Understanding 1st Party and 3rd Party Collectors

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I have been following the How to Fight Debt Collectors series and noticed that the articles are all geared towards third party collections. For 3 years, I worked as a first party collector in the collections department for a mortgage company.

During that time, I learned a lot about debt, people, and collection law. I did some things that may have been considered shady but I never broke the law. The reason is in the distinction between 1st party and 3rd party collections.

1st Party Collections

Lets say my mortgage is with The Bank of Suburban Dollar. Suburban Dollar is reviewing their books and discover that I’m a month behind on my mortgage. They pick up the phone and call me to see what’s happening. The bank representative making the phone call is a direct employee of the bank and therefore a 1st party collector. When asked, they should say they work “with” rather than “on behalf of.” They are not a proxy of the bank, they are the bank.

3rd Party Collections

Same scenario, slightly different circumstances. I am still a month behind but the bank decides they don’t have the funds or the resources to pursue me. Instead, they opt to hire the Bargaineering Busters Collection Agency to do their dirty work. Jim calls me up one day and says “Hey Kyle, this is Jim with Bargaineering Busters Collection Agency calling on behalf of a debt you owe to the Bank of Suburban Dollar.” Jim is acting “on behalf of” the bank but does not work for the bank. Jim is a 3rd party in this debt saga, that makes him a 3rd party collector.

Why It Matters

Whenever you see discussion about debt collection, the Fair Debt Collections Practices Act (FDCPA) is almost always mentioned. The FDCPA is intended to protect the consumer but it only protects the consumer against 3rd party collectors.

Before the law was enacted it wasn’t uncommon for someone from a collection agency to call you up and fill your ear with empty threats until you pay up. The intent of the law was to protect you from this harassing behavior from a party you don’t owe money to. It was not intended to limit the ability of creditors, like the mortgage company, from being able to collect on dbets.

FTC comments define a “debt collector” as:

Employees of a debt collection business, including a corporation, partnership, or other entity whose business is the collection of debts owed another.

As well as,

A firm that regularly collects overdue rent on behalf of real estate owners, or periodic assessments on behalf of condominium associations, because it “regularly collects . . . debts owed or due another.”

In reference to the Creditor (1st party):

Creditors are generally excluded from the definition of “debt collector” to the extent that they collect their own debts in their own name. However, the term specifically applies to “any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is” involved in the collection.

Even more specifically the FTC directly excludes credit card companies trying to collect card holder accounts. The FDCPA does not apply to the 1st party employees of the company you owe money to and they know it. Fortunately most in house collection shops, like the one I worked for, do make a concerted effort to abide by the FDCPA.

Where 1st Party Collectors Blur the Line

After three years in a 1st party collections environment, you start to learn where you are silently encouraged to blur the lines. There are certain spots where a 1st party collector may take additional liberties where a 3rd party collector dare not go for fear of retribution.

  1. Your Neighbors – Any collector, 1st or 3rd party, can contact your acquaintances and neighbors in an attempt to locate your contact information. They can only contact each of them once and only until they get that information. 1st party collectors will call more than once and in some cases leave messages.
  2. Hours of Calling –  The FDCPA defines the hours of contact to be from 8:00 AM to 9:00 PM. If you are a particularly difficult person to reach, a 1st party collector may stretch those hours out in either direction.
  3. At Work – Collectors may not contact you at your place of employment if they know you are not allowed to receive calls there. When you go off the grid and are otherwise unreachable 1st party collectors will typically contact you anyway they can, this includes your work.

The law was enacted to stop collectors from harassing consumers. Most 1st party shops still want your business, so it isn’t in their best interest to violate the law even if it doesn’t apply to them. Another thing to consider is your local state specific laws on debt collection. There are a number of laws which further limit the types of things collectors can do. California has some of the most strict. Several sites maintain lists of the specific laws, you can find one such list at

One a final note, collectors are contacting you because you didn’t pay something you owe. Don’t lose sight of the fact that you still owe them money and it is your responsibility to pay. This doesn’t give them free reign to treat you like dirt so don’t let them, a good collector will work with you to pay your debt in a manner that will help you get back to where you can pay as agreed in your contract.

This is a guest post by Kyle, who writes at where he brings finance and the real world together.

{ 7 comments, please add your thoughts now! }

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7 Responses to “Understanding 1st Party and 3rd Party Collectors”

  1. zapeta says:

    Thank you for this informative article and pointing out this important distinction.

  2. Greg says:

    That is amazing information! I have heard Dave Ramsey and Clark Howard on a number of occasion cite the FDCPA without validating that it was a 3rd party collector. I wonder how many times their listeners tried to push back only to find out it was a 1st party collector working “within” the guidelines?

    Goes to show, knowledge is important, but the right knowledge makes all the difference!

  3. eric says:

    Bargaineering Busters..ha 😀

  4. george says:

    Hey, Kyle
    How sure are you about 1st party collectors that are not deemed by the rules of the FDCPA.
    So, if I worked for a company’s collection dept, that would make me a 1st party collector that shouldn’t have been affected by an adverse decision based by the rules of the FDCPA? Now, let’s take this a step further, if the company states that during a monitored recording they claim that I was in violation of the FDCPA. Regardless of the fact, that in doing so, had salvaged one of their customer’s urgent and delinquent high balance account from nearly being outsourced by providing an arrangement to a hardship program that was clearly available and qualified for thus achieving a mutual resolution for customer retention. Whereby reinstating services empathized appreciation from patient satisfaction for the continued service to their quality of care.
    Are you saying that my employment rights may have been violated and that I should seek counsel??

  5. Ashlee says:

    I have worked both as a 1st.and 3rd party collector both legal.n non legal fields and 1st party collectors.are not subject to laws ie fdcpa.but it may be a company policy to follow them which then will leave u subject to insubordination and in a.right to work state.such as arizona it doesnt matter why ur fired if its not one of the protected parties pregnancy race.gender sexual preferance martial status n so on

  6. Lindsey says:

    Thanks for making this distinction… It took me a while to find the actual wording “loophole” that 1st parties are not subject to the FDCPA, but that it’s ‘recommended’ to use it as a guideline anyway. Seeing it here made it easier to visualize it, in essence.

  7. Anonymous says:


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