Collection agencies don’t have the best reputations with the general public. Neither do lawyers. So it’s only natural that when the two decide to work together, controversy ensues.
Next month, a Markham, Ont., lawyer named Deanna Natale faces a disciplinary hearing in front of the Law Society of Upper Canada for sending draft statements of claim to debtors on behalf of one of Canada’s largest collection agencies, Global International Inc. The documents resemble statements of claim in every respect (aside from the word “draft” stamped across the top) and lead debtors to believe they are facing legal action when in fact no litigation has been filed.
The practice is a long-standing — and controversial — one in the industry, and is very effective in convincing debtors to pay up. Natale Law Offices, which operates out of the same building as Global, even promoted this service on its blog in July. Natale declined an interview, but her lawyer, William Trudell, argues the practice is above board. “There’s nothing the matter with it,” he says. “It’s clearly marked draft. If you don’t understand it, you’re going to ask somebody.”
Collection agencies are forbidden from sending imitation court documents in Canada, but only in Ontario and British Columbia are the regulations broad enough to prevent lawyers from sending draft statements on behalf of agencies, argues Mark Silverthorn, an Ontario lawyer. “The attitude is, do it as long as you can get away with it,” he says. Silverthorn actually worked in the collections industry for 12 years and was responsible for sending many draft statements. He’s since reinvented himself as a consumer advocate. “I feel like I’m trying to atone for my previous behaviour,” he says.
Even other collection agencies frown upon the practice. “I find the ethics behind it unfavourable,” says Bob Richards, executive vice-president of CBV Collection Services in Vancouver. “I’ll serve a true notice of claim, not send some fictitious threat.” Actual litigation is expensive and time-consuming, which is why collection agencies rarely resort to legal action. It’s much easier for some agencies to just give the appearance of legal action.
In October 2008, the Ontario Registrar of Collection Agencies, Brian Pitkin, wrote a letter advising against the practice of sending draft legal documents, calling it “deceitful and misleading.” He also wrote that hiring a lawyer to do so is just as inappropriate. Global did not heed the warning, retaining Natale to send draft statements as recently as November. Pitkin says Global has since stopped sending them, and that he did not pursue imposing a penalty. (Global did not return calls for comment.)
Silverthorn is actually the one leading the charge against Natale with the Law Society, having filed a complaint last year. Trudell in turn lodged a complaint against Silverthorn, accusing him of using the issue to promote his recent book about dealing with debt collectors.
Natale could be disbarred if she has violated the code of conduct for her profession. Trudell contends the legislation in Ontario is unclear, and that a disciplinary hearing is not the appropriate way to address the issue. “Ms. Natale should be given credit for bringing an ethical approach to this,” he says. “We’re talking about people who are refusing to pay their debts, and a method to assist businesses to get them to do that.”
In the meantime, the issue will continue to be debated in the industry itself. “At the point in time when the credit community says we don’t want it used, it’ll stop,” Richards says. “But it’s like steroids. It will enhance your performance.”