It is unlawful for a collection agency to attempt to collect from your customer if they haven't first obtained the proper licensing and bonding. Some creditors are told that the agency doesn't require a provincial license if the debtor is a corporate entity as opposed to an individual consumer; however this isn't the case. The various provincial consumer protection acts across Canada do not make the distinction between a corporate or individual consumer as it relates to debt collection activities.
Fines can be levied against individual collectors and their employers for failing to comply with the requirement to be licensed. Levies of up to $10,000 and $100,000 respectively can be given to the offender.
To protect your company's reputation in the marketplace and mitigate the risk of your funds disappearing from a collection service supplier who is being investigated or fined, we recommend taking the following precautions:
- Ask the agency for a copy of their current provincial license where your customer resides.
- If the agency uses an affiliate in a certain jurisdiction, (common in Quebec) be sure to get a copy of the affiliates license as well.
- While it isn't necessary in Canada, we recommend working with a company that carries Professional Liability insurance. This way you're covered in the event the agency is sued while working your accounts.
- And while not an absolute guarantee, check to see if the agency is a member of an industry professional association such as ACA International or the IACC (International Association of Commercial Collectors). Agency owners that go to the trouble of paying to be involved with these trade associations generally conduct themselves properly.
If they are not licensed and taking their chances, what else are they not telling you?