Stronger Consumer Protection in Debt Settlement Services
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Ministry of Government and Consumer Services – Ontario is taking action to protect consumers against the practices of some companies offering debt settlement services. Effective July 1, 2015, new rules will provide additional protections that will help consumers safeguard their hard-earned money in a fair and informed marketplace.

Key Facts about Debt Settlement Services Companies in Ontario

The Ministry of Government and Consumer Services is warning consumers to exercise caution when considering a contract for debt settlement services. Some key facts for consumers:

  • There are currently 22 companies and 38 credit counselling providers offering debt settlement services in Ontario.
  • Services may be marketed as “debt settlement”, “debt management”, “debt arrangement”, “debt reduction” or “debt consolidation.”
  • In 2014, there were 162 complaints and inquiries to the ministry about debt settlement services. Some debt settlement services charge customers large upfront fees and use complex language in contracts to describe the services they will provide – but fail to deliver the promised reduction in debt.
  • As of July 1, 2015, Ontario will require clear contracts, ban debt settlement services providers from charging fees before a debtor begins making payments to a creditor, and provide a 10-day cooling-off period for consumers to cancel the contract. Companies that do not comply can have their registration revoked.
  • Debt settlement services providers will also face limits to how much they can charge a debtor who comes to them for assistance as of July 1, 2015. When repaying debt, providers can charge the debtor a maximum of 15 per cent of each payment made to creditors when repayment is by way of a schedule of payments, plus a maximum $50 one-time fee. When settling debt, the debtor can be charged a maximum of 10 per cent of the original debt, if the debt is settled by way of a one-time offer rather than a schedule of payments.

Tips for Consumers Considering Debt Settlement Services

Consumers are encouraged to take the time they need to understand the contract, including the fine print. If consumers don’t understand something, they should not agree to it or sign anything.

The ministry also offers the following tips:

  • Ask for clarification. What is written in the contract is what matters, not what you are told over the phone or promised verbally in a meeting.
  • Watch out for exaggerated or false claims by debt settlement companies. Remember, your creditors may not agree to reduce any of your debts or reduce them by large percentages.
  • Beware of claims that working with a debt settlement provider will have no effect on your consumer report (e.g., credit file, credit rating).
  • The provincial government does not approve debt settlement programs. Beware of claims saying that programs are “approved by the government.”
  • Debt settlement providers cannot stop collection agencies and creditors from contacting you about the money you owe.
  • Do not deal with debt settlement providers that try to charge large upfront fees for their services. Debt settlement providers are not allowed to ask for fees before any work has been done.


June 29, 2015

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