What is a Debt Buyer?
When you don’t pay a bill, a debt collector usually comes along to try to collect the debt, either through a phone call, or through a letter (or multiple attempts at both of these). The general population calls all of these people “debt collectors,” but this is a general term, and is not legally accurate, as there are separate categories for who is calling to collect.
As the name implies, a debt collector collects debt for someone else. They are usually hired to collect for and on behalf of the original creditor—that is, the company (including any medical provider, if it is a medical debt) that you first incurred the debt with.
Sometimes called “collection agencies,” these companies are just hired guns, and are usually paid a percentage of what they are able to collect from the company that hired them.
There is a larger category of debt collectors, called “debt buyers.” Unlike collection companies that are just hired by the true owner of the debt, debt buyers purchase bad debt from the original collector, often for pennies on the dollar, and then proceed to collect on it.
This means that the debt buyers actually own the debt they are collecting on, and often own large, multi-million dollar portfolios of debt.
Because they own the debt, debt buyers often have more flexibility in working out solutions with consumers—they don’t need to ask permission of a separate owner of the debt before agreeing to a settlement.
However, because they shelled out cash to purchase the debt, and because it’s theirs whether they collect it or not, debt buyers often are more unscrupulous than simple debt collectors when it comes to collection tactics. Additionally, because they own the debt, and thus can sue in their own name, buyers may have an easier time going to court to sue over the debt.
Having purchased so many bad debts at once from original creditors, debt buyers often don’t even know if the debt is good, and may try to collect on debts discharged in bankruptcy, or on debts that are too old to even legally be collected.
Compliance with Collection Laws
Debt buyers are generally required to comply with the Fair Debt Collection Practices Act, as they almost all engage primarily in the business of collecting the debt they have purchased.
Sometimes, there may be an occasion where an individual purchases debt that he or she wants to collect on, or even a law firm that handles collection matters, that buys debt to collect for itself. In those cases, the question of whether the debt buyer primarily engages in the practice of debt collection (and thus is subject to the FDCPA) may be a factual question to be resolved by the court.
Do you have a question about how a debt is being collected? Is someone saying you owe a debt that is not yours? Contact Jacobs Legal in Miami today to discuss your options to fight back.