“Debt Collectors” and “Debt Buyers”

I talk about debt collectors a lot, but many, and perhaps most people being sued for debt are being sued by people (or companies, usually) that have purchased the debt from someone else, and are suing to collect the money for themselves. Debt purchasing companies bid for “debt” at huge auctions, where they buy whole “portfolios” or “tranches” of debt from banks or other companies that generate lots of debt that doesn’t get paid off. So the debt buyer might buy a million or two dollars of “nominal” debt (that is, the face value of the debt supposedly owed) for between two-tenths of a cent to twenty-five cents or more per hundred dollars of nominal value. They then harass the people who supposedly owe the money and often end up suing them. In the law, debt buyers are treated as “debt collectors.”

So What is the difference between a “debt collector” and a “debt-buyer?”

Most people think of debt collectors as the people who call them up and bug them for money. And the companies, to the extent many people know about them at all, might be called “debt-buyers.” But in the law, if the company deals primarily with debts generated by another person, it is a “debt collector” whether it is a debt buyer or otherwise. So the company that bugs you on behalf of the original creditor is a debt collector, and so is the company that bought the debt and began harassing you in an attempt to collect for itself. And so, usually, is the lawyer and his or her firm that are suing you. All must obey the Fair Debt Collection Practices Act.