Payday loans, shady contracts, and smooth operators: those are the images that inevitably pop up whenever people hear the words “debt collection.” It’s an unfortunate association, and one that has sometimes been justified. In most cases, however, it hasn’t.
To understand why, it suffices to examine just one major misconception: debt collection is all about storefront lenders who charge exorbitant interest rates. This is simply not true. Surveys of the industry reveal that the large bulk of delinquent debt in Canada rests, in fact, with federal and provincial governments, municipalities, universities and banks. And these institutions have reputations to protect. The last thing they want is to be associated with a debt-collection agency that uses underhanded tactics and arm-twisting.
The result is that reputation management has become a vital part of debt collection. And thanks to major changes in the industry, it is law—not dodgy call centres using dubious tactics—that is increasingly in the driver’s seat.
Collection Through the Law
Debt collection in Canada is ultimately a legal process. It starts at the pre-litigation level and continues, when necessary, until a judgment is obtained and enforced.
Recognizing this, creditors are now looking beyond collections agencies for ways of recovering what they are owed. Indeed, according to Vincent Pigeont, a Collection and Recovery Lawyer practicing in Vancouver, “there is an increased willingness by large creditors to use law firms to recover their accounts. This is not only because lawyers are equipped to go the extra miles in commencing a legal action when necessary. It’s also because they can serve clients as advisors. Lawyers exercise the judgement needed to decide whether a legal proceeding is appropriate and cost-efficient, as well as what approach best serves the client’s reputation.”
By placing their outstanding debt with respected law firms, major institutions are now getting a process that scrupulously follows the law. That translates into peace of mind: law firms have their own reputations to protect, which means that their goals are aligned with those of the client. After all, violating professional and ethical standards is the kiss of death for any respectable law firm—an outcome that is not always the case, unfortunately, with a collections agency. Simply put, once lawyers take on collections cases, their own interests are at stake.
Yet this inevitably raises a question: how can a law firm possibly process the same volume of accounts as a collections agency? After all, the number of cases held by institutional creditors—such as banks and government—is huge. As they lower their threshold for legal actions, the volume of court cases is poised to skyrocket.
Technology to the Rescue
The answer is simple: technology. While it used to be true that law firms were limited by their headcount of lawyers, technology has changed all that. The modern law firm can use a whole range of technologies—from advanced file management and document organization to speech analytics—to process cases at much larger scales than ever before.
CTL Law, a new type of firm in Toronto that has hybridized the debt collection and litigation process, exemplifies this approach. According to its president and founder, François Sauvageau, “CTL Law’s automated, proprietary processes allow its legal staff to oversee every step along the path to debt recovery. What was formerly done by collections agencies on a very large scale is now done by our firm—with a level of accountability that was generally lacking in the debt collection business.”
Far from diminishing the control of lawyers in the process, technology actually enhances it. This is because the technology that CTL employs ensures that only its lawyers and licensed paralegals have the authority to undertake certain actions in processing a claim. “We remove discretion from large parts of our collection and litigation process,” notes Sauvageau. “And that in turn allows the use of non-lawyers to support pre-litigation and litigation management. So we can handle a large volume of claims without resorting to a large, expensive battery of lawyers—all while upholding the integrity and ethics of the lawyers and paralegals we do have on staff.”
With the emergence of debt-collection law firms like CTL Law, the field of debt recovery appears to be headed into a new domain. Financial collection is no longer the shark tank it once was, having been transformed into a legal and pre-legal process that is bringing order to a vital service. Consumers and creditors will both benefit. After all, the revenue that institutions recover would otherwise have to be generated by higher taxes, university fees and bank service charges.
That should spells relief for us all.