Debtor Warning – Debt Consultants and Consumer Proposals

If you look on the internet, you will see ongoing “discussions” via posts and articles on various websites about unscrupulous practices and notices of “Debtor Warnings” with respect to credit/debt industry and various types of “Debt Consultants”.

There are many things that a debtor should be aware of before they file a Consumer Proposal to understand how the system actually works and who all the players in that process.  Below is a link to an article written by a local reporter from Victoria BC (recently retired from the CBC) who outlines some of the issues she has come across when researching the credit industry in BC.

Legal vs. Ethical,

If you want to file a consumer proposal (a federally regulated, legally binding, compromise with your creditors) then you must seek the services of a licensed insolvency trustee.   From the article below, you will see that there are some very unhappy Debt Consulting clients who feel that they were taken advantage of only after paying thousands in  “unnecessary fees” upfront to the Debt Consultant before they were introduced to the Licensed Trustee.   And further, they were unhappy with the Trustee who accepted the referral. 

The personal experiences of the people in the article echo many of other complaints that I have heard coming from debtors who are very unhappy when the find that they could have gone directly to a Licensed Trustee to file a consumer proposal instead of paying what they see as thousands of dollars in unnecessary fees upfront.

If you have had similar unhappy experiences please let me and my firm know and we will see if there is anything that we can do to help. 

Further, I encourage all who feel that they have been misinformed or mistreated by anyone in the credit/debt area to file a complaint with the Office of the Superintendent of Bankruptcy, Consumer Protection BC, post negative comments on the offending companies website or complain to the Better Business Bureau if they are members.   Consumers have rights in this area and should not feel stigmatized to come forward and complain about dicey industry practices.  Together we can encourage all levels of government, provincial and federal, to change the legislation to ensure that debtors are better informed as to their options to avoid the feeling like someone has ‘taken advantage of my vulnerability” especially from those that are suppose to be helping you.

Focus Magazine, March 2016, in part (AS REVISED MARCH 18 2016)

“J.D., ….. “My Debt Counsellor recommended a repayment plan that did not include all of my creditors. He said I could pick and choose which creditors to include in my consumer proposal, which I later discovered was untrue. The trustee I was referred to did not check things properly. He did not tell me I had to include all my debts and he did not advise me whether I would qualify for bankruptcy. I ended up paying more than $4400 dollars in fees to a Debt Consultant  plus 18 months of consumer proposal payments totaling $5700 dollars. But I was not protected from other creditors………… I’ve been told I could sue the trustee and the Debt Consultant, but I don’t have any money left to pay for a lawyer.”

AUTHORS NOTE (April 8 2016)

My original blog (March 8th 2016) and Focus Magazine’s original article stated the name of the local Debt Consulting Company used by the debtors quoted in the article. After a legal complaint was made from the Debt Consultant’s lawyers threatening legal action, Focus Magazine amended their article to remove the name of the Debt Consulting Company. I also received a letter threatening legal action from the same lawyer from Vancouver. After considering my options and the fact that I am a sole practitioner here in Victoria and only have myself to rely upon, and realizing that the Debt Consulting company states that they have many offices across Canada, (i.e. large national nirm and therefor big financial resources) I felt it financially prudent to remove the name of the Debt Consulting Company from my blog as well.  Removing their name does not in any way admit to any wrongdoing on my part or that of Focus Magazine 

However, my intent was never to hurt or malign any specific business but rather point out current debt consulting practices that I find troubling both at the Debt Consultant level and those services offered by some Licensed Trustees.

The Consumer Proposal “solution” to debt problems is legislated under the Bankruptcy and Insolvency Act (“BIA”)  as are the fees that the debtor is expected to pay (i.e. what the trustee can charge) is also clearly legislated. The BIA not only outlines the fees that a Trustees can charge, but also the amount and type of documentation that the Trustee must compile while overseeing the Proposal. If Trustees are unwilling to perform this work, or are outsourcing this work to Debt Consultants, then the cost of this outsourcing of work vs. the Trustee doing it themselves, should not be borne by debtors twice by paying both the Debt Consulting Company AND the Trustees, but rather should be coming out of the fees that the Trustee or Debt Consulting Company charge collectively.

The Trustees who charges the fees set out under the BIA and who accepts these referrals knowing full well that the debtor has already paid large upfront fees to a Debt Consultant and therefore saving themselves the effort of preparing their own documentation or conducting their own consultations are, in my opinion, taking advantage of the most vulnerable debtors solely for their own financial betterment.

Once again, if you believe that you have been treated unfairly by a professional in the debt restructuring area, whether or not they are actually licensed,  then please contact both the Office of the Superintendent of Bankruptcy (oversees federally Licensed Insolvency Trustees), and Consumer Protection BC ( oversees the provincial obligation of consumer protection).

There are now more stringent regulations in BC as of April 1, 2016, and it may be that this legislation does not go far enough to protect the average debtor. Together by talking about our experiences we can inform others so they can avoid the pitfalls, but also encourage all levels of government to change the legislation to ensure that there are rules to govern all who practice in this area.

A warning from FCAC on this issue is posted below

You will see from the above link that one of the key recommendations is as follows

Many debt reduction companies will require you to pay a large fee in advance before you see any reduction in your debt. These upfront fees can cost you hundreds of dollars or even more than a thousand. Don’t count on a refund if debt negotiations are unsuccessful.

Be very cautious about paying any fees before you have written confirmation that the company has worked out a deal with your creditors to reduce your debt.

There may also be other fees, such as ongoing monthly fees and fees for cheques sent to creditors.”

  1. […] An article on the website of Trustee, Coleen Craig, LIT Another warning from Colleen about Debt Counsellors. […]

  2. Factor Loads Factoring 10 months ago

    Thanks for sharing these article. These article serves as a warning to people. I think that we should always be very cautious especially if money is involve. I’ll definitely check the warning link that you shared.

  3. Factoring Finance 9 months ago

    Yes, I totally believe with what you said. I think that it is just right that we complain about something that it is not right. We all have the rights to defend ourself. I also believe that consulting to professional will definitely a big help to know the right thing to do. Thanks for sharing this.

    • Author
      colleen 3 months ago

      Sorry for the delay in responding. We had website issues! Thank you. Yes, I believe that the best way to make sure you are treated fairly is to ask questions, inform yourself of the facts, and always go to someone who is licensed for the services they are offering.

  4. Jenna 9 months ago

    Yes, I totally agree with what you said. I think that we should always choose properly the provider we give our trust to. Nowadays, there are a lot of scams which is very scary especially online. I also think that we must definitely have to be alert all the time. Thanks for sharing this very informative article. I will definel share this to my friends and relatives so that they will be aware too.

  5. Nova Cash Flow Finance 8 months ago

    Great article! I also think that it is very important that we know how to choose reliable and trust-worthy provider or source of financing. We should not trust easily and decide instantly. I think that having awareness is very important. Thanks for sharing article.

  6. We Factor 7 months ago

    This article is a must read! I believe that reading article like this helps us to prevent future problems regarding financing. Thanks for sharing this article.

  7. Nova Business 4 months ago

    Very helpful article! I believe that this article is an effective warning for people in the finance industry. I will share this as well to my friends. Thanks for sharing this article.

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