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Epic Contributor
Posts: 26,027
Registered: ‎03-19-2007
Re: Understanding agencies that buy your loans once defaulted


The tool d'jour being used by some debt collectors to confuse the system, and unknowlegeable consumers!


A "factoring company" is a company that buys "accounts receivable" assets from a business seeking immediate cash, and then collects on those receivables from the consumers who owe the debt. Technically, a factored account is supposed to be an account that is NOT past due...the business just wants their money faster than the length of time normally allowed (30-90 days).


If a creditor has charged-off a debt, then they have already moved the receivable asset from their accounts receivable ledger.  That is what a CO is.  They thus have no account receivable to sell to a factor.


The distinction arises in credit reporting based on case law which considers a party who buys debt that is already delinquent as a “debt collector,” and thus subject to all of the provisions and requirements of the FDCPA.  Some want to avoid being subject to the FDCPA, so report as a "factor," implying that they are not subject to the FDCPA.


Thus, an apparently growing tactic that some CAs are using is to send info to the credit agencies that they are now a factoring company, and also a “creditor” based on purchase of the debt.  Some even go so far as to assert they have become an original creditor.


If delinquent at the time of purchase, however, they are not considered a creditor under the FDCPA, but rather a debt collector.