Why you should never pay a collection agency canada?

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Paying off a collection agency might not help your credit report in Canada. It could lower your score by resetting the ‘date of last payment’ and keeping the debt on your record longer. Settling an old debt may also revive legal risks. Sometimes, not paying avoids these problems, especially for small, old debts. If you’re unsure, reach out via phone, text, or live chat if you have any questions.

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Never Pay Collection Agencies Canada Question

why you should never pay a collection agency canada A few months ago, I got a call from a collection agency about an old bill. I almost paid it right away but then read that doing so might not actually help my credit. I want to understand why paying them directly in Canada could be a mistake.

From: Anonymous Question
Location: Kelowna, British Columbia (BC)
Category: debt settlement

Never Pay Collection Agencies Canada Answer

Deciding to pay a collection agency in Canada may not be the wisest move for your credit report. Paying off a debt that’s in collections doesn’t actually boost your credit score. Instead, it can have the opposite effect by resetting the ‘date of last payment’ and prolonging the visibility of the debt on your report. Even after you settle the debt, the original slip-up remains on your record for six years from when the delinquency first happened. Paying just updates the latest payment date, which can keep the debt hanging around longer on your report. Also, if the debt is pretty old, coughing up the money might reset the statute of limitations, which could open the door for collectors to come after you legally again. This could drag you into messy lawsuits or wage garnishments that would have otherwise stayed off your radar. By not paying, especially on minor debts that collectors might skip due to cost and age, you could steer clear of these legal headaches.

For guidance on debt management, consider exploring different options like debt settlement.

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

Paying a collection agency directly in Canada can be a mistake because it may not eliminate the original debt owed to the creditor and could lead to further complications. When you pay a collection agency, it does not guarantee that the payment will be reported to credit bureaus or that your credit report will be updated accordingly. Moreover, under the Bankruptcy and Insolvency Act (RSC 1985, c B-3), settling a debt might not change its legal status or discharge you from the requirement to pay it in full if it is not properly documented.

Additionally, under the Collection Agencies Act, collection agencies may not provide accurate information regarding the original creditor or the debt status. If you pay them directly without confirming the legitimacy of the debt or the agency’s authority to collect, you might end up paying a debt you do not legally owe. This misstep could further damage your credit standing rather than improve it. Always consult with a licensed insolvency trustee or a legal advisor to explore appropriate solutions and ensure that any debt repayment is done correctly.

From: OSB Helper

Related Questions to Never Pay A Collection Agency In Canada

Here are the top 5 most frequently asked questions related to the topic of why you should never pay a collection agency, based on Canadian data and current trends:

1. What happens if you don’t pay a collection agency?

You could face legal action, including lawsuits, wage garnishment, and freezing of your bank account[3][5].

2. Does paying off collections improve your credit score?

Paying off collections can improve your credit score, but the debt will remain on your credit report for six years from the date of payment[1][3][5].

3. Can collection agencies take you to court?

Yes, collection agencies can take legal action and sue you to collect outstanding debts if they are within the statute of limitations period[3][5].

4. How long can a debt be collected?

In Canada, the time limit for collecting a debt varies by province but generally ranges from 2 to 6 years[3].

5. Can paying a collection agency reset the statute of limitations?

Yes, making a partial payment to a collection agency can restart the statute of limitations period, giving the creditor more time to sue you[1][5].

If you have a question about debt see our debt questions or ask your own debt related question.

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