In the state of Georgia, as in the rest of the United States, the Fair Debt Collection Practices Act (FDCPA) serves as a crucial safeguard for both consumers and creditors. Because used car dealers sometimes collect payments from their customers (depending on the financing type and agreement), they frequently ask me: “Am I a debt collector?” In this article, we unpack the FDCPA from the perspective of a used car dealer.
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Who is Considered a Debt Collector Under The FDCPA?
The FDCPA is comprehensive legislation that set guidelines and standards that debt collectors must adhere to when communicating with debtors. While this legislation is integral in protecting both collectors and consumers, it begs the question: Who is considered a debt collector? How do used car dealers comply with the FDCPA? Compliance is the one thing that scares dealers most, at least those in buy here/pay here financing models.
Unfortunately, the FDCPA governs several different issues when it comes to debt collection, which means it should be handled on a case-by-case basis. However, one thing used car dealers must know is that first-party debt collectors are not subject to the FDCPA. This means people that own or businesses that established and own the debt, like a buy here/pay here dealer, are not usually subject to the FDCPA. Now, this may not always be the case given the nuances embedded in the FDCPA legislation.
Usually, the FDCPA only applies to what’s called third-party debt collectors. Those are debt collectors that do not own the debt but instead are merely acting as a collection firm to collect on the debt. That does also apply to law firms that are debt collection law firms, not just debt collection finance entities, but also debt collecting law firms.
While this legislation is not simple, one thing is clear: The FDCPA governs the collection of debts, and usually a first-party debt collector – that’s the one that owns and certainly established and owns the debt – is not governed or restricted by the restrictions in the FDCPA. Again, though not always the case.
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