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It was with concern that Credit Counselling Canada read the Office of the Superintendent of Bankruptcy (OSB) draft Directive No. 1R4, Counselling in Insolvency Matters.  As a stakeholder in the insolvency system, we have submitted comments/suggestions as per the consultation process. The submission was done jointly with the Canadian Association of Credit Counselling Services. This is a summary of our submission. The full submission can be viewed here.


Credit Counselling Canada and Canadian Association of Credit Counselling Services are national associations governed by professional volunteer boards of directors. Our members are accredited based on required governance, financial stewardship and operational standards. Honesty, transparency, unparalleled expertise and professionalism are the basis of our counselling services.  We are not-for-profit and registered charities.

For more than two decades we have offered counselling support services to trustees who do not have adequate resources, time or capacity to provide effective insolvency counselling services and develop quality educational material for their clients.  Trustees currently have flexibility to partner with not-for-profit credit counselling agencies to provide the legislated required debt counselling services to insolvent consumers.

We can assure the Superintendent that our professional associations, CCC and CACCS provide oversight and audits of our members who are required to track and report on performance data on the components of credit counselling programs. In addition, many of our members across Canada are already regulated in several provinces that have legislation requiring registration, licensing and oversight.

The Problem

In the ‘Review of Licensed Insolvency Trustee business practices in relation to administration of consumer insolvencies’ the Superintendent has identified some inappropriate practices through a small sampling of trustees that engaged in relations with certain external counselling service providers (third party debt consultants).  To remedy this, the Superintendent issued this draft directive which seeks to address and eliminate the inappropriate and unethical practices and dubious relationships. We strongly support the objective of improving oversight and eliminating disreputable practices that harm consumers and charge debtors with needless and costly services.

Clearly, when tens of thousands of Canadians seek bankruptcy protection with a trustee every year, trustees must ensure clients are provided with certified counsellors and accredited counselling services such as those offered by our not-for-profit agencies.

The Concern

The draft directive suggests that trustees are the only competent option for providing counselling services.

The draft directive, as currently written, will require trustees to curtail current service arrangements with us by creating unwarranted and restrictive barriers.

Our Perspective

We conclude that the draft directive establishes obstructive rules on trustees and that the proposed rules create barriers in the market place that deny not-for-profit counselling service providers with the right to offer and provide insolvency counselling services to trustees and Canadian citizens. It is our view that these excessive rules will close the door on not-for-profit counselling services ability to offer quality services to trustees and insolvent Canadians.

Trustees should be able to obtain professional assistance from proven, competent providers that are available to service their clients. In addition to being registered Insolvency Counsellors, credit counselling staff must achieve an Accredited Financial Counsellor Canada® designation and comply with the code of Ethics and Standards of Practice established and monitored by their association’s accreditation process. These mandatory requirements that we have distinctly exceed the standards as set out in the draft directive.

With respect to the issue of referral arrangements between trustees and debt counselling service providers, we agree that there should not be any closed-door arrangements. However, there is nothing inappropriate for trustees to use external service providers that are highly competent and can provide quality counselling to indebted consumers. We propose that when an external debt counsellor identifies bankruptcy or a consumer proposal as options for an insolvent debtor, that the counsellor be required to provide the debtor with a list of local trustees without recommendation.

We Recommend – An Exemption for Not-for-Profit Credit Counselling

By filing our response to the draft directive, we ask that the Superintendent implement a final directive that meets the objective of dealing with and eliminating inappropriate and harmful practices without causing unwarranted consequences for not-for-profit credit counselling services and insolvent Canadians. Our concern is that the proposed directive may be a violation of the Competition Act.

To achieve fairness, we ask that not-for-profit credit counselling services be granted a formal exemption from the proposed draft directive.

Clearly, the goal of the Office of the Superintendent of Bankruptcy should be to facilitate ways for trustees to offer financially distressed Canadians a high quality and transparent counselling service including access to external providers. The proposed requirements seem to unfairly put not-for-profit credit counselling services in the same category as third-party debt consultants.

We agree that there should be an effective monitoring and oversight framework to address inappropriate behaviour and that it should include new powers for the Superintendent to issue administrative monetary penalties (AMPs).  AMPs would address infractions by trustees quickly in terms of non-compliance with new counselling standards whether the service is offered by the trustee or through an external service provider.

We thank you for the opportunity to share our experiences and views with you as you seek to establish a supervisory framework that ensures quality services delivered with integrity and respects the right of trustees to use qualified external counselling services.

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