If tough times are making their way into your financial picture (or ever have) you are probably finding it difficult, if not impossible, to continue to pay your credit card bills. Other times I have seen a credit card company arbitrarily jack someone’s credit card interest rate up to usurious levels of 24-30%.
If you stop paying your credit card bills, you will start getting harassed incessantly by the credit card company. Once you are 5-6 months behind, the credit card company will have to “charge off” the debt as bad debt which will mean that they no longer can directly collect on the debt anymore. But they will assign the collection of the debt to a debt collector or a collection agency.
The collection of a debt by these companies are directly regulated by the Fair Debt Collection Practices Act (FDCPA).
You MUST know you have solid, concrete rights so don’t be afraid of these companies. Get educated! Read the Act, stand on these rights, violations of these rights subject these collection agencies to penalties and you can sue them for violations.
If you want to stop a collection agency or law firm collecting on a debt to screeching halt, you can use the right to require them to VALIDATE THE DEBT before they can do anything else OR report this collection on your credit report. Now, here’s the deal… THEY CAN’T VALIDATE THE DEBT. I have never seen a collector be able to yet.
Here’s some of what the FDCPA says:
Fair Debt Collection Practices Act Sec. 1692g. – Validation of debts
(a) Notice of debt
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing -
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) Disputed debts
If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.
(c) Admission of liability
The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
So what does this all mean?
It means that you have a right to dispute the debt, but not doing so also gives the collector the right to assume the debt is valid. Here are four questions posed to legal counsel at the Federal Trade Commission which are important enough to include here:
1) “Is it permissible under the Fair Debt Collection Practices Act for a debt collector to report charged-off debts to a consumer reporting agency during the term of the 30-day validation period detailed in Section 1692g?”
Yes. As stated in the Commission’s Staff Commentary on the Fair Debt Collections Act, a debt collector may accurately report a debt to a consumer reporting agency within the thirty day validation period (p. 50103). We do not regard the action of reporting a debt to a consumer reporting agency as inconsistent with the consumer’s dispute or verification rights under § 1692g.
2) “Is it permissible under the Fair Debt Collection Practices Act for a debt collector to report, or continue to report, a consumer’s charged-off debt to a consumer reporting agency after the debt collector has received, but not responded to, a consumer’s written dispute during the 30-day validation period detailed in § 1692g?”
As you know, Section 1692g(b) requires the debt collector to cease collection of the debt at issue if a written dispute is received within the 30-day validation period until verification is obtained. Because we believe that reporting a charged-off debt to a consumer reporting agency, particularly at this stage of the collection process, constitutes “collection activity” on the part of the collector, our answer to your question is No. Although the Fair Debt Collection Practices Act is unclear on this point, we believe the reality is that debt collectors use the reporting mechanism as a tool to persuade consumers to pay, just like dunning letters and telephone calls. Of course, if a dispute is received after a debt has been reported to a consumer reporting agency, the debt collector is obligated by Section 1692 e(8) to inform the consumer reporting agency of the dispute.
3) “Is it permissible under the Fair Debt Collection Practices Act to cease collection of a debt rather than respond to a written dispute from a consumer received during the 30-day validation period?”
Yes. There is nothing in the Fair Debt Collection Practices Act that requires a debt collector to continue collecting a debt after a written dispute is received. Further, there is nothing in the Fair Debt Collection Practices Act that requires a response to a written dispute if the debt collector chooses to abandon its collection effort with respect to the debt at issue. See Smith v. Transworld Systems, Inc., 953 F.2d 1025, 1032 (6th Cir. 1992).
4) “Would the following action by a debt collector constitute continued collection activity under § 1692g(b): reporting a charged-off consumer debt to a consumer reporting agency as disputed in accordance with § 1692e(8), when the debt collector became aware of the dispute when the consumer sent a written dispute to the debt collector during the 30-day validation period, and no verification of the debt has been provided by the debt collector?”
Yes. As stated in our answer to Question II, we view reporting to a consumer reporting agency as a collection activity prohibited by § 1692g(b) after a written dispute is received and no verification has been provided. Again, however, a debt collector must report a dispute received after a debt has been reported under § 1692e(8).
If you do not dispute the debt, then the collector can continue dunning you and requesting that you pay. It is in your best interest to dispute the debt in writing after you receive the first notice from the collector. If you do not, then you may have difficulties later on. The good news is that the debt collector must send you proof of the debt if you dispute it. I highly doubt on most of these old debts that the debt collector could even produce adequate documents to prove the debt. Most provide only a computer print out which is not adequate according to the Federal Trade Commission opinion.
The point here is not whether I owe it, but rather how much do I owe, has the statute of limitations run out, is the credit report reflecting inaccurate information because of the collection agency, and, are the figures correct, for fees, penalties and principal. Just as debt collectors have many ways to attempt collection, you too have many ways to protect your credit and your rights. It’s highly likely as well, that at some point the collector may have violated your rights by attempting to collect an invalid debt or violated other areas of the Fair Debt Collection Practices Act.
First things first
When you receive the very first notice from a collection agency, be sure to send your Validation Of Debt letter before the 30 day period!! Especially because if you can get the Validation Of Debt letter to the agency before they have a chance to report the account to the credit bureaus, then you may keep it from being reported at all. This is extremely important because getting it off is much harder and if the collection agency DOES report it after the date of your Validation Of Debts (using your certified mail receipt as proof) then they have violated portions of the Fair Debt Collection Practices Act and can be sued for each violation! That is powerful for debtors and should not be overlooked. If the agency refuses to acknowledge your Validation Of Debts then a follow up Estoppel letter can be used.
What if you did not dispute within the first 30 days of receiving the notice?
This is a tricky area and the Act should actually be amended to be clearer on this issue. While the Fair Debt Collection Practices Act states that the consumer should dispute the debt within the first 30 days of receiving the notice it does not state that you cannot dispute it later. It may be that you discovered the debt 45 days later or the original notice sent by the collector did not reach you or that you received it but did not know what to do until you starting looking into your options. Either way there is NO provision in the Act that says you are barred from disputing later, it may just take more persistence, more money and a counter suit if the debt collector goes to court for a judgment.
If the collection agency completely refuses to validate your debt because they claim it has surpassed the 30 day period then their only other option is to sue you, wherein you can defend yourself at that time by appearing and explaining to the court that you were never allowed to receive proof of what they claimed you owed- and, you were not going to pay anything until you had proof that their balance was valid.. Additionally the collector will not be able to prove when you were first notified of the debt simply by sending a notice regular mail. Again, you may have never even received it.
History shows us that collectors HATE Validation Of Debts requests. It is time consuming and stalls their collection efforts. You may never even receive the proof even after many requests. Many consumers never hear from the collector again after they ask for Validation Of Debts. If the balance is large enough and worth the collector’s time, you may receive some sort of proof. If you are happy with the proof then you can move forward, dealing with the debt and a resolution.
809. Validation of debts [15 USC 1692g](c) This section of the Fair Debt Collection Practices Act states: The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
What this tells you is that if the collector were to sue you, there is still NO admission made by you that the debt is valid and the court would definitely make the collector prove the debt at that time. Remember a printout is NOT adequate proof. Additionally take note of your credit reports. Be sure the collector has ceased reporting it while in dispute.
A simple but effective way to stop the collector
The FTC’s opinion letter:
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
Division of Credit Practices
Bureau of Consumer Protection
Jeffrey S. Wollman
Vice President and Controller
Retrieval Masters Creditors Bureau, Inc.
1261 Broadway
New York, New York 10001
Dear Mr. Wollman:
This is in response to your letter of February 9, 1993 to David Medine regarding the type of verification required by Section 809(b) of the Fair Debt Collection Practices Act. You ask whether a collection agency for a medical provider will fulfill the requirements of that Section if it produces “an itemized statement of services rendered to a patient on its own computer from information provided by the medical institution . . .” in response to a request for verification of the debt. You also ask who is responsible for mailing the verification to the consumer.
The statute requires that the debt collector obtain verification of the debt and mail it to the consumer. Because one of the principal purposes of this Section is to help consumers who have been misidentified by the debt collector or who dispute the amount of the debt, it is important that the verification of the identity of the consumer and the amount of the debt be obtained directly from the creditor. Mere itemization of what the debt collector already has does not accomplish this purpose.
As stated above, the statute requires the debt collector, not the creditor, to mail the verification to the consumer.
Your interest in writing is appreciated. Please be aware that since this is only the opinion of Commission staff, the Commission itself is not bound by it.
Sincerely,
John F. LeFevre
Attorney
Division of Credit Practices
END
This letter says it all – a printout is NOT sufficient evidence of a debt and the burden of proof is on the collector. Validating debts can be confusing because one never knows whether to seek out attention from the collector or to continue to hide. It all depends on your own situation. If you are already being hounded or hunted then you should do your best to make sure all of your rights are protected and followed by the debt collector and, check your credit report to be sure the agency is not abusing their right to check your credit (by hitting it many times with inquiries especially on an expired debt). Under federal law — the Gramm-Leach-Bliley Act — it’s illegal for anyone to: use false, fictitious or fraudulent statements or documents to get customer information from a financial institution or directly from a customer of a financial institution.
So what does one do when you receive a collection letter?
Here’s the steps…
NOTE: To protect your rights and to prevent the debt collector from getting a judgment against you, you must answer every letter and follow-up letter from the debt collector.
You receive a collection notice from a collection agency saying you have a debt due. You’re not sure it’s yours or that the amount due is correct.
As soon as you receive it, send a Validation of Debt request to the collection agency, make sure and send it via certified mail (keep your receipt) asking them to send proof to you of the debt. Use the address on the letter.
Be sure their letter also contains the Mini Miranda warning. All collection letters must contain this notice and if it doesn’t you can cite that in your complaint letter too. The Mini Miranda is that little tag line that says “this is an attempt to collect a debt, etc.” At the same time dispute the collection account with the credit bureaus (only the credit bureau that is currently reporting it!) otherwise you risk inserting it.
Wait for the collection agency to respond, about 30 days or so. Normally you will receive nothing more than a printout from the collection agency which is not adequate proof. Some will argue that the Fair Debt Collection Practices Act is not specific in what is considered adequate proof and believe me, collection agencies fully believe this. I say, no! The Fair Debt Collection Practices Act is specific in that, if the debtor requests a “Validation of debt” from a collection agency, they must obtain verification from the original creditor. Period!
If The Debt Collector Does Not Respond:
If the debt collector has not supplied the demanded proof of the alleged debt within 30 days you may presume, under the doctrine of estoppel by silence, that no proof of the alleged debt, nor therefore any such debt, in fact exists.
There is some case law on this that defines what “validation of the debt” actually means. The landmark case “Spears vs. Brennan” is a big one as the Indiana Appeals Court ruled that simply providing a contract or a few account statements does not constitute full validation.
Specifically, here is what they said:
Brennan maintains, however, that there was no violation of the FDCPA because he “sent adequate verification of the debt [to Spears] in the October 30, 1996 notice of claim.” Brief of Appellee at 13. Specifically, Brennan claims that a copy of the consumer credit contract between Spears and American General attached to the notice of claim provided sufficient verification of the debt within the meaning of 15 U.S.C. § 1692g(b). We cannot agree.
The contract in no way provides sufficient verification of the debt. A review of the document reveals that it identifies only the terms of Spears’ loan, including a 17.99% annual interest rate and the original loan amount of $2,561.59. The loan agreement contains no accounting of any payments made by Spears, the dates on which those payments were made, the interest which had accrued, or any late fees which had been assessed once Spears stopped making the required payments. Indeed, the existing unpaid contract balance at the time Brennan sent the debt collection notice was at least $350.00 more than the original loan amount. Therefore, Brennan violated 15 U.S.C. § 1692g(b) when he failed to cease collection of the debt by obtaining a default judgment against Spears after Spears had notified Brennan in writing that he was disputing the debt but before Brennan had mailed verification of the debt to Spears.
[END]
In other words, validating the debt and the exact amount owed requires the collector to prove exactly how they arrived at that amount! This means a FULL ACCOUNTING. Every statement, every payment made, every fee assessed, etc. etc.
CONCLUSION:
Make sure and keep EVERY letter sent to you by a collection agency or collector. Keep very good records, keep these in a separate file for each account. Dispute the debt immediately. Send these letters via Certified Mail. Keep the receipts you get from Certified Mail so you can prove what you sent and when it was received.
If you need help with this, give me a call at (800) 985-4685 or shoot an email to me at lane@lanehouk.com
