Your Right
To Validation of Debts
Everything you need to know about
Validation Of Debts-Estoppel- Understand debt validation including rights
under the Fair Debt Collection Practices Act
This page covers Validation Of Debts:
Validation of debt. A powerful weapon in safely handing collection accounts.
If you have been contacted by a
debt collector then you should know that
you have a right to dispute the validity of the debt. The burden of proof is
on the debt collector not you. Before you even consider paying the debt,
read the statute below. It protects your rights. Also, know that you have a
right to request that the bill collector provide adequate proof of the
(alleged) debt.
So many people will pay a collection account,
risk renewing the statute of limitations only to find after it is too late
that they had an absolute defense to the alleged debt. You'd be surprised
how often a collection agency cannot validate a debt and therefore cannot
legally enforce collections.
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 all this 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 1692e(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 Debts before the 30 day period!! Especially because
if you can get the Validation Of Debts 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
So you're wondering how does all this apply to me in the real world. How do
I actually fight back and what steps do I take? This letter from the FTC
gives you all the ammunition you need. A debt collector (someone other than
the original creditor- lawyers too!) must be able to prove the debt if
requested.
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
