Legal Blog
Collection Agents
There are two types of collectors: those who are employees of financial institutions and those who are employees of third party collection agencies. They usually go about their jobs differently. Employees of financial institutions understand that their goal is to collect money that debtors owe to their employers, but that they also must attempt to preserve the relationship with the debtors. They recognise that not all debtors are shirking their responsibilities; some may be experiencing financial problems that are not entirely of their own making. If financial institution employees can work with the honest but problematic debtors, they will. If they cannot, or determine that the debtors simply do not want to pay, they move the file to legal action.
Employees of collection agencies have no relationship to maintain. Once they receive their orders to collect a bad debt, all relationships have been severed. Other than the threat of legal action, what weapons do collection agents have in their arsenal to force unwilling debtors to pay? We suggest that the major weapons all relate to the debtors: ignorance, fear, and embarrassment. Ignorance because many debtors do not understand their rights; fear because many debtors think that bad things will happen to them if they do not pay; and embarrassment because many debtors do not want others to know that they cannot or will not pay their debts.
The regulations under the Collections Agencies Act, the statute that regulates collection agencies, sets out prohibited practices, most of which are for the protection of debtors. In particular, it is prohibited to:
“make telephone calls or personal calls of such nature or with such frequency as to constitute harassment of the debtor, his or her spouse or same-sex partner or any member of the debtor’s family or household” (section 20(d)); or to
“give any person, directly or indirectly, by implication or otherwise, any false or misleading information that may be detrimental to a debtor” (section 20(f))
Run Amok
Collection agencies sometimes cross the prohibited practices line, as demonstrated in Tran v. Financial Debt Recovery Limited, a 2001 decision of the Ontario Divisional Court.
The debtor was a newly graduated student who was unable to continue repayment of his student loan because he lost his first job. When he obtained his second job, he wrote to the government to determine what he had to do to arrange for repayment but received no answer. A couple of years later, Employee 1 called the debtor and informed the debtor that he was a lawyer with the Ontario government and wanted to collect the outstanding loan. The debtor and he talked on numerous occasions. The debtor indicated that he thought the amount requested was too high and therefore wanted an exact calculation. Employee 1 sent a demand letter on the letterhead of the collection agency, with no calculation, demanding payment of $13,195.00. Employee 1 was not a lawyer, nor did he work for the Ontario government.
Employee 2 called the debtor and informed him that he also was a lawyer with the Ontario government, spoke of the outstanding debt and asked to be transferred to the debtor’s boss. The debtor refused. Employee 2 then called the president of the debtor’s employer and told her that the debtor had applied for work elsewhere and that the sheriff would be attending at the debtor’s employer to serve a court order. Employee 2 was an employee of the agency and everything that Employee 2 told the president was a lie.
The president did not know it was a lie and since the debtor’s employer was an investment firm, the president was not pleased with what she heard. She and other executives at the debtor’s employer were also concerned with the number of times that the agency’s employees were calling the employer, as many as 10 calls an hour.
Employee 3 also called the president and informed the president that the president “was not running a good firm to let this go on.” Employee 3 was very rude and informed the president that the agency had a right to call the workplace as often as it had been.
Employee 4 telephoned the debtor on several occasions. He called the debtor a “stupid snaky son” and said that he would “deal with him personally”, a remark that the debtor interpreted as a threat against his person.
To Court
In order to stop the harassment, the debtor commenced an action, without legal representation, against the agency. His statement of claim for damages of $15,000 was rudimentary at best. The trial judge categorised the statement of claim as a document in which “the plaintiff, not being versed in the law, simply put the facts of his case before the court and requested relief.” The judge bent over backwards to help the debtor.
The debtor and the president testified. The agency presented no evidence.
Based on the evidence, the judge determined that the debtor had proven a case for defamation, intentional interference with economic relations, and intentional infliction of emotional harm. She noted that the actions of the agency breached the regulations under the Collection Agencies Act.
The judge assessed damages under the various torts at $40,000. The monetary limit under the Simplified Rules was then $25,000 and the plaintiff had claimed only $15,000. On her own initiative, the judge allowed the plaintiff to amend the statement of claim to claim $25,000 and awarded that amount against the agency.
The judge ordered that the agency send a copy of her reasons for decision to the government representative with whom the agency dealt and noted that she would send a copy of her reasons for decision to the Registrar of Collection Agencies.
We think that the actions of the agency may have upset the judge, just a touch.
Appeal
The agency appealed the decision, not necessarily because there should have been a different decision but on the element of procedural fairness. The appeal court opened as follows: “With considerable regret, we all agree that there must be a new trial, because of a reasonable apprehension of bias on the trial judge’s part. The regret stems from our finding that the trial judge was motivated by the highest principles of rendering justice to an unrepresented and unsophisticated plaintiff for whom English was a second language, all within the frame work of the simplified Rules. The appellant alleged no actual bias and we find there was none.”
Let us translate. The appeal court agreed that the agency should have been slammed but felt that procedurally the agency received a raw deal and therefore felt compelled to give the agency a new trial. Justice must not just be done; it must be seen to be done.
The trial judge had made several decisions in the course of the trial that, by themselves, may not have been sufficient to warrant a new trial but, taken together, did. For example:
1. The judge held that the statement of claim disclosed a number of causes of action when they were not specifically pleaded. If the pleadings do not raise the cause of action, a defendant cannot be prepared at trial to meet the allegation.
2. The judge allowed the debtor to present documents as exhibits during the agency’s cross-examination of him, although the agency had never been shown those documents.
3. The judge conducted the debtor’s entire examination in chief. This is not good; it impairs the image of judicial impartiality.
4. On her own motion, the judge amended the statement of claim to increase the damages from $15,000 to $25,000.
5. In one instance, the judge stated: “If they’re not successful, then we’ll call the evidence.” As the appeal court stated: “This may have caused the defendant to wonder just who ‘we’ were.”
The appeal court showed its disdain for the agency in its award of costs. It awarded the princely sum of $500. The appeal had to have cost the agency at least $5,000 to $10,000.
By the way, when the debtor commenced the action, the harassment stopped.