If you are past due on a credit account, whether it’s a credit card or a different form of credit, the originating creditor may first attempt to collect on the debt in-house. If they’re unable to collect on the debt successfully or don’t have adequate resources, they might opt to sell the debt to a collections agency or to a debt buyer.
Debt collection agencies are businesses that attempt to arrange payments on delinquent accounts owed by consumers or businesses. There are various types of collection agencies but it’s important to know the difference between a first-party creditor and a third-party creditor.
This page will answer some common questions you might have about collection agencies. If you don’t see something you’re looking for, please let us know by using live chat or calling us at (888) 726-3181.
First-Party Creditor vs. Third-Party Creditor
A first-party creditor is the originator of the credit card, loan, product, or service that you may have used, received, or obtained. Typically first-part creditors are credit card companies, loan companies, medical providers, and other types of businesses or organizations that may issue credit. They are not subject to the same legislation that regulates third-party collections.
A third-party creditor is typically a collections agencies, collections law firm, or debt buyer, and is not part of the original agreement made between the first-party creditor and the debtor. Third-party creditors are typically contracted by the originating creditor to handle accounts receivable issues such as delinquent and past due debts. Usually third-party creditors are paid on contingency fees.
Some companies use first-party collection agencies to collect on debts for them instead of immediately relying on third-party agencies. These first-party agencies are subsidiaries or affiliates of the first-party creditor. While their objective is to collect on the debt that is due, these agencies typically do a better job of maintaining the customer relationship. Like first-party creditors, these companies are not guided by third-party collection legislation.
Most consumers associate debt collection with third-party agencies. These include debt collection companies, debt buyers, and debt collection law firms. These businesses are contracted by the original creditor – or bought outright by debt-buyers – and attempt to collect the debt over a specified period of time. Most agencies will collect on the debts for a 30-day to 6-month period. In some cases, accounts can be held at an agency for a year or several years.
Collection agencies have the second highest rate of complaints according to the Federal Trade Commission (FTC). The FTC, along with the Bureau of Consumer Financial Protection, possess the majority of regulating power over these third-party agencies. The Fair Debt Collection Practices Act (FDCPA) is the primary group of laws that govern third-party agencies regarding consumer debts.
Common Collections Agencies You May Have Heard Of
- Allied Data
- Allied Interstate
- Asset Acceptance
- CACH, LLC d/b/a Fresh View Funding, LLC
- CBE Group
- Encore Receivable Management
- GC Services
- MediCredit Inc.
- Midland Credit Management
- Northland Group
- Phillips & Cohen
- Portfolio Recovery Associates
- Revenue Group
- Simm Associates
- Valentine & Kebartas Inc.
The following is an excerpt from the consumer portion of the FTC website, and we hope it’s useful to you in understanding what third-party creditors can and cannot do when interacting with you. The information below can be found here:
Harassment. Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For example, they may not:
- use threats of violence or harm;
- publish a list of names of people who refuse to pay their debts (but they can give this information to the credit reporting companies);
- use obscene or profane language; or
- repeatedly use the phone to annoy someone.
False statements. Debt collectors may not lie when they are trying to collect a debt. For example, they may not:
- falsely claim that they are attorneys or government representatives;
- falsely claim that you have committed a crime;
- falsely represent that they operate or work for a credit reporting company;
- misrepresent the amount you owe;
- indicate that papers they send you are legal forms if they aren’t; or
- indicate that papers they send to you aren’t legal forms if they are.
Debt collectors also are prohibited from saying that:
- you will be arrested if you don’t pay your debt;
- they’ll seize, garnish, attach, or sell your property or wages unless they are permitted by law to take the action and intend to do so; or
- legal action will be taken against you, if doing so would be illegal or if they don’t intend to take the action.
Debt collectors may not:
- give false credit information about you to anyone, including a credit reporting company;
- send you anything that looks like an official document from a court or government agency if it isn’t; or
- use a false company name.
Unfair practices. Debt collectors may not engage in unfair practices when they try to collect a debt. For example, they may not:
- try to collect any interest, fee, or other charge on top of the amount you owe unless the contract that created your debt – or your state law – allows the charge;
- deposit a post-dated check early;
- take or threaten to take your property unless it can be done legally; or
- contact you by postcard.
Be advised, professional third-party agencies make debt collection their business. You, as the consumer, should be aware of this when dealing with these companies. It’s important to know that as a debtor, you do have rights afforded to you under the FDCPA. When dealing with these agencies you should not allow your personal feelings to get in the way of your negotiations. In addition, these agencies oftentimes force consumers to make financial arrangements with them that the consumer has no way of fulfilling. The collection agent and the agency itself has one objective, and that’s to generate revenue. The revenue they receive is determined by how much they can collect out of a debtor and how quickly they can collect the debt.
If you feel you’ve been a victim of a Fair Debt Collection Practices Act violation, or are being taken advantage of by a third-party agency, contact an Ohio consumer protection lawyer. Only then will you know if your rights have been violated and if you have any legal recourse.