New debt settlement laws will protect consumers

VICTORIA – Enhanced protections for B.C. families, particularly those in financial distress, are at the heart of legislative changes introduced today by the B.C. government.

The Province is taking action to regulate the debt settlement industry with amendments to the Business Practices and Consumer Protection Act (BPCPA). If passed, these amendments will prohibit debt settlement companies from charging fees until both the debtor and creditor have approved a debt repayment agreement. These amendments will also lay the foundation for additional new rules to safeguard consumers which government aims to bring into effect in fall 2015.

Debt settlement companies typically offer to negotiate, on behalf of a consumer, lump-sum settlements with creditors for amounts significantly less than the consumer’s outstanding debt. Consumers are often required to pay excessive, largely non-refundable fees up-front and are encouraged to stop paying their debts and instead save up for a lump-sum settlement. This differs from traditional debt pooling services, which set up reduced-interest repayment plans that assist consumers with eventually paying off their full debts.

Many people are unable to save enough for the lump-sum settlement amount and subsequently ‘drop out’ of the program, losing any money they have already paid to the debt settlement company. There is no guarantee a creditor will accept the lump-sum settlement, although this risk is often not communicated to consumers. This can negatively affect credit scores and further accumulate debt, as late fees, missed payments and penalties build up.

Today’s proposed changes, developed with advice from a debt collection industry advisory group and in consultation with Consumer Protection BC, would help prevent these negative practices and also modernize outdated provisions to ensure B.C.’s debt collection laws both reflect the present-day collection and credit industry and align with other Canadian jurisdictions.

Remember, if you are experiencing financial difficulties do not wait. Call Solutions Credit Counselling at 1(877)588-9491 or fill out our Debt Consolidation Questionnaire and get your Free Credit Counselling Advice today.

For more information visit Debt Canada - your Canadian credit education centre.

If you are a woman in debt, speak with Women and Money first. We specialize in helping women with their personal and business financeMoney management advice you can count on!

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