What’s the difference between a Debt Purchaser, Debt Collector, Collection Attorney, and a Collection Agency?

September 2, 2008

What is a “debt purchaser”? A “collection agency”? A “debt collector”? A “collection attorney”?

Companies called debt purchasers buy old accounts from original creditors– for example, credit card companies. Debt purchasers also buy accounts from other debt purchasers.

Debt purchasers then either try to collect on these accounts themselves or hire another company or attorney to do the collections work for them.

The company actually doing the collection work may be called a “debt collector” or “collection agency.” After trying to collect for a while, they may refer the account to a “collection attorney.”

In some cases debt collectors refer the accounts to attorneys just before they file a debt collection lawsuit.

This can be confusing for consumers, because several different companies might contact the consumer trying to collect on the debt.

For example: the consumer might get calls and letters from the original creditor, the debt purchaser itself, the company doing collections on the account, and the debt collector’s attorney.

What should I do if a debt collector calls me or sends me a collection notice?

It is important to note that debt purchasers typically pay pennies on the dollar for these accounts. A consumer will want to take this into account if he or she decides to negotiate a settlement with a debt purchaser.

It is also important to realize that merely paying a collection agency usually does NOT improve a person’s credit score. Improved credit reporting must be negotiated as part of any settlement agreement.

You should also research the following:

Is the account valid?
Are the debt collector’s numbers accurate?
Are the debt collector’s collection techniques legal?
Are the collection fees charged by the debt collector legal?
Which (if any) party is legally entitled to payment– the debt collector, the original creditor, or the collection attorney?

Note that debts are often sold or assigned to multiple collection agencies. And, if a consumer settles a debt for less than its full amount, the debt collector might attempt to resell the remainder of the debt unless there is a settlement agreement in place to prevent the resale.

What protections do consumers have?

Fortunately, there are both federal and state laws that protect consumers.

Whenever possible, it is very important to respond to collection agencies within 30 days of their first contacting you. Doing so will help preserve all of your legal options.

But, you still have many legal protections, even if you are responding more than 30 days after hearing from a debt collector.

And, different legal protections apply when original creditors attempt to collect on an account.