The 4 Pillars Debt Consulting Conundrum! Legal Information v. Legal Advice!
The 4 Pillars Debt Consulting Conundrum! Legal Information v. Legal Advice!
Prior to becoming a legal practitioner, I had often grappled with the difference between giving someone Legal Information v. Legal Advice in the Insolvency Industry. As a Debt Debt Settlement agent with 4 Pillars Consulting Group, the largest Debt Settlement Firm in Canada, these issues became apparent early on, during my tenure. The idea that unsuspecting Debtors are coming to us and asking for our advice on ways to address their debt from purely an informational perspective vexed me, in many ways. With the knowledge of the various statutes that would be applied to a particular Debtor’s specific situation and being told by 4 Pillars Corporate that we were not providing legal advice, went against every ethical principle I have adhered to in my business life. So, I ask, if 4 Pillars Consulting Group is only providing Debtors with Legal Information and not Legal Advice then how can a 4 Pillars Franchise Manager make this statement;
First, if Mr. Eichinger and 4 Pillars have a deep understanding of the rules and regulations that govern debt in Canada, then they ought to know that they are applying the Execution Act, RSO 1990, c E.24 and more specifically ONTARIO REGULATION 657/05 (Exemptions) under the Act, to an individual Debtors situation. Their unique approach is not unique, but rather what we call, in the Legal industry, as providing Legal Advice to a Debtor regarding a Debtors Legal interests with their debt and the rules and regulations that affect a Debtors decisions.
Now before we get ahead of ourselves, let’s first differentiate between someone engaged in the practice of providing “Legal Information” and one that is engaged in providing “Legal Advice”. All of the 4 Pillars Franchise Managers ought to look at the prevailing legislation that governs the Bankruptcy and Insolvency Act of Canada and how Provincial Statute guides a large part of the process. My bet is that many 4 Pillars Franchise Managers are only taught, by their Corporate offices, in British Columbia that the Exemptions that the Managers are applying to a Debtor’s situation are merely rules that are guided by the Bankruptcy and Insolvency Act and not taught or informed that the exemptions are in fact, embedded in Provincial Statute. That’s the way I was taught when I was with 4 Pillars and they have not provided any alternatives to this, other than they are stating that they only provide Legal Information to the Public. Having a clearer understanding of how 4 Pillars “restructures” debt in the beginning, I believe that many 4 Pillars Franchise Managers would have paused before signing their Franchise Agreements.
The first question that we must ask is what then is providing legal information to the public and why is this an acceptable practice in Canada? Giving someone legal information is not contrary to any law or statute in Canada or Ontario. When an individual is providing someone with legal information, they are in fact explaining the legal system or process in general terms and not specific to a debtor’s situation. This could include explaining to a Debtor the players that are involved in the Bankruptcy process, like a licensed insolvency Trustee. It could be informing a Debtor where to find the legislation that governs the Bankruptcy process such as the Bankruptcy and Insolvency Act and the Execution Act of Ontario. It can also involve informing the Debtor of their options in addressing their debt like through a credit counseling program, through debt settlement with a licensed practitioner or through a Trustee in Bankruptcy, without making any specific recommendations. The act of providing Legal Information to a Debtor is not contrary to the law, provided that it is done in a way that the Debtor can make the decision to seek the services of the legal practitioner that can apply the various Regulations to a Debtor’s specific situation.
You see, under the Execution Act, a Debtor is entitled to certain exemptions that include personal belongings, tools of a Debtors trade, vehicles and property, to name a few in the Insolvency processes. When working at 4 Pillars we would use these exemptions knowing that a Debtor will be filing a Consumer Proposal or Bankruptcy in the Bankruptcy Court and advising the Debtor on how these exemptions will impact what they would be worth during those legal proceedings. We would then assess the debtor’s assets against the exemptions, provided in the Act and give our assessments directly to a Licensed Insolvency Trustee our client’s restructured debt, even before the client meets with the Trustee. Essentially, the Debtor uses the 4 Pillars Consultant to advise them of their rights and responsibilities under the rules and regulations that govern debt in Canada, packages the Consumer Proposal or Bankruptcy for the Debtor, then sends the package to the Licensed Trustee before the Debtor meets with the Trustee. If the Trustee agrees with the restructured package provided by the 4 Pillars Franchise Manager (typically in the form of a Consumer Proposal), a meeting is set up with the Trustee, Debtor and the Debtor’s representative, the 4 Pillars Franchise Manager to sign the legal documents.
Does this sound familiar to you legal practitioners? If you are a Lawyer or a Paralegal your answer should be yes! Approximately, 2-5 times per month I am in attendance in court with clients that are undergoing Debtor Examinations. Prior to the examination of a Debtor, I am advising them of these very same exemptions under the Execution Act, just as a 4 Pillars Franchise Manager is advising their client’s of the impact that these same Exemptions will have in their Bankruptcy/Consumer Proposal Proceeding in the Bankruptcy court. This is, in fact, providing Legal Advice, as we are advising the debtor the legal implications involved in how the exemptions in the Execution Act will be scrutinized by the courts, as well as the Debtors creditors.
This leads us to, what then is providing Legal Advice? Giving Legal Advice, quite simply applies the law, including statute (regulations) and legal principles to a specific situation, just as the 4 Pillars Manager states earlier in this piece. The Law Society Act R.S.O. 1990, CHAPTER L.8 states, in no uncertain terms in the Figure Below;
Law Society Act; Provisions of Legal Services
For instance, when a Debtor comes into my office and asks to discuss their options in addressing their debt, I have the ability, as a legal practitioner to explain to the Debtor how the exemptions, based on the Execution Act of Ontario work in the circumstances or objectives of a person, with respect to their legal interests. The exemptions that are used are guided by Provincial Statute, here in Ontario and as such a Debtor needs to understand how these exemptions will affect their Bankruptcy, Consumer Proposal, Assessment Hearing in court or during a negotiated debt settlement with a creditor or collection agency. The Figure below is the listed exemptions in the Execution Act, RSO 1990, c E.24;
Execution Act; Exemptions
So, when I tell a Debtor, when they are considering a Consumer Proposal, Bankruptcy or Debt Settlement, after looking at their home as an asset, and when applying the exemption under subsection 2(2) of the Act, they are afforded $10,000 as an exemption against a Debtor’s equity in their home. Most Trustees will only apply the exemption if the equity is less than $10,000, however, others will apply the exemption regardless of the equity against a Debtor’s home. In the case of a Consumer Proposal or a Debt Settlement, I use this number to leverage the Debtor against a Bankruptcy with a Collection Agency or Creditor. In this case, I am providing legal advice to the Debtor as I can show the Debtor how the exemption will affect the legal proceeding (Consumer Proposal) with the Officer of the Court, or Trustee. I also use the exemption when negotiating the Debtor’s legal interests in a Debt Settlement.
Legal Information v. Legal Advice (CPLEA)
You see, providing legal advice is when you advise the Debtor on how a particular statute will affect their specific case. Since the Bankruptcy process is part of a legal proceeding and a Debt Settlement is a contractual agreement between at least two parties, anyone who shows a Debtor how the Provincial Statute, in this case, the Execution Act, RSO 1990, c E.24 applies to a Debtor’s specific situation, is in fact, giving legal advice.
Another way we provide legal advice is by providing specific recommendations, such as, what type of legal proceeding should the Debtor choose. The decision to file a Consumer Proposal, or a Bankruptcy are both legal proceedings that fall under the Bankruptcy and Insolvency Act of Canada. Providing a recommendation to a Debtor of what type of legal proceeding that would be in the Debtor’s best interest is also providing legal advice. This principle also deals with the idea that a legal practitioner can also provide referrals to a specific Trustee for a Debtor to address their needs, unlike a debt consultant who may only speak in general terms regarding who the players are in the community that a debtor may go to obtain the needed results. For instance, after I have explained to a Debtor their rights in the process, explaining how the various Statutes will impact their Bankruptcy or Consumer Proposal, based on my experience and understanding on how different Trustees interpret the Act, I may provide to a Debtor a specific referral to a Trustee that will look at the Debtor’s situation in a more favourable way.
Finally, the Law Society Act R.S.O. 1990, CHAPTER L.8. states;
Law Society Act; Legal Interests
Remember what Mr. Eichinger states on the 4 Pillars website, as quoted earlier,
“We then leverage our deep understanding of the rules and regulations that govern debt in Canada to negotiate the lowest possible pay back with creditors and in many instances, the officers of the court (Trustees in Bankruptcy) savings $1000’s in the process.”
Clearly, 4 Pillars is engaged in the practice of negotiating a Debtor’s legal interests, as all Debtors have contractual obligations with their creditors. A 4 Pillars Franchise Manager cannot simply tell a Debtor what their legal obligations are in any type of contractual agreement with a Debtor and Creditor unless that consultant is appropriately licensed to provide legal advice or is exempted by way of Statute that governs the consultant. Since 4 Pillars Debt Consulting refuses to be governed by any legislation that would exempt them from giving legal advice to a Debtor, I cannot see how 4 Pillars Consulting Group can avoid the Statutory requirements in the Law Society Act R.S.O. 1990, CHAPTER L.8. The Statute clearly states that an individual is providing legal advice if they are negotiating the legal interests or responsibilities of a person (Debtor). 4 Pillars Consulting Group cannot simply state that they negotiate the lowest possible pay back with Creditors and Trustees without providing the Debtor, at a minimum, the Debtors legal obligations to their creditors and/or assigned Trustee. The legal and binding agreements that a Debtor is in fact negotiated by a 4 Pillars Manager who, as they say, is representing and advocating on behalf of the Debtor in the Consumer Proposal or Bankruptcy process is in fact a contractual agreement between a Debtor and Creditor and would thusly be providing a legal service to an unsuspecting Debtor.
As I stated earlier, it is my belief that most, if not all of the 4 Pillars Franchise Managers are unaware of where the exemptions come from and are probably scratching their heads right now wondering if they are giving legal advice without understanding the broader implications of their advice to a Debtor. I am certain Mr. Herzenberg of Newmarket, Ontario is reconsidering his comments on the 4 Pillars website when he states, “Falling behind (in a restructured agreement) by three payments will result in an annulment of your contract and you will be back with your debt again.” Clearly, Mr. Herzenberg is providing the legal implications under the Bankruptcy and Insolvency Act, to a Debtor, should the Debtor fail to live up to the obligations under the Contract that the 4 Pillars Manager negotiated on behalf of a Debtor with the Licensed Trustee and or Collection Agency/Creditor.
The fact that 4 Pillars Consulting Group is simply stating that they are not giving legal advice, is not enough. When a debt consultant is providing advice, their first obligation is to provide the best advice that they believe is the right answer on how the consultant would decide a debtor’s situation if they were a Trustee or their Legal advocate. In this case, the debt consultant is giving advice in the context of the debtor’s legal obligations inherent in the Bankruptcy or Debt Settlement processes. If you are applying Provincial Statute, whether wittingly or unwittingly, to a Debtor’s situation, and clearly, this is what I did, as an employee while at 4 Pillars and what their consultants continue to do today, then they are providing legal services in contravention of the Law Society Act.
Simply put, it is time for 4 Pillars Consulting Group to come out of their caves and see the light. Registering with the Ministry of Government and Consumer Services, as a Collection Agency will enable their organization to provide all of these services without further public scrutiny. It will also afford their organization and good people that they employ, standing within the Debt Industry in Canada and provide a possible exemption under the Law Society Act. Myself, I have referred a number of my own clients to 4 Pillars for their after-Consumer Proposal loans. It is a wonderful program that provides debtors with an opportunity to pay off their Proposals quickly, while at the same time rebuilding their credit. It is my belief that it is time for 4 Pillars to become registered with the Ministry, as a Collection Agency. Their registration will provide them with the credibility they need to continue to grow as one of the leading Debt Settlement Firms in Canada!