Course Overview: Exposing Debt Collection Practices in Canada

Free Module: Introduction to Debt Collection Practices in Canada

Chapter 1: Understanding Debt Collection and Securitization

​

Section 1.1: What is Securitization?

​

Introduction:

Securitization is a critical concept in understanding modern financial transactions, particularly how banks and financial institutions manage debt. It involves bundling various types of debt, such as mortgages, credit card balances, and loans, and selling them as securities to investors. This process allows banks to free up capital, enabling them to issue more loans. However, it also means that the original creditor no longer owns the debt.

What is Securitization?

Securitization is the process by which debts are pooled together and sold to investors. These pooled debts are then used to create new financial instruments, such as bonds, which investors can purchase. The cash flows from the underlying debts (such as loan repayments) are used to pay returns to these investors. The bank or financial institution that originated the debt often acts as the "servicer," collecting payments from borrowers and passing them on to the investors.

​

Why Does It Matter to You?

When a debt is securitized, the original creditor (such as a bank) sells the debt to another entity, which means the creditor no longer owns the debt. Despite this, many creditors or their collection agents continue to attempt to collect on these debts as though they still own them. This creates a situation where consumers may be paying debts to entities that no longer have a legal right to collect them.

​

Example:

Consider the Royal Bank of Canada (RBC). Although RBC engages in securitization, they may not inform borrowers when their debt has been sold. Despite this, collection agents may still attempt to collect the debt, potentially misleading the borrower into paying a debt that RBC no longer owns.

​

Conclusion:

Understanding securitization is essential for recognizing whether a creditor still owns your debt. This knowledge empowers you to demand proof of ownership before making any payments, ensuring you are not paying a debt to an entity that has no legal claim to it.

​

Section 1.2: The Role of Debt Collectors

​

Introduction:

Debt collectors play a significant role in the financial ecosystem. They are often the intermediaries between creditors and borrowers, tasked with recovering unpaid debts. However, their operations can sometimes be shrouded in practices that may mislead or pressure borrowers into paying debts without proper verification.

​

How Debt Collectors Operate:

Debt collectors are hired by creditors to recover unpaid debts. In some cases, the debt has been sold to the collection agency, which then owns the debt and attempts to collect it. However, many collectors operate on behalf of the original creditor and may not actually own the debt they are trying to collect.

Collectors are required by law to provide documentation proving that the debt they are collecting is valid and still owned by their client. However, some collectors either fail to obtain this proof or intentionally avoid providing it to the debtor, leading to potential legal and ethical issues.

​

Case Study:

Stu Barnes from MJR Capital, a debt collection agency, was recorded stating that the Royal Bank of Canada (RBC) never sells debt. This statement was later proven false, as RBC engages in securitization, meaning they do sell debts. This misinformation could lead borrowers to pay debts that have already been sold, resulting in double payment and potential fraud.

Relevant Canadian Legislation:

​

• Collections Agencies Act (Ontario): This law regulates the practices of collection agencies in Ontario, requiring them to provide proof of debt ownership if requested by the debtor. Failure to do so can lead to penalties and legal action against the agency.

​

Conclusion:

Understanding the role of debt collectors and their legal obligations is crucial for protecting yourself from paying debts that have been sold or improperly managed. Always request proof of debt ownership, especially if you suspect that the debt may have been securitized or sold.

​

Chapter 2: Identifying and Responding to Misleading Debt Collection Practices

​

Section 2.1: Recognizing Misleading Statements

​

Introduction:

Misleading statements from debt collectors can confuse and intimidate borrowers, leading them to make payments on debts they may not owe or that have been sold to another entity. Recognizing these statements is crucial for protecting your financial interests.

​

Common Misleading Statements:

Debt collectors may use various tactics to convince you to pay a debt, even when they cannot provide proof of ownership. Some of the most common misleading statements include:

• "We still own your debt." Even if a debt has been securitized or sold, collectors might claim that the original creditor still owns it.

• "You are legally obligated to pay us." This statement can be misleading if the debt has been sold to another entity, and the collector does not have the legal right to collect it.

• "We don't need to provide proof of ownership." By law, collectors must provide proof if requested. Failing to do so is a violation of your rights.

​

Case Study:

Stu Barnes of MJR Capital made the false claim that RBC never sells debt. This is a clear example of a misleading statement designed to convince borrowers to pay a debt without questioning the validity of the claim. However, RBC’s own documentation reveals that they do engage in securitization, proving that Barnes’s statement was false.

​

Recognizing the Signs:

To protect yourself, be aware of the following signs that a debt collector may be misleading you:

• Refusal to provide documentation or proof of debt ownership.

• Statements that contradict publicly available information (such as a bank’s involvement in securitization).

• Aggressive tactics that aim to pressure you into paying without question.

​

Conclusion:

By recognizing misleading statements, you can protect yourself from paying debts that are no longer legally owed or that have been misrepresented by the collector. Always ask for proof of debt ownership and verify the information before making any payments.

​

Section 2.2: The Importance of Verifiable Proof

​

Introduction:

Verifiable proof of debt ownership is the cornerstone of lawful debt collection practices. Without this proof, any attempt to collect a debt could be considered invalid or even fraudulent. Understanding the importance of demanding verifiable proof can help you protect your rights and avoid paying debts that are not legally owed.

​

Why Verifiable Proof is Essential:

When a debt is sold or securitized, the original creditor no longer owns the debt. However, many debt collectors or even the original creditors may continue to attempt to collect on the debt. To protect yourself, it is essential to request verifiable proof that the entity attempting to collect the debt still owns it.

​

What Constitutes Verifiable Proof:

The only acceptable form of verifiable proof is:

• The original signed contract: This is the document you signed when you originally took on the debt.

• A sworn affidavit from a chartered accountant: This affidavit should confirm that the debt is still owned by the creditor and has not been sold or securitized.

Without these documents, any claim of debt ownership is questionable.

​

Case Study:

Collectors from DNA Group admitted in recorded conversations that they do not obtain verifiable proof that their clients, such as Walmart MasterCard, still own the debts they are attempting to collect. Instead, they "take the client's word for it." This is a clear violation of ethical debt collection practices and could lead to collecting on debts that have been sold, resulting in fraud.

Relevant Canadian Legislation:

• Consumer Protection Act (Canada): This act provides protections for consumers against unfair practices, including the collection of debts that are not legally owed.

​

Conclusion:

Demanding verifiable proof of debt ownership is not just a right—it’s a necessity. Without this proof, you could be paying a debt to an entity that has no legal claim to it. Always insist on receiving the original signed contract and a sworn affidavit before making any payments.

​

Enroll Now to Continue Learning

​

This free module has provided you with a foundational understanding of debt collection practices in Canada, including the importance of securitization and the role of debt collectors. By enrolling in the full course, you will gain access to additional modules that dive deeper into your legal rights, practical tools for debt dispute resolution, and real-world case studies that will empower you to protect your financial future.

Don’t miss out on the knowledge and tools that can help you navigate the complexities of debt collection with confidence. Enroll now to continue your journey to financial empowerment!