What Happens When a Debt Goes to Collections in Canada

A collection agency is a company that specializes in recovering unpaid debts. FCAC says your creditor (the company you owe) may try to get their money back by:

• Using its own collection department, if it has one.
• Hiring a collection agency to collect on its behalf.
• Selling your debt to a collection agency.

According to FCAC, you'll usually receive a written notice before a collection agency contacts you. It should include:

• The name of the collection agency.
• The name of the person or business you owe money to.
• The amount you owe.

If you get a notice saying your debt will be sent to collections, FCAC suggests contacting your creditor right away. You may be able to pay part or all of the amount, or make other arrangements, so the debt isn't transferred.

FCAC says that once a debt is sent to a collection agency, your credit score will go down. A lower score can mean lenders refuse credit or charge more interest, insurers charge more, landlords decline to rent, or employers decide not to hire.

Collection accounts are negative information, so they don't stay forever. See how long negative information stays on your credit report.

Whether paying a collection removes it from your report: not stated, needs verification. Ask the bureau or agency how the account will be shown once paid.

FCAC suggests asking for, and writing down:

• The agent's name.
• The company they work for.
• The name of the company they're collecting for.
• The collector's telephone number.

Ask for details of the debt, and keep notes and copies of everything. Collection agencies are regulated by your province or territory, so your provincial consumer affairs office can tell you what a collector is and isn't allowed to do where you live. Specific rules vary by province.

An account you don't recognize could be an error, or a sign that someone applied for credit in your name. FCAC recommends checking your report from both bureaus. If it's wrong, you can dispute it for free with our Equifax or TransUnion letter template.