Friday, August 21, 2009

Who's a debt collector?



Day 2 of 30 Days of Debt: Let's take a look at who is or is not a debt collector. Remember, I touched on this (in a more complicated way) not long ago when I reviewed a court case that seemed to say that whether you're a "debt collector" depends on whether you think you're a debt collector.

That's a little too mind-bending, for now, so I'd like to begin with the basics. The federal law we're discussing, the Fair Debt Collection Practices Act, (FDCPA) is the law that we're concerned with here -- it's a federal law and applies to all fifty states, so it's easy to discuss on an insanely popular blog like this one - -and the FDCPA has some basic rules for who's a debt collector and who's not.

This isn't, remember, intended to be a discussion of every possible person who could ever possibly be considered possibly a debt collector. Instead, it's an overview. It's entirely possible that people I don't mention here are, or are not, debt collectors. But with that said, let's consider a few basic rules for who is, or is not a debt collector.

Here's the most basic rule, one that applies nearly all the time: You probably ARE a debt collector if you are collecting money that was at one time or another owed to someone besides you or your company.

"Debt collectors" under the FDCPA are people collecting money owed to someone else. So if someone calls you about your credit card account, and it's not the credit card company, you're probably dealing with a "debt collector."

There's a wrinkle, though, as there always is: If you originally owed the money to someone else, and they "sold" or "assigned" your debt, the new person is not necessarily a debt collector. That's important to note, what with all the companies merging and being bought out these days. For example, Bank of America just bought Countrywide -- so if you owed money to Countrywide, you now owe money to Bank of America, so Bank of America is probably not a debt collector.

There's a wrinkle to the wrinkle, though, and this is it: If the new person got your debt after it was in default, then they probably are a debt collector. So if you owed money to Credit Card Company, and defaulted, and Collection Company bought the debt, then Collection Company is a "debt collector."

With me so far? There's a wrinkle to the wrinkle to the wrinkle, too -- and here's that one: In some cases, the person collecting money for the other person isn't a debt collector. That can happen in some business arrangements, like when there's a "servicer" for a "mortgage lender." If the mortgage lender loans you money, and then hires the "servicer" to collect that money for them, before you default, then the servicer is not a debt collector.

But, if you default (breach the contract, usually through not paying) and then the lender changes servicers, that new servicer might be a debt collector.

Still with me? It's dizzying, isn't it? But it's important stuff, as we'll see over the next 28 days, because if someone is a debt collector then that person has a lot of do's and don't's, and violating those do's and don't's can cause big problems, for them, and get you some money.

So let me lay it out again, as simply as I can with this rule for determining whether or not someone is probably a debt collector: A debt collector is a person collecting a debt owed to another, or a person collecting a debt that was in default when the person got that debt.

And, to simplify that even further, let me give you an even better way of determining if someone is or is not a debt collector: Call a lawyer and ask.


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