THE WESTERN CANADIAN LUMBER WORKER ay _ YOUR RIGHTS AS CONSUMERS OR DEBTORS Editor’s note: The following article has been kindly submitted by Mr. Sheppard to give IWA mem- bers some idea of their rights as consumers or debtors. Mr. Sheppard is a noted authority on the subject as well as on taxation matters. By A.F. SHEPPARD, B.A., LL.B., LL.M. BARRISTER AND SOLICI TOR AND PROFESSOR IN THE FACULTY OF LAW, UNIVERSITY OF BRITISH COLUMBIA Consumer debt has become the lifeblood of the Canadian economy. As of December, 1976, the amount of consumer debt outstanding was twenty- seven times greater than the amount outstanding in the late 1940’s. The latest estimates indicate that Canadians are more in debt by 16.4 per cent than in 1976. Today, in Canada, the amount of consumer debt outstanding averages out to more than $1000 for every man, woman and child. Many individuals, who have borrowed excessively against their future income to pur- chase the ‘‘good life’’ in the form of cars, television sets and buildings have suffered heartache and despair. If these . debtors had known their rights and had taken advantage of debt counselling, these problems could have been dealt with effectively and without personal anguish. What are a debtor’s fights and where can he or she obtain counselling? In this short article, I only can highlight some of the more important rights and particularly, recent developments. The Trade Practices Act A consumer who buys on credit might, from the start, be unable to make all the payments. The amount was beyond the debtor’s reasonable ability to pay. The consumer should consider whether the seller has been guilty of an “unconscionable _ practice’, which means that the seller cannot collect the amount owed but the consumer can recover damages for losses suffered. Subsection 3(2) (d) of the Act includes in the definition of ‘‘unconscionable practices” a transaction where the seller puts the consumer into debt over his or her head, if “‘at the time the consumer transaction was entered into there was no reasonable prob- ability of full payment of the price by the consumer”’. The Debt Collection Act Debt problems usually start when a consumer who is a wage or salary’ earner ill and has to take off from work, loses a job quickly as possible. The creditor could go to court but this takes time and can be expensive. So, the unpaid creditor will first try to collect the debt directly from the consumer debtor, by using economic and psychological coercion. The Act provides a victimized debtor with the means to put a stop to harass- ment by shady or unscrupulous merchants or debt collectors. Subsection 14(1) of the Act states that any collection practice is illegal if it involves the exertion of “undue, ex- cessive or unreasonable pressure upon a debtor, or any member of his family or house- hold or his employer.’”’ This pressure could come from an unpaid merchant or other creditor or a debt collector. Specific illegal collection practices are as follows. Subsection 14(1) (a) prohibits any ‘‘charge, threat or promise that pertains to matters other than the collection of the debt.” It would be illegal to threaten a debtor with physical force or criminal proceedings. A well- worn collection tactic is for the creditor or debt collector to threaten the debtor, that unless he or she pays up, the debtor’s employer will be told that the debtor is a ‘‘deadbeat’’ and that the employer will fire the debtor. Subsection 14(1) (a) makes this threat illegal. Subsection 14(1) (b) makes it illegal, except for the purpose of verifying the employment, to communicate with the debtor’s employer without the debtor’s consent. So, carrying out the threat is also illegal. Subsection 14(1) (c) makes it illegal to harass a debtor, his family or employer through phone calls, letters, visits or nasty or obscene language. Subsection 14(1) (i) makes it illegal to telephone the debtor long distance with the charges reversed (‘‘collect)) calls) or to send letters with postage due, as a collection tactic. Another illegal collection practice is the use of documents which are written to look like official court papers, to fool the debtor into thinking that they are backed up by the powers of the courts when they are actually directly from the creditor: subsection 14(1) (d). Subsection 14(2) protects a debtor who is unusually vulnerable to harassment such as an aged, infirm or illiterate debtor. If a person is suffering “alarm, distress or humilia- tion” as the result of any collection method, however mild or legal, he or she can complain to the Director of Debt Collection. The Director ean send the creditor or debt collector a notice which makes it illegal for the creditor / col- lector to use that practice against that debtor, under subsection 14(1) (e). The Director of Debt Collection is an officer of the Department of Consumer and Corporate Affairs, 850 Burdett Street, ; Victoria (telephone 387-6374). -convenient A debtor who is being vic- timized by illegal collection tactics can use the Act in three ways. The debtor might point out to the guilty person that the practices are illegal and that if they continue the debtor will start an action for damages against the guilty party an- d/or complain to the Dirctor of Debt Collection. Section 19A of the Act provides that a debtor who has suffered loss, damage or inconvenience as a result of an illegal collection practice can go to court and re- cover a minimum of $100 or the actual damages for each and every illegal collection practice. For a claim of up to $1,000 in damages, Claims ‘Court provides the debtor with an inexpensive and procedure. A debtor who wished to conduct such an action would usually not require the services of a lawyer. If the debtor owed less than $1,000 and recovered a judgment for $1,000 for the il- legal collection practice, he or she would, after offsetting the debt against the judgment, be ahead by the difference. The Attachment of Debts Act To recover an outstanding debt, an unpaid creditor can. sue the debtor. If the debtor - has no defence, the creditor recovers an unopposed judgment called a ‘default judgment”’. With this judgment, the judgment creditor, as he is now called, can use judicial collection remedies, such as _ garnish- ment, under The Attachment of Debts Act. By court order, garnishment requires a third person called the ‘‘garnishee’’, who owes money to the debtor, to pay the money into court, rather than to the debtor, for the benefit of the judgment creditor. Garnishable assets include bank and trust com- pany accounts (not joint ac- counts unless the owners of the account are joint debtors) and registered retirement savings plans. Garnishment of a debtor’s wages or salary requires the employer to pay into court 30 per cent of wages or salary with a minimum exemption for the employee of $100 if that is greater than 70 per cent of the monthly wages. A worker who earned $150 a week after deductions for income tax, Canada Pension and Unem- ployment Insurance could have his wages docked by a further $45 on garnishment. In Matrimonial cases the exemp- tions are lower so that more of the debtor’s wages are gar- nishable. A debtor who feels that the standard exemption of 70 per cent is unfairly low in his circumstances can apply to increase the exemption to as high as 90 per cent of the wages or salary: section 3A of the Act. To do so, the debtor must apply to the court which issued the garnishment order. Garnishment of wages may have an adverse effect on relations between an employer Small : and employee. It is inconven- ient and costly to the employer and may cause him to conclude that the employee is finan- cially irresponsible. Some employers used to fire employ- ees whose wages were gar- nished. Nowadays, dismissal of an employee because of garnishment is an offence. The Execution Act - Although the title of the Execution Act appears terrify- ing, the Act simply enables a judgment creditor to take pos- session of and sell certain of the debtor’s assets such as company shares, the family car, land.and buildings. A debtor can apply to court to delay the execution sale of the family home but only if some arrangement for payment of the debt’ is made with the judgment creditor: section 42 of the Act. If the baliffs at- tempt to take the debtor’s personal goods, the debtor has the right to choose and keep items whose total value does not exceed $2000. These items cannot be taken or sold. Some creditors are not af- fected by any exemptions, for example, The Department of National Revenue. The Debtor Assistance Act To provide free services to debtors . with ~— financial problems, in B.C., there is a branch of the Provincial Department of Consumer and Corporate Affairs called “Debtor Assistance’’. Its objective is to provide a range of free services and remedies to help debtors to pay their - debts as they are able to do so — within a reasonable period of time and without sacrificing a reasonable standard of living. The services include counselling debtors, prepara- tion of a budget or a proposal to creditors and mediation with © creditors on behalf of debtors. Under section 8, Courts can re- fer the personal financial problems of debtors to Debtor Assistance for analysis. The Small Claims and the United - Family Courts find this proce- -— dure very helpful. If you have debt problems, you should consider going to your local Debtor Assistance office. They may be able to help you. They are located at 38rd Floor, 411 Dunsmuir Street, Vancouver V6B 1X4 (tel. 668-2345) ; 838 Fort Street, Victoria V8W 1H8 (tel. 387- 6831); 521 Seymour Street, Kamloops -V2C 2E1 (tel. 374- 5676); 395 Victoria Street, Prince George V2L 2J6 (tel. 562-9331); 190 Wallace Street, Nanaimo (tel. 753-7151). Ihope to have shown you that as a debtor you have certain rights, and you have recourse against unscrupulous creditors. Also, you can get help from Debtor Assistance to deal effectively with unpaid creditors. IN CANADA BRITISH STUDY BACKS WORKERS A new British study should soundly shatter any-claim that wages were pricing Canadian manufacturers out of inter- national markets during the first half of the current decade and the second half of the 1960’s. Instead, in terms of keeping down total labour costs, includ- ing fringe benefits, ‘“Canadian manufacturers improved their competitive position consider- ably during the 10 years ended in 1974,”’ says a report on the study published in The Labour Gazette, a monthly periodical of the federal labour depart- ment. The study also shows. that Canadian workers in manufac- turing made the lowest gains in real earnings during the period of those in any member country of the Organization for Economic Co-operation, with one exception — the U.S. The study was conducted by G. F. Ray of Britain’s National Institute of Economic and Social Research. He analyzed data gathered by the Interna- tional Labour Organization and the Swedish Employers’ Confederation research department to compile an index of total hourly labour costs, including ‘‘social charges’’ — or fringe benefits — borne by the employer. Based on the British hourly labour cost equalling 100, the Canadian index dropped by 6 points from 192 in 1964 to 186 in 1974. At the start of: the period, Canada had the second-highest index, behind the U.S., but by 1974 the Canadian index had dropped to fourth place behind Sweden, 208; the U.S., 194; Norway, 189, and Denmark, 188. “Canada’s hold on fourth place was somewhat precarious,’’ The Labour Gazette points out, since its index was just one point above fifth-place West Germany, with 185, and two points above . the Netherlands, in sixth place at 184.” The increase in real earnings in Canadian manufacturing — relating hourly earnings to the consumer price index — was 3.1% during the period, while the U.S. increase was only 0.9 - percent. The Canadian and U.S, in- creases trailed behind all the other OECD countries where real increases ranged from 3.6 percent in Sweden to 6.6 per- cent in Italy. Britain’s increase in real earnings was 4.1 per- cent.