An Introduction To Your Rights
Under the Fair Debt Collection Practices Act, FDCPA, you have the right to “debt validation“. This is a written demand requiring a creditor reporting information on a credit report to prove the account is really your responsibility and the balances are accurate. A collection agency must also prove they have a legal right to collect the debt.
The collection agency must STOP all collection activity, including reporting and verifying, until they supply proper validation to you after a written request. Although no time limit is specified for them to validate the debt, they cannot continue collection activities until they provide the information. Sometimes, collection agencies will stop collection activities and return the account to the original creditor rather than validate the debt. (This is perfectly legal.)
When a collection agency calls, a consumer has several avenues to protect their credit score. It’s important to remember that if you plan on disputing the debt, the best course is to take action right away. And the first step in dealing with a collection agency is to validate the debt.
Examples of When Debt Validation Might Come In Handy
Let’s say Sarah borrowed some money from John. Later, she gets a call from Laura demanding a thousand dollars in payment of Sarah’s debt to John. How can Sarah be sure she really owes John a thousand dollars? Furthermore, how can Sarah be sure if she pays Laura, her debt with John will be satisfied?
For these reasons, a federal law entitled the Fair Debt Collection Practices Act (FDCPA) entitles consumers to validate their debt when a collection agency demands money from them. If a collection agency can’t validate the debt, the agency cannot list it as a negative mark on your credit score. When you validate debt, you request the collection agency prove it has the legal right to collect the debt, that you agreed to pay the debt, and the amount of the debt is accurate.
The Debt Validation Process in 4 Easy Steps
There are four steps to validating your debt:
1. Within 30 days of learning about the debt, send a debt validation request via certified mail to the collection agency. Click here for Sample Validation Letters, per 15 USC § 808(b). Sending the validation request via Certified Mail, Return Receipt Requested, provides proof, in the form of a receipt (“green card”) that your demand letter was received. You should also keep a copy of the letter you sent on file. Once this letter is received, the collection agency must stop attempting to collect the debt until they supply validation – per 15 USC § 808(b)(a).
2. If you hear nothing from the collection agency, then you should send them a copy of the receipt, the letter requesting validation, and another letter stating that, in accordance the Fair Debt Collection Practices Act, you will not pay the debt. The credit agency is required under the FDCPA to stop contacting you.
3. If the collection agency sends you proof they have the right to collect the debt, the debt is yours, and the amount is accurate, the debt is validated. You must take other steps if you wish to dispute the debt.
4. If the collection agency failed to validate the debt and has sent a notice of the debt to a consumer reporting agency, the notice of the debt must be removed. If not, send a notice of the failure of the validation to the consumer reporting agency. Unless the credit reporting agency can validate the debt, it should be removed.
Tips to Remember for Debt Validation
When dealing with collection agencies it is good to remember most states require credit agencies to be licensed. You should check whether or not your state requires a license and, if so, whether or not the collection agency is licensed.
NOTE: You do NOT have the legal right to debt validation under the FDCPA when dealing with an original creditor.
Consumers should note the requirement to validate debts only applies when the debt has been assigned to a third party for collection. If the person or company demanding payment is the same person or company who provided you with a service or loaned you money, they are not required to validate the debt. In either case, there are still other ways of disputing the debt in these situations.
The original creditor may supply validation at their option, but are not required to do so. However, you do have the right under the FCRA to dispute directly with an original creditor any information reported which you feel is incorrect. This can be found in section 15 USC §623. Once they have received your dispute, they must investigate the reported info and they are directed to report the account as disputed with the credit reporting agencies.
You may also have additional rights under the FCBA (Fair Credit Billing Act), and possibly your state law.
If you demand validation from a creditor who is already listing a derogatory trade line on your credit report, they are required to note that account as “disputed by consumer” (or similar language). They may NOT place a new listing, or verify a current listing with the credit reporting agency until they have provided you with validation.