Creditors vs. Debt Collectors Under the FDCPA

Consumers who have debt in default have probably received many calls from debt collectors wanting them to make payments. Consumers are protected from abusive collection practices under the Fair Debt Collection Practice Act (FDCPA). However, the FDCPA protections do not apply to a consumer’s original creditor.

The FDCPA was created by Congress to prohibit the unfair, deceptive, or abusive practices by debt collectors when attempting to collect on consumer debt. There are numerous restrictions placed on debt collectors as to what they are allowed to do when they are collecting debts. Consumers are also provided with certain rights and remedies against debt collectors who violate provisions of the FDCPA. These provisions do not apply to creditors.

Creditors

Under the FDCPA, a creditor is defined as a person or entity that extends credit to a consumer in the first place. The FDCPA is designed to protect debtors from third party debt collectors, not the original creditor or the employees of that creditor. There is one exception to this rule. If a creditor is attempting to collect its own debts while using a different name, implying that a third party is attempting to collect on the debt, then the creditor will not be exempt from the FDCPA.

Debt Collectors

A debt collector is considered to be a third party who regularly engages in the business of collecting or attempting to collect debts that are owed to another person. Common examples include:

• Entities that purchase debts that are delinquent then attempt to collect them,
• Debt collection agencies, and
• Collection attorneys

Exceptions to the Definition of Debt Collector Under the FDCPA

Under the FDCPA, a person who is attempting to collect on a debt from someone else is not considered a debt collector when:

• The debts are business debts. The FDCPA applies only to consumer debts that were incurred for personal or household expenses and does not apply to corporate or business debts
• The debt was not in default when it was purchased. If the debt was sold by the original creditor to a third party when it was not in default, then the entity that purchased the debt is not a debt collector under the FDCPA
• The collector is a government employee collecting on a debt in their official capacity. Employees of the state and federal governments ware exempt from the FDCPA when they are, as a part of their official duties, collecting debts
• Legal process servers are serving process. When serving legal process as a part of a judicial proceeding to enforce a debt, process servers are exempt from the FDCPA
• The person is not regularly engaged in the business of debt collection.
• Collecting on the behalf of a related entity. Persons or entities attempting to collect debts on the behalf of another company under the same ownership or corporate control won’t be considered debt collectors provided their principal business is not debt collection
• At the consumer’s request, a nonprofit organization performs credit counseling and debt liquidation services. When a consumer requests credit counseling from or sends a nonprofit organization payments that are then distributed to the consumer’s creditors, then that organization is not a debt collector
• The debt is incidental to a fiduciary obligation or an escrow arrangement.
• The debt originated by the debt collector. A creditor that originates the debt but then sells it to a third party can still collect the debt on the third party’s behalf and not be considered a debt collector under the FDCPA
• The debt was obtained as security in a commercial credit transaction with the original creditor

Our experienced attorneys here at Krohn and Moss Consumer Law Center have also provided many helpful resources regarding the TCPA and the FDCPA and how telephone debt collectors should act. We have been successfully representing those abused and taken advantage of by debt collectors for years, and have a long list of successful stories to share with you. We offer a FREE CASE REVIEW for you to assess whether we can assist you with your matter. Please do not hesitate to contact us toll free at 1-800-875-3666 or visit our website at http://www.krohnandmoss.com/.