In Ontario, collection agencies act on behalf of creditors to recover unpaid debts from individuals or businesses. Their authority to collect is derived from either a direct assignment of the debt or a contractual agreement with the creditor. These agencies are governed by the Collection and Debt Settlement Services Act (CDSSA), which outlines how they may communicate with debtors, the information they must provide, and the restrictions placed on their methods of contact.

When informal collection efforts fail, agencies frequently turn to the Small Claims Court—a branch of the Superior Court of Justice—to obtain a legally enforceable judgment. This process allows creditors or their agents to formalize the debt and seek repayment through legal means such as garnishment or seizure of assets.

Commencing a Claim in Small Claims Court

A collection agency initiates an action in Small Claims Court by filing a Plaintiff’s Claim (Form 7A) under the Rules of the Small Claims Court, O. Reg. 258/98. The claim must set out the amount of money allegedly owed, the basis for the claim, and any supporting documentation such as invoices, loan agreements, or statements of account.

Once filed, the court issues a Summons to the Defendant, which must be served in accordance with Rule 8.01. Proper service is essential to ensure the defendant receives notice of the proceeding. Failure to respond within 20 days allows the plaintiff to request a default judgment, granting the agency the right to pursue enforcement without a hearing.

Collection agencies are often represented by paralegals experienced in debt recovery, ensuring procedural compliance and efficient handling of court documents. This professional representation is crucial, as procedural errors can delay proceedings or lead to dismissal of the claim.

Common Defences to Collection Agency Claims

Individuals who receive notice of a Small Claims action initiated by a collection agency have several potential defences. Some of the most common include:

1. Lack of Proof of Assignment: A collection agency must provide documentation proving the debt was lawfully assigned or transferred to it from the original creditor. Without valid proof, the claim may be dismissed.
2. Incorrect Amount Claimed: Disputes often arise over the amount owed, particularly where interest, late fees, or administrative charges have been added without contractual authority.
3. Expired Limitation Period: Under Ontario’s Limitations Act, 2002, a claim must generally be brought within two years from the date the debt was discovered or reasonably discoverable. If the limitation period has expired, the defence of limitation can bar the claim entirely.
4. Identity or Mistaken Debtor: Errors in account assignment or record-keeping sometimes result in actions being filed against the wrong person.
5. Breach of the Collection and Debt Settlement Services Act: Aggressive or improper collection practices may be challenged if they violate provincial consumer protection legislation.

A defendant who disputes the claim must file a Defence (Form 9A) within the prescribed timeframe to prevent default judgment. Tim at MTS Paralegal Services assists clients in preparing and filing such defences to ensure compliance with procedural requirements and protection of their rights.

Mediation and Settlement Opportunities

Small Claims Court in Ontario encourages resolution through negotiation and settlement. Many cases are referred to mediation before proceeding to trial. Mediation allows both parties to discuss the dispute in a structured environment with the help of a neutral mediator.

Settlement can often prevent further legal expenses and minimize the impact of a judgment on a debtor’s credit record. Tim at MTS Paralegal Services frequently advises clients during mediation, helping them reach practical agreements that balance financial responsibility with fairness.

Enforcement of Judgments

Once a collection agency obtains a judgment, it gains access to several enforcement mechanisms under the Courts of Justice Act. These include:

• Wage Garnishment: A court order directing an employer to deduct a portion of the debtor’s wages until the judgment is satisfied.
• Bank Garnishment: Freezing and seizing funds held in a debtor’s bank account.
• Writ of Seizure and Sale: Permitting the sheriff to seize and sell non-exempt assets belonging to the debtor.

Before enforcement can occur, the agency must file a Notice of Garnishment (Form 20E) or other relevant documents, accompanied by an affidavit confirming the outstanding balance. The court ensures procedural fairness, allowing debtors to bring motions to vary or set aside orders if necessary.

These enforcement steps can have long-term financial implications, including damage to credit ratings and additional legal costs. Legal advice from an experienced paralegal such as Tim at MTS Paralegal Services is essential in navigating these proceedings effectively.

Legal Guidance for Responding to Collection Agency Claims

Receiving a claim from a collection agency can be stressful and confusing. Many individuals are uncertain about their rights, the validity of the claim, or how to respond appropriately. Failure to act within the prescribed time limits can lead to automatic judgment, further enforcement, and increased financial burden.

Tim at MTS Paralegal Services, located in Kitchener, Ontario, provides professional representation in Small Claims Court matters involving debt collection. With a strong understanding of the procedural and evidentiary requirements under Ontario law, Tim assists clients in reviewing the legitimacy of claims, drafting proper defences, and negotiating settlements when appropriate.

For individuals or businesses facing legal action from a collection agency, early legal advice is the most effective way to protect rights and minimize exposure.

For professional assistance, contact Tim at MTS Paralegal Services — Small Claims Court, it’s what we do. Visit mtsparalegalservices.com to learn more.