The Regulations As Imposed By The Collection And Debt Settlement Services Act

Collection And Debt Settlement Services Act or CDSSA regime usually regulates the role and conduct of the third party collection agencies. It also governs the delivery of debt settlement services. The primary essence of the CDSSA is to protect the consumers any sort of unfair collection practices typically followed by these agencies. This Act protects the rights of the debtors who engage with debt settlement services.

According to the Act a collection agency is defined as a person or an entity that performs the following specific duties such as:

  • Obtaining or arranging for payments of money owing to a creditor or a lender
  • Selling or offering to sell letters and forms that represent the collection system or its scheme
  • Providing debt settlement services
  • Purchasing debts from different parties that are due and collecting them and
  • Providing consultation on Collection and Debt Settlement Services Act regulation reform.

Moreover, as per the CDSSA regulation reform the services provided by a debt settlement services are also categorically defined and means the following:

  • Offering or undertaking to act as a negotiator for a debtor and making arrangements for the same with the specific creditors
  • Receiving money from the debtor for distribution to the creditors
  • Any services provided in exchange of a fee, commission or any other forms of remuneration that is charged from the debtor.

However, the CDSSA Act prohibits any person or business entity to carry on such jobs that may be deemed fit as a business of a collection agency without having any proper registration as per the Act and their conduct is regulated by the registrants. It is for this reason you are always recommended to check out the debt settlement reviews of a specific company before you actually hire their service. This will ensure that you are in the safe hands and will get the desired service without being duped and left in the same dire situation as before.

Impact on the lawyers

Just as the CDSSA governs and oversees the conduct and functioning of the debt settlement and collection agencies, the application of the Act also has serious impact and implication to the creditor lawyers as well as the law firms who engage with debt collection, litigation and extrajudicial matters.

The CDSSA regime will significantly reduce the chances of any duplication in the regulatory requirements. In addition to that the application of the CDSSA will also impact materially on the ability of the lawyers to provide their services to their clients.

It is noted that this Act will also have cross-border impact where either a collection agency or a collector and the debtor belongs to different locations. This means that the law firms that are located in other parts and act on behalf of an insolvent debtor who is located somewhere else while dealing with the creditors of that part will be subject to the CDSSA requirements as well.

Requirements and restrictions of the Act

The Act also imposes a few practice restrictions and prohibits registration under the CDSSA if the individual registrant does not have a minimum experience of two years of actually handling a collection agency business in each phase. It also prohibits someone who does not have any experience that is related and equivalent to the actual experience that the Registrar feels is necessary to pass the required written examination.

  • In absence of these qualifications, the Act does not even permit a qualified lawyer to practice and perform such actions pertaining to collection or any other services that are directly or indirectly related to insolvency debtors.
  • There are also specific conditions laid down by the Act for such practice and of the registration by the Registrar. In the absence of the above mentioned qualifications and experiences, a lawyer is exempted from even represent or act on the instructions of their clients.

According to the CDSSA there are also a few disclosure of precedents required that enumerates the following:

  • Every applicant must file their registration for a collection agency with the Registrar
  • They must include all copies of forms and letters that it intends to use while dealing with the debtors
  • They must also include copies of forms of agreement that is required in such dealings.

The license is granted for a collection agency after proper inspection and scrutiny of the documents furnished and forms after its receipt. Anything that is relevant to the inspection such as any retrieval device, data storage disks and others may also be included to provide the Registrar with all due information. However, these may be returned to you once the inspection is completed.

Apart from these there are few provisions in the CDSSA as well that may be required for the issuance of search warrants or for the seizure of any specific documents as deemed fit by the Registrar. However, as far as the files for lawyers’ applications, the Act is not so particular and strict regarding preserving confidentiality of the client as well as the solicitor-client privilege.

Debt settlement services agreement

The CDSSA also requires that the debt settlement service agreement meets the specific criteria and requirement if an agency or registrant wants to provide debt settlement services. In the agreement there must be clear mention of a few specific elements such as:

  • The fees: The CDSSA regulates payment for debt settlement services provided. It regulates the ability of the lawyer or the service provider to obtain security or accept a retainer from the debtor or client as well as the amount as fees for providing such services.
  • The service process: The agreement must also include the working process very clearly. The Regulations prohibits the lawyers from contacting a debtor in any way who denies about the debt. It also restricts the lawyer from providing a statement of claim to the debtor.

Apart from the above onus on client is another aspect that should be clear in the agreement just as it is required to include the typical and probable events of default and breach of a covenant or any material inaccuracy.

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