Creditor v. debt collector: What is the difference?

When individuals get calls demanding they repay their debt, it is easy for emotions, like fear and anxiety, to take over. However, one question remains: who is calling to collect the debt? Is it a creditor or a debt collection agency?

This is an important distinction to make.

How are they different?

Many New Mexicans might believe that creditors and debt collectors are essentially the same. After all, they both look to collect debts. In some cases, this might be true, but not always.

Individuals must understand the difference:

• Creditors are the parties to which individuals owe the original debt. They provided the loan. This could be the credit card company, the bank or another institution that provides credit.
• Debt collectors, on the other hand, are agencies that creditors hire to collect delinquent debts. If individuals do not repay loans or negotiate a new repayment plan, then creditors might hire such agencies to collect the debt on their behalf.

These two entities are often different. However, it is critical to note that it is still illegal for either creditors or debt collectors to harass individuals for debt repayments. After all, debt collectors looking to collect third-party debts are strictly regulated and subject to the Fair Debt Collection Practices Act (FDCPA).

What should you do?

When someone calls to collect a debt, individuals have a right to know who is calling. In these cases, individuals should:

• Confirm who is calling, to differentiate whether it is a creditor or collection agency;
• Verify the debt they are looking to collect; and
• Determine how they can negotiate to repay the debt.

It is always important to verify the debt. Even though debt collectors are subject to the FDCPA, some agencies might try to collect an older debt, on which the statute of limitations has passed. Paying debts like this – commonly called zombie debt – could renew one’s responsibility to pay that debt.

Struggling with debt plus calls from creditors and debt collection agencies can be incredibly stressful. However, individuals can find debt relief through bankruptcy. And once the automatic stay goes into effect, neither creditors nor debt collectors can continue to call.