Canadian Bankruptcy Statistics - Business Bankruptcies decline in July 2008

Sept 5, 2008: According to the latest Canadian Bankruptcy Statistics released today by the Office of the Superintendent of Bankruptcy for the month of July 2008 business bankruptcies have declined by 4% over 2007 for the same 12 months period ending July 31, 2008.
The total business number of bankruptcies for the 12-month period ending on Jul 31 2007 was 6183 as compared to 6,441 for the same 12-month period last year.

While the overall numbers in Canada show a decline, Nova Scotia and Quebec have shown about a 9% increase in the filing of bankruptcies for their respective provinces in 2008 over the same 12 months period ending July 31, 2007.

In comparing the total number of bankruptcies filed just for the month of July there was a drop of 6.4% this year over last year. The month of July 2008 also showed a decline over last month by about 2%. (Refer to the following table for detailed numbers)
Provinces that have shown an increase for the month of July 2008 as compared to July 2007 are Nova Scotia, New Brunswick, Newfoundland, Quebec, Manitoba and British Columbia.

Notable amongst these is Quebec as the province has show an increase of 3.2% for the month of July 2008 as compared to July of 2007. Quebec has also shown an increase of 12% in the number of bankruptcies in the month of July 2008 over June 2008 and an overall increase of 9% over a 12-month period ending July 31st 2008 as compared to the same period in 2007.

Note:
Business bankruptcies numbers include the following:
* Any bankrupt commercial entity &
* An individual who as a result of operating a business incurs 50% or more of total liabilities.

Article contributed by: CreditGuru.com

[Statististics sourced from Industry Canada: http://www.ic.gc.ca/]

Commercial Restructuring under the Canadian Bankruptcy and Insolvency Act

Creditor's rights in the event that a business files for a proposal in Canada.

There is a provision under Part III of the Canadian Bankruptcy and Insolvency Act (BIA) for an insolvent business to file a 'Proposal' with its creditors. In layperson's terms it is like making a modified arrangement with its creditors to pay them off in an acceptable manner which is generally over a longer period of time. These kinds of proposals made by businesses are termed Division I Commercial Proposals under Part III BIA.

The BIA (Weblink: http://laws.justice.gc.ca/en/B-3/index.html) was reformed in 1992 with an objective to promote business proposal as an alternative to bankruptcy. While 'Bankruptcy' corresponds to the liquidation of the debtor's business assets and the end of its operations, a Commercial 'Proposal' involves settling debts between the debtor and its creditors, enabling an insolvent business entity to continue operating in the market. The intent was to promote ‘rehabilitation’ of an insolvent over ‘liquidation’ and turn increase recovery for the creditors. However, a proposal if not viable and unacceptable to the creditors fails, which then leads to the business being forced to declare bankruptcy.

Statistics however shows that approximately one in every two business proposals succeeds proving that proposal as an alternative to bankruptcy is working in the Canadian insolvency arena. This in a way proves to be a win-win situation both for the insolvent company and its creditors as the business whose proposal gets accepted, continues to operate and the creditors recover at least something from the debtor-company for the debt owed and perhaps can make up the shortfall by continuing to deal with the company as opposed to the chances of getting near to nothing had the insolvent debtor company filed for bankruptcy.

How does a business make a Commercial Proposal under Division 1 Part III BIA? What is the process?
The procedure of making a Commercial Proposal begins when an insolvent business seeks the help of an administrator who typically is a trustee in bankruptcy or a person appointed by the Superintendent of Bankruptcy. The trustee on behalf of the insolvent company files either a Notice of Intention to Make a Proposal ("Notice of Intention-NIMP" [BIA section 50.4]) or the Proposal itself with the Official Receiver (OR).

What happens after a Proposal is filed with the Official Receiver (OR)?
Within 10 days after filing the proposal with the Official Receiver, the trustee is required to send the OR a ‘Projected Cash Flow Statement’ and its reasonableness and a debtor's endorsed cash flow statement. No extension to this time limit of ten days is allowed and if the cash flow statements are not filed within this 10 day period, the insolvent business, filing the proposal, is deemed to have declared bankruptcy.

Unless protected by court orders, any creditor may obtain a copy of the cash-flow statement on request made to the trustee

After a Notice of Intention is filed with the OR, the trustee then has up to thirty days to file the Proposal itself. If the trustee fails to file the Proposal, the business is deemed to have declared bankruptcy. The effective date of the bankruptcy would be on the expiry date of the thirty-day period. If the trustee is unable to file the Proposal within the thirty-day period, there is a provision in BIA to seek extensions. These extensions are granted in increments not exceeding forty-five days up to a maximum of five additional months. (In essence an insolvent business has no more than six months to file a proposal.) The court reserves the rights to refuse requests for such extensions or alternatively impose special conditions on the extension of a proposal.

Within five days after the filing of a notice of intention, the trustee named therein must notify every known creditor.

Before the expiry of the initial thirty-day time limit for filing the Proposal, or any extension granted in the case of a NIMP or before the first creditor's meeting in the case the proposal has already been filed, any creditor has the right to seek the court's order in having the proposal cancelled. In order to seek the termination order of a Proposal the creditor will have to prove in court that the business making the Proposal lacks due diligence and a viable Proposal is unlikely to be made before the expiry of the time allotted or that the creditors as a whole would be challenged in material respect (materially prejudiced).

Once a trustee files a Notice of Intent or a Commercial Proposal on behalf of an insolvent business, it cannot be withdrawn. The main outcomes could be an acceptance by the creditors (which allows the business to continue) or rejection (which leads to bankruptcy and ultimate liquidation of the company).
However, during this entire process the insolvent business can declare bankruptcy at any time.

What happens once a Notice of Intention or a Proposal has been filed?
Once a Notice of Intention or a Proposal has been filed a 'Stay of Proceedings' (stay) takes effect. The stay applies to secured and unsecured creditors.
Under this stay, creditors cannot terminate leases or amend existing contracts and agreements. However, after the Notice of Intention or the Proposal has been filed, going forward, creditors are under no obligation to extend any future credit and can insist on cash-terms for any goods or services sold in future to the insolvent business. The same would apply to any rental payments on leased property.

This stay remains in effect until the Proposal has been performed without default or the debtor goes bankrupt. This allows the insolvent business to restructure its debt with its creditors and formulate the Proposal without interference.

A Commercial Proposal is made to all creditors. All unsecured claims constitute one class, unless the proposal provides for more than one class of unsecured claim. Secured creditors can be separated into classes based on "commonality of interest" [BIA 50. 1.4]. This commonality is based on factors like the structure of the debt, its hierarchy, the remedies of default or otherwise as to how the court decides the interests of the creditors.

Some exceptions to the Stay of Proceedings:
If a secured creditor serves the insolvent business with a Notice of Intention to Enforce Security under the BIA more than ten days before the debtor filed a NIMP (notice of intention) then the stay does not apply to that particular secured creditor. [BIA subsection 244(1)]
If secured creditor took possession of secured assets of the insolvent business for the purpose of realization before the notice of intention (NIMP) was filed from dealing with those assets
If the Commercial Proposal does not address the claims of a particular secured creditor, the stay in that case does not apply to that creditor
If a certain class of secured creditors rejects the Proposal, then the stay does not apply to the secured creditors in that class.

Voting on the Proposal:
The following creditors with proven claims are entitled to vote:
All unsecured creditors, and
Those secured creditors in respect of whose secured claims the proposal was made;

The creditors vote by class, according to the class of their respective claims, and for that purpose
All unsecured claims constitute one class, unless the proposal provides for more than one class of unsecured claim, and
The classes of secured claims [As determined under BIA subsection 50(1.4)];

The votes of the secured creditors do not count, but are relevant only for the purpose of BIA subsection 62(2); and

The Proposal shall be deemed to be accepted by the creditors if, and only if, all classes of unsecured creditors vote for the acceptance of the proposal by a majority in number and two thirds in value of the unsecured creditors of each class present, personally or by proxy, at the meeting and voting on the resolution.

Upon acceptance of the Proposal the trustee, within five days, applies to the court for its formal sanction (the court has to accept the Proposal).
Fifteen days before the hearing, the trustee sends a notice of the hearing date and place to the insolvent business, the OR, and to all creditors with proven claims.
Ten days before the hearing, the trustee sends a report on the Proposal to the OR and files this report with the court at least two days before the hearing.

If a Proposal is accepted, it is binding on all unsecured creditors and on those secured creditors whose claims were dealt in the Proposal and whose class voted to for it.

If a Proposal is rejected, the business is automatically assigned into bankruptcy and the trustee administering the Proposal immediately calls for a meeting of all known creditors to consider the affairs of the now bankrupt business and to confirm the appointment of the existing trustee or to appoint a new one as a trustee in bankruptcy.

Certain claims, such as wages and the Trustee's fees and expenses; Government claims, such as source deductions and GST and PST, are given special priority.
The Proposal must include a provision for payment in full within six months after approval of the Proposal for amounts that were owed to the federal or provincial government when the Notice of Intention or Proposal was filed.

What if the insolvent business stops making the payments and defaults on the performance of the proposal?
If the insolvent business fails to keep the terms of your proposal and does not remedy the default within thirty days, the trustee informs both the OR and the creditors within thirty days. The creditors have a choice to waive the default if they believe that the default was unintentional or that the insolvent business has intentions of, and the capacity to, remedy the default. If the default is not waived, either the trustee or the creditors may apply to the court for the annulment of the Proposal.

If a Proposal is annulled, it results in automatic bankruptcy for the business making the proposal (the business will be deemed bankrupt on the date of the annulment.) Within five days of the annulment order from the court, the trustee will send out a notice to all known creditors of a creditors' meeting to consider the affairs of the now bankrupt business and to confirm the appointment of the existing trustee or to appoint a new one as a trustee in bankruptcy

What happens after the successful completion of the Commercial Proposal?
A business that successfully complies with the terms of the Proposal receives a ‘Certificate of Compliance’. The debts owed by the business are considered to be satisfied and no action can be brought by any creditor to recover any shortfall between the original debt and the amount paid under the terms of the Proposal.

Does it cost to make a proposal?
There is a filing fee to be paid to the Superintendent of Bankruptcy. In addition, the trustee is entitled to be paid. These fees are prescribed by the Bankruptcy and Insolvency Rules which may be consulted on the Office of the Superintendent of Bankruptcy's (OSB) Web site at: http://osb-bsf.ic.gc.ca.
Typically the business makes all payments prescribed in the proposal to the trustee. The trustee deducts its costs and fees, and the Superintendent's levy (a five percent levy on all payments to creditors) and then distributes the net proceeds to the creditors.

How can Commercial Proposals be statistically viewed?
In 2007 Business insolvencies in Canada declined by 6.8% over 2006 where the number of new cases filed in 2007 totaled 7,624. This is the sixth consecutive annual decrease in business insolvencies — each of them more than 6%. Commercial Proposals on the other hand have shown about a 7% rise in 2007 over 2006. In 2006 the total number of commercial proposals filed was 3,036 as compared to the 3,241 filed in 2007.

The inference drawn from these numbers is that perhaps commercial proposals are helping businesses going in for rehabilitation and averting liquidation. For creditors this is good news as it implies enhanced recoveries of liability dollars in the Canadian world of business insolvencies.


Defining some terms used in this article
Official Receiver (OR): is an employee of the federal government who works in the Office of the Superintendent of Bankruptcy. The duties of the OR, among others, is to accept documents filed in proposals and bankruptcies, examine bankrupts under oath and chair meetings of creditors

Office of the Superintendent of Bankruptcy (OSB): is a Special Operating Agency Industry Canada which supervises the administration of the Bankruptcy and Insolvency Act. The OSB has Division Offices throughout Canada.

Bankruptcy: the action whereby the property of a debtor is taken over by a receiver or trustee in bankruptcy for liquidation and for the benefit of the creditors. This action is conducted as prescribed by the Bankruptcy and Insolvency Act (BIA) in Canada, and may be voluntary or involuntary.

Insolvency or Insolvent: The condition of being unable to pay debts as they become due or having liabilities that exceed the total value of assets.

Secured Creditor: is a person or company (e.g. bank) holding an instrument such as a mortgage or a lien on or against the whole or part of the property of a debtor as security for a debt due from the debtor.

Trustee: is person licensed by the Superintendent of Bankruptcy to administer bankruptcy and proposal estates.

Office of the Superintendent of Bankruptcy (OSB)
http://osb-bsf.ic.gc.ca/

Canadian Bankruptcy and Insolvency Act (BIA)
http://laws.justice.gc.ca/en/B-3/index.html

Trustee Directory- Finding a trustee for a particular jurisdiction
http://strategis.ic.gc.ca/cgi-bin/sc_mrksv/bankruptcy/trusteeSearch/queryTrustee.cgi?refine=0



Adapted from an article written by:

Puru Grover
General Manager

Credit Guru Inc.
Website: http://www.creditguru.com/education
Canadian Corporate Bankruptcy Seminar: http://www.creditguru.com/education/seminar-BIA.html

Abusive practice by some credit card companies and banks

In the month of May 2008 Americans put another 8 billion dollars on their credit cards. This is an increase of 7% of credit card usage.

Banks and companies offering credit cards are becoming more and more wary of the recent meltdown in the mortgage market and are looking for additional indicators when monitoring credit risk. Another factor that worry’s the consumer credit market is that consumer bankruptcies are predicted to double this year

So now instead of just watching the paying habits of their customers some Credit Cards companies and Banks have started to pry into the buying habits of their customers to comb for any future warning bells of financial stress. For example if a person starts using his credit card to pay off utilities, food or doctor’s bills the credit card company may see this as a red-flag. The credit card companies are setting up codes for these potentially troubling danger signals of financial difficulty in order to trigger a reduced line of credit and or even raise the interest rates offered on future credit-card borrowing.

The Consumer Federation of America dubbed this practice is wrong as it too believes that is not what the consumer buys but how the customer pays coupled with their history of credit to determine credit worthiness.

So watch out the next time you buy cheap or refurbished stuff and pay for it by a credit card, as your credit card company may deem it to be a sign of financial trouble and penalize you…. when actually you may be exercising financial prudence!

Indymac Bank Collapses - A Sub Prime Victim

Pasadena, California based Indymac Bank the 9th largest mortgage lender in the country with 33 branch locations in Southern California has gone bust. On Friday customers of the Bank were met with closed doors and a notice announcing the collapse of the institution. This is the second largest financial institution ever to go insolvent in the history of the United States.

The financial position of the Bank has been deteriorating since last quarter. The bank lost over 900mn dollars when home owners defaulted on their mortgages. Their “Alt-A” lending practice is blamed for their demise. “Alt-A” loans are loans with relaxed scrutiny where little or no evidence of assets or income is required for getting a loan.

Last month when the liquidity problem of the bank was made public there was a run on the bank and depositors in the past two weeks ended up withdrawing close to $1.3 Billion. This further worsened the liquidity of the bank.

The regulators, Federal Deposit Insurance Corporation (FDIC) have seized the bank and placed John Bovenzi in charge as the CEO. Before the appointment Mr Bovenzi served as the Chief Operating Officer of FDIC.

The FDIC maintains a list of “problem banks” and Indymac was on the list. It was made public that currently there are about 90 banks on the list.

The federal regulators are now trying to market Indymac and put it back the bank in to private hands. They expect this to be done within the next three months. FDIC wants to prevent customer panic and is assuring customers with under $100,000 in deposits that for them it will be business as usual. But, customers with deposits over $100,000 would have to wait and see how much they'd be able to realize as it will depends on what the Bank can fetch on its sale.

Friday also brought in bad news as shares of Fannie Mae and Freddie Mac slumped further. This is particularly concerning as between these two giant almost half of America's mortgage debt is either owned or guaranteed.

The government is now attempting to avert a crisis of confidence. The Treasury Secretary, Henry Paulson, in trying to calm fears on Wall Street said that the government is trying to give more credit to Fannie Mae and Freddie Mac and the treasury may even buy stock in them. The President's office has also voiced concern as the collapse of any one of these institutions will cause recession in the US and will also have a significant cascading impact globally. The statement issued by the White House read “It is crucial that Congress quickly works to enact this legislation as a complete package along with the strong oversight reform legislation recently passed in the senate.”

These are signs of the times and the seriousness of the sub prime and credit crisis in the US.

Link: What Is and Is Not Protected by FDIC Insurance

International Financial Reporting Standards and Canada

Canada and International Financial Reporting Standards

Canadian GAAP and IFRS

Globalization of Capital markets has spurred the acceptance of International Financial Reporting Standards. The term “IFRSs” refers to standards approved by the International Accounting Standards Board (IASB) or its predecessor body, the International Accounting Standards Committee, as well as interpretations originated by the IASB’s interpretations committee, the International Financial Reporting Interpretations Committee (IFRIC) or its predecessor body, the Standing Interpretations Committee. In essence a global set of accounting standards facilitates international commerce and transactions around the world.

In Canada the Accounting Standards Board (AcSB) has recently confirmed January 1, 2011 as the changeover date (i.e., the date IFRSs will replace current Canadian standards and interpretations as GAAP for this category of reporting entity). As a result, except as noted in “Scope” below, publicly accountable enterprises are required to prepare their financial statements in accordance with IFRSs for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. Some may choose to adopt IFRSs earlier.

Scope
The AcSB (Accounting Standards Board) proposes that all Canadian reporting entities, except the following, be required to apply IFRSs after January 1, 2011:
Private enterprises, that is, profit-oriented entities that:(a)
(i) have not issued (and are not in the process of issuing) debt or equity instruments in a public market; and
(ii) do not hold assets in a fiduciary capacity for a broad group of outsiders. Entities with fiduciary responsibility, such as banks, credit unions, insurance companies, securities brokers/dealers, mutual funds, and investment banks, stand ready to hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity.
Not-for-profit organizations, as defined in (b) FINANCIAL STATEMENT PRESENTATION BY NOT-FOR-PROFIT ORGANIZATIONS, Section 4400.
Public sector entities to which the standards contained in the CICA Public (c) Sector Accounting Handbook apply. The Introduction to the CICA Public Sector Accounting Handbook states that for purposes of their financial reporting, government business enterprises and government business-type organizations are deemed to be publicly accountable enterprises and should adhere to the standards applicable to publicly accountable enterprises in the CICA Handbook – Accounting, unless otherwise directed to specific public sector standards. Accordingly, the changeover to IFRSs applies to these two categories of public sector entity.

Entities required to apply IFRSs after January 1, 2011 are collectively referred to as “publicly accountable enterprises.”

IFRS is big, but it’s not a revolution. The fundamental financial reporting premise is the same and the standards cover almost identical areas. There’s no difference in the basic concepts, the difference is in the details.

The three important and widely applicable differences between IFRS and Canadian GAAP are the treatment of i) impairment, ii) securitization and iii) revaluations.

The following are only a few significant differences between Canadian GAAP and IFRS and does not include all of the differences that might arise in a particular entity’s circumstances.

Historical Costs Principle: Historical cost is the main accounting convention. Under GAAP items are usually accounted for at their historical cost. However, the IFRS permits the revaluation of intangible assets, property, plant and equipment, and investment property to fair value. IFRS also requires certain categories of financial instrument and other biological assets to be valued at fair value. All items, other than those carried at fair value through profit or loss, are subject to impairment. The best evidence of fair value is a quoted price in an active market (also termed ‘mark to market’). It is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.
IFRSs provide guidance on determining when the economy of an entity’s functional currency is hyperinflationary. When an entity’s functional currency becomes hyperinflationary, it makes price-level adjustments retrospectively. The financial statements of a foreign operation whose functional currency is hyperinflationary are adjusted before being translated for consolidation purposes.

Going Concern Assumption: General Standards on Financial Statement Presentation has been amended to include requirements to assess an entity’s ability to continue as a going concern and disclose any material uncertainties that cast doubt on its ability to continue as a going concern.

The Statements: IFRS does not require a statement of retained earnings. If an entity chooses the same can be incorporated as a part of the income statement. In IFRS financial statements a 'Statement of Changes in Equity' is now required. The statement of changes in equity presents a reconciliation of equity items between the beginning and end of the period.
The following items are presented on the face of the statement of changes in equity:
(a) profit or loss for the period;
(b) each item of income or expense recognized directly in equity (for example, revaluation gains on PPE, currency translation differences arising on the translation of the financial statements from the functional to the presentation currency) and their total;
(c) total income and expense for the period (the sum of (a) and (b)), showing separately the total amounts attributable to equity holders of the parent and to minority interest; and
(d) for each component of equity, the effects of changes in accounting policies and corrections of material prior-period errors. Details of distributions, the balance of retained earnings and a reconciliation of the carrying amount of each class of equity and each item recognized directly in equity are presented either on the face of the statement of changes in equity or in the notes to the financial statements. (review sample following this article)

Inventory Evaluation Methods: The cost of inventories used is assigned by using either the first-in, first-out (FIFO) or weighted average cost formula. Last-in, first-out (LIFO) is not permitted. The same cost formula is used for all inventories that have a similar nature and use to the entity. Where inventories have a different nature or use, different cost formulas may be justified.

Sample Reports of Independent Audit and Review under IFRS

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS
We have audited the accompanying financial statements of Good Group (International) Limited and its subsidiaries (‘the Group’), which comprise the consolidated balance sheet as at 31 December 2007 and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as of 31 December 2007, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Chartered Accountants & Co.
Date City:

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION.

Introduction
We have reviewed the accompanying consolidated condensed balance sheet of ABC Corporation as of 31 May 2006 and the related consolidated condensed statements of income, changes in equity and cash flows for the six-month period then ended. Management is responsible for the preparation and presentation of this consolidated condensed interim financial information in accordance with International Accounting Standard 34, ‘Interim financial reporting’3. Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of review
We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of interim financial information performed by the independent auditor of the entity'. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated condensed interim financial information is not prepared, in all material respects, in accordance with IAS 34.

[Accounting Firm]
Date
City

Sample ‘Statement of Changes in Shareholders’ Equity

Adapted from an article written by:

Puru Grover

General Manager

Credit Guru Inc

Website: http://www.creditguru.com/education

Financial Statement Analysis Course: http://www.creditguru.com/education/seminar-UFS.html

Protecting and Fighting against Identity Theft

The biggest and fastest growing crime today is the crime of Identity theft. It happens when someone steals your personal information and then commits fraud assuming your identity without you being aware of it.

One person every four seconds is being ripped off somewhere in the world. These Id thieves can take away your information with the blink of an eye and then destroy your credit history in a snap that you perhaps have toiled for years in the past to build upon. It is bit of an unnerving thought that someone is pretending to be you and doing things in your name that may eventually cost you money and your good name. Last year identity theft victims spent over $5billion to rectify the harm caused by stolen identity. It affected more than 10 million individuals globally with about $50 billion in losses to businesses worldwide. On an average a victim of identity theft could end up sending up to $1,200 in repairing the damage and that does not include the countless hours that get spent in un doing the harm.

Most of the stolen information gets traded on online chat rooms where the profile of these thieves is male 18-25 years old. The information is traded like a commodity and there is so much of information available that a full profile of an individual can be bought for as little as $20. This profile includes information like name, address, phone, credit card number, PIN, mother's maiden name, date of birth, social security/insurance number etc..
Just by getting your credit card information most of these crooks can drill down to obtaining your entire profile.

FBI agents, crime prevention cops and others that monitor these chat rooms find it virtually impossible to nab these crooks a) as there is no point-of-origin for these chat facilities and b) the chats rooms surfs over thousands of servers globally. Knocking down one server does nothing as the threads get picked up on thousands of other servers. The problem is global and what compounds the problem is there is no global jurisdiction to curb the crime. Then there are countries (like Iran) that will not cooperate with any US crime prevention authorities. This gives the crooks save heaven to operate from.

There are several ways that your personal information could get into the hands of these rogues:

• They send tricky emails that get you to believe that it is from your financial institution and there is a problem with your account and that you need to click on a link to rectify your personal information or resubmit it. This type of impersonation of your financial institution is called Phishing.
• Telemarketers who call and do the same as above
• Stealing mail from your mailbox or picking financial and personal information from your discarded garbage
• Employees may copy or sell your personal information at work or a hotel you stayed at; a hospital you were admitted; or a restaurant you ate at; a store you bought at; a gas station you filled gas at etc…
• Online shopping on non-secure or dubious sites
• Eavesdropping on ATM, debit card and other public transactions
• Unattended briefcases, purses, wallets
• Today thieves that break into homes are also seeking personal information to rob.
• Stolen wallets, purses, PDA (Palm, Treo, Blackberry etc.), computers/laptops
• Viruses that can record your keystrokes while making online transactions like banking or purchases
• Surfing social networking sites (e.g. FaceBook, MySpace) and Googling
• Hackers. A couple of years ago hackers hacked into T.J. Maxx/Winners store online and stole millions of credit card numbers and personal information of shoppers.
  
  From the above it is evident that no one is immune to identity theft. It is a matter of someone in the chain where your personal information resides compromising the information. The idea here is not be scared of identity theft but be aware that it can happen to anyone and that everyone can do something to safeguard themselves against this rampant crime.

Prevention is better than cure:

• Some of the very basic question that you need to ask yourself is:
  Do you know what information you carry on you personally?
  What is in your wallet/purse?
  Do you have a log of your credit/debit cards and a telephone number of the provider lest you lose them?
  If you do then why do you carry your Social security or Social Insurance card on you?
• Getting hold of a social security or social insurance number is a gold mine for an Id bandit. Even with a mismatched name and date of birth a social security number a crook can establish credit. This number should be either in your head or with your valuable and not where it can be easily misplaced, stolen or lost. When applying for a product or service if someone asks for this number, ask them why they need it and if it is mandatory. If it is mandatory then you have the right to know as to how they would be safeguarding it.
• Do not give out any personal credit or financial information on the phone, online or even in person to anyone that you don’t know or suspect.
• Make sure that you clear your mail regularly from your mail box. There are thieves that scour though apartment buildings to collect any un forwarded mail of residents that have left or are on vacation.
• Shred any documents that contain vital personal or financial information before discarding it onto your garbage.
• Limit the use of your debit card. (Canadians are known to use their debit cards liberally.) Keep in mind that a debit card gives direct access to your financial institution/bank account.
• Change your passwords often. Do not use simple or easy to guess passwords especially of loved ones with the family! Choose password that have a combination of numbers, alphabets and upper/lowercase.
• Ask your credit card company to change your credit card number often
• Use a specially designated credit card for online shopping with a very low limit to reduce your exposure in case of fraud.
• Monitor your credit card and financial statements for any unusual charges
• Re-Pin your credit card, bank card and debit card at least once every year. Although, it is recommended that you re-pin it more often.
• Some places now you can ask your financial institution to prompt the retailer to check your ID instead of just your signature when paying by credit card.
• On your computer keep all the patches offered by the operating system current. Use three levels of internet protection by having i) Antivirus, ii) Anti Spy ware and iii) Firewall ‘on’ when surfing the net.
• Check your credit report at least once every six months to detect any unusual activity on your credit file. It is important to do so because if a thief uses your social security/social insurance number to apply for new credit you will have no way of knowing it unless you monitor your credit report regularly. According to Federal laws you have the right to a free credit report from each of the three major consumer reporting agencies (also called credit bureaus) namely, Equifax, Experian and TransUnion. [US Tel Nos: Equifax (1-800-685-1111), Trans Union (1-800-916-8800) and Experian (1-888-397-3742) Canada Tel Nos: Equifax (1-800-465-7166), Transunion (1-800-663-9980)] In the US visit http://www.annualcreditreport.com/

What to do if you become a victim:

• If you lose a credit card apart from just calling the credit card company and canceling that card and requesting a new one you must also call the credit bureaus ( listed above) and ask them to put a ‘Fraud Alert’ on your credit report immediately. If you don’t do this it is quite easy for the crook to reopen the card and order new ones! Time is critical and this must be done immediately.
• Contact all your creditors, in writing, explaining what happened where you find that the information has been misused and get an acknowledgement of these disputed and fraudulent transactions. Have them resolved.
• Contact your local police and report the fraud. This establishes that a crime occurred and is a serious and punishable office.
• Call and immediately close any accounts that were opened fraudulently or you feel have been compromised due to the identity theft.
• If a collector is attempting to collect on such a fraudulent transaction you may want to submit your explanation on an affidavit along with the police report.
• Also report the fraud so that it can be investigated by authorities and prevent others from becoming victims of the same crime:
  In the US: Contact the Federal Trade Commission www.ftc.gov/idtheft (Toll free 877-ID-THEFT and report it. This information helps the federal enforcement officials to fight Id theft in the States.
  In Canada: Report the crime to RCOL (the RCMP-led Reporting Economic Crime Online) and PNCC (PhoneBusters National Call Centre)
  RECOL: (http://www.recol.ca/) is a web-based initiative that involves an integrated partnership between international, federal and provincial law enforcement agencies, as well as regulators and private commercial organizations that have a legitimate investigative interest in receiving a copy of complaints of economic crime, including identity theft.
  PNCC: (http://www.phonebusters.com/) is the Canadian anti-fraud call centre, jointly operated by the Ontario Provincial Police and the Royal Canadian Mounted Police that collects information on telemarketing fraud, advanced fee fraud letters and identity theft complaints.

Your identity is part of your net worth do not compromise it. Be proactive and help fight this rapidly growing crime.

Dealing with Bill Collectors and Illegal Parking Tickets in Ontario

Lately in Toronto Collection agencies have been relentless in collecting Parking Tickets that are illegally issued by private parking lot owners. They are illegal because an Ontario court ruling prohibits private property owners or their agents from issuing parking tickets/notices demanding payment for parking on private property. As a result of the decision, the only document that may be issued for parking on private property without the property owner's consent is a City parking infraction notice (parking ticket) issued under the Provincial Offences Act. The Toronto City Council addressed the issue because of complaints to City officials and the police.

The agency that is issuing these collection notices is issuing on the letterhead 'Municipal Parking Corporation'. It is issued form its Collection Department that reads 'Notice of Default'. Municipal Parking Corporation (MPC) is a private company that offers parking enforcement with their private ticket programs that use 'Trespassing laws' to issue tickets on behalf of their clients that are commercial, institutional or residential property owners. (Website http://www.municipalparking.ca/)These private parking lots have access to license plate information through the ministry which enables The collection agencies to get the personal information to issue these notices. CityTV in Toronto has already brought this to light and has approached both the Transportation Minister- Mr. Jim Bradley and Mr. Ted McMeekin the Minister Government and Consumer Services to take the necessary actions to protect the consumer a) by halting these fake tickets and bogus fines and b) protect the consumer's personal information that can be easily stripped by using the license plate numbers database that is in the domain of the Ministry of Transportation.

There are two issues here
1) Identifying a bogus v. the one actually issued by the City of Toronto under the Provincial Offences Act
The fundamental difference is that the legit parking ticket issued by the cops in the City of Toronto is yellow in colour with the City of Toronto's logo on it. (Click on the image to see a sample) The ones issued by MPC tend to be white or off-white with the logo somewhat mimicking the city's logo.

2) Dealing with an aggressive and relentless Bill Collector from a Collection Agency
As a consumer if you are faced with very pushy and sometimes obnoxious bill collector from a collection agency and you feel that you are being treated unfairly, keep in mind that debt collectors are governed by the Ontario Collection Agencies Act. (Web Link: http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90c14_e.htm )The Collectors and Collection Agencies are regulated by the Ontario Ministry of Government and Consumer Services
As starters you may want to first speak with the manager of the collector and then if necessary lodge a formal complaint with the Ministry's Consumer Protection Branch.

As an ‘FYI’ the regulations coded in Ontario Collection Agencies Act forbid collection agencies from:

• contacting you until six days have passed from sending you written notice of the following:
  • the name of the creditor
  • the balance owing
  • the name of the agency and its authority to demand payment


• continuing to contact you if you did not receive the notice unless a second copy of the written notice is sent to an address provided by you, and then contact may only be made six days after sending notice;


• contacting you if you send a registered letter to the agency saying that you dispute the debt and suggest the matter be taken to court;


• contacting you if you or your lawyer notify the agency by registered mail to communicate only with your lawyer, and you provide the lawyer's name, address and telephone number;


• contacting you on Sunday, except between the hours of 1 p.m. and 5 p.m., and on a holiday;


• contacting you other than by ordinary mail more than three times in a seven-day period without your consent, once the agency has actually spoken with you;


• using threatening, profane, intimidating or coercive language, or using undue, excessive or unreasonable pressure;


• continuing to contact you if you have told them that you are not the person they are looking for unless they take reasonable precautions to ensure you are that person;


• giving false or misleading information to any person;


• recommending to a creditor that a legal action be commenced against you without first sending you notice;


• contacting your employer except on one occasion to obtain your employment information, unless your employer has guaranteed the debt, the call is in respect of a court order or wage assignment or if you have provided written authorization to contact your employer;


• contacting your spouse, a member of your family or household, or a relative, neighbour or acquaintance except to obtain your address and telephone number unless the person contacted has guaranteed the debt or you have given permission for the person to be contacted.
  

The Consumer Protection Branch of the Ontario Ministry of Government and Consumer Services can be contacted at:
Toll Free: 1-800-889-9768Toronto: (416) 326-8800Web Link: http://www.gov.on.ca/mgs/en/Contact/STEL01_045739.html