“Debt Collectors” and “Debt Buyers”

I often talk about debt collectors, 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. These are sometimes called “junk debt buyers.”

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

There are some companies that collect debts for other companies, taking a percentage of the collections as their fees, and most people think of these companies when they think about “debt collectors.” But the term “debt collectors,” in its legal sense, is broader than that. There are also debt buyers, who buy the debt from the original creditors and collect on their own behalf, and these companies can also be “debt collectors” in the law.

If a company’s “principle business” is the collection of debts, it is a “debt collector” whether it is a debt buyer or (just) a collector. 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, are the lawyers suing you and their firms. All must obey the Fair Debt Collection Practices Act.

“Debt collector” used to be more conveniently determined as a matter of when a company purchased a debt – if it buys a debt that isn’t being paid solely for the purpose of collecting it, it is obviously functioning simply as a debt collector. But our distinguished Supreme Court – distinguished mostly based on its hostility to working people and its favor to the rich – sees otherwise. It ruled against common sense in 2017. So now one must look to the status of the company – what its “principle business” may be – rather than its actions.

One problem with using the “principle business” standard is that the term has rarely, if ever, been actually quantified. That is, no one really knows what percentage of a company’s business needs to be a certain thing before that thing is its principle business. More fundamentally, all the debt buyers are doing is changing the name of the person allegedly owed. They make exactly the same amount of money they ever did (or they can if the deal is structured that way because there is no real risk of ownership), and their business is exactly what a third person debt collector’s is: they collect money owed to someone else. This should not be changed if the company incidentally happens to have some other operations that are other than collecting debts.

For example, a law firm that buys debts and sues on them (as many do) will almost certainly no longer be a debt collector, whereas Congress has been pretty clear that it wanted them to be. And the standard wrongly seems to focus on the overall business of the business rather than the nature of its operations vis a vis the debt in question.

Nevertheless, to prove a debt buyer is a debt collector under the FDCPA, you will now have to prove that is it’s principle business, and that will make bringing a counterclaim more difficult.

However, for purposes of defense this will not make any difference. The important thing about debt buyers, from our perspective, is that they are suing on a debt which they did not generate. This means they probably won’t have, and won’t be able to get, the records that would legitimately support the debt at trial. You should be able to beat any debt collector or debt buyer in court.

Our materials work on both debt collectors and original creditors.