What Happens If You Don't Pay RBC?

How RBC's collection process works

RBC is Canada's largest bank by market capitalization, serving over 17 million customers.

Most RBC accounts go through four stages before a collection agency gets involved. The timeline below is typical for credit cards. Personal loans and lines of credit follow a similar path, though the exact handoffs aren't publicly disclosed.

Timeline for in-house Collections on a RBC VISA

RBC writes off unpaid credit card balances after 180 days.

Source: RBC 2005 Annual Report filing, SEC (note on Allowance for Credit Losses)

The fact that a creditor writes off your debt does not mean that you no longer owe the debt. It simply means that for internal accounting purposes, your creditor has changed the status of your unpaid account.

For other products, like personal loans, lines of credit and mortgages, the timeline isn't fixed. RBC marks them as problem accounts at 90 days past due and decides when to write them off based on how likely it is to recover the money.

Source: OSFI – IFRS 9 Financial Instruments and Disclosures

Credit bureau reporting usually starts at around 30 days late.

Assignment vs sale

When RBC assigns your account to a collection agency, it is acting as a collection agent on RBC's behalf, and RBC still owns the debt. The third party collection agency is working on a commission basis.

When RBC sells your unpaid account to a debt buyer, the debt purchaser steps into the shoes of RBC. RBC no longer owns your debt, and RBC is out of the picture.

This matters because it changes who you're negotiating with.

What happens when you miss RBC payments

Different RBC products follow different collection paths.

RBC Visa credit cards

RBC credit cards follow the standard timeline above. The account usually gets suspended or has its limit reduced before collections start. Interest continues to accrue at the card rate until the balance is written off or settled.

If you miss the minimum payment twice in any 12-month period, RBC increases your interest rate on purchases and cash advances.

The higher rate applies to new transactions and to your remaining balance. You keep paying the higher rate until you've made your minimum payment on time for 12 consecutive months.

Source: RBC Royal Bank Credit Card Agreement

RBC Royal Credit Line

RBC moves faster on lines of credit than on credit cards because the Royal Credit Line is a demand loan. That means RBC can call in the full outstanding balance at any time.

Triggers include missing a minimum payment, RBC deciding to reduce or close your credit limit, or RBC deciding you're a higher risk.

RBC overdraft

Overdraft moves through collections faster than any other RBC product. An unresolved overdraft is usually converted to a demand loan or sent to collections well before the credit card write-off point. RBC doesn't publish a specific overdraft timeline.

RBC personal loans

Personal loans have fixed payments. A missed payment triggers a demand for the full remaining balance. RBC's recoveries team usually tries to restructure payments before escalating.

RBC mortgages and HELOCs

Mortgages and home equity lines of credit are secured debt. The collection process is different and involves Power of Sale in Ontario or foreclosure in most other provinces.

RBC's right of set-off

RBC can take money straight from any deposit or investment account you hold with the bank to cover a debt you owe them. This is called the right of set-off. It's in your RBC account agreement.

RBC doesn't need to notify you or successfully sue you to do this.

Source: FCAC – When a financial institution can take money from your account

Section 10 of RBC's Personal Deposit Accounts Agreement lets RBC "at any time, without notice, apply the funds on deposit in an Account to any debt or obligation you or any one of you, if this is a joint Account, owe to the Bank."

Source: RBC Personal Deposit Accounts Disclosures and Agreements

What RBC can set off against

RBC can take money from your chequing, savings, non-registered investments and joint accounts at RBC.

It's important to note that RBC can drain the full balance of a joint account to cover one holder's individual debt, even if the other person on the account has nothing to do with it.

If that happens, the other account holder has to sort it out with whoever owed the money. RBC bears no responsibility for it.

What RBC can't touch

RBC cannot exercise the right of set off in connection with your bank accounts or non-registered investments held at other financial institutions.

RBC can't set off against your RRSP or RRIF. These accounts are held in trust, which puts them outside RBC's reach for collection purposes.

The Canada Revenue Agency can still reach RRSPs and RRIFs to collect unpaid tax debt, using a Requirement to Pay under section 224 of the Income Tax Act.

Locked-in retirement accounts like LIRAs and LIFs have extra protection under pension legislation on top of what RRSPs get.

Sources: Income Tax Act, section 224, Justice Laws Website and CRA – Tax collections policies (Information Circular IC98-1)

How to protect your money from RBC set-off

If you're behind on an RBC debt and still have other RBC accounts, move your primary banking to a different bank before things escalate.

The goal isn't to hide money. It's to stop the bank from taking funds you need for rent, groceries and utilities.

How RBC decides whether to sue, sell or outsource

RBC doesn't publish its internal rules for what happens to a charged-off account. But a clear pattern shows up in public records and industry practice.

If you owe money to RBC and you own real property, there is a real possibility that you will be sued even for amounts below $10,000.

Small balances are usually sold to debt buyers in bulk. Once sold, the debt buyer owns the debt and becomes the party you deal with.

Mid-sized balances are usually sent to third-party collection agencies. Agencies reported for RBC include CBV Collection Services, which lists RBC Royal Bank on its own payment page.

Source: CBV Collection Services – Make a Payment

RBC might also arrange to sue larger balances. The same applies to commercial and complex files.

The specific dollar amounts that trigger each path aren't published by RBC and vary in practice.

Negotiating directly with RBC

When a file goes to an agency, the agency works within a settlement range that RBC has pre-authorized.

Consumers sometimes interpret agency flexibility as the agency being more willing to negotiate than the bank, but the authority to discount still comes from RBC.

Source: Debt Coach Silverthorn – The Life Cycle of a Consumer's Unpaid Account

Timing and ranges

Settlement is more likely near the charge-off point than during the first few weeks of late payments. Once your account hits 120 to 180 days past due, the bank has written off the loss and is trying to recover what it can.

Source: Equifax Canada – What is a Charge-Off?

Settlement percentages depend on the creditor, how old the account is, and who's doing the negotiating. LIT firms publish industry-wide ranges, but these aren't RBC-specific and don't guarantee anything.

Farber reports private debt settlements typically fall between 30% and 70% of the balance, and that credit card issuers often accept 20% to 40% in consumer proposals.

Hoyes Michalos says collection agencies often accept up to 50% of the debt as a lump-sum settlement.

Sources: Farber – What Creditors Actually Accept and Hoyes Michalos – What Percentage Should I Offer to Settle Debt?

RBC has a reputation among LITs for being unusually aggressive. Hoyes Michalos' data shows RBC votes against consumer proposals more often than all other creditors combined.

Source: Hoyes Michalos – Why does the Royal Bank vote NO on consumer proposals more than all other creditors combined?

Warnings

Always get a settlement agreement in writing before you pay. A verbal offer means nothing once the money is gone.

A partial payment or a written acknowledgment of the debt can restart the statute of limitations in your province. If the debt is close to the limitation period, pay only under a full written settlement, not in instalments.

Your options if you can't repay RBC

You have four options, depending on what you can afford.

Payment plan with RBC

If you can afford the monthly payments but not a lump sum, call RBC's recoveries team.

RBC can set up a fixed payment schedule that stops further collection action, as long as you don't miss a payment. Interest usually keeps adding up during the plan.

Lump-sum settlement

A one-time lump-sum settlement eliminates your RBC debt for less than the full outstanding balance.

With one exception, the collection stays on your Equifax Canada and TransUnion credit reports for six years from the date of first delinquency, marked as settled. If you are an Ontario resident, the collection item remains on your TransUnion credit report for seven years from the date of first delinquency.

Consumer proposal

A consumer proposal is a formal debt solution filed through a Licensed Insolvency Trustee. It can reduce what you owe to RBC and your other unsecured creditors.

You make monthly payments for up to five years, and RBC can't sue you while the proposal is active.

RBC is an aggressive creditor in consumer proposal votes. It often counter-proposes for higher repayment than other creditors. An experienced LIT will know how to structure an offer that RBC is more likely to accept.

Bankruptcy

Bankruptcy is a more severe option for unmanageable debts. It clears most unsecured debt, including credit cards, lines of credit and loan debt.

If RBC is your only debt and the balance is small, you don't need a consumer proposal. If RBC is one of several creditors you can't pay, it's worth considering.

If you're worried about being sued, get help with your debt before RBC decides.

Frequently asked questions

Will RBC sue me for credit card debt?

RBC routinely sues debtors. RBC is very aggressive in suing individuals who own real property. Smaller balances are usually sold to a debt buyer or sent to a collection agency. The likelihood of a lawsuit increases with the size of the balance and with how long you've ignored it.

How long does an RBC collection stay on my credit report?

A collection account gets an R9 rating, the worst possible, and stays on your credit report for six years from the date of first delinquency. TransUnion keeps it for seven years in Ontario. Paying changes the status to paid but doesn't remove the record.

Can RBC garnishee my wages?

Not without a court judgment. RBC, like any unsecured creditor, has to sue you in court and win before your wages can be garnisheed. If your paycheque, however, is deposited into an RBC account, then RBC can take monies in your account under its right of set-off.

What happens if I ignore RBC's collection calls?

Ignoring RBC's collection calls doesn't stop collection efforts. RBC keeps reporting missed payments to Equifax Canada and TransUnion, adding interest and fees. If you ignore collection calls on monies owing to RBC, there is a good chance you will be sued, especially if you own real property.