General Difference: The original creditor is the one who provides the funds or loan. Other creditors are those that are managing or handling a loan they did not initially provide. Only third-party debt collectors are regulated under the FDCPA.
All creditors are not the same. There are original creditors that loan you money or credit. Then there are other creditors that take on the collection of a debt they did not originally issue. It’s important to understand the different types of creditors.
For one thing, only certain creditors fall under the requirements of the Fair Debt Collection Practices Act (FDCPA). The FDCPA is a federal law that regulates how third-party debt collectors communicate and collect on a debt.
Original and third-party debt collectors have different responsibilities. Read on to understand more about creditors, their differences and the responsibilities of each.
What is an Original Creditor?
An original creditor is the company that initially loaned you the money or credit. For example, if you are financing a car or house, the company that approved you and supplied the initial funds is the original creditor. Also, if you have a revolving count, such as a credit card, that company is also the original creditor.
An original creditor must make it clear who they are. They must do so by always using their business name in all correspondence and other communication. If they fail to do so, the FDCPA may consider them a third-party debt collector under that law.
An original creditor has the right to sell any past due debts to another company for them to collect.
What Other Types of Creditors Are There?
Other types of creditors are often referred to as third-party debt collectors. They are any type of creditor that collects on a debt that they did not originally provide.
A debt buyer is one type of third-party creditor. Typically, these are companies that purchase the loan from the original creditor. There are other companies that will collect a debt on behalf of the original creditor. They are sometimes referred to as a collection agency.
Another type of creditor is a collection attorney. Sometimes a collection attorney operates independently. However, others may be a part of a larger collection agency.
Note: A loan servicer is not a creditor. They are responsible for managing the debt for another creditor. However, if they misidentify themselves or engage in certain actions, the FDCPA may classify them as a debt collector.
If you get a call from a debt collector you do not recognize it is likely not the original creditor. You should be able to confirm this by reviewing the validation notice.
When a third-party debt collector takes over a debt, they must send you a validation notice within 5 days of their first communication with you. This validation notice must include various information. This includes their company name, the original creditor and other important account information.
What Laws Regulate Creditors?
As stated earlier, third-party debt collectors fall under the regulations of the FDCPA. This law provides requirements for information a collection agency must provide you. In addition, it prohibits various forms of harassment, abuse and deception. For example, a collection agency cannot call you at odd hours or use profane language. They also cannot use deception to trick you into making a payment.
If a third-party debt collector violates the law there are options you can take to stop them. You can send them a cease-and-desist or other type of demand letter. You can also submit a complaint to the Consumer Financial Protection Bureau (CFPB) or the Federal Trade Commission (FTC). Lastly, you may hire an attorney and file a lawsuit.
Original creditors do not fall under the FDCPA. However, there are still laws that regulate how they collect on a debt. First, the original creditor is subject to the terms and conditions of the contract with the consumer. If the original creditor breaches the contract you can file a lawsuit. They are also subject to other laws such as the Telephone Consumer Protection Act.
Conclusion
There are important distinctions between an original creditor and third parties that collect on a debt. Depending on the type of creditor, they may have different responsibilities and restrictions.
If you are being harassed by any type of creditor, contact a consumer rights attorney to learn about your options. They can assist you in determining if they have violated your rights. If so, they can provide guidance on the next steps you should take.
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