Credit Strategies

If you have an account in collections …

Most creditors charge off accounts after 180 days of non-payment. That accounts for roughly six months of missed payments, but during that time they can charge more fees and interest.

Once it has been turned over to a collections agency, a consumer is generally entitled to receive an itemized statement of the debt along with other documentation to verify its legitimacy. While the applicable law does not explicitly outline what a consumer should receive, it typically must be sufficient for the consumer to ascertain whether the debt is owed to the party attempting to collect.

Therefore, at a minimum, you should expect the debt collector to provide an accounting through an account statement that details how they calculated the amount they are trying to collect. 

If they initiate a lawsuit regarding the debt, they must present proof to the court demonstrating that they own the debt, including a contract you entered into with them or the original creditor, as well as documentation indicating that they purchased the debt and that it is now owed to them.

It is worth requesting such documentation because 99% of the time they cannot provide this particular paperwork as most debt is purchased in huge quantities for pennies on the dollar. If they bought the “chain of ownership”, it would cost them much more. They make so much from intimidation and scare tactics that they don’t need to purchase the debt!

Send the request via certified mail to ensure you have proof of receipt. If you prefer that they cease contacting you, include that request in your letter, and they are typically required to honor it.

Here are some pertinent links and info:

Fair Debt Collection Practices Act

Your consumer rights under federal law

Debt Validation is a very useful tool when you are forced to deal with collection agencies.  Unfortunately, the process can be complex.  Time and time again, I see people getting confused by the nuances of debt validation.  They get tripped up on things such as:

• The exact protection it offers,
• What a collection agency has to send as proof
• How long a collection agency has to respond.

Here are some of the most frequently asked questions:

Q. It’s been 30 days since I’ve sent out my debt validation letter to the collection agency.  I haven’t heard a peep out of them.  Isn’t this illegal?

A. No. The Fair Debt Collection Practices Act (FDCPA) does not require a collection agency to respond to your debt validation request, even if you answered within the initial 30 day time period.  However, if a collection agency does not respond, then they cannot continue collection activity.

Q. What qualifies as debt validation?

A. The FDCPA does not specifically spell out the requirements of debt validation. However, there is general agreement among the legal community and the Federal Trade Commission as to what would and would not be considered proper debt validation.

Proper Debt Validation (any of the following items):

• A copy of a statement from the original creditor.
• A copy of a check from you.
• A copy of an itemized list of charges and payments from the original creditor

Improper Debt Validation (any of the following items):

• A computerized print out from the collection agency/law firm
• An affadavit from the collection agency

Q. I sent a debt validation letter out 3 months after the collection agency first sent me a notice that they were pursuing me for a debt.   The collection agency did not respond to my request.  However, they continue to call and send letters.  Isn’t this illegal?

A. No.  Per the Fair Debt Collection Practices Act, if you did not respond within the 30-day period following the first written communication from the collection agency, even if the collection agency does not respond, they can continue to call and write you.

However, you can send a request for an investigation under the Fair Credit Reporting Act at any time and they must respond within 30 days.  An investigation request is not a debt validation request, they are based on two different federal laws.   Read up on the procedure here.

Q. A collection agency sent me a summons/complaint because they are suing me about a debt.  I’ve sent them a debt validation letter as a response.  Is this enough?

A. No.  If you are sued you must answer the complaint.  I don’t know how to say it any more simply – the debt validation process, used or not has ZERO bearing on whether a creditor sues you. If you do not answer the complaint, you will lose the case and have a judgment against you.  If you are sued, bring your copies of the request you sent and their reply – if they didn’t provide the information you requested. The case will be immediately thrown out and you can file a counter-suit.