Originally published in Blakes Bulletin on Financial
Services, February 2012
On February 15, 2012, Manitoba amended its consumer protection
legislation to provide for new limits on the amount debtors may pay
in connection with debt repayment agreements or to persons who are
acting for the debtor in arrangements or negotiations with
creditors. Further, the new amendment provides that fees may not be
charged to a debtor prior to the successful arrangement or
negotiation of a settlement acceptable to the debtor.
The Manitoba Consumer Protection Act (the CPA) limits
the amount that a person may collect from a debtor for making
arrangements or negotiating with credit grantors on behalf of the
debtor or for receiving money from the debtor for distribution to
his or her creditors. Under the amendment, this limit is set at the
greater of (i) 15% of the money actually collected from the debtor
for distribution to his or her creditors and (ii) $20, in the case
of a debt repayment agreement that includes a schedule of payments.
Where there is a one-time payment to a credit grantor or an
agreement to make arrangements or negotiate on the debtor's
behalf with a credit grantor identified in a debt repayment
agreement, the limit is set at 10% of the debt owing. This 10%
maximum fee may now only be charged after a settlement
acceptable to the debtor has been successfully negotiated or
arranged. Pursuant to a news release by the Manitoba government,
the policy reason for this new provision is to ensure that people
struggling with debt do not pay large fees upfront with no
guarantee that the services provided will actually reduce their
Previously, the legislation provided that collection agents were
permitted to charge a fee which was no more than 15% of the money
actually collected from the debtor for distribution to his or her
creditors, with a permitted minimum charge of $20.
It is interesting to note that under the Manitoba CPA, a
"collection agent" is defined to exclude: persons who
accept payment of account on behalf of creditors but who do not
otherwise negotiate with or attempt to obtain payment from debtors,
banks, credit unions, trustees in bankruptcy, court officers,
lawyers licensed in Manitoba, trust companies, real estate brokers,
insurance agents, and liquidators appointed under the CPA. In
contrast, "person" is vaguely defined in the CPA as being
inclusive of a partnership and an unincorporated association. By
broadening the wording of the legislation from "collection
agents" to "persons", the fee limits set in the
amendment are being extended to include creditors as well as
collection agencies. This change is consistent with the
prohibitions on debt collection practices set out in the CPA, which
apply equally to collection agencies and creditors.
This amendment comes as part of a broader five-year Manitoba
government plan for stronger consumer protection called
"Let's Make a Better Deal", which was launched in
May 2010. This plan includes proposals for new legislation, such as
this recent amendment, as well as a consumer rights awareness
strategy for Manitobans. It is likely that additional amendments to
Manitoba's consumer protection legislation will be
In announcing the amendments, the government noted the
amendments bring Manitoba in line with similar provisions in
Alberta's consumer protection legislation that have been in
force for some time. However, we note that the applicable Alberta
legislation applies only to debt repayment agencies and not to
creditors, in contrast to the broader wording of the Manitoba
legislation as noted above.
Despite the similarities between the Manitoba and Alberta
provisions, it is clear that there is still no consistent approach
in Canada with respect to the fees which may be charged by these
entities, known variously as debt repayment agencies, debt poolers,
credit counsellors or, under certain laws, included under a broad
definition of collection agencies. Businesses that engage in debt
collection or provide debt repayment services across Canada should
monitor and review their practices to ensure that they are
compliant with not only these new amendments in Manitoba but also
with Canada's patchwork of debt collection legislation.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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