The Ontario government is set to introduce new debt settlement regulations designed to crack down on abusive debt settlement companies and it’s about time. Following the lead taken by Alberta, Manitoba and Nova Scotia,the new rules are likely to ban debt management and debt settlement companies from charging upfront fees, limit the total amount in fees consumers can be charged and require clearly worded contracts. Best of all they are proposing a 10 day cooling off period which will allow anyone who may have been pressured into signing up to rethink their decision and seek a second opinion.
With heavy advertising and promises to reduce your credit card debt by up to 70%, these debt settlement offers have become quite familiar and look like a great option when you are experiencing financial problems. Many however do not deliver. The Ministry of Consumer Services receives at least 70 complaints a month about debt settlement companies charging high up front fees and not delivering on their promises to help consumers get out of debt.
“There is evidence of harmful practices used by some debt settlement companies and that is why our government is taking steps to protect consumers. We want to put a stop to abusive practices in the marketplace. Consumers should know their rights before they sign contracts and they should not make any payments until they get results” said Margarett Best, Minister of Consumer Services in a release issued Friday.
This is nothing but good news for legitimate debt management companies in Ontario who have been warning consumers to beware of debt settlement scams since these players arrived, many from the US.
If you find yourself in debt and are looking for help our recommendation is to talk to a professional — like a trustee in bankruptcy or not-for-profit credit counsellor — who will explain all your debt relief options not just their canned packaged. If you are uncomfortable with what you hear, seek a second opinion. Most of all, you should never have to pay any up front fees or any referral fees. Bankruptcy trustees in Canada provide a free, no-obligation consultation to talk to you about your situation. With debt relief options like a consumer proposal or bankruptcy regulated by the federal government you are already protected.