It makes sense that debt collection would have a set of legal guidelines in place. With disputes a possibility and with the stressors that may occur from your clients as well as yourself, having a framework in place is important and needed.
To that end, there are several major rules that the Canadian government has put in place which can help both sides resolve debt in a way that is advantageous for both parties. Knowing what these laws are can go a long way toward making sure debt is completely erased from the books for everyone involved.
The limits on collecting debt
One of the rules that needs the most clarification is the statute of limitations on debt collection, and it can be murky depending on where you do business in the country. In general, the government of Canada has rules that a debt cannot be pursued after six years. At the same time, the statute of limitations varies from each province. Here’s a look at the latest from each area:
6 years: British Columbia, Manitoba, New Brunswick, Nunavut, Nova Scotia, Prince Edward Island, Yukon, Northwestern Territories.
2 years: Alberta, Saskatchewan, Newfoundland and Labrador, Ontario
3 years: Quebec.
There are even exceptions to these. In Nova Scotia and Alberta, the statute of limitations can be extended by the court, up to 10 years. There’s also a law on the books in Ontario where if the debtor makes payments or acknowledges the debt before the two years are up, then the limitation is still in place at two years.
The crucial laws involving contact and lawsuits
There are also no grey areas when it comes to contacting a business or collector during or after the statute. Before is where you have the most leverage, as it’s legal for businesses to take debtors to court as long as the statutes of limitation are still in effect. This is why it’s best for consumers to work with you to agree to pay the debt within a certain time frame.
Where it changes is when the debt is after the statute. Depending on the province, a company is not able to take a debtor to court in order to court, and there can be limits to contact from the company’s standpoint. It’s still legal for you to collect payment and to contact them, but it’s more difficult to close that debt without the power to litigate. Regardless of where you are in Canada, be sure to do your research regarding collection laws in your area to better understand the legality of your collection practices.