Office of the Superintendent of Bankruptcy Issues Directive on Counselling

In previous newsletters, we addressed the issue of possible changes being proposed to the counselling directive by the Office of the Superintendent of Bankruptcy (“OSB”).  The OSB issued its draft directive in October 2017 and commenced public consultations, inviting comments from stakeholders.

On January 29, 2018, the OSB issued its final Directive relating to the qualifications of Insolvency Counsellors, referral arrangements and debt advisors, along with the transition phases and its plan to revamp the entire counselling curriculum. The Directive can be found here.

The OSB has stated that the first phase of amendments will contribute to a level playing field for all LITs and reduce risks to the integrity of the consumer insolvency process related to:

  • LIT involvement in prohibited referral arrangements; and,
  • reliance on intermediaries whose activities are incompatible with an LIT’s legal and professional responsibilities.

It will also provide LITs with flexibility to accommodate debtor circumstances in the delivery of insolvency counselling, and by ensuring insolvent Canadians continue to benefit from:

  • Access to insolvency proceedings at regulated rates;
  • Open choice of an LIT; and,
  • Protection from unnecessary costs and predatory activities.

The second phase of the counselling amendments, including on line modules, will de developed in 2018 and beyond.  No timetable for the implementation has been set.

Improved protections

The aim of the Directive is to ensure that:

  • consumers are not charged more for the insolvency process than is allowed under the BIA. This will be accomplished by having the counsellor registered against the LITs license and not be involved in any unregulated and unnecessary services or predatory activities.
  • consumer debtors and bankrupts are free to choose whatever LIT they want and make an open choice of an LIT, rather than being directed to a specific LIT chosen for them under an arrangement negotiated by the person who will then provide their BIA insolvency counselling.
  • consumer debtors and bankrupts receive clear and accurate information, regarding responsibility for insolvency counselling, related fees, and the roles and responsibilities of debtors, LITs and registered BIA Insolvency Counsellors.
  • consumer debtor’s or bankrupt’s informed consent to the LIT is now required prior to the sharing of that debtor’s insolvency information with ahird-party BIA Insolvency Counsellor.

Additional delivery flexibility

  • Directive No. 1R4 provides flexibility to accommodate an insolvent person’s circumstances related to participation in insolvency counselling by video conference in order to avoid significant inconvenience; or at the third-party location of a registered BIA Insolvency.
  • Upcoming renewal of the BIA insolvency counselling curriculum will provide further delivery enhancements, such as the addition of on-line learning modules at no cost to the debtor.

LITs relying on third-party BIA Insolvency Counsellors

There is no restriction from LITs relying on third-party BIA Insolvency Counsellors.  However, these counsellors must meet registration requirements under the Directive and adhere to the same professional standards as LITs themselves are required to follow including adherence to all relevant provisions of the BIA, its Rules — including the LIT Code of Ethics – and Directives from the OSB.

The Directive applies only to LITs.  It does not restrict a third party to provide unregulated products and services to Canadians outside the scope and parameters of federal insolvency legislation.

Conclusion

It is our view that the changes to the Directive will enhance the counselling process for consumers and provide delivery flexibility for LITs where the debtor is in a remote location or where there are other circumstances where a face to face meeting would be inconvenient. The Directive comes into force on October 1, 2018.  Until that time, the previous Directive applies. Details regarding this Directive can be found here.

Boale, Wood & Company Ltd. has helped thousands of individuals and families overcome debt for more than 14 years.  

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