We appreciate that the Washington Post ran this article about debt collectors calling but there is one area we want to clarify as it might leave consumers with the wrong impression about debt buyers (debt scavengers/bottom feeders/buyers of distressed debt – whatever you want to call them).
The article mentions that the Fair Debt Collection Practices Act (FDCPA) applies to third party debt collectors but not the original creditor. Here is the part that could be confusing:
The act doesn’t apply, however, to the original lender. And if the original creditor sells the debt to another company, Talbott said, the law treats the new owner the same as the original lender. In either of these cases, collectors have wide latitude in how and when they contact borrowers.
To be clear – the original creditor is normally not subject to the FDCPA. A company that buys the debt – the “new owner” – IS subject to the FDCPA if it bought the debt when the debt was in default. So, if a debt is sold because one company is buying another or buying a huge portfolio of current accounts, the article is correct – the FDCPA does not apply. But, as is the case in the vast majority of the time, if the debt (credit card, car loan, etc) was late and in default then the new owner is considered a “debt collector” and is subject to the FDCPA.
This was established by several courts including the Kimber decision several decades ago in Alabama that said a debt buyer is subject to the FDCPA and suing after the statute of limitations (SOL) has run is a violation of the FDCPA.
So, if you are dealing with a debt buyer, remember that normally it is subject to the FDCPA even if it claims it is not. Please feel free to contact us for more information.
Another resource for you is to join our Facebook Fan Page – Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.