What are Debt Management Programs?
In Canada, we are unaware of any firms that advertise being credit counsellors that offer credit education and budgeting techniques. Instead, these firms offer individuals what they refer to as a “Debt Management Program”. In British Columbia, Debt Management Programs can only be offered by firms registered as Debt Repayment Agents under the Business Practices and Consumer Protection Act of British Columbia. These firms are registered under the same legislation as debt collectors. The biggest difference is they can pool your funds to be distributed to multiple creditors.
Debt Management Programs are not a legislated process under Canadian law. Creditors do not have to participate; creditors can agree to the plan and then later cease to continue. Furthermore, they can, at any time, continue with legal actions. The Federal Government does not deal with Debt Repayment Agents for federal debts; so, if you owe money for income tax or student loans, a Debt Repayment Agent cannot help.
In addition, using the services of a Debt Repayment Agent will not necessarily improve your credit rating, deter the efforts of a creditor to collect a debt, or prevent legal action to recover the debt, including garnishment of your wages.
A Debt Management Program does not necessarily allow for a person’s debts to be compromised, nor does it necessarily protect the debtor from harassment, continued collection efforts, or legal actions by creditors not participating or ceasing to participate in the program. A Debt Management Plan also has a fee to the Debt Repayment Agent. This fee is in addition to the amount of your debt. Under the Business Practices and Consumer Protection Act, this fee must not be greater than 15% of the debt. In most cases, debtors will pay the debt in full over 5 years plus an additional 15%.