A Helpful Introductory Guide to Understanding the Law Applicable to Reporting Debts to Credit Bureau Agencies

Article Author, Giancarlo MazzitelliBy: Giancarlo Mazzitelli

Creditor clients of United Legal Services (“ULS”), including collection agencies, are often faced with reporting concerns, and perhaps faced with defamation litigation, among other things, as legal claims, or the threats of such legal claims, involving alleged wrongful debt reporting conduct.

The Statute Law
The Consumer Reporting Act

The Consumer Reporting Act, R.S.O.  1990, c.  C.33 (the ("Act"), section 9, governs debt reporting to a consumers credit bureau.  Section 9 requires reporting agencies to adopt procedures that ensure accuracy and fairness of the consumer reports.  Creditors use these reports to determine the risk or lack of risk in loaning monies to a consumer when an application for credit is received.  In respect of reporting compliance, section 9(3)(f) of the Act is clearly worded to describe limitations in regard to reporting to a credit bureau.  It is well established both in the Act and in common law that the limitation for reporting is seven (7) years since the last date of payment or where there is no payment, seven (7) years since the default in payment.  Specifically, subsection (f) forbids reporting of:

(f) information regarding any debt or collection if,

(i) more than seven years have elapsed since the date of last payment on the debt or collection, or

(ii) where no payment has been made, more than seven years have elapsed since the date on which the default in payment or the matter giving rise to the collection occurred,

The Common Law
Grant v. Equifax of Canada

In the case of Grant v. Equifax Canada Co., 2016 ONCA 500, Grant brought an application seeking an order that two consumer reporting agencies remove debts over two-year old that were shown on his credit report.  The two-year limitation in the Limitations Act, 2002, S.O.  2002, Chapter 24, Schedule B, that Grant was referencing was not interpreted correctly by Grant.  The two-year limitation only applies to claims pursued in court proceedings, and not relevant in a creditors ability to report to a credit bureau.  Grant was ordered to pay costs to the reporting agencies:

The appellant shall pay costs of the appeal to the respondents Equifax Canada Co.  and Trans Union of Canada fixed at $5,000 each and to the respondent Ministry of Government Services and Consumer Services fixed at $1,000, all costs inclusive of applicable taxes and disbursements. 

Another Recent Decision 
Harvey v. Capital One Bank

In a recent decision Harvey v. Capital One Bank2019 CanLII 69716, the Plaintiff Harvey brought a claim for $25,000.00 and plead damages against Capital One Bank for reporting past the two-year limitation period.  Once again, the Ontario Superior Court of Justice (Small Claims Court at Kitchener) supported and referenced the Grant decision at paragraph 27:

The Supreme Court of Canada denied leave to Mr.  Grant to appeal this decision.  By so doing, it implicitly acknowledged the correctness of this decision. 

Credit Reporting, Not Defamatory if True

Additionally, in the Harvey decision, Deputy Judge C.  Dickson also stated that a truthful report, in relation to debt owed, cannot be defamatory if it is true, as the purpose of a credit reporting is to determine one’s creditworthiness and is not meant to be an enforcement tool.  This is well articulated at paragraph 42 where DJ Dickenson said:

[42] I agree with Capital One’s submission that if Mr.  Harvey’s argument were correct, the purpose of the Consumer Reporting Act, to advise other potential creditors of an individual’s credit worthiness, would be completely undermined.  The ramifications to businesses extending credit to others could be deleterious if such information was unavailable, simply because the creditor did not commence legal proceedings for payment of the debt prior to the two-year limitation period.  Many consumer debts do not justify the time or expense of legal proceedings.  Nevertheless, an individual’s failure or refusal to pay their legitimate debts is important information to other creditors, to whom that same debtor has sought more credit.  The extinguishment of the right to report such debt by operation of the Limitations Act, as posited by Mr.  Harvey, allows the debtor an unfair advantage in our credit-based society.

[43] What Mr.  Harvey fails to appreciate is that Capital One is simply reporting the debt was never paid.  This reporting under the CRA is not intended to be a debt enforcement method and differs from the statutory collection process referred to in Markevich.  As a result, the reporting of his outstanding debt to the credit reporting agency is not defamatory. 

Double Cost Consequence

In the decision of Harvey, Deputy Judge Dickenson noted that Harvey brought an identical claim against PRA Group Canada Inc., that was dismissed by way of motion for failing to disclose a reasonable cause of action.  It is important to note that the double cost rule is applied commonly for individuals that do not accept reasonable offers to settle.  Deputy Judge Dickenson awarded Capital One $7,500 in fees plus $1,250 in disbursements.  Dickenson stated in his closing remarks and reason for judgment that:

[55] Also of importance is the fact that Mr.  Harvey brought an identical claim against PRA Group Canada Inc.  in London Small Claims Court, court file 1681-18.  On May 10, 2019, PRA Group brought a motion to dismiss.  It was dismissed orally by Deputy Judge Davies as disclosing no reasonable cause of action, was inflammatory and a waste of the court’s time.  PRA was awarded costs fixed at $1,355.00.  I note that the Equifax Credit Report produced in this action showed that the Canadian Tire debt owed by Mr.  Harvey had been purchased by PRA Group Canada Inc. 

[56] Mr.  Harvey made it clear that he intends to appeal the London Small Claims Court decision, but was waiting for the outcome of this case.  He agreed that offers should be seriously considered, and if the sole basis of the doubled cost award is that he failed to accept the offer, he accepts that.

[57] For all the foregoing reasons, I conclude this is an appropriate case to award 30% for fees.  Capital One is awarded fees of $7,500.00 plus $1,250.00 in disbursements. 

Summary Synopsis

As per the decisions of Grant and Harvey, reporting to credit bureaus for consumer debt is governed by the Consumer Reporting Act and clearly sets forth a presumptive seven year limitation period.  The cost consequences of bringing a claim for defamatory reporting are clearly established and failure to accept a reasonable offer if a claim is initiated, can further burden a debtor.

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