Mark explains whom a Canadian can sue over collection activity, the risks and costs of litigation, and the four best scenarios for suing a bill collector, collection agency or creditor.
Transcript
If you are a Canadian who wants to sue a bill collector, a collection agency or a creditor, then you need to watch this video. This information is based upon my three decades in the debt collection and debt relief industries, including 12 years spent as a collection agency lawyer and nine years working as a consumer lawyer representing Canadians struggling with debt. If you watch to the end of this video, there is a bonus feature in which I identify the four best scenarios for suing a collection agency or a creditor.
I'm Mark Silverthorn, the founder of Debt Coach Silverthorn. A bill collector or a creditor might have done something that is causing you tremendous grief. Firstly, they may be making collection calls in circumstances that are causing you harm. Secondly, they may be responsible for listing one of your accounts on your credit report illegally, resulting in financial loss. You are angry and you want these issues resolved. Furthermore, you want financial compensation for your ordeal, and you may be considering suing someone.
A word of caution before you sue
Initiating a lawsuit is a serious matter, and there might be several reasons why you should not sue anyone. I am not saying that a Canadian should never sue a collection agent or a creditor. I will say, however, that a consumer should only resort to litigation in a limited number of circumstances. If you commence a lawsuit, then your goal should be to put yourself in a better financial position. This means that not only should your claim be successful, but the monies you recover should be greater than any litigation-related costs that you would incur. My goal is to assist you in avoiding a nightmare scenario in which you start an unsuccessful lawsuit and then find yourself in a much worse financial position.
I have conducted a considerable amount of research involving Canadian consumers suing bill collectors and collection agencies. Consumers who do not hire a competent civil litigation lawyer to represent them fare poorly in these lawsuits. If, on the facts of your case, a court might reasonably award more than $50,000 in financial compensation, then it is highly recommended that you hire an experienced civil litigation lawyer. Collection agencies and creditors invariably hire good lawyers to represent them when they are sued, and consumers who represent themselves are at a significant disadvantage. If you are not going to hire a lawyer or a suitable paralegal, then you should consider filing your lawsuit in small claims court, where your financial exposure for paying the opposing side's legal fees in an unsuccessful lawsuit is significantly reduced.
Furthermore, if you commence a lawsuit, you should anticipate that you are in a war of attrition. If a collection agency loses, there is a good chance that it will appeal the judgment and seek to have it overturned. A lawsuit might not only cost you money but also exact a psychological toll. From an emotional perspective, it can be difficult to move forward with your life if you are focused on events from the past. Finally, in Canada the losing party in a lawsuit will invariably be required to pay a portion of the winning side's legal costs. This means that if you lose your lawsuit, you should anticipate paying a portion of the opposing side's legal fees.
Who you can sue
If you are going to commence a lawsuit, then the issue arises as to who you are going to sue. There are three categories of potential entities that you can sue. Firstly, you can sue the person or persons who have wronged you, which in most instances will be a bill collector. There are several different types of bill collectors. A debt collector might be employed by any one of the following: your original creditor's in-house collection department, a debt buyer's in-house collection department, a collection agency or a collection law firm. Secondly, you can sue the debt collector's employer on the basis of what is referred to as vicarious liability. In the context of debt collection, an employer is virtually always responsible for the conduct of its employees.
Finally, if a Canadian sues a collection agency, then they will sometimes also sue the creditor on whose behalf the agency is attempting to collect the account. The collection agency is the agent for its principal, the creditor, and under the law of agency you can sue the principal for the conduct of its agent. Where a bill collector has engaged in egregious behaviour, it is typical for a consumer to sue the collector's employer, because the collection agency will have the money to satisfy a judgment awarded by a court. If you were to simply sue a collector and obtain a judgment, then you might not be able to recover any monies from the collector.
If you sue a collection agency, you have the option of also suing the creditor on whose behalf it is attempting to collect an account. You might decide to only sue the agency, because if you were to sue the creditor, this might trigger a lawsuit by your creditor against you.
You need a cause of action
If your goal is to bring a successful lawsuit, then it is not sufficient that you were angry over the conduct of a bill collector, a collection agency or your creditor. The document commencing your lawsuit must contain one or more reasons recognized under Canadian law as a ground for awarding financial compensation. This is referred to as a cause of action. The judge at your trial is not going to award you a penny in financial compensation unless you can successfully establish one or more causes of action.
Illegal credit report listings
We are now going to do our bonus feature, during which I will identify the four best scenarios for suing either a bill collector or a creditor. Some collection agencies and debt buyers will engage in illegal behaviour by having an item appear on a person's credit report in circumstances where it cannot legally appear on a credit report. You might apply for a loan or credit and your application is denied because an item appears on your credit report that should not legally appear on it. In some instances, a potential home buyer might not be able to purchase a home because of the presence of this item.
As a result, a prospective home buyer might suffer financial loss because he or she could not obtain mortgage financing. Depending upon the circumstances, this financial loss might be in the tens of thousands of dollars. In this scenario, the prospective home buyer should be able to successfully sue the entity responsible for placing the item on their credit report. The financial compensation sought in the lawsuit should be the amount of the financial loss.
Lawsuits arising from collection calls
There are a number of scenarios where a Canadian can sue a collection agency or a creditor arising from collection calls. A Canadian can bring a lawsuit for defamation where a bill collector has disclosed information about a debtor to anyone other than the debtor. This would include the mere existence of a debt. The fact that a collection agency left a message at a debtor's workplace with a co-worker, and the message included the name of the collection agency, would be sufficient grounds for a lawsuit based on defamation. There was one lawsuit against a Canadian collection agency where a debtor successfully sued for more than $400,000, because the collection agency disclosed harmful information to the debtor's workplace, resulting in the debtor's termination from employment.
It is possible for a Canadian to sue for negligent infliction of emotional distress. This arises where a bill collector makes phone calls causing a recognized psychiatric illness or medical condition, such as depression or an ulcer. To successfully sue on this ground, the consumer must show that the bill collector has violated provincial or federal law. They must also show that the collection calls caused the condition.
It is also possible for a Canadian to sue a debt collector where it has made collection calls in violation of provincial or federal law. It would be illegal for a bill collector to make collection calls to a person after it has received a valid cease and desist letter from the individual or their legal representative. There are also a number of provincial laws that prohibit or restrict calls to a person's workplace. Furthermore, several provinces limit the frequency of collection calls. Ontario, for example, only permits three phone calls to a debtor during a seven-day period. Finally, most provinces prohibit collection calls that are of an overly aggressive and threatening manner. It is possible for a Canadian to successfully sue a bill collector or its employer in circumstances where laws regulating collection calls have been violated.