Creditor vs. Collector – Is There a Difference?
What’s the difference between creditor and collector? Credit industry jargon can be unclear and confusing. Sometimes, our new clients ask, “Wait, isn’t a creditor the same as a collector?” The answer is always no, followed by an explanation we’ll share with you today. Creditor vs Collector: Explained!
In short, yes. They are different. Continue reading to discover how these two are distinct and why it’s important to understand that distinction.
Why You Should Know the Difference
Banks have the habit of selling debts to other creditors. In all the reselling, it can be easy to lose track of who has their hands on what. Sometimes, collection agencies and collection attorneys get involved along the way, too. Come what may, it’s essential that you realize who you owe. Again, a creditor vs collector. Knowing where your money goes is a healthy financial practice.
And when it comes to the FDCPA credit law, you want to be familiar with the term “collector.” Restrictions concerning collectors and your rights as a consumer are both on the line. Laws are in place to protect you.
Creditors vs. Collectors: What’s the Difference?
You may be interested in repairing your credit or understanding more about your current credit score. You’ll want to know these terms. Consider this your quick vocabulary lesson. This will help you navigate credit documentation and laws.
What Is a Creditor?
A creditor, put plainly, is the direct source. These individuals or businesses are owed money. This person or entity extended the line of credit in the first place. They expect to be paid back. They stand as the original lender. Sometimes, we hear consumers use “creditor” and “collector” interchangeably. Although they’re somewhat connected, they are separate operations.
If a creditor doesn’t receive payment in 90 days, they often reach out to a “collector.” Debt collectors will essentially hunt for these missed payments. Their job is to track down the past due amount.
What Is a Collector?
Under the FDCPA, a collector is a third party. They’re routinely engaged in collecting the debts owed to a creditor.
Collectors make it their mission to pursue debts. Why? They get to collect a percentage of the amount collected. The idea is that, in the long haul, a creditor gets back most of what they’re owed. Without the hassle and inconvenience of contacting the consumer repeatedly. The collector gets a cut of the past due, too.
Sometimes, collection agencies purchase debts from the creditor. Why? So they can collect the entire amount owed themselves. With all the selling and reselling, things can become unclear about transitions and what is actually still owed. Tip: Keep a close eye on who’s managing your debt and payments.
Your Financial Journey Matters
At WJA, we like to keep things clear. Creditor vs collector is an important differentiation. We’re honest about our aggressive approach and the work we do in credit repair. We believe in buying power. In getting it back. It’s difficult to feel that power if you’re misled or completely lost. So, we’ve made it part of our business to educate consumers. There are a lot of consumer rights out there. We want you to know them and rightfully claim them.