If any of your debts are in default, you have probably received numerous calls from debt collectors wanting you to make payments. The Fair Debt Collection Practices Act (FDCPA) protects debtors against abusive collection tactics by debt collectors. However, it does not apply to your original creditor. Read on to learn more about the difference between a debt collector and a creditor, and how it affects your rights under the FDCPA.
Congress created the FDCPA to prohibit debt collectors from using unfair, deceptive, or abusive practices when collecting consumer debts. The FDCPA places numerous restrictions on what debt collectors are allowed to do when collecting debts and provides consumers with certain rights and remedies against those who violate any of its provisions. However, the FDCPA generally only applies to third party debt collectors, not a creditor. (Learn more about debt collection activities prohibited by the FDCPA.)
The FDCPA defines a creditor as the person or entity that extended you the credit in the first place (in other words, your original lender). Since the FDCPA is designed to protect debtors against third party debt collectors, it does not apply to your original creditor or its employees.
However, there is an exception to this rule. When collecting its own debts, a creditor will not be exempt from the FDCPA if it uses a different name that implies a third party is attempting to collect the debt.
Under the FDCPA, a debt collector generally refers to a third party regularly engaged in the business of collecting or attempting to collect debts owed to another person. The most common examples of debt collectors include:
For purposes of the FDCPA, a person attempting to collect a debt for someone else is not considered a debt collector under the following circumstances.
Business debts. The FDCPA only applies to consumer debts incurred for personal or household expenses. It does not apply to corporate or business debts.
Government employees when collecting debt in their official capacity. Federal or state employees are exempt from the FDCPA when collecting debts as part of their official duties.
Generally, debt buyers collecting debts they own. In the case of Henson et al. v. Santander Consumer USA Inc.,137 S.Ct. 1718 (2017), the United States Supreme Court decided that, under the FDCPA, businesses like Santander, which buy (and therefore own) the debt they’re trying to collect, aren’t attempting to collect “debts owed or due…another.” So, companies like Santander that attempt to collect debts owed to themselves aren’t debt collectors under the FDCPA. But after the Supreme Court decided the Henson case, the United States Court of Appeals for the Third Circuit decided in Tepper v. Amos Financial, LLC, 898 F.3d 364 (3d Cir. 2018), that debt buyers qualify as debt collectors under the FDCPA if their "principal purpose" is collecting debts. (Santander had successfully argued that its principal purpose was loan origination—not buying and collecting defaulted debts.) In deciding Tepper, the Third Circuit was the first appellate court to issue a precedential decision addressing the applicability of the Supreme Court's holding in Henson to the "principal purpose" definition of a debt collector under the FDCPA.
Legal process servers. Process servers are exempt from the FDCPA when serving legal process as part of judicial proceedings to enforce a debt.
Persons not regularly engaged in the business of collecting debts. If a person or entity does not regularly collect debts on behalf of others, it may not be considered a debt collector under the FDCPA.
When collecting debts on behalf of a related entity. If a person or entity is attempting to collect a debt on behalf of another company under the same ownership or corporate control, it will not be considered a debt collector as long as that person’s principal business is not debt collection.
Nonprofit organizations performing credit counseling and debt liquidation services at the consumer’s request. If a consumer requests credit counseling from or sends payments to a nonprofit organization that distributes the payments to his or her creditors, that organization is not considered a debt collector.
Debts incidental to a fiduciary obligation or escrow arrangement. If a person or entity is attempting to collect a debt which is incidental to a fiduciary obligation or escrow arrangement, it is not considered a debt collector by the FDCPA.
Debts originated by the debt collector. If a creditor originated the debt but later sold it to a third party, the original creditor is still not considered a debt collector when collecting that debt on behalf of the new entity that owns it.
Debts obtained as security in a commercial credit transaction with the original creditor. If the person or entity obtained the debt as a security interest in a commercial credit transaction with the original creditor, it is not considered a debt collector.
To learn more about what debt collectors can and cannot do, and how to deal with debt collectors, see our Debt Collectors & Collection Agency area.