Small-business clients often fail to set a payment deadline, says Francois Sauvageau, president of national boutique agency Collection Systems Canada.Getty Images/iStockphoto
A credit collection agency owned by National Bank of Canada is engulfed in a fight over foreclosure threats in California.
Credigy Receivables, which focuses on "the acquisition and servicing of distressed companies and written-off consumer debt" and falls under National's financial markets segment, is in the business of following up with credit card owners whose debts are long overdue. A new story from California Watch, which is affiliated with the Center for Investigative Reporting, alleges that Credigy more or less bullies homeowners by threatening to foreclose on them if they don't pay their credit card debts.
Legally speaking, the firm may not be breaking any rules because California is known to have relatively lax debt collection laws. And as the story notes, a law professor at Pepperdine University said that attaching a property to convince a business to pay up is "a very common procedure in the commercial world."
However, many believe Credigy has gone too far. Many homeowners contacted by Credigy were caught off guard, because they didn't think someone could go after their home for money owed on unsecured credit cards, and they are confused by the threats.
For that reason, a consumer lawyer has filed a lawsuit and asked the Orange County Superior Court to it class-action status. The lawsuit claims that Credigy "seeks to terrify consumers who owe small amounts into paying their debts by threatening them with the loss of their home."
National Bank did not comment for the California Watch story, citing pending litigation, and also declined to comment to the Globe.
Whatever the outcome, this is a rare case in which National Bank has been caught up in negative U.S. headlines.
Tim Kiladze