By: Robert J. Nahoum
Federal debt collection laws known as the Fair Debt Collection Practices Act (FDCPA for short) regulates the collection of consumer debts by third party debt collectors. The FDCPA precludes debt collectors from using false, misleading, deceptive and harassing debt collection tactics.
A “debt collector” is defined under the FDCPA as “any person who . . . [operates] any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect . . . debts owed . . . another.” The definition also includes any original creditor who “in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.”
Because the FDCPA definition of a “debt collector” is limited to third party debt collectors, original creditors (the company initially extending the credit) do not fall under the definition and thus are not covered by the FDCPA.
In addition to original creditors and debt collectors, there is a third category called a loan or debt servicer. It is sometimes the case that an original creditor outsources the administrative functions associated with management of the extension of credit to a third party. The most common examples are with mortgages and student loans but loan or debt servicers are also used in connection with medical bills and even gym memberships.
So if a loan servicer is a third party collecting a debt for another, does it fall under the FDCPA definition of a “debt collector”? The answer depends on when the debt was assigned to the loan servicer for collection. For FDCPA purposes, the distinction between a “loan servicer” and a “debt collector” depends on whether the loan was in “default” at the time it was obtained. If the loan was in default when assigned to the servicer, then it is a debt collector if it was not in default it is not a debt collector.
One important thing to keep in mind, while the loan servicer may not be subject to the FDCPA, their attorneys usually are. A law firm representing a loan servicer is precluded from using any false, misleading, deceptive or harassing debt collection tactics. If a debt collection law firm violates the FDCPA, you can sue for statutory damages up to $1,000.00, actual damages (like pain and suffering) and the debt collection attorney may have to pay for your attorney.
If you need help settling or defending a debt collection law suit, stopping harassing debt collectors or suing a debt collector, contact us today to see what we can do for you.