Debt Validation Section
Debt validation is the process of confirming the true and accurate amount that you owe a creditor or collection agency. Why should you validate a debt? Possibly the debt has already been paid, does not belong to you or perhaps the Statute of Limitations has expired on the debt and you cannot be legally sued for the debt.
Before you begin debt validation, it’s important to first determine who is attempting to collect this debt. If your debt is still being collected by the original creditor, you may not be able to take advantage of debt validation because they are not bound by the FDCPA.
In many instances, your debt is sold or assigned to a 3rd party debt collector, usually a collection agency. Some original creditors assign your debt to their own collection company or a law firm, and in other instances your debt is sold off to a completely separate company known as a "junk debt buyer".
A junk debt buyer is a collection agency who has purchased a large portfolio of delinquent or charged-off accounts from credit card companies or other collection agencies. Also referred to as "bad debt buyers", these companies fall under the Fair Debt Collection Practices Act definition of a collection agency. Junk debt buyers generally buy bad debts for pennies on the dollar and then attempt to collect the debt. Regardless of whether the collector is a collection agency, law firm, or a junk debt buyer, debt validation may be useful because it is governed the FDCPA and makes the debt collector comply with federal law to validate a debt.
In addition to the original creditor, only one debt collector should be reporting an unpaid debt. (Note: When an account is charged-off by the original creditor it can remain on your credit reports for up to 7 years. Neither the FCRA nor the FDCPA requires a first debt collector to delete their reporting once they are no longer pursuing collection efforts and the debt remains unpaid. Technically it can stay on your credit report because it is an accurate representation of the account’s history.) If the original creditor transfers or sells the account to a debt collector, that debt collector may also report the debt. If a debt collector attempts to collect a debt for several months but then sells it to another debt collector - the new debt collector may begin reporting the debt but the previous debt collector may not continue to report the debt since they are no longer attempting collection. Duplicate reporting of the same debt constitutes inaccurate credit reporting which is a violation of the FCRA.
Requesting debt validation is particularly helpful if the debt has been sold. Often junk debt buyers have little information about the debts they own. They purchase a portfolio of debts often with little more than basic information about you and the alleged debt. They may try to collect the wrong amount or from people with similar names who don’t owe the debt.
In some instances, consumers who simply request debt validation discover a junk debt buyer will cease collection of the debt. Debt buyers have one goal in mind – get the money as quick as possible. They want to collect without putting too much time and effort into the collection process, especially if it is older debt.
The Debt Validation Process
One of the most important sections of the Fair Debt Collection Practices Act is Section 809 Validation of debts. This Section lays down the guidelines for conduct relating to the debt validation process.
Debt Validation Period
Within five days of its first communication to you, the debt collector is responsible for sending you a debt validation notice. This notice should be in writing letting you know you have the right to dispute the validity of the debt within 30 days. The FDCPA allows the collector to include the debt validation notice in the initial communication.
As an example, if the debt collector’s first communication with you is by phone, you should receive a debt validation letter from them within five days thereafter. If the first communication is by letter, that letter might already include the debt validation notice; otherwise, you should soon get another letter including the notice.
If you don’t dispute the debt in writing within 30 days, the debt collector has the right to assume the debt is valid. The debt collector must stop its attempts to collect the debt from you until it provides your validation.
Submitting a Validation Request
For debt validation, your request must be submitted in writing. You can dispute the entire debt, part of the debt, and you can request the name of the original creditor. After receiving your dispute, the debt collector cannot contact you until it has provided you with the requested information.
Your debt validation letter must be sent in writing. Consumers often send the letter via certified mail with return receipt requested. This way, you have proof of the letter’s mailing and receipt by the debt collector. If you have to file a lawsuit against the debt collector, the certified and return receipts will help strengthen your case.
The Collector's Response
After receiving your dispute, the collection agency must send you proof that it owns or has been assigned the debt by the original creditor. Verification that you owe the debt and the amount of the debt needs to include documentation from original creditor (however, it is the debt collector who sends it to you). It is not enough for the collection agency to simply send you a printout of the amount owed.
If the debt collector does not verify the debt within 30 days, it is not allowed to continue collecting the debt from you nor can it list the debt on your credit report. Should the debt collector list the debt on your credit report, you should dispute the debt with the credit bureau. Sending the credit bureau a copy of your debt validation letter along with the certified and return receipts will help get the account removed from your credit report. You should note that even suing you at this stage is illegal (they have to validate the debt before they can sue you).
Proceed with Caution . . .
If you are not financially prepared to pay a debt, you may not want to validate, or even acknowledge it. It is perfectly reasonable to want to gather your resources before contacting a collector. Prior to that, it may be better to stay off the collection radar screen. But if you have decided to confront the debt as part of your credit repair program you should always validate it before offering any money.
Alternatives to Debt Validation
What if I just want to make sure the collection agency or debt buyer is legitimate? Your goal is to confirm their involvement without formally drawing attention to yourself. If you suspect that it COULD be a debt you owe, but don’t recognize the name or you’re uneasy about the third-party collection agency and you would like to confirm their involvement, it is in your best interest to inquire on the chain of title. This can be done verbally by calling the original creditor and confirming the collection agency or debt buyers’ involvement.
If you’re unclear on who the original creditor is, ask the debt collector for their clients’ contact information. Then call the collection agencies’ client and inquire on who the original creditor was. Once you’re provided that information, call the original creditor to make your inquiry.
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