From Banks to Debt Buyers- What's the difference?

Before I begin I always will state the following:

What Company is Calling?

“I don’t have a credit card with you”

You ever get a call about a debt you are told you owe but you don’t recognize the company calling?

After years in the debt buying biz, I've seen how confusing debt collection can be for folks. Today, I'm gonna break down one of the biggest head-scratchers: WHO OWNS MY CREDIT CARD or LOAN? Who owns your delinquent debt matters as to the approach a debt collector will have with you when trying to get you to pay.

What’s the difference between original creditors and debt buyers. Trust me, knowing this stuff can save you a ton of headaches (and maybe even some cash).

Let's Start with Original Creditors

So, you know that credit card you signed up for or that loan you took out? The company that extended you that money is your original creditor. Seems simple, but not so simple when it comes to knowing the exact name of the company which owns your debt.

Where do you find this? In your original agreement you signed, look for sections labeled “Creditor,” “Lender,” or “Terms.” The original creditor’s name should be listed there. If it’s unclear, check the opening pages or contact customer service for clarification. Knowing the original creditor name is very important to always have written somewhere for future reference.

These are the big banks, credit card companies, or other financial institutions that decided to trust you with their cash.

Now, if you fall behind on payments, these guys will usually try to collect the debt themselves for a while. Usually these original creditors will try to collect on your delinquent debt up to 180 days. Not always but that is common.

They might send you some letters, call your phone, hit your credit.

Here's the thing about original creditors - they care about keeping you as a customer. Weird, right? They might offer you some flexible repayment options or work with you to get back on track. They're hoping you'll stick around and keep using their services and pay at least the minimum due to rack up that interest and some fees.

When Things Go South: The Write-Off and Sale

But let's say you can't pay, and the original creditor gets tired of chasing you. They might decide to "charge off" the debt. Don't get excited - this doesn't mean you're off the hook. It's just an accounting thing. The creditor is basically saying, "Yeah, we don't think we're gonna get this money back."

Here's where it gets interesting. A lot of creditors will then sell your debt to companies I work for debt buyers. They bundle up a bunch of these charged-off debts and auction them off to the highest bidder. And get this - we usually pay pennies on the dollar. It depends on how close your debt is to that 180-day delinquency and that write-off(charge off) date. Debt buyers pay more for “fresh” charge-off accounts(close to the 180 days) vs. accounts that were charged off and laying around awhile, say 12 months since charge-off or more. Pretty wild, right? This is a simplified summary just to give a general idea.

Enter the Debt Buyer (That's Me!)

So now your debt is in the hands of a debt buyer. We're a whole different animal from the original creditor, and here's why:

1. We're in it for the money, plain and simple. We bought your debt as an investment, and we want to turn a profit.

2. We've got more wiggle room to negotiate. Since we paid so little for your debt, we can often settle for less than the full amount and still come out well.

3. We might not have all the details about your original debt. That's why it's super important to always ask us for debt validation. More on this in future articles.

4. We don't care about keeping you as a customer. Our only goal is to collect on your debt.

5. We're working against the clock. We want to collect before the debt gets too old to legally pursue.

6. Debt Buyers also want to work with you nicely, reputation in the industry is important and banks won’t want to sell to companies known for poor collection practices or have government agencies coming after them.

What This Means for You

Knowing whether you're dealing with an original creditor or a debt buyer can make a big difference in how you handle things:

1. Negotiation Power: With us debt buyers, you've got more room to haggle. Remember, we paid peanuts for your debt, so even if you pay less than the full amount, we can still make a profit.

2. Always Ask for Proof: When a debt buyer contacts you, always ask them to validate the debt. Sometimes info gets lost when debts change hands.

3. Know Your Time Limits: Every state has a statute of limitations on debt. After that time's up, we can't legally sue you to collect. Be careful though - in some states, even talking to us about the debt, or worse yet, making a payment, can restart that clock.

4. Credit Report Impact: Both original creditors and debt buyers can report to credit bureaus. But settling with the original creditor might look a bit better on your credit report.

5. Keep Records: Document everything when dealing with debt buyers. Every call, every letter, every agreement. It could save your butt if there's a dispute later. Also remember, all those phone calls are being recorded. At least should be.

Here's the most important thing to remember: You've got rights. The Fair Debt Collection Practices Act protects you from shady collection practices, whether you're dealing with an original creditor or a debt buyer.

Don't be afraid to stand up for yourself or get some professional advice if things get overwhelming.

Within the last 20 years, the shift towards increased consumer rights has been incredible. I do not believe people truly understand the land mines debt buyers have to maneuver through to make sure their debt is still legally allowed to be collected. Use these land mines to your advantage. The FDCPA is your friend.

Thanks for reading Debt Collection Insider.

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