loan or credit card payment becomes overdue. In Canada, the account becomes delinquent after a grace period of 90 days has passed and no payment is made by the borrower or credit card holder. Canadian Money Advisor says that it is the responsibility of the banker to collect the amount due from the defaulting borrower. Once the loan is moved to a delinquent one, the matter is normally referred to a collection agency. The federal government in Canada has passed legislation allowing banks to recover the loan from the defaulter's account without prior notice.

The following topics are discussed in this article:
  1. Updates on Delinquent Repayments

  2. Regulation of Debt Collectors in Canada

  3. Creditors and Collection Agencies

What are the Latest Updates on Delinquent Repayments?

One of the top credit monitoring companies, Equifax revealed information recently that more Canadians are falling behind on their credit repayments. Credit account delinquencies have increased by approximately 20 percent.
Delinquencies have affected almost 2.00 percent of the total number of credit accounts in Canada. The increases were reported in British Columbia (30 percent) and Alberta (32 percent). The delinquency rate is calculated by the number of delinquent accounts compared to the total number of credit accounts.

The following are reports from Equifax:
  • The delinquent accounts rate stands at 1.21 percent in Vancouver.

  • Calgary comes in at 1.36 percent, which is 35 percent higher, than the same period in 2008.

  • Edmonton has a rate of 1.45 percent.

  • Toronto has the highest delinquency rate at 2.03 percent.

  • Nova Scotia is the province with the highest at 2.09 percent

  • Saskatchewan has the lowest rate at 1.24 percent.

What is the Regulation of Debt Collectors in Canada?

In Canada, the following entities have the right to collect debts:
  • Creditors

  • Collection agencies

  • Debt buyers

  • Lawyers licensed to practice law in Canada

These individuals or agencies have the authority to contact debtors either by telephone or mail, subject to certain limitations, to collect outstanding debts.

In Canada there are laws and regulations enacted pursuant to these laws, and rules of professional conduct governing the conduct of lawyers designed to protect consumers from overly aggressive debt collectors. Laws regulating debt collectors vary to some extent in each province and territory. They also vary depending on who attempts to collect a particular debt. As a general rule, the conduct of creditors collecting their own debts is not regulated compared to those involved in collecting debts on behalf of others. In Canada, collection agencies are subject to more scrutiny from regulators than creditors, lawyers and debt buyers.

What are Creditors and Collection Agencies?

A creditor is the company from whom debtors receive goods, services or credit. If you have a credit card from a major retailer and your account is overdue, you will likely receive delinquency notices and collection calls from the retailer's Collection Department. In most provinces, collectors employed by creditors are not regulated by the government. If unpaid accounts are overdue from three to six months, the creditor will place the overdue account with a collection agency for collection on a commission basis.

Collection agencies specialize in the collection of overdue accounts from debtors. Each province and territory in Canada extends licenses to collection agencies in collecting debts from residents. Each province and territory prohibits certain conduct on the part of collection agencies and imposes certain obligations on collection agencies. Provincial laws regulating collection agencies are not the same in Canada. Therefore, a collection agency's actions that may be perfectly legal in Ontario may be illegal in British Columbia. These laws, and in some cases regulations enacted pursuant to these laws, typically contain provisions prohibiting certain conduct on the part of collection agencies.

The Need to Settle Delinquent Accounts

It is not advisable to allow your debts to go unpaid for a long time. Neither is it wise for you to be late in making payments. Responsible consumers do not allow their accounts to be delinquent. This is a counter-productive move that will generate more disadvantages in your credit scores.


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