Debt Settlement: Consumer Alert for Ontarians
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The Ministry of Government and Consumer Services is warning consumers to exercise caution when considering a contract for debt settlement services.

Complaints about companies offering debt settlement services are increasing. Most of the complaints are about unclear or misleading contracts, excessive fees, and failure to reduce debts as promised.

Services may be marketed as “debt settlement”; “debt management”; “debt arrangement”; “debt reduction”; or “debt consolidation.” Companies may tell you that they can reduce the amount of debt you owe your creditors.


Don’t be pressured.

  • Take the time you need to understand the contract, including the fine print.
  • If you don’t understand something, don’t agree to it and don’t sign anything. Ask for clarification. What matters is what is written down in the contract not what you are told over the phone or verbally in a meeting.

Watch out for exaggerated or false claims.

  • Remember, your creditors may not agree to reduce any of your debts, let alone reduce them by 50 per cent or more.
  • Claims that working with a debt settlement company means there will be no negative effect on your consumer report (e.g. credit file, credit rating) are wrong and misleading.
  • Beware of claims saying that programs are approved by the government. The provincial government does not approve debt settlement programs.
  • Debt settlement companies cannot stop collection agencies and creditors from contacting you regarding your delinquent accounts.

Be wary of large up-front fees and service contract amounts.

  • Some companies may ask for large up-front fees even before any work has been done.
  • Some will not refund money that you paid and meant to be used to pay off your debts even if your creditors refuse to deal with debt settlement companies or refuse to reduce your debts.
  • If you decide to terminate the contract before the end of the term, you may have to pay a large fee.

Ontario’s Consumer Protection Act (CPA) protects consumers entering into contracts, including contracts with debt settlement companies.

Under the CPA, you have:

  • The right to be informed: Ontario law requires clear, comprehensible and prominent disclosure of key details in contracts.
  • The right to be free from false, misleading or deceptive representations: It is an unfair practice for a person to make a false statement when dealing with a consumer.
  • The right to approve or reject material changes in contracts for ongoing services: Contracts cannot be changed without your consent.
  • The right to cancel a contract within the first year if the contract does not meet all the requirements of the CPA: If this is the case you may be entitled to be paid back the money you paid under the contract.


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