David O. drops new rules on uncool debt-settlement practices

It’s something Greg Elsby, executive director for Credit Counselling Service of Sault Ste. Marie, has seen many times before.

A person in debt reaches out to a for-profit debt-settlement agency — which promises to settle their debt — but ends up in deeper trouble than when they started.

“What they were doing is charging up-front fees and would make promises that quite often wouldn’t come through but continued to take fees from the client. By the time the client realized the service wasn’t working they could be out several thousand dollars in fees and their credit rating was in much worse shape,” said Elsby.

Credit Counselling Service of Sault Ste. Marie is a non-profit registered charity and a United Way Member Agency.

“So we’re a social service agency first. We’re unbiased and here to help people get the debt-management and money-management help they need,” said Elsby.

MPP David Orazietti, who serves as minister of Government and Consumer Services, was on-hand at Credit Counselling Service of Sault Ste. Marie’s Queen Street office today to announce new protections for consumers who are seeking help with their consumer debt.

“Unfortunately many people who attempt to use debt settlement are already struggling with high debt and high stress levels. This makes them especially vulnerable to supposed solutions to their problems, which can in reality put them further in debt,” Orazietti said.

New rules include banning companies from charging fees before a debtor begins making payments, as well as a 10-day ‘cooling off’ period for contracts entered into after July 1 of this year.

Orazietti and Elsby pointed out that not all agencies use these unfair practices.

Elsby hopes the new rules will mean people who need help will get it, not be placed further in debt.

Credit Counselling Service of Sault Ste. Marie helps those in need of managing their existing debt, but also offers education to people as young as elementary school students.

Elsby said many people get into financial problems early, sometimes from their first credit card or OSAP payment in college or university.

“We see a lot of kids that go away and get in trouble very quickly because they don’t have a plan in place,” he said.

“We find it really important to teach people the fundamentals of how to set up a simple budget, even if you’re just starting off in your first part-time job,” he added.

Orazietti also announced new protections which go in to effect July 1 against so-called 'phantom-bidding' in real estate transactions.

"If you were to make a bid (on a house) today, the agent wouldn't necessarily need to show you other bids in writing," said Orazietti.

After July 1 a real estate agent would be required to present competing offers to prospective buyers in writing and keep them on file for at least one year.

Today's news release from the Ministry of Government and Consumer Services can be seen below:

As of July 1, 2015, debt settlement service providers will face limits to how much they can charge a debtor who comes to them for assistance. The new rules also: 

• ban debt settlement companies from charging fees before a debtor begins making payments to a creditor

• require clear contracts 

• provide a 10-day cooling-off period for any debt settlement services contract entered into on or after July 1, 2015 

• permit licences of non-compliant companies to be revoked

• Debtors should know their rights before they sign contracts, and they should not make payments until they get results.

In real estate transactions, new rules are being implemented to address the issue of "phantom bidding."

As of July 1, 2015, real estate salespeople and brokers will not be allowed to indicate that an offer exists unless it is in writing.

Records of offers will have to be kept for at least one year, allowing concerned buyers to ask the Real Estate Council of Ontario to verify the number of bids received on a property.

Protecting consumers by supporting a fair, safe and informed marketplace is part of the government's economic plan to build Ontario up.

The four-part plan includes investing in people's talent and skills, making the largest investment in public infrastructure in the province's history, creating a dynamic and innovative environment where business thrives, and building a secure retirement savings plan.

Quick Facts

• There are currently 22 companies and 38 credit counselling providers offering debt settlement services in Ontario.

• The average consumer debt in Ontario is more than $29,000 per person, according to 2014 statistics from TransUnion.

• According to Statista.com, the total number of resale housing units in Ontario is predicted to exceed 210,000 in 2015.

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(PHOTO: MPP David Orazietti seen today at a press conference announcing new rules protecting consumers from debt settlement companies and real estate transactions. Kenneth Armstrong/SooToday)