Consumer and Non-Profit Law
Creditors' Rights
Creditor: an individual who gives credit.
Debtor: an individual to whom credit is given.
What Rights Do Creditors Have?
A lender giving you credit believes that you will live up to the terms of the agreement. Since you are borrowing the creditor's money the creditor has rights in the money borrowed. The creditor has a right to expect you to pay as agreed. The creditor can also require immediate repayment of the loan if you miss a payment(s).
When May a Creditor Seize Your Property?
A creditor will usually only seize property after all reasonable efforts to receive payments have failed. If a debtor fails to pay a secured debt, such as a conditional sales contract or a chattel mortgage, the creditor may take and sell the goods given as security without a Court judgment. The conditions on which a creditor may seize property are written into each contract.
- In a conditional sales contract, the creditor owns the property bought on credit until the debtor makes the final payment. The creditor is, therefore, taking back his/her own goods.
- In a chattel mortgage, the debtor signs a contract allowing the creditor to seize certain goods if the debtor fails to make proper payments.
- With an unsecured debt, the creditor needs a Court Order from the Court of Queen's Bench of New Brunswick to seize any property and use it to pay the debt. This order may allow the Sheriff to take and sell some of the property at public auction to cover the debt and the costs of holding the sale. A creditor cannot seize certain necessities such as basic furniture, appliances and tools of a trade.
What May a Creditor Do to Collect a Debt?
If a borrower misses a payment the creditor can demand payment by giving the debtor notice of the amount owing, including interest charges, and the date of the repayment. If the debtor still does not make a payment there are several other collection methods a creditor may use.
- The creditor may hire a collection agency. Creditors use these agencies when the debtor refuses to pay, avoids the creditor's demands or becomes hard to find. With some creditors this procedure is automatic. As soon as a payment is missed a collection agency is called. Collection agencies and collectors must be licensed by the Province of New Brunswick.
- Often credit agreements will allow the creditor to seize and sell goods bought on credit without taking Court action if the debtor fails to make proper payments. Creditors refer to these arrangements as "secured debts".
- The creditor may take legal action in the Court of Queen's Bench of New Brunswick. If the creditor wins the case the debtor may be ordered to repay the debt according to his/her ability. The Court can also order the Sheriff to seize and sell some of the debtor's property to pay the debt.
What Rights do Collection Agencies Have?
- A collection agency or collector can collect only the money owed and no additional money.
- A collection agency or collector cannot charge a telephone call to you when the call is to demand money.
- A collection agency or collector cannot include your spouse in any action about repayment when it is clear your spouse is not liable for such a debt.
- A collection agency or collector, when talking with you or contacting you through the mail can use only their proper business name.
- A collection agency or collector can only make an enquiry through you when demanding payment of a debt.
- A collection agency or collector cannot use offensive language, threats of loss of work, or threaten to inform your neighbours, friends and co-workers when conducting enquiries about a debt owed.
- A collection agency or collector cannot threaten to embarrass you in any way or intrude upon the privacy of your home and family. Personal and phone contacts can only be made between 7:00 am and 9:00 pm.
Where Can I Get More Information on Creditors' Rights?
The Financial and Consumer Services Commission can give you information about creditors' rights.
Financial and Consumer Services Commission
1-866-933-2222
www.fcnb.ca
Public Legal Education and Information Service of New Brunswick (PLEIS-NB) is a non-profit organization. Its goal is to provide New Brunswickers with information on the law.
PLEIS-NB receives funding and in-kind support from the Department of Justice Canada, the New Brunswick Law Foundation and the New Brunswick Department of Justice.
We gratefully acknowledge the assistance of Consumer Affairs Branch, New Brunswick Department of Justice, in the preparation of this pamphlet.This pamphlet does not contain a complete statement of the law in this area and laws change from time to time. Anyone needing advice on his or her specific legal position should consult a lawyer.
Published by:
P.O. Box 6000 Fredericton, N.B.
E3B 5H1 CANADA
Tel: (506) 453-5369
Fax: (506) 462-5193
Email: pleisnb@web.ca
June 2004
ISBN: 1-55048-323-4
Disclaimer: Please note that our website contains general information about the law. This is not a complete statement of the law on particular topics. We try to update our publications often, but laws change frequently so it is important for you to check to make sure the information is up to date. The information in our publications is not a substitute for legal advice. To receive legal advice about your specific situation, you need to speak to a lawyer.
