Most people assume that when they take out a loan, they will always owe the debt to the same lender. However, buried in the fine print of nearly every credit card, loan, and mortgage agreement is an "assignment clause", which allows banks and financial institutions to sell, transfer, or securitize your debt without your knowledge or consent.
This means that the entity attempting to collect on your loan may not actually be the legal owner of your debt. Yet, borrowers are never notified when their debt is sold or securitized—leaving them vulnerable to potential wrongful collection efforts. Kevin Kumar in Alberta emphasizes the importance of understanding how debt assignment affects borrowers' financial rights.
What is an Assignment Clause?
An assignment clause gives a lender the right to sell or transfer your debt to a third party at any time, without notifying you. Here are real examples from some of Canada's largest financial institutions:
Canadian Tire Bank:
"We may assign any one or more of your accounts and all of our rights under this agreement to any other entity or person without your consent."
Capital One:
"At any time, we may sell, transfer, or assign any, or all of our rights and obligations under this Agreement or your Account without telling you in advance."
Fairstone Financial:
"We may, from time to time, without prior notice to you or your consent, sell or assign all or any part of the entire New Balance, Debt, and/or any other obligation(s) under this Agreement."
TD Bank:
"We may transfer, sell, or assign part or all of the Account to someone else without telling you and without your consent."
Key Takeaway: The bank that originally issued your loan may not be the one that owns it today.
Why This Matters – The Risks of Debt Assignment
You May Be Paying the Wrong Party
If your debt has been sold or reassigned, you could be making payments to a bank that no longer owns it. This can result in double collection efforts, where both the original creditor and the new creditor claim ownership.
Your Debt Could Be Securitized Without Your Knowledge
Banks frequently bundle loans into securitized financial products, selling them to institutional investors. If your loan is securitized, the actual ownership of your debt could change multiple times—but you'll never be told.
Debt Collectors May Not Have the Right to Collect
Many collection agencies buy defaulted loans in bulk from financial institutions. If your debt was sold to a third-party collector, the original bank no longer has legal standing to collect on it. Yet, many borrowers continue to pay the original lender under the false belief that they still own the debt.
You Have the Right to Demand Proof of Ownership
If a creditor or debt collector demands payment, you have the right to request written proof that they legally own your debt. If they refuse to provide documentation, they may not have the legal right to collect. Kevin Kumar in Calgary suggests that borrowers should exercise this right to protect themselves from fraudulent collection efforts.
What Can You Do to Protect Yourself?
Before making any payments, request a written validation of debt ownership.
If your lender refuses to verify ownership, escalate the matter to consumer protection authorities.
Monitor your credit report to ensure there are no duplicate collection efforts.
Know your rights—banks use assignment clauses to protect themselves, not you.
Banks and creditors rely on public ignorance to continue these practices. It's time to demand financial transparency and accountability.
