Under the FDCPA, you have the right to “debt validation“. This means a consumer can demand that a creditor reporting information to the credit bureaus prove the account is really your responsibility and that the balances are accurate.
In addition, a collection agency must also prove they have a legal right to collect the debt. Requesting that your debt be verified comes with a variety of benefits and can hopefully lead to getting the collection completely dismissed. Read on to learn everything you need to know about the debt validation so you can get started today.
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What is debt validation?
Once your letter is received, the collection agency must stop all collection activity, including reporting and verifying, until they supply proper validation of the debt. Although no time limit is specified for them to validate, they cannot continue collection activities until they provide such information.
Sometimes, collection agencies will stop collection activities and return the account to the original creditor rather than validate the debt, which is perfectly legal. Either way, not being able to communicate with you provides plenty of incentive for the collection agency to resolve the validation issue.
Oftentimes, a debt collection agency may not have the appropriate records it needs to legally collect the debt from you. Or perhaps you already settled the collection with the original creditor but the collection agency is harassing you anyway. Or maybe their record keeping is so disorganized, they’ve accused you of a debt you don’t actually owe.
A debt validation can address all of these reasons so that you aren’t subject to incorrect collections.
Why is debt validation important?
Understanding the role of a debt collector may seem complicated, but it’s really not. Let’s break it down into a real-life example to fully grasp the importance of debt collection. Say that 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 that she really owes Laura a thousand dollars, rather than John? Furthermore, how can Sarah be sure that if she pays Laura, her debt to John will be satisfied?
Requesting the debt validation helps confirm all these things. First, you’ll know that the collection agency is legally authorized by the creditor to collect money from you. You can also check to make sure that all past payments have been applied, as well check the accuracy of any fees applied to the debt.
Finally, you get to make sure that the debt is actually yours and that you still owe an outstanding balance. If you fail to validate all of these points, you run the risk of paying a debt that you don’t actually owe, or even paying someone who shouldn’t actually be taking your money. It’s a safe way for any consumer to protect themselves from countless scammers and unscrupulous collection agencies.
What are your legal rights for debt validation?
For these reasons, the FDCPA entitles you as a consumer to validate a debt when a collection agency demands money from you. If a collection agency can’t validate the debt, the credit bureau cannot list it as a negative mark on your credit report. When you get your debt validated, you request the collection agency to prove it has the legal right to collect the money.
It also confirms that you agreed to pay the debt, and the amount of the debt is accurate. Any debt collection agency that refuses to follow these steps can be reported to both state and federal officials for violating the law.
How can you get your debt validated?
There are five steps to validating your debt:
Within 30 days of learning about the debt, send a debt validation request letter via certified mail to the collection agency. Click Here For sample validation letters. Sending the demands via Certified Mail Return Receipt Requested gives you proof, in the form of a receipt (“green card”) that your demand was received and on what date it was received.
It’s very important the letter is sent by certified mail so you have proof you sent the request. You should also keep a copy of the letter on file. This can help bolster your case in the event you need to sue the debt collector. While that’s a worst case scenario, it’s definitely better to be safe than sorry. Once this letter is received, the collection agency must stop attempting to collect the debt until they supply validation.
- 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 FDCPA guidelines to stop contacting you and may not attempt to sue you for the outstanding balance.
- 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 each consumer reporting agency that lists the debt. Unless the credit reporting agency can validate the debt, it should be removed from your credit report.
- If the collection agency sends you proof they have the right to collect the debt, the debt is yours, and the amount is accurate, then the debt is validated. They can continue their collection attempts. Check the statute of limitations in your state to make sure that the debt isn’t expired. If it is, the collection agency may not sue you for the debt, and you can send an expired SOL notification letter to get them to stop their collection attempts. If the debt has not expired, you must take other steps if you wish to dispute it.
- There are a few different ways to handle verified debt. You can pay it in full if that’s a realistic possibility for you. You can also try to negotiate a settlement, where you agree to pay only a portion of the debt. If the collection is listed on your credit report, you can also request a pay for delete, which gets the item removed from your report once you pay off what you owe. Whatever you do, don’t ignore the problem. Do your best to come up with a solution so you can get your finances under control. Simply ignoring the issue won’t make it go away.
What should you include in your debt validation letter?
A debt validation letter doesn’t have to be fancy or complicated, but it should include a few basic essentials. First, never admit that the debt is yours or that you intend to pay it because this can reset the statute of limitations.
Simply request that you are requesting validation of the debt and when you received original notice of the agency’s intention to collect. For example, you’d mention the date on a letter or the date and time of a phone call.
Other Tips for Debt Validation
When dealing with collection agencies it is good to remember most states require credit agencies be licensed. You should check whether or not your state requires a license and, if so, whether or not the collection agency is licensed.
Consumers should also note the requirement to validate debts only applies when the debt has been assigned. If the company demanding payment is the same one who provided you with a service or loaned you money (the original creditor) they are not required to validate the debt.
They may choose to supply validation if you request it, but they are not required to do so. However, there are still other ways of disputing the debt in these situations. You also have the right under the Fair Credit Reporting Act to dispute directly with an original creditor any information reported which you feel is incorrect.
Once they have received your dispute, they must investigate the reported info and they must also report the account as disputed with the credit reporting agencies.
For more information on removing collections from your credit report check out our guide:
Other Legal Rights
You may also have additional rights under the Fair Credit Billing Act (FCBA), and possibly your state’s laws. Also, if you demand validation from a creditor who is already listing a derogatory item 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. It’s smart to familiarize yourself with these laws so you can stand up for yourself when the time comes.