The Adverse Effects of the Debt Advisory Marketplace on the Insolvency System

This position paper supersedes the 2017 "Review of Licensed Insolvency Trustee business practices in relation to administration of consumer insolvencies” and the 2006 position paper on “Referral Agreements between Trustees and a Third Party”.

Contents

Observations on the Debt Advisory Marketplace

The Office of the Superintendent of Bankruptcy (OSB) has observed that some Licenced Insolvency Trustees (LITs) have entered into business relationships with unregulated individuals or businesses, broadly categorized as debt advisors or lead generators, that conflict with the BIA, Code of Ethics for Trustees or Superintendent’s Directives and negatively impact the integrity of the insolvency system.

It is not contrary to the BIA for a debtor to independently, and based on complete and accurate information, seek advice on how to manage their debt. Providing debt management advice to individuals is legal, both federally and provincially. Concerns arise when lead generators or debt advisors attract individuals to the insolvency system based on misleading information or LITs form relationships with these entities that conflict with the BIA , Code of Ethics for Trustees or Superintendent’s Directives.

Some debt advisors imply that they can directly relieve individuals of their debt burden and its associated repercussions. Their business models focus exclusively on guiding consumers to federally regulated insolvency proceedings, typically consumer proposals. They do not consider the debtors’ financial circumstances or other legislative and non-legislative debt relief options. 

Definitions

The terms ‘debt advisor’, ‘debt consultant’, ‘credit counsellor’, and ‘lead generator’ are unreliable to differentiate the behaviour of participants in the debt advisory marketplace. These terms are not regulated or trademarked, and anyone can use them to offer debt advice regardless of professional qualifications or training. This document will categorize participants in the debt advisory marketplace into two groups based on their business model: debt advisors and lead generators.

Debt advisors:  Individuals or organizations, other than LITs, who in return for payment or consideration, provide services or advice about any BIA matter including bankruptcy or consumer proposals. For example, they may collect information and advise debtors on BIA matters, act as advocates for debtors, be a point of contact for LITs, or refer files to them. This includes those who benefit from selling various services to insolvent persons, before, during, or after a BIA insolvency filing. These services may include advocacy, preparing information for debtors in relation to insolvency proceedings, representation, restructuring services, credit rebuilding, loans in various forms, or insolvency filing insurance.

Lead generators:  Individuals or organizations who market debt relief services to potential debtors and provide debtor contact information to LITs for payment or other consideration. Some lead generators do not verify the financial status of the potential debtor, while others collect basic financial information. Typically, these entities do not charge the potential debtor. Their primary client is normally the LIT and, unlike debt advisors, their role typically ends when the contact information is forwarded to the LIT.

Gaps in Regulation

Debt advisors’ activities are not regulated under any industry-specific provincial or federal legislation. As a result, there are no education or experience requirements, no standards on services provided, and no caps on the fees that debt advisors may charge. While individuals or companies that directly settle debt may fall under provincial debt-settlement legislation, those who only provide debt advice are not covered in most provinces.[1] Moreover, provincially regulated debt settlers may also engage in business practices and behaviours of concern outside the scope of their regulated activities.

It is worth noting that the profit orientation of an organization—whether for-profit or not-for-profit—does not dictate the quality or ethicality of its business practices or behaviors. Non-profit organizations are different from charitable organizations, which operate under a distinct set of regulations and objectives.

Some debt advisors may claim to be certified by a voluntary self-regulating accreditation body. However, the effectiveness of such accreditation depends on the reputation and legitimacy of the organization. The debt advisory marketplace does not have a certification body that is widely recognized, reputable, or enforces consistent standards across the industry.  

Role in the Insolvency System

The BIA establishes LITs as the only professionals who may administer a bankruptcy or consumer proposal. LITs must be honest and impartial according to the Code of Ethics for Trustees. As part of their duties, LITs must provide complete and accurate information to debtors about all the debt options, including non-BIA options, based on a thorough assessment.

Debt advisors may make claims that are false and misleading. They may position themselves as advocates for the debtor, implying that without their intervention, the debtor will not be treated fairly, or that the LIT will only represent the creditors’ interests.

Debtors do not need a debt advisor to access an LIT and make an insolvency filing under the BIA. Debtors can discuss their financial situation directly with an LIT and LITs generally offer a free initial consultation. LITs must meet mandatory education, experience, and licensing requirements. Their fees are regulated and debtors can file complaints with the OSB if they have concerns with an LIT.

Why it Matters

Debt Advisor Influence over LITs

Financial incentives to work with debt advisors, and the market share that they control, may influence the professional judgment of some LITs where debt advisors threaten to stop working with LITs who refuse to accept conditions, such as proposed payment amounts for consumer proposals. In 2022, debt advisors provided financial advice on approximately 22% of consumer proposals. The distribution varied substantially across Canada, with some provinces having up to 40% of consumer proposals with advice provided by debt advisors. 

Cost to Debtors

Debt advisors may impose significant costs on debtors. The OSB collects data on financial advice and the corresponding fees paid by debtors within 6 months prior to an insolvency filing and, in 2022, started collecting data on the amount committed to be paid post-insolvency[2].  Fees paid to debt advisors before filing amounted to approximately $13.8 million in 2021 and $8.3 million in 2022. The fees committed to be paid post-filing were approximately $7.6 million in 2022.

Consulting a debt advisor may also delay the debtor’s opportunity to seek the right solution for their financial challenges.

Cost to Creditors

The significant costs imposed on debtors through debt advisor fees may reduce returns to creditors. The timing and structure of their fees generally mean they are prioritized over the debtor’s other creditors. In addition, the OSB is aware of instances where a debt advisor has encouraged debtors to charge the fees to their credit card knowing that this debt will be included in the insolvency filing. The practice allows the debt advisor gets paid but leaves the credit card issuers to absorb the debt.

Duplicating Services

Debt advisors justify their fees as necessary for the cost of advisory meetings, advice, document gathering, preparation of the consumer proposal, and, in some cases, financial literacy services. The fees paid to debt advisors for advice and preparation of the proposal are separate from, and in addition to, the regulated fees paid to the LIT for their services. LITs are required by the BIA and the Superintendent’s Directives to provide debt advice, assess the debtor’s financial situation, prepare and file the insolvency proceeding, offer insolvency counselling and distribute payments to creditors with funds paid to them.

Supplemental Products and Services

After the approval of a consumer proposal, some debt advisors offer loans to pay out consumer proposals as well as other new credit instruments, such as credit repair services and credit rebuilding loans. Debt advisors may imply these products and services are required for an insolvency filing. These products may further increase the debtor’s costs and negatively impact their financial rehabilitation. The services and products offered by debt advisors can amount to thousands of dollars in additional costs for debtors.[3]  

Issues and Positions

The debt advisory and lead generation marketplace is complex and multi-faceted. This section will describe the OSB’s positions on six areas of concern in the debt advisory marketplace.

1. Debt Advisors Acting as or Misrepresenting Themselves to be LITs

Context

The OSB has noted that some lead generators and debt advisors state or imply that they are LITs or have the ability to commence an insolvency proceeding on the debtor’s behalf. For example, debt advisors have stated they can “…settle debts under the insolvency act” or that “consumer proposals can only be filed by a Licensed Insolvency Trustee such as [debt advisor’s name]”, or more generally that a consumer proposal is a service they provide. By relying on such misrepresentations, debtors may end up paying for services that are unnecessary and duplicative of those provided by the LIT , to the detriment of both the debtor’s ability to pay, their financial rehabilitation, and the returns to creditors.

Considerations

Paragraph 202(1)(a) of the BIA states that:

A person who (a) not being a licensed trustee, does any act as, or represents himself to be, a licensed trustee, […] is guilty of an offence punishable on summary conviction and is liable to a fine not exceeding five thousand dollars, or to imprisonment for a term not exceeding one year, or to both.

In addition, an individual or company falsely claiming they are LITs may be contravening subsection 52(1) or paragraph 74.01(1)(a) of the Competition Act, and provincial consumer protection laws that prohibit false, misleading, or deceptive representations.

Subsection 52(1) of the Competition Act states that:

No person shall, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever, knowingly or recklessly make a representation to the public that is false or misleading in a material respect.

Subsection 74.01(1)(a) of the Competition Act states that:

A person engages in reviewable conduct who, for the purpose of promoting, directly or indirectly, the supply or use of a product or for the purpose of promoting, directly or indirectly, any business interest, by any means whatever […] (a) makes a representation to the public that is false or misleading in a material respect.

Position

The BIA establishes LITs as the only professionals who may be appointed as trustee or administrator[4] in a BIA insolvency proceeding. To act as or represent oneself as an LIT while not being licensed is deceptive, unethical, and constitutes a criminal offence.

This can create a false impression of expertise and authority, leading consumers to accept the debt advisor's advice and services based on false credentials or authority. This misrepresentation undermines the integrity of the insolvency profession and can have serious consequences for individuals seeking debt advice, as they may not receive accurate information, appropriate guidance, or the recourse offered by working with a licensed professional.

202(1)(a) of the BIA has two components:

  • Representing oneself as a Licenced Insolvency Trustee:
    • The OSB interprets “representing oneself to be a trustee” as an individual or company either explicitly claiming to be an LIT , implicitly claiming they have the ability or authority to file an insolvency proceeding or that they can provide access to the insolvency system. This includes any situation where debt advisors indicate that they provide consumer proposals as a service.
  • Acting as a Licenced Insolvency Trustee:
    • The OSB interprets “acting as an LIT ” to include situations when, for the sole purpose of filing an insolvency, individuals or companies perform any act that LITs are required to do under the BIA , unless that individual or company is delegated those duties by the LIT under the Directive on Delegation on Tasks. This includes conducting the debtor assessment, completing prescribed insolvency forms, chairing meetings of creditors, etc.

The OSB encourages all stakeholders to report potential BIA paragraph 202(1)(a) concerns to the OSB through the OSB’s Statutory Complaints portal, Competition Act issues through the Competition Bureau’s Complaint Form, and violations of provincial consumer protection legislation to the relevant authority.

2. Lead Generation or Soliciting Individuals into an Insolvency

Context

The OSB has noted that some lead generators advertise debt relief services and sell leads of financially distressed individuals to LITs.

The OSB has also noted attempts by LITs to circumvent restrictions on paying for leads by characterizing lead-generation expenditures as advertising, sponsorship, donations or entering into indirect payment or compensation arrangements. For example, the LIT may pay a lead generator to send the referrals to a debt advisor, and the debt advisor will try to convert the lead before sending it to the LIT.

Lead generation is different from advertising or marketing services because it is not done under the LIT’s name. Lead generation often uses fictitious companies and provides misleading information about the insolvency system and process. Lead-generation agreements with LITs may attempt to render regulated advertising activities unregulated through the use of non-licensed entities.

The OSB has been made aware of some debt advisors and lead generators aggressively advertising debt relief through an insolvency proceeding and using high-pressure sales tactics to persuade an individual to make an insolvency filing. These tactics may result in the debtor making an insolvency filing without a complete understanding of the consequences.

Considerations

There is an important distinction between lead generation and marketing or advertising on the LIT’s behalf. LITs may procure marketing or advertising services from third parties. With marketing or advertising services, the advertising is in the LIT’s name, the accountabilities are clear and aligned with the rules set out in Directive 33, Trustee Designation and Advertising. LITs must ensure that their advertisements are:

  • demonstrably true, accurate, and verifiable.
  • not misleading, confusing or deceptive, or likely to mislead, confuse or deceive
  • are in the best interests of the public and consistent with a high standard of professionalism.

The Bankruptcy and Insolvency General Rules (the Rules) explicitly prohibit LITs from paying for referrals.

Section 49 states:

Trustees shall not, directly or indirectly, pay to a third party a commission, compensation or other benefit in order to obtain a professional engagement or accept, directly or indirectly from a third party, a commission, compensation or other benefit for referring work relating to a professional engagement.

Section 51 states:

Trustees shall not, directly or indirectly, advertise in a manner that (a) they know, or should know, is false, misleading, materially incomplete or likely to induce error; or (b) unfavourably reflects on the reputation or competence of another trustee or on the integrity of the bankruptcy and insolvency process.

The nature of the advertising and communication from some debt advisors and lead generators may be considered soliciting or canvassing under 202(1)(f) of the BIA.

Paragraph 202(1)(f) of the BIA states that:

A person who: directly or indirectly solicits or canvasses any person to make an assignment or a proposal under this Act, or to file an application for a bankruptcy order…  …is guilty of an offence punishable on summary conviction and is liable to a fine not exceeding five thousand dollars, or to imprisonment for a term not exceeding one year, or to both.

According to R. v. Ratelle (1994), 202(1)(f) of the BIA is intended to prevent:

“[…] an organized campaign in search of victims to sacrifice on the altar of authorized assignment. The trustees are on the look out day and night; they have recruiting agents and the moment they have an inkling of a person seeming somewhat financially embarrassed, they find means of meeting their intended victim, having them interviewed, proposing all kinds of schemes, verbally assign so to speak and finally convince their victim that he had better make a clean slate of it and begin life anew, and wipe out all obligations contracted up to date. The debtor first listens, then on the spur of the moment or feeling somewhat depressed gives in, allows himself to be convinced and signs an authorized assignment.”

Position

Lead generation activities carried out by a third party are a form of indirect advertising on the part of the LIT. LITs are accountable for any advertising content provided, directly or indirectly, on their behalf.

LITs must not engage in any practice that would obscure payment for referrals.

LITs must not, directly or indirectly, pay for referrals, leads or information of any kind on debtors, as this is contrary to Rule 49 of the Code of Ethics for Trustees.

Any advertising conducted on behalf of an LIT must comply with the LIT’s advertising rules, including those set out in Directive 33, Trustee Designation and Advertising. This includes identifying the LIT who is running the advertisement and the use of the LIT designation.

The OSB considers any attempt to pressure debtors into filing an insolvency as contrary to subsection 202(1)(f) of the BIA. The decision to file an insolvency should be solely the debtors’.

3. Appearance of Undue Influence over LITs and Behaviours that Compromise the Ability of LITs to Effectively Administer Estates

Context

The OSB has noted that some LITs may rely on referrals from debt advisors to sustain or increase their business. Some LITs licence extension requests may be for the sole purpose of working with a debt advisor in a specific geographic area. 

LITs may be inappropriately influenced by debt advisors as a means to avoid losing referrals. Such decisions may not be in the best interest of stakeholders and may undermine the fairness and impartiality expected of an LIT.  

For example, debt advisors have coordinated with some LITs to set a shorter term for proposals, often between 50 to 57 months, while a typical consumer proposal lasts for 60 months. The debt advisor will then receive monthly payments that equal the difference between the proposal length and a typical 60-month proposal. In this scenario, the LIT is facilitating a preferential payment to the debt advisor over all other creditors.

Considerations

There is nothing improper, in and of itself, with an LIT receiving a referral. Regardless of whether a debtor approaches a debt advisor first or not, those who qualify should always have access to LIT services to commence an insolvency proceeding. However, LITs must be cognisant of their unique role in the insolvency system and must always meet the highest standards in terms of exercising their professional judgment and fulfilling their duties under the law. There can be a real or perceived conflict or appearance of influence and bias when referrals or leads are received from debt advisors.

One of the core responsibilities of an LIT is to conduct a complete and accurate assessment of the debtor’s financial situation, which is subject to strict regulatory requirements. LITs who do not faithfully perform their statutory duties and instead rely on debt advisors for business advantage, do so to the detriment of the integrity of the insolvency system and risk compliance consequences.

Section 39 of the Rules states:

Trustees shall be honest and impartial and shall provide to interested parties full and accurate information as required by the Act with respect to the professional engagements of the trustees.

Section 44 of the Rules states:

Trustees who are acting with respect to any professional engagement shall avoid any influence, interest or relationship that impairs, or appears in the opinion of an informed person to impair their professional judgment.

Position

When LIT’s routinely accept referrals from debt advisors, LITs put themselves in situations that may appear to influence their professional judgment and impartiality.

Public trust is essential for the integrity of the insolvency system and the image of the LIT profession as a whole. The greater the proportion of an LIT’s inventory that is sourced from a debt advisor, the more it can be argued that they are not impartial but other factors may also indicate impaired professional judgment. The OSB considers several actions by the LIT as evidence of influence, including:

  • Failing to accurately determine the debtor’s liabilities at the time of the filing, especially the liabilities to debt advisors.
  • Failing to obtain independent valuations of a debtor’s major assets and instead accepting valuations from debt advisors or related companies.
  • Neglecting to investigate payments made by a debtor to a debt advisor before filing an insolvency.
  • Inappropriately relying on information collected and compiled by debt advisors.
  • Using the terms of a consumer proposal provided by debt advisor without independently determining fair and reasonable terms. This includes proposal terms that are structured to favour post-filing payments to debt advisors.
  • Disclosing confidential information about an insolvency to debt advisors without a valid reason for or benefit to the estate.
  • Taking instructions from the debt advisor.
  • Having anomalous consumer proposal filing rates, returns to creditors, terms or failure rates.
  • Owning, investing or having an advisory interest in debt advisory or lead generation businesses. 

This non-exhaustive list of scenarios violates several sections of the Code of Ethics including sections 36, 39, 40, 41, 44, 47, 49, and 50 as well as Section 95 of the BIA.

4. Lack of Transparency for Debtors on the Role of the LIT and Debt Advisors

Context

The OSB has noted that some LITs may, intentionally or by omission, mislead debtors about the role of debt advisors, giving the impression that debt advisors and their fees are a necessary part of an insolvency proceeding.  This can create a false perception that the involvement of a debt advisor is an expected part of the insolvency process. Additionally, it can reduce trust in the insolvency system and raise questions about the integrity and motives of LITs.

Debt advisors, like any other business, charge fees for their services. If debtors are misled into believing they need their assistance to file an insolvency, they may incur unnecessary expenses or continue to pay unnecessary fees. Also, it may increase the likelihood of a negative outcome of their proposal as well as reducing returns for creditors.

Many debtors lack knowledge of the insolvency system and without professional guidance from the LIT may be unaware that by paying a debt advisor they are reducing their ability to pay creditors and satisfy the terms of a proposal. Payments to debt advisors may result in lower proposal amounts leading creditors to potentially reject the proposal or delay its acceptance.

Considerations

Section 39 of the Rules states:

Trustees shall be honest and impartial and shall provide to interested parties full and accurate information as required by the Act with respect to the professional engagements of the trustees.

Section 38 of the Rules states:

Trustees shall not assist, advise or encourage any person to engage in any conduct that the trustees know, or ought to know, is illegal or dishonest, in respect of the bankruptcy and insolvency process. 

Section 36 of the Rules states:

Trustees shall perform their duties in a timely manner and carry out their functions with competence, honesty, integrity and due care.

Position

LITs must be independent, transparent, honest and avoid misleading or confusing debtors, intentionally or by omission, about the role of the LIT and that of debt advisors.

The LIT should explain to the debtor that any non-excluded debts and liabilities, present or future, which they have at the time of insolvency, including those owed to a debt advisor, are subject to a stay of proceedings and will be released upon successful completion of the insolvency proceeding. Additionally, the LIT should advise the debtor that reaffirming a pre-filing debt owed to a debt advisor, either by continuing to make payments or by express agreement, may not be in the debtor’s best financial interest. A debt advisor’s pre-filing claim should appear on the Statement of Affairs and be released through the insolvency proceeding.

LITs must provide their expert opinion and outline potential solutions tailored to the debtor’s specific financial issues. This includes providing accurate and unbiased information on the role of debt advisors and explaining the impact of future payments to debt advisors on the acceptance and viability of a consumer proposal. This allows debtors to make informed decisions and prevent unnecessary expenses and promotes the integrity of the insolvency system.

Some actions taken by LITs may mislead debtors about the roles of the LIT and the debt advisor. For example:

  • Sharing a physical office may confuse debtors about the role of the LIT and the debt advisor. This may also raise concerns about the indirect exchange of consideration through rent payments.
  • Employing individuals who also work with a debt advisory firm. This may also raise concerns about the indirect exchange of funds or consideration through the payment of an employee’s salary.
  • Contracting out insolvency work to debt advisors.
  • Implying that the debt advisor has a defined role in the insolvency process to represent the debtor or is a required or expected part of an insolvency filing.
  • Failing to inform debtors of their rights when it comes to the existing contract with the debt advisor and any future obligations the debtor owes the debt advisor at the time of filing.
  • Communicating with debtors through debt advisors or treating debt advisors as agents of debtors without clear and explicit authorization from the debtor.

5. Lack of Transparency for Creditors on Debt Advisor Fees and Future Financial Obligations

Context

The OSB has observed that debtors and LITs often fail to list the debts owed to the debt advisor on the statutory documents, providing incomplete disclosure to creditors.  As a result, creditors may lack accurate information on fees paid to debt advisors prior to the insolvency or amounts committed to be paid post-insolvency filing.

Considerations

If fees paid to debt advisors are not fully investigated and disclosed to creditors, they cannot make an informed decision on consumer proposals. LITs who are aware of debtors’ arrangements with debt advisors and submit documentation without listing debt advisors’ fees or do not consider those fees in the context of the fairness and reasonableness of the proposal violate several sections of the Code of Ethics, including Rule 45.

Section 45 of the Rules states:

Trustees shall not sign any document, including a letter, report, statement, representation or financial statement that they know, or reasonably ought to know, is false or misleading, and shall not associate themselves with such a document in any way, including by adding a disclaimer of responsibility after their signature.

Section 21 of the BIA states:

The trustee shall verify the bankrupt’s statement of affairs referred to in paragraph 158(d). 

(See also BIA ss. 66.4(1))

Subsection 66.13(2) of the BIA states:

An administrator who agrees to assist a consumer debtor shall (a) investigate, or cause to be investigated, the consumer debtor’s property and financial affairs so as to be able to assess with reasonable accuracy the consumer debtor’s financial situation and the cause of his insolvency.

Sub Section 66.14(a)(i) and(i) of the BIA requires the administrator to prepare and file a report regarding:

“The administrator’s opinion as to whether the consumer proposal is reasonable and fair to the consumer debtor and the creditors, and whether the consumer debtor will be able to perform it.”

Position

LITs have an obligation to investigate the financial affairs of debtors and accurately report information, especially on financial advice from debt advisors.

The LIT has a statutory responsibility to:

  • Thoroughly investigate the debtor’s financial affairs and disclose any information that could impact the fairness or reasonableness of a consumer proposal to creditors. This will enable creditors to make a fully informed decision on the proposal. In the context of the debt advisory marketplace, this means that LITs must fully investigate the fees paid to debt advisors.
  • Include any amounts owing for services provided before the filing of the consumer proposal on the Statement of Affairs to ensure the stay of proceedings is respected.
  • Provide their expert opinion to the creditors on whether the proposal is fair and reasonable. Their opinion must address the impact of ongoing obligations to debt advisors on the debtor’s ability to complete the proposal and the reduced return to creditors as a result.
  • Include any payment that the debtor makes on a pre-filing debt owed to a debt advisor or obligations to make payments for post-filing debt advisory services on the Monthly Income and Expense Statement. LITs should include this amount under the other payments section of the monthly discretionary expenses.

6. Responsibilities of LITs when Debt Advisors are Acting Illegally, Dishonestly, or Attempting to Influence the LITs Ability to Administer Estates

Context

LITs are engaging with debt advisors or lead generators in situations where the LIT knows, or ought to know, that debt advisors or lead generators are engaging in behaviour that is contrary to the BIA, Competition Act or provincial consumer protection legislation.

Considerations

It is understood that in some circumstances, LITs cannot control who refers debtors to them. LITs are not expected to refuse service to a debtor for the sole reason that they received financial advice from a debt advisor.  However, LITs must take steps to minimize the influence of unscrupulous debt advisors or lead generators on the insolvency administration to maintain the public trust in the insolvency system.

Section 34 of the Rules states:

Every trustee shall maintain the high standards of ethics that are central to the maintenance of public trust and confidence in the administration of the Act.”

Section 38 of the Rules states:

Trustees shall not assist, advise or encourage any person to engage in any conduct that the trustees know, or ought to know, is illegal or dishonest, in respect of the bankruptcy and insolvency process.

Position

LITs must avoid knowingly engaging with debt advisors or lead generators who violate the BIA , the Competition Act or provincial consumer protection laws.

LITs should not ignore the nature or conduct of individuals or entities from whom they receive referrals. They are expected to promptly report any non-compliance to the relevant regulator(s) and inform the referred debtor(s).  Failure to do so, while continuing to benefit from the referrals of non-compliant entities does not align with the high standards of ethics that are central to the maintenance of public trust and confidence in the administration of the BIA.

Examples of activities which LITs ought to be aware of include:

  • Debt advisors advertising that they are LITs, that they can provide access to the insolvency system or that they reduce or eliminate debt through a government program (especially where the debt advisor’s primary function is to refer debtors to an LIT).
  • Lead generators that solicit or canvas individuals into an insolvency.
  • Debt advisors coaching debtors on how to circumvent the requirements of the BIA.
  • Debt advisors providing false or misleading information to debtors on the insolvency system or process, particularly where it may adversely influence the debtor’s decision-making process.

Information on problematic practices with debt advisors can be submitted through the OSB’s Statutory Complaints Portal, through the Competition Bureau’s Complaint Form, and through provincial consumer protection processes.

Conclusion

The OSB will specifically target the issues identified in this position paper and any other matters, as they arise, if they are contrary to the regulatory framework. To address non-compliance, the OSB has launched, and will continue to initiate, professional conduct investigations where LITs contravene the BIA, the Rules, or the Superintendent’s directives. The OSB will consider all available options to address non-compliance including licensing measures, civil and criminal proceedings. Additionally, the OSB will continue to collaborate with other federal and provincial regulators to prevent and address non-compliance and the negative impacts of debt advisors on the integrity of the Canadian insolvency system, on individual debtors and on creditors.

Footnotes

[1] Under the Consumer Protection Act of Quebec debt advisors may be considered “debt settlement service merchants” and, if so, would be subject to the provisions set out in Division VIII of the Act. These provisions govern both the contractual relationship between the debtor and the merchant, as well as the business practices of the merchant.

[2] This information is found on the assessment certificate, required by Directive No. 6R5, Assessment of an Individual Debtor.

[3] See Position paper on LITs Promoting and Facilitating Loans to Debtors.

[4] Other than a person appointed or designated by the Superintendent to administer consumer proposals: BIA paragraph 66.11(b).

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