I Wish I Knew.
Why You Should Choose your Debt Advisor Carefully
On November 14, 2023, the Office of the Superintendent of Bankruptcy (OSB) and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) issued a joint news release alerting consumers to the fact that unregulated debt advisors are targeting indebted Canadians with promises of a quick fix, charging unnecessary fees for debt-relief services they are not authorized to provide.
Debt-relief scams are not new in Canada but the current economic climate and increased comfort levels with accessing services on-line brought on by the COVID pandemic have combined to allow these unlicensed and unregulated debt “advisors” to proliferate.
These debt relief scams often target insolvent consumers by falsely promising insolvency options like consumer proposals and bankruptcies. Some unlicensed debt advisory firms charge hundreds or even thousands of dollars in unnecessary fees for services they are not licensed to provide and often misrepresent the services that they can offer.
The OSB and CAIRP recommend that you watch out for these telltale signs of debt relief scams.
Unrealistic promises or pressure to make quick decisions.
Unregulated debt advisors may make promises they can eliminate your debt, without fully understanding your financial situation. They may pressure you to make quick decisions without discussing all of your available options.
Licensed Insolvency Trustees (LITs) are the only debt-relief professionals in Canada legally required to offer a complete financial assessment and explain all of your options for debt relief. Only after a thorough financial assessment of your personal financial situation will they offer specific advice about resolving financial difficulties.
Asking for fees up front or claiming they can get you a “better deal”.
Requesting payment before delivering any real service is a red flag. LITs offer free consultations, with no commitment and no up-front fees. They are legally and ethically bound to play an impartial role in ensuring your rights (and those of your creditors) are protected. The fees charged by LITs for consumer insolvencies and bankruptcies are regulated by the federal government.
Charging unnecessary fees disguised as “referral fees” or “administration fees”.
They may charge money for services that are not necessary and do not provide debt-relief. You should always meet with a LIT first. You do not need a referral to speak with a LIT. Even if it is determined that the services offered by a LIT are not right for you, a LIT will recommend non-insolvency options such as consolidating your debts, establishing and following a budget, or entering into a Debt Management Plan (with a reputable, not for profit credit counselling agency).
They tell you to stop communicating with, and/or paying your creditors or claim they can
negotiate with them on your behalf.
They claim they can be your “advocate” and negotiate on your behalf. In reality, creditors are not legally bound to deal with these “advisors”.
LITs are the only federally licensed and regulated debt relief professionals with legal authority to negotiate binding agreements with creditors on your behalf. Only LITs can offer consumer proposals or bankruptcy services which legally require creditor actions, including collection calls and wage garnishments, to stop.
They may only offer online services with no option for in-person service.
Beware of debt advisory firms that only offer online services or that don’t have a legitimate address or office in Canada. If a debt advisory firm only operates online without any indication of in-person service availability in your province, it is wise to seek assistance elsewhere.
LITs are required to be licensed by the OSB and must provide in-person service at any point during the process, at your request. It is wise to confirm with your LIT that they have a staffed office in your province/area and that in-person service is available on a regular basis.
Janes & Noseworthy Ltd. has helped almost 30,000 Newfoundlanders and Labradorians get out of debt since 1985. With fully staffed offices in St. John’s, Marystown, Gander, Grand Falls-Windsor and Corner Brook, we provide virtual and in-person meetings, usually on the same day they are requested.
Remember, it’s OK to get help with your debt!