What Is the Difference Between a Debt Collector and a Creditor?

Learn the difference between creditors and debt collectors for purposes of the FDCPA.

By , J.D., California Western School of Law
Updated by Amy Loftsgordon, Attorney · University of Denver Sturm College of Law

If any of your debts are in default, you've probably received numerous calls from debt collectors wanting you to make payments. Congress created the federal Fair Debt Collection Practices Act (FDCPA) to prohibit collectors from using unfair, deceptive, or abusive practices when collecting consumer debts.

The FDCPA places numerous restrictions on what debt collectors can do when collecting debts and provides consumers with certain rights and remedies against those violating any of its provisions. But the FDCPA usually doesn't apply to the original creditor or some debt buyers.

Who Is Considered a "Creditor" Under the Federal 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). Because the FDCPA protects debtors against third-party debt collectors, it doesn't apply to your original creditor or its employees.

But an exception to this rule exists: When collecting its own debts, a creditor must comply with the FDCPA if it uses a different name that implies a third party is attempting to collect the debt.

Who Is a "Debt Collector" Under the Federal FDCPA?

Under the FDCPA, a "debt collector" is generally a third party regularly engaged in the business of collecting or attempting to collect debts owed to another. The FDCPA's definition of "debt collector" includes anyone who:

  • uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts or
  • regularly collects, or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another.

So, under the FDCPA, the term "debt collector" generally includes debt collection agencies, collection attorneys, and mortgage servicers that obtained the account in default. Again, original creditors are usually excluded.

Does the FDCPA Cover Debt Buyers?

Debt buyers purchase old debts, often for pennies on the dollar, and then try to collect on those debts. But does the FDCPA cover debt buyers?

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.

Appeals Court Says the FDCPA Covers Debt Buyers If Their Purpose Is to Collect Debts

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.

Official Interpretation of Federal Law Says the FDCPA Covers Debt Buyers If Their Purpose Is to Collect Debts

As of November 30, 2021, the official interpretation to 12 C.F.R. § 1006.2(i) of Regulation F, which implements the federal FDCPA, says that a person who collects or attempts to collect defaulted debts that the person has purchased (that is, a debt buyer), who does not collect or attempt to collect, directly or indirectly, debts owed or due, or asserted to be owed or due, to another, and who does not have a business the principal purpose of which is the collection of debts, isn't a debt collector.

So, this interpretation basically confirms the Third Circuit's decision: debt buyers qualify as debt collectors under the FDCPA if their principal purpose is collecting debts, even if they're just collecting on debts they own.

Exceptions to the FDCPA's Definition of Debt Collector

The FDCPA doesn't cover the following.

  • Business debts. The FDCPA only applies to consumer debts incurred for personal or household expenses. It doesn't 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.
  • 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 doesn't regularly collect debts on behalf of others, it might 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 won't be considered a debt collector if that person's principal business isn't 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 creditors, that organization isn't 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 isn't 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 isn't considered a debt collector.

Talk to a Lawyer

If you think a debt collector has violated the FDCPA when trying to collect a debt from you, consider talking to an attorney to get advice about your options. You might be able to sue and recover money and other damages.

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