Canadian Association of Insolvency and Restructuring Professionals

Signs of Debt Relief Scams

Debt relief scams often target indebted consumers by falsely promising insolvency options like consumer proposals and bankruptcies. Some unlicensed debt advisory firms charge hundreds or even thousands of dollars in unnecessary fees for services they are not licensed to provide and often misrepresent the services they can offer. Watch out for these telltale signs.

  1. Unrealistic promises or pressure to make quick decisions. Unregulated debt advisors may make promises they can eliminate your debt, without understanding your financial situation. They may pressure you to make quick decisions without discussing all of your options.
    Licensed Insolvency Trustees (LITs) are the only debt-relief professionals in Canada legally required to offer a complete financial assessment and explain all the options for debt relief. Only after a thorough financial assessment of your personal financial situation will they offer specific advice about resolving financial difficulties. They are legally and ethically bound to provide accurate, unbiased debt advice and they are subject to ongoing oversight via regular reviews, audits and inspections to ensure standards of practice and adherence to the law including a comprehensive Code of Ethics.
  2. Asking for fees up front or claiming they can get you a “better deal”. Requesting payment before they meet with you or before delivering a service, is a red flag. They may make false claims they can “get a better deal” with your creditors or better serve your interests.
    LITs generally offer free consultations, with no commitment and no up front fees, to give you a realistic picture of the debt relief options available for your situation. They are legally and ethically bound to play an impartial role in ensuring your rights, as well as those of the creditors. The fees charged by LITs for consumer insolvencies and bankruptcies are regulated by the federal government.
  3. Charging unnecessary fees disguised as “referral fees” or “administration fees”. They may charge money for services that are not necessary and do not provide debt-relief, leaving you in a worse position financially. For example, they may claim they can grant you access to more debt-relief options through a referral to a LIT, sometimes for an additional fee.
    If you have decided you need help with your debt, you should meet with a LIT first. You do not need a referral to speak with a LIT. Even if it is determined that the services offered by an LIT are not right for you, they may recommend non-insolvency options such as talking to your creditors, consolidating your debts, establishing and following a budget or entering into a Debt Management Plan (DMP). If needed, they can refer you to a reputable credit counselling agency, for example, to access DMP services. LITs do not charge fees for referrals.  
  4. They tell you to stop communicating with, and/or paying your creditors or claim they can negotiate with them on your behalf. Some debt advisory companies may encourage you to cut ties with your creditors and claim they can be your “advocate” and negotiate on your behalf. Creditors are not legally bound to deal with them, so you may pay up front fees for this service even if they are unsuccessful in reducing your debt and then you end up further in debt.
    LITs are the only federally regulated debt professionals with legal authority to negotiate binding agreements with creditors on your behalf. Only LITs can offer consumer proposals or bankruptcy services which legally require creditor actions, including collection calls and wage garnishments, to stop.
  5. They may only offer online services with no option for in-person service. Beware of debt advisory firms that only offer online services, that don’t have a legitimate address or a location in Canada, or that offer limited information about who they are on their website. If a debt advisory firm only operates online without any indication of in-person service availability within Canada or your province, it is wise to seek assistance elsewhere.
    LITs are required to be licensed by the OSB and must provide in-person service at any point in the file, at your request.

Looking to find an Licensed Insolvency Trustee? 

CAIRP and the OSB have map-based directories of LITs and LIT firms. Licensed Insolvency Trustee services are available across the country, even in remote locations. 

You can also find reliable tools and information about options for dealing with your financial difficulties by visiting the OSB’s Debt Solutions Portal at

Source: CAIRP-OSB joint consumer alert (November 14, 2023)