Deep in debt: B.C. still hasn’t acted to stop debt-settlement companies
Published Tuesday, July 22, 2014 6:00AM PDT Last Updated Wednesday, July 23, 2014 11:45AM PDT
More than two years after the B.C. government promised to regulate the debt settlement industry, vulnerable consumers are still losing thousands of dollars from their dealings with certain debt settlement businesses.
With $36,000 in debt, 65-year-old Val Mueller jumped at the chance to fix her financial woes after a U.S.- based company called Canadian Debt Services offered to fix her problems.
“I was paying them $345 every two weeks and I thought it was money to start for them to negotiate with my creditors," she said.
But $4,000 later, Mueller learned that none of the money had gone to pay down her debt. Instead, all of it went to pay upfront fees to Canadian Debt Services.
The company has an “F” rating with the Better Business Bureau and it doesn't have a license to operate in B.C., according to Consumer Protection BC.
Sands and Associates credit counsellor Blair Mantin sees desperate consumers like Mueller every week.
"They were trying to do the right things, trying to deal with a horrible financial situation and they just got taken advantage of and ended up spending money they didn't have, and being worse off in the end," said Mantin.
Many U.S. states have moved to prevent debt settlement companies from charging high upfront fees. So have Alberta, Manitoba, Ontario, Nova Scotia and P.E.I.
But B.C. still hasn’t acted, despite the fact it has the highest rate of consumer debt in the country and has been studying the issue for years.
Justice Minister Suzanne Anton declined an interview request with CTV News, responding only by email to say: "legislative changes will be required to license and regulate debt settlement companies in B.C."
"So the fix is there and everybody knows what it is, it just takes a long time to get the legislation through unfortunately and while we're waiting I see more people who are still falling prey to these operators," said Mantin.
Mueller stopped payment with Canadian Debt Services and signed a consumer proposal with Sands and Associates. Her debt is now frozen and reduced by up to 80 per cent. She has five years to pay it off, and creditors aren't allowed to bother her during that time.
Mueller decided to take Canadian Debt Services to small claims court and shortly after she filed the claim, the company agreed to refund her the $4,000 she had paid them.
Consumer Protection BC offers information on its website to assist consumers in making decisions when it comes to debt management options.
The agency identifies five questions for consumers to consider before choosing a company.
- Does the company offer to negotiate reduction in the total debt amount excluding interest?
- When are fees required to be paid to the company?
- When are payment made to the creditor?
- Is there a potential to increase the amount of debt over time during the debt repayment plan?
- What is expressly guaranteed to you and what is only indicative or set as an objective?