Great news last week in the fight against predatory debt consultants. The government of Manitoba has made amendments to its Consumer Protection Act to protect Manitoba consumers. Here is the news release.
Why is this important? It’s simple. There has been a flood of unregulated debt consultants doing exactly what these amendments will now prohibit.
The common scenario is that people are told to stop paying their debts and instead pay the consultant thousands of dollars over several months to cover the consulting fee and build up funds to negotiate a settlement of the debt. The problem is that the collection calls continue and many people are told the disappointing news that no settlement could be reached with the creditors.
Basically, you’re worse off than when you started. Since the payments were to cover the consultant’s fee, do you think they are going to return your money?
There are two key changes:
• Consumers can only be charged a fee is there is an agreement reached to reduce the debt repayment, and
• The consultant’s fee will be limited to a maximum of 10% of the debt owed.
Compare all of this to a consumer proposal.
A consumer proposal is a legal process filed under the Bankruptcy and Insolvency Act. A consumer proposal is filed with a licensed trustee in bankruptcy. A trustee is licensed by the federal government of Canada, and is subject to the government’s scrutiny. The fee paid to the trustee is set by law and comes out of your monthly proposal payments – no up front costs. Most importantly, it provides you legal protection from your creditors.
So, good news for citizens of Manitoba. Unfortunately, no word yet on similar changes in Ontario.