What is a Collection?

In Canada, a Collection occurs when a lender (such as a bank, cell phone company, or credit card issuer) stops trying to collect an overdue bill internally and either transfers it to a recovery department or sells the debt to a third-party agency.  Once an account moves to collections, it is no longer a standard “bill”—it is a legal file specifically flagged for debt recovery.

Collection Process

  • The Transfer: Typically after 90–180 days of non-payment, the original creditor “charges off” the debt and assigns it to an agency.

  • Written Notice: In Ontario, an agency must send you a written notice (by mail or email with your consent) before they start calling. This must include the creditor’s name and the amount owed.

  • The 6-Day Rule: Collectors must wait six days after sending the notice before they are legally allowed to call you to demand payment.

  • The Credit Hit: The agency reports a “Collection” status to Equifax and TransUnion, which can immediately drop your credit score.

Rights in Ontario

Collection agencies are strictly regulated under the Collection and Debt Settlement Services Act. They are prohibited from:

  • Harassment: They cannot use threatening, profane, or abusive language.

  • Prohibited Hours: They may only call between 7 AM – 9 PM (Mon–Sat) and 1 PM – 5 PM on Sundays. They cannot call on statutory holidays.

  • Excessive Contact: In Ontario, they cannot contact you more than 3 times in a 7-day period (including answered calls, voicemails, and emails) without your permission.

  • Contacting Others: They can only contact family, friends, or your employer to confirm your contact info or employment status—they cannot discuss your debt with them unless that person co-signed the loan.

Impact on Credit Score

A collection is one of the most damaging marks on a credit report, often resulting in an R9 rating (the lowest possible).

  • Duration: It stays on your credit report for 6 years from the date of the first missed payment (delinquency).

  • Paying it Off: Settling a collection doesn’t remove it from your history, but it updates the status to “Paid Collection.” While this doesn’t immediately fix your score, it looks significantly better to future mortgage lenders than an “Unpaid Collection.”

2-Year Rule

n Ontario, there is a legal time limit for a creditor to sue you for unsecured debt:

  • The 2-Year Window: Generally, a creditor has 2 years from the date of your last payment or written acknowledgement to take you to court.

  • After 2 Years: The debt is “statute-barred.” They can still call and ask for the money, but they cannot sue you, garnish your wages, or seize your assets.

  • Warning: Making a small payment “to be nice” or acknowledging the debt in writing restarts this 2-year clock, giving them a fresh window to sue.