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Credit Counselling in Canada: An Empirical Examination

Published online by Cambridge University Press:  22 July 2013

Stephanie Ben-Ishai
Associate Professor, Osgoode Hall Law School
Saul Schwartz
Professor, School of Public Policy and Administration, Carleton University


When debt becomes unmanageable, two options for a consumer debtor in Canada are: (1) enlisting the services of a bankruptcy trustee, and (2) becoming a client of a not-for-profit credit counselling agency. Each of these options is regulated differently and has public and private dimensions. At first glance, these two options might seem to illustrate the potential of multiple legal orders to better serve the public. In this paper, however, we argue, based on empirical research on the credit counselling industry, that while this pluralism has potential to facilitate debt relief in Canada, it has failed to do so. The lines between public and private options have been blurred to the point where they are difficult to discern, and the consumer debtor is ultimately disadvantaged.


Au Canada, lorsque le niveau d’endettement devient difficile à gérer, deux options s’offrent au débiteur : (1) faire appel aux services d’un syndic de faillite ou (2) devenir client d’un organisme de conseil en crédit à but non lucratif. Chacune de ces options est soumise à une réglementation différente et comporte des aspects publics ainsi que privés. À première vue, ces deux options sembleraient démontrer le potentiel présenté par des multiples ordres juridiques qui permettraient de mieux servir le public. Cependant, dans cet article, nous soutenons, à partir d’études empiriques sur l’industrie du conseil en crédit, que malgré le potentiel de ce pluralisme pour faciliter effectivement l’allègement de la dette au Canada, il a échoué à le faire. Les lignes de démarcation entre les options privées et publiques ont été brouillées à tel point qu’il est difficile de les discerner et, au bout du compte, c’est le débiteur qui en fait les frais.

Copyright © Canadian Law and Society Association / Association Canadienne Droit et Société 2013 

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1 Among the other options are negotiating with individual creditors, signing up with a for-profit credit counselling agency, or “doing nothing.” These options will be described later in the paper.

2 Atwood, Margaret, Payback: Debt and the Shadow Side of Wealth (Toronto: Anansi, 2008).Google Scholar

3 Atwood, supra note 2 at 132.

4 We made calls only to the largest agencies. A number of far smaller agencies exist across Canada and our findings may not apply to them.

5 Rainforest Alliance, Timber Legality Verification: Rainforest Alliance <>.

6 Fairtrade International, What is Fairtrade?: Fairtrade International <>.

7 Jody Freeman, “The Private Role in Public Governance” (2000) 75 NYUL Rev 543 at 552.

8 Jerry Mashaw defines “soft law” as consisting of “social accountability regimes” and being “infinitely negotiable, continuously revisable, often unspoken; oscillating between deep respect for individual choices and relentless social pressure to conform to group norms.” Mashaw, Jerry L., “Accountability and Institutional Design: Some Thoughts on the Grammar of Governance,” in Dowdle, Michael W., ed., Public Accountability: Design and Experience (Melbourne: Cambridge University Press, 2006) 115 at 125.Google Scholar

9 See Babbage, Maria, “Ornge Scandal: Ontario Liberals Got Warnings As Early As 2004,” The Huffington Post (28 May 2012): <>.Google Scholar

10 As Ian Ayres and John Braithwaite put it in Responsive Regulation: Transcending the Deregulation Debate (New York: Oxford University Press, 1991) at 11, “there is a tendency to confuse privatization and deregulation as the same issue when indeed privatization is often accompanied by an increase in regulation. . . . Privatization and deregulation can be negatively correlated social trends.”

11 Freeman, supra note 7 at 549.

12 Bankruptcy and Insolvency Act, RSC 1985, c B-3 s 178(1).

13 Bankruptcy and Insolvency Act, supra note 11 at s 67(1)(b).

14 Bankruptcy and Insolvency Act, supra note 11 at s 168(1)(a)(i).

15 Bankruptcy and Insolvency Act, supra note 11 at s 168(1)(a)(ii).

16 Bankruptcy and Insolvency Act, supra note 11 at s 66.12(5).

17 Office of the Superintendent of Bankruptcy Canada, “About Us”: Office of the Superintendent of Bankruptcy Canada <>. Also, see Canada, Office of the Superintendent of Bankruptcy Canada, Code of Ethics for Trustees in Bankruptcy (Ottawa: Superintendent of Bankruptcy Canada, 2000).

18 Stephanie Ben-Ishai & Saul Schwartz, “Bankruptcy for the Poor?” (2007) 45 Osgoode Hall LJ 471.

19 Iain Ramsay, “Interest Groups and the Politics of Consumer Bankruptcy Reform in Canada” (2003) 53 UTLJ 379 at 388, cited in Stephanie Ben-Ishai, “The Gendered Dimensions of Social Insurance for the ‘Non-Poor’ in Canada” (2005) 43 Osgoode Hall LJ 289 at 304.

20 Ramsay, supra note 19 at 388, cited in Ben-Ishai, supra note 19 at 304.

21 Iain Ramsay, “Market Imperatives, Professional Discretion and the Role of Intermediaries in Consumer Bankruptcy: A Comparative Study of the Canadian Trustee in Bankruptcy” (2000) 74 Am Bank LJ 399 at 408, cited in Ben-Ishai, supra note 19 at 304.

22 Ben-Ishai & Schwartz, “Bankruptcy for the Poor?”, supra note 18 at 480.

23 Ibid.

24 CCAs consistently claim to provide a plethora of other services in addition to repayment plans. Evidence of those other services among the large CCAs is difficult to discern.

25 Ben-Ishai, Stephanie & Schwartz, Saul, “Debtor Assistance and Debt Advice: The Role of the Canadian Credit Counselling Industry” in Sarra, Janis P., ed., Annual Review of Insolvency Law (Toronto: Carswell, 2011) 351 at 384.Google Scholar

26 Ben-Ishai & Schwartz, “Debtor Assistance,” supra note 25 at 384.

27 Ibid.

28 The following four pages are based on the account published in Ben-Ishai & Schwartz, “Debtor Assistance,” supra note 25. Estaban Uribe & Amanda Tait, “Credit Counselling: A Way Forward” The Public Interest Advocacy Centre (30 March 2007): The Public Interest Advocacy Centre <>.

29 “Metro Credit Counselling Opens Centre Tomorrow,” Globe and Mail (20 September 1966), p 11.

30 “A Decade of Debt Lies Ahead,” Globe and Mail (9 May 1980); Warren Potter, “Budget Now for Christmas,” Toronto Star (10 December 1985), ES12; Ellen Roseman, “Credit Counsellors Face Money Worries,” Globe and Mail (23 November 1991), B6.

31 Reports of the Ministry of Community and Social Services, various years.

32 Roseman, supra note 30 at B6.

33 Ibid.

34 Moses McKay, “Credit Counselling,” Globe and Mail (20 May 1968).

35 McKay, supra note 34.

36 G. E. Penfold, “Credit Counselling,” Globe and Mail (24 May 1968).

37 McKay, “Credit Counselling,” Globe and Mail (30 May 1968).

38 “Credit Advice Trimmed,” Globe and Mail (9 November 1991), A7.

39 See Ontario, Legislative Assembly, Official Report of Debates (Hansard), 35th Parl, 1st Sess, Vol A (19 December 1991) at 1450 (Hon Mrs Boyd): <>. The Minister also pointed out that cuts to federal funding for social programs made the action necessary. In addition, she hoped that “the federal bankruptcy bill” would mandate creditor contributions.

40 IDS and Credit Canada (the name under which Credit Counselling Services of Metropolitan Toronto now does business) announced their merger early in 2012, forming Credit Canada InCharge Solutions.

41 The Congressional Report on abuses by the US credit counselling industry entitled “Profiteering in a Not-for-profit Industry” distinguished between “old school” credit counsellors that had been community-based and “new school” credit counsellors that lacked any such base. See US, Profiteering in a Not-for-profit Industry: Hearing Before the Permanent Subcommittee on Investigation, 108th Cong (24 March 2004): Senate Committee on Homeland Security & Governmental Affairs < Hearing&Hearing_id=35837baf-2e06-4ab6-95fa-624fbf2aae76>.

42 The current paragraph and the following one are based on the T3010 forms filed by the CCAs mentioned. The forms for each CCA are available online: Canada Revenue Agency, Charities Listing <>.

43 E-mail communication with Margaret Johnson, President, Solutions Credit Counselling Service, (10 July 2011).

44 Kane, Michael, “Credit Advisors Open Office in Royal City,” Vancouver Sun (8 November 1996)Google Scholar.

45 Credit Counselling Services of Alberta Ltd. (CCSA), “About Us”: Credit Counselling Services of Alberta Ltd. (CCSA) <>. Part X of the BIA gives provinces the option of administering an Orderly Payment of Debts (OPD) program that allows debtors to pay all of their debts over a four- year period with future interest limited to 5 percent. Only Alberta, Saskatchewan, and Nova Scotia offer OPD programs, and they are relatively small in scope.

46 CCSA, supra note 45.

47 Ben-Ishai & Schwartz, “Debtor Assistance,” supra note 25 at 356.

48 Bouw, Brenda, “Banks Pull Out of National Credit Counselling Donation Program; Individual System Instead That Some Worry Will Be More Onerous,” Canadian Press (26 August 2009)Google Scholar, cited in Ben-Ishai & Schwartz, “Debtor Assistance,” supra note 25 at 356.

49 Re: Monroe L Beachy Debtors (June 2012, Ohio 10-62857 (Ohio Bankr). See:

50 Sean O’Connell, Credit and Community: Working Class Debt in the UK Since 1880 (Oxford: Oxford University Press, 2009).

51 Canada, Canada Revenue Agency, 2011 Registered Charity Information Return for Consolidated Credit Counselling Services of Canada, (Ottawa, Canada Revenue Agency, 2011).

52 Canada, Canada Revenue Agency, 2011 Registered Charity Information Return for InCharge Debt Solutions Canada, (Ottawa, Canada Revenue Agency, 2011).

53 Canada, Canada Revenue Agency, 2011 Registered Charity Information Return for Credit Counselling Service of Toronto, (Ottawa, Canada Revenue Agency, 2011).

54 Profiteering in a Not-for-profit Industry, supra note 41, cited in Ben-Ishai & Schwartz, “Debtor Assistance,” supra note 25 at 369.

55 We assigned each counselling session a letter (T, A, or N) and a number. Each letter corresponds to one of the persona. The number indicates the order of calling (e.g., T2 represents Tom’s second telephone counselling session).

56 Credit ratings are assigned on a scale from R1 to R9 with R9 being the worst rating. Agreeing to a DMP results in a credit rating of R7-R9. A personal bankruptcy results in an R9 credit rating for seven years after the bankrupt’s discharge. See Office of Consumer Affairs, “Credit report, credit score and credit rating”: Industry Canada <>.

57 The counsellor has switched to talking about the DMP; she had previously mentioned that at the end of DMP, Tom’s bank would offer him a secured credit card, one that requires prepayment.

58 Supra, note 56.

59 The CCAs tell clients that the fee is either 10 percent or 20 percent. However, as indicated in the discussion between “Tom” and Counsellor T2, the amount paid to the CCA was to be $1,050, and the CCA would retain $105 as a fee. Thus, the amount paid to the creditors would be $945 ($1,050-$105). The $105 fee is 11.1 percent of the $945 paid to the creditors. For that reason, we say “roughly 10 percent” rather than “10 percent.”

60 However, the Canadian Banker’s Association (CBA) has publicly supported CCAs. Following a recent television documentary on the topic, the CBA responded by requiring the CCAs to reduce the number DMPs they put debtors into and increase the amount of time spent on counselling. However, the enforcement mechanisms are unclear and our interviews suggest progress has not been made in this direction. “Putting credit counselling to the test” Marketplace (19 March 2010) (video): Canadian Broadcasting Company <>.