Earlier this month, the Minister of Government and Consumer Services introduced Bill 156, the Alternative Financial Services Statute Law Amendment Act, 2015 (Bill 156). Bill 156, if enacted, would amend, among other legislation, the Collection and Debt Settlement Services Act (Collections Act). Among the amendments are the introduction of an administrative monetary penalty regime, an expansion to the exemptions from the Collections Act and the removal of the collector licensing regime.
Bill 156 also proposes to amend the Consumer Protection Act and Payday Loans Act, 2008. For a discussion of the amendments to these Acts, please see our December 2015 Blakes Bulletin: Regulating "Alternative Financial Services" in Ontario.
Bill 156 was introduced following a consultation paper that was released by Ontario's Ministry of Government and Consumer Services on June 15, 2015. Comments to the consultation paper were due on August 14, 2015. For a discussion of the consultation paper, please refer to our June 2015 Blakes Bulletin: Stronger Protections for Financial Services Consumers in Ontario? in respect of "high cost" financial services, and to our June 2015 Blakes Bulletin: Expanding the Meaning of Debt Collector in Ontario? in respect to debt collection.
ADMINISTRATIVE MONETARY PENALTIES
Bill 156 introduces an administrative monetary penalty regime under the Collections Act. The amendments permit an individual designated by the registrar to impose an administrative monetary penalty on a person that has contravened or is contravening certain sections of the Collections Act or its regulations (Regulations). We will have to wait for new Regulations that will specify such sections.
The amount of an administrative monetary penalty will be fixed by the Regulations, but will not exceed C$10,000. We will have to wait for new Regulations to see if the penalty will be assessed once per type of violation or for every individual incident.
An administrative monetary penalty may be assessed against a person, even if the person took all reasonable steps to prevent the contravention or if, at the time of the contravention, the person had an honest and reasonable belief in a mistaken set of facts that would have made the contravention innocent. Such penalties can be imposed in addition to any other penalties under the Collections Act and may be imposed without a hearing or other opportunity to object. An appeal right is included in Bill 156, but we will have to wait for new Regulations to see if an independent appeal process is proposed.
The addition of administrative monetary penalties under the Collections Act is part of a trend toward regulators adding such penalties to their enforcement toolkit. The rise of administrative monetary penalties brings with it concerns about a lack of due process in assessing these penalties.
Included in Bill 156 is a list of proposed exemptions from the Collections Act. Bill 156 proposes to exempt the following, subject to the Regulations:
- An authorized foreign bank, as defined in section 2 of the Bank Act (Canada)
- A person who purchases debts through acquiring or merging with a business, in a transaction that includes the transfer of accounts receivable
- A person who acquires debts through the seizure of accounts receivable under a security agreement
- A person who acquires a debt by taking an assignment of the contract that gave rise to the debt for the purpose of financing a transaction
- A person who purchases a financing agreement or group of financing agreements or the payments due under a finance agreement or group of financing agreements
- A person who purchases a debt that permits that person to collect the debt under the name of the original creditor
- A person who enters into an agreement to finance the purchase of goods or services and who assigns the rights to payments under the agreement to a third party, even if the person continues to collect those payments on behalf of the third party
Bill 156 also allows the minister to specify requirements in order to be exempt under the Collections Act. This suggests that these exemptions will not be unconditional exemptions.
Notably, the proposed exemptions do not include express exemptions for the following:
- A business that purchases a specific business portfolio, which might be considered less than "acquiring or merging with a business"
- Retail associations and credit unions incorporated in other provinces in Canada, similar to the exemptions for Schedule I and II banks and credit unions incorporated in Ontario
- Corporations that collect debts for affiliated corporations, similar to the affiliates exemption found in British Columbia's debt collection laws
- Service providers of creditors who are performing first-party collection activities in the name of the creditor and on behalf of the creditor. We note that Alberta's debt collection laws exclude from the definition of collection agency a collector performing collections in the name of the original creditor. This type of exemption would have been a welcome change, reflecting today's business reality, where outsourcing is common. Exemptions (2) to (7), listed above, contemplate certain business structure exemptions that are business friendly, but do not provide for the service-provider exemption.
Interestingly, the amendments contemplate that the registrar may establish written policies regarding the interpretation, administration and enforcement of the Collections Act, which will be publicly available. We will have to see what these policies may be, but in any event they will add another layer of compliance requirements. On the positive side, assuming a timely process, this may provide a way of obtaining an interpretation from the regulator and public availability of such interpretations.
REMOVAL OF COLLECTOR LICENSING REGIME
A welcome change for debt collectors is the removal of the requirement to have collectors individually licensed. Instead, Bill 156 provides that a collection agency that employs, appoints or authorizes an individual to act as a collector shall exercise due diligence to ensure that the individual complies with the Collections Act and the regulations when acting as a collector. As a result, collection agencies will no longer have to provide notice to the regulator in respect of the commencement or termination of employment of a collector.
EXPANSION OF "COLLECTION AGENCY"?
The amendments to the Collections Act would include an expansion of the definition of "collection agency" to "a person who purchases debts that are in arrears and collects them". "Arrears" is defined as a debt that is past due and that meets certain criteria, if any, to be set out in Regulations.
This expanded definition will likely not have a dramatic impact of the types of entities that are regulated, as this description captures those entities traditionally thought of as "collection agencies".
Bill 156 was carried on first reading on December 9, 2015. The Legislature adjourned on December 10, 2015 and will resume on February 16, 2016, after which the bill will be up for second reading.
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