A creditor is a person or entity to whom you owe money. Most commonly, a creditor is the outfit who originally gave you a loan. Your mortgage company is a creditor. So is the company that administers your credit cards. If mom and dad lend you $100, then they are also, technically speaking, creditors. Again, in most cases, the original owner of the debt is a creditor, not a debt collector.
These original creditors try to hold on to debts for as long as they are profitable. Debts remain profitable if there is a history of on-time payments. However, once payments become erratic or consistently late, the debt becomes a serious liability for the creditor.
To get rid of this liability, financial institutions and other lenders sell the account to a debt collector. A debt collector is a third-party collections agency, not the original creditor. Debt collectors buy delinquent accounts for less than the original debt is worth. They utilize a variety of aggressive collection techniques to get borrowers to pay up. This is how they make money. Some say they are unscrupulous in their aggressive ways. I say that is an understatement.
Fair Debt Collection Practices Act
There is good news for debtors regarding debt collectors and collection agencies. Debtors are protected by the Fair Debt Collection Practices Act. Under this Act, debt collectors and collection attorneys must adhere to strict regulations when attempting to collect payments. The Act prevents debt collectors from calling excessively or at odd hours of the day. Likewise, it prohibits the false threat of legal action, and threatening borrowers with arrest.
Please note that original creditors are not bound by the Fair Debt Collection Practices Act. This is important. You need to know who you are dealing with and what rights you have. Having financial problems is difficult enough without additional harassment. If debt collectors are bullying you with their illegal methods, call me for help. And call me if you are having money problems – we can also help with that.
