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Out Of The Darkness: Shedding Light On Canada’s Consumer Debt Crisis
Recent press reveals the myriad of misinformation surrounding the options available to debt burdened Canadians.
Much has been written recently regarding consumers’ options when faced with insurmountable debt. The root of the recent press is related to the record levels of household debt reported in recent studies; what is ultimately at risk is the financial future of more than a million Canadians.
Until fairly recently, the options presented to consumers were bankruptcy, consumer proposal and credit counselling. The unfortunate reality of these options is that they are all controlled by creditors. Bankruptcy trustees are paid a percentage of the funds they extract from the estate of a bankrupt.
When bankruptcy trustees administer a consumer proposal, they are paid a percentage of each dollar collected from the consumer. Given the source of their income, it is clear that trustees do not represent debt-burdened Canadians. In fact, bankruptcy trustees are not mandated to represent consumers.
“I do not begrudge bankruptcy trustees for trying to maximize their revenue” says Larry Pomfret, President of Invictus Financial Solutions. “Bankruptcy trustees are business people and consequently are motivated by profit. I do, however, take issue with their incorrect and inflammatory statements regarding the debt-related consumer advocacy sphere.”
Not-for-Profit Credit Counsellors loudly deride the debt settlement industry. Scott Hannah is the President and CEO of Credit Counselling Society, a not-for-profit credit counselling firm in British Columbia. Mr. Hannah has been interviewed in print and on television talking about consumer options. He has stated his dislike of companies that represent consumers in negotiations with creditors.
The reason for not-for-profit credit counsellors disapproval of companies that represent consumers is twofold:
1) Consumers who use debt relief, debt management, debt settlement or consumer advocacy organizations to help negotiate with their creditors are taking potential revenue from the not-for-profit credit counselling industry;
2) Not-for-profit Credit Counsellors like Credit Counselling Society and Credit Canada Ltd. are funded by the very creditors with whom they negotiate on behalf of their clients.
Since these organizations are funded by creditors, it is impossible for them to honestly say that they have an “unwavering commitment to their clients”, as is stated on Scott Hannah’s website, ironically called nomoredebts.org.
Canadian creditors sometimes use predatory lending tactics to lead Canadians into debt situations that they cannot manage. It is profitable for creditors to ensure that their customers owe as much as possible for as long as possible. Canadian banks are recording record profits while Canadian consumers are shouldering record debt. Such creditor tactics are the real risk faced by Canadians.
Creditors (banks, payday lenders, cell phone providers and others) routinely outsource their overdue accounts to collection agencies. “As a former collection industry insider…” says Pomfret “I can categorically state that collection agencies in Canada, as agents of banks, regularly break provincial collection laws and federal privacy laws. Threats of legal action, incessant calls and breaches of privacy are normal operating procedures at many collection agencies in Canada.”
Bankruptcy trustees are paid to maximize the amount of money collected from consumers. Not¬-for-
“We welcome the opportunity to present our view of this debate, backed by over 20 years of industry experience,”
To learn more about the complimentary educational offerings available to local media, contact:
Cheryl Richardson – Communications Cheryl@invictuscorp.ca 1-855-332-8371
Page Updated Last on: Oct 03, 2012