The colossal failure of Target in Canada shocked a lot of people, including many business analysts. In just 22 months, the $70-billion U.S. retail giant opened – and closed 133 stores across the country.
That it happened so quickly signified how, despite many similarities between our two countries, Canadians are much more than unarmed Americans with healthcare.
Recent bankrupted Canadian expansions include Wal-Mart’s Sam’s Club, K-Mart, Radio Shack, Linens ‘N’ Things, and Sony Stores. And Best Buy, Sears Canada and others are teetering on the edge after deep cuts.
The differences between Canada and the U.S. are many.
Canada may have a slightly smaller population than the state of California, but expanding across our border is never as easy as adding another state. For one thing, packaging standards are different, meaning that labeling must be redesigned to include French and comply with federal requirements. That’s an expensive little extra for retailers carrying tens of thousands of SKUs.
There are other cost factors the majority of us don’t think of. Minimum wages are higher, and so are taxes north of the 49th parallel. Commercial real estate costs more, and bringing goods across the border on a weaker currency also adds costs.
It seems obvious when you think about it – but consumers can’t be expected to understand, or sympathize. Canadians familiar with U.S. Target stores expressed resentment that at a time when the loonie and greenback were near parity, items in meagerly-stocked stores here cost upwards of 30 percent more than across an imaginary line. Shoppers felt Target’s “Expect More” promise was a farce – with the exception of price. Such a sentiment did not help cultivate legions of early brand ambassadors.
From a debt collection point of view, several less-known but equally important differences can hurt U.S. expansions into Canada and lead to millions in unexpected bad debt writeoffs. My agency collects for U.S. based businesses of all sizes, and I have seen first-hand the consequences of innocent gaps in knowledge by our neighbours to the south.
If your customers reside in multiple provinces, you should be using a good national collection agency.
Across the United States, debt collectors are bound by the Fair Debt Collections Practices Act (FDCPA). There is no national equivalent in Canada, where debt collection is regulated by the provinces and territories – meaning 13 different sets of legislation. A Canadian debt collection agency must be licensed and bonded individually in each of those jurisdictions in order to collect commercial debt in them. And in Québec, where laws are entirely different, the agency is required to have a physical office in the province.
Fortunately, this doesn’t mean you need 13 different collection agencies, but if your business has customers who reside in (or may move to) multiple provinces, you should be using a good national collection agency. Some agencies purport to be national but are not, so check their physical locations to be sure.
In Canada, we are a bilingual country by law. According to Canada’s constitution, the official languages of English and French “have equality of status and equal rights and privileges as to their use.” This means debt collectors must be able to communicate in the official language of the debtor’s choice.
At MetCredit, this is not an issue, as we have a major office in Montréal and our agents across the country are fluent in at least 20 languages. But for U.S. based businesses offering centralized customer service or using a small regional collection agency, it can become a significant problem.
Statutes of Limitations on debt collection in the U.S. are typically much longer than in Canada — in some states up to FIVE times longer than in many provinces. (Download the Free Guide)
In The United States, the statute of limitations on oral and written contracts ranges from three six to 10 years. In Canada, our statutes of limitations vary by province or territory, but are a mere two years in half our provinces. That gives businesses a brief window of time in which to litigate, before the debt becomes statute barred and virtually uncollectable.
Court judgments are immediately valid for 20 years in one-third of the U.S. states, compared to 10 years in our Canadian provinces. Again, a difference that makes collecting debt in Canada extra challenging for businesses accustomed to much more available time for collection and negotiation.
It’s important for all credit grantors and businesses operating in Canada to be familiar with these limitations that can effectively erase money owed to them.
To download a complete, printer-friendly list of the Statutes of Limitations in all Canadian provinces, along with some exclusive debt collection pro tips, click the button below. And if you have any questions about collecting debt or the provincial statutes, drop me a line!
President and CEO of MetCredit, Canada's top-performing consumer and commercial collection agency
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