Know the rules for credit counsellors and debt settlement companies

Non-profit counsellors and debt settlement companies can help you set up an informal debt repayment plan. To set up the plan, the counsellor will look at your income, , and and then help you plan how to repay your creditors. They will also talk to your creditors and try to get them to agree to:

  • reduce the amount you owe
  • accept a lower rate of
  • accept payments over a longer period of time

When you make a debt repayment plan, you will have to sign a contract with the counsellor or company that is helping you. The contract will include the fees that you must pay them.

There are rules about these contracts and the fees that can be charged. The rules say that are not allowed to charge you:

  • an up-front fee for a making repayment plan, except for a $50 set-up charge
  • more than of 15% on any payments you make to your debt settlement plan
  • any fee before they have made an agreement with your creditors and made payments to those creditors

For example, if you have a debt of $1,000 and are making a monthly payment of $100:

  • the maximum set-up fee is $50
  • the maximum charge on each monthly payment is $15
  • the fee can only be charged after a payment has been made to one of your creditors

If you sign a contract with a debt settlement business or a credit counsellor, you always have the right to cancel it within ten days. You do not have to give a reason. This is called a 10-day .

It is important that you understand your contract and talk to your creditors. It is a good idea to tell your creditors that you are getting help with your finances.

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