Assigned Claim Vs. Owner of Debt

While taking out a loan seems like an agreement between yourself and a specific bank or institution, debt is often treated like a commodity. Debts can be bought and sold between banks, debt collectors and even individuals. The job of collecting on past-due debts can be assigned to collectors who don't own the debt. The state of ownership of your debt can affect your rights.

Original Debt Owner

The original owner of your debt is the person you created a loan contract with. Examples of original owners include credit companies, banks who make personal loans and issue mortgages, and businesses that provide services and bill later. Keep your original contract or bill as a record of the debt and terms. Even if ownership of the debt changes, the original terms of your contract will not, although credit card contracts can allow for interest rate changes and fees.

Assigned Debt

Should you fail to make your debt payments, the original debt owner may take steps to collect. Sometimes he will assign the task to an outside collection agency, making your debt an assigned claim, also known as assigned debt. The agency with the assigned claim has the authority to pursue payment from you. It may even sue you for the debt in court, on behalf of the original debt owner. The collection agency receives a commission for each debt it collects and the rest of the money goes to the owner of the debt.

Sold Debt

Debt owners may also sell debts to another party. This can be done in the form of securities, such as grouping mortgages and allowing pension plans to buy them for the interest. Alternatively, a company may seek to get rid of hard-to-collect debts. Distressed debt can go for as little as pennies on the dollar, meaning that the buyer pays only a few cents for every dollar you owe. In this case, the collection agency keeps any money it can collect from you.

Debtor Rights

The Fair Debt Collection Practices Act (FDCPA) protects you from abusive debt-collection practices. However, whether it applies depends on who currently owns your debt. The act does not apply to original debt owners, such as the service provider who billed you, the bank that owns your mortgage or auto loan, or the original issuer of your credit card. The act only applies to debt collectors or lawyers who have been assigned to collect your debt, and agencies that purchase debt and attempt to collect.