Debt settlement service merchants are required to abide by terms and conditions to collect any payments from you. This applies when they offer you either of the following services:

  • negotiating a debt settlement with your creditors;
  • receiving funds to be distributed to your creditors.

Conditions to request a sum of money

Is the merchant asking you for a sum of money? You should know that merchants can do so under 3 conditions:

  • you have received a copy of the agreement in principal the merchant has negotiated your creditor within 15 days after it is entered into;
  • you accepted this agreement in principle, in writing;
  • you received the summary document informing you of the progress of the merchant's work.

Conditions to request payment of fees and charges

Merchants can collect fees and charges from you when all 3 conditions listed above have been fulfilled, and after the merchant has remitted a payment to the creditor. Refer to your contract for the payment due dates.

The amount of fees and charges merchants can collect is limited. It corresponds to no more than 15% of the amount of the debt reduction obtained. This amount is distributed over all of the payments you make to the merchant.

Example

An agreement in principle has been entered into with your creditor: your $10,000 debt has been reduced to $6,000. It will be payable in 12 monthly instalments of $500. You accept this agreement.

Since the merchant has reduced your debt by $4,000, he or she is thus entitled to 15% of $4,000, or $600. The merchant can therefore collect $50 in fees and charges with each monthly payment of $500 you will make.

The amount of the payment ($500) is multiplied by 15% of the amount of the reduction of your debt ($600), then divided by the amount of the new debt ($6,000), which amounts to $50.

Contract to improve your credit file

If the purpose of your contract is to improve your credit file, the merchant must have improved your credit file in order to collect payment.

To consult your credit file, you have to submit a request with a Canadian credit bureau, such as Equifax or TransUnion. Fees may apply.

Contracts with an educational purpose

If the purpose of your contract is to provide you with education or raise your awareness regarding budget management or debt settlement, the merchant must abide by the rules that apply to collecting payment for a series of courses.

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Last update : February 14, 2019

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The information contained on this page is presented in simple terms to make it easier to understand. It does not replace the texts of the laws and regulations.