Montreal, Quebec’s largest city, is a bustling economic hub where businesses frequently engage in transactions that involve extending and collecting credit. Business debt collection is an essential aspect of this financial landscape, ensuring that companies can recover the funds they are owed. However, the process is governed by a specific set of laws and regulations designed to protect both creditors and debtors.

Legal Framework for Debt Collection in Montreal

In Montreal, as in the rest of Quebec, business debt collection is primarily regulated by the Civil Code of Quebec (CCQ) and the Act Respecting the Collection of Certain Debts. These laws provide guidelines on how debts can be collected, ensuring that creditors’ rights to recover owed amounts are balanced with the protection of debtors from unfair or abusive practices.

Unlike other Canadian provinces, Quebec operates under a civil law system, which has its own unique rules and procedures for debt collection. Montreal (and Quebec as a whole) law emphasizes formal agreements and written contracts, which can affect how debts are documented and pursued.

The Role of the Civil Code of Quebec (CCQ)

The Civil Code of Quebec lays down the fundamental principles that govern all contractual relationships, including those involving debt collection. Key provisions relevant to business debt collection include:

Obligations and Contracts: The CCQ outlines the general obligations of parties in a contract, including the obligation to fulfill contractual agreements. If a debtor fails to pay a debt as agreed by the contract, the creditor has the right to seek remedies through the legal system.

Proof of Debt: In Quebec, creditors must provide sufficient proof of the debt they are attempting to collect, such as a written contract, invoice, or other document that establishes the debt and terms of repayment. Without such documentation, creditors may face challenges in court when attempting to enforce the debt.

Statute of Limitations: Quebec law specifies a prescription period (aka statute of limitations) for collecting debts, which is generally 3 years from the date the debt became due to initiate legal proceedings for collection. However, this period can vary depending on the type of debt and specific contractual agreements.

Act Respecting the Collection of Certain Debts

Although it primarily applies to consumer debt, the Act Respecting the Collection of Certain Debts has principles that are often extended to business debt collection to ensure fair practices. Key elements of include:

Prohibited Collection Practices: The Act prohibits harassment, making false or misleading statements, and communicating with debtors in a manner that is considered abusive.

Communication Restrictions: The Act limits how and when debt collectors can contact debtors. This rule applies to all types of debt collection, including business debts, to prevent undue pressure on debtors.

Licensing & Regulation: Commercial debt collection agencies must be licensed to operate in Montreal. This licensing process helps ensure that agencies are qualified to collect debts and understand the legal constraints within which they must operate.

Prestige Services, Inc., is licensed to practice commercial debt collection in Montreal. Visit our Services page to see how we can help you.

Debtors’ Rights and Protections

While creditors have the right to collect debts owed to them, debtors in Montreal are also afforded several protections under Quebec law:

Right to Dispute: Debtors can dispute a debt if they believe it is incorrect or unjustified. If a debtor disputes a debt, the creditor or collection agency must pause collection efforts until the dispute is resolved.

Protection Against Harassment: Debtors are protected from harassment and abusive collection practices. If a debtor believes a collector has violated these rules, they can file a complaint with the Office de la Protection du Consommateur or take legal action.

Bankruptcy and Insolvency: Businesses facing financial difficulties may consider bankruptcy or insolvency proceedings as a means of addressing their debts. These processes are governed by federal law and provide a structured way for businesses to either restructure or liquidate assets to satisfy creditors.

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