Phony debt collection ruse

(includes collecting on outstanding loans, commercial debts and settlement agreements)

The ruse

This is the ruse commonly used in the bad cheque scam. The collection may purport to relate to a debt created by a commercial loan agreement, a personal loan, a commercial invoice or a settlement of some personal injury, wrongful dismissal or other claim. It may also arise in the matrimonial context.    

Here is the description of the scam as first reported:

One ruse to make use of your trust account involves a new client, located outside of Canada, requesting your assistance to recover a debt from a Canadian company. At first instance, this seems like an ordinary request; however, you are asked to provide little in the way of legal services. 

You send a demand letter and receive a bank draft for the full amount from the alleged debtor payable to your firm in trust. The bank draft is drawn on a Canadian bank and looks completely real. If you call the telephone number printed on the bank draft, the call is professionally answered and the bank draft is declared valid. The client will ask that you transfer the funds, less fees and disbursements, as soon as possible. It is only after the money is sent to the client that the law firm discovers the bank draft is not valid.

Counterfeit bank drafts — yet another trust account scam (Notice to the Profession, May 5, 2008)
Cautions on cash and new scams (Practice Watch, Benchers' Bulletin, 2008 No. 2 May)
How fraudsters use your trust account – counterfeit schemes and bank draft scams (Practice Watch, Benchers' Bulletin, 2008 No. 3 July)

Twists and developments 

Since first reported, we have seen new twists to the phony debt collection and other ruses as fraudsters try to trick lawyers. Because the details of any particular ruse or scam may change and any variation in one may be used in another, lawyers will want to be familiar with all of these twists and developments, the majority of which appear in the phony debt collection ruse. 


For a complete list of publications relating to the phony debt collection ruse, see Bad cheque scam publications.

Learn more about how to protect yourself from the bad cheque scam.



The ruses

The fraudsters generally use a particular ruse to trick lawyers. Here are the details of the different ruses reported by the Law Society:

Phony debt collection ruse (includes collecting on outstanding loans, commercial debts and settlement agreements)

Phony debt collection in the matrimonial context ruse

Phony business loan ruse

Phony real estate conveyance or fake mortgage ruse

Retainer overpayment and refund ruse