Identifying The Different Types of Debt Collectors

Determining which type of Debt Collector you are dealing with is key to resolving your situation. It is important to understand the legal relationship between the debt collector and yourself. The nature of this relationship affects the available defenses to collection, and the existence of potential consumer protection claims that can be used as leverage to negotiate a reduction or elimination of the debt. Identifying the type of debt collector you are facing is crucial in determining the best approach to resolving your debt.

Types of Debt Collectors

Direct Creditors:

Direct creditors are the banks, finance companies, or other lending institutions that have actually approved your credit application, and/or loaned money or extended credit. These creditors may be credit card issuing banks, such as American Express, Capital One Bank, Citibank, Bank of America, Discover, and Synchrony Bank, to name but a few. Other common consumer creditors include automobile finance companies, including Ford Motor Credit Company, Autovest, Santander, PARS Financial, and many others. Another common type of consumer debt that often results in collection litigation involves unsecured, personal loans made by storefront lenders such as First Franklin, Brookwood Loans, Republic Finance, World Finance, and Lendmark Financial, among others.

Servicers/Securitization Assignees:

Most people, including many judges and lawyers, believe that consumer lenders make their money primarily by recovering interest and principal payments from borrowers. The truth is that the “account receivables” that are generated through lending practices are re-packaged and sold through a chain of other companies as part of a process known as “securitization.” Through the securitization process, accounts are transferred to servicing companies that collect and hold the actual payments from borrowers, and organize receivables according to various factors, to be sold to intermediaries through the use of “pooling agreements.” All rights to the account receivables are sold to the intermediaries, who are usually other banks or special trusts, and who help to complete the process by which the receivables are classified, underwritten, and ultimately sold to industrial investors as registered securities. The funds paid by these investors are then returned to the lenders or creditors, to further their business operations. These entities are rarely involved or disclosed during the collection and litigation process. However, an understanding of the securitization process is immensely helpful to the defense of debt collection efforts.

Debt Purchasers/”For Profit” Assignees:

Where loans or credit accounts have remained in a delinquent, unpaid status for a significant period of time, and collection has been unsuccessful, many creditors and lenders choose to sell all rights to the unpaid accounts to companies that profit from debt collection. Depending on numerous factors, including the age of the debt and risk profile of the borrower, the prices paid for these accounts may range from as low as .005 to as much as .10 on the dollar. Because these companies are attempting to collect debts issued or originated by others, they are considered to be “debt collectors” withtin the meaning of the Fair Debt Collection Practices Act, at 15 USC 1692, et seq. This firm routinely files claims against debt collectors relating to false, misleading and deceptive statements, and unfair practices or actions utilized to collect consumer debts.

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