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Debt Validation: FDCPA Rules

By Debt Prison on March 30, 2009

One of the most important sections of the Fair Debt Collection Practices Act is Section 809 Validation of debts. This Section lays down the guidelines for conduct pertaining to the debt validation process. Within 5 days from the first time a collection agency contacts you (phone or mail) you should write a Debt Validation Letter.

**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.

In their response to this letter, the collection agency is to provide you with the following:

* The amount of the debt.

* The name of the original creditor (Capital one, Bank of America, Discover, etc, etc..).

* Their response letter should state, that unless you dispute this validation within 30 days, that this debt will be considered valid and collection attempts will commence. It should also state that if the debtor does in fact dispute the debt, the collection agency will mail you a verification of the debt or a previous judgment from a civil court case.

* If the debtor disputes the debt, the collection agency must halt all collection attempts for 30 days until they can provide a mailed copy of the applicable information: 1. amount of debt and/or 2. original creditor’s name and address and/or 3. verification of debt and/or 4. civil court judgment.

Please understand that failure to ask the collection agency to validate the debt would not be used as an admission that you owe the money – if you later find yourself in civil court over the matter.

809. Validation of debts

(a) 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) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) 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 any 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. Collection activities and communications that do not otherwise violate this title may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.

(c) 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.

(d) A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).

(e) The sending or delivery of any form or notice which does not relate to the collection of a debt and is expressly required by the Internal Revenue Code of 1986, title V of Gramm-Leach-Bliley Act, or any provision of Federal or State law relating to notice of data security breach or privacy, or any regulation prescribed under any such provision of law, shall not be treated as an initial communication in connection with debt collection for purposes of this section.

Discuss this article and meet new people at Debt Prison Forums.

Related Articles

* What is a Junk Debt Buyer?

* Restrictions on Wage Garnishment for Debt Collection.

* The Fair Debt Collection Practices Act

* Reasons not to file Bankruptcy or Settle Your Debts

* Can you go to jail for not paying your debts?

* How to settle your debts on your own

* How to deal with collection agencies

* Sample Debt Validation Letter

Does Debt Validation Actually Work?

By Debt Prison on December 25, 2008

A recent reader at Sample Debt Validation Letter questioned as to whether or not requesting debt validation would prevent a collection agency from pursuing a judgment. Since his debts were nearly past the Statute of Limitations he was hoping to prevent payment and a possible appearance in civil court. Debt validation often works on Junk Debt Buyers. Junk Debt Buyers (Debt Acquisition) often buy packages of defaulted debt from an original creditor or another collection agency. Therefore as this debt is passed from collector to collector, some crucial details regarding your debt may become lost through the various transfer of hands.

A collection agencies initial letter to you should indicate the original creditor and the dollar amount you owe. If your name, original creditor, or dollar amount appears incorrect you may want to consider debt validation. However, debt validation is not simply a means of getting out of paying your debts. In fact, a debt validation letter will draw attention to your account. Therefore, if you owe the debt, you may be better off simply ignoring their calls and letters. Whether or not this is a good idea will depend on many factors. You should use debt validation only when necessary. Since you probably don’t know anything about the collection agency… you won’t know if they:

Don’t have legal representation in your state in which to represent the collection agency in civil court.

Don’t have a track record of suing debtors.

Don’t have a track record of winning judgments.

Some collection agencies have no legal representation in your state. The smaller the collection agency the more likely they will not have legal representation. If their office is located inside your state then obviously they have legal representation. However, if the collection company has no legal representation in your state, they won’t bother suing you in civil court. They will not attempt a judgment. The only circumstance that may cause them to attempt to file suit, would be if they acquired knowledge that you, the debtor, has access to monies or assets which they could acquire. And the monies and assets are significant enough to warrant their time and expense.

Dear Barry,

Let me start by saying thank you for the website. It was extremely insightful and I had no clue that there were so many rights afforded to consumers, especially those who had gone through hard times. To make a long story short, I have received a letter from a collection agency, (Nelson, Watson and Associates, LLC) who claim to represent Palisades Acquisition. I checked my credit report and Palisades is on there and dinging my report. However, there is no mention of the other collection agency anywhere and the amounts are vastly different (hundreds of dollars).

I won’t lie about it this was my fault. About 2 to 3 years ago, after being laid off, I went to a free counseling service. They very subtly told me to get my student loans and such paid current as I would never get out of it. However, they advised to let the smaller balances go to see if they would be written off (not morally right, I just didn’t have it). I was told to get a pre paid credit card that reported to the Credit Bureaus. They helped me plan a budget and told me in time the smaller balances might drop off. It would still affect my credit, but in time I could rebuild. I did everything they asked and things are improving, and my credit score is going up, very slowly but is improving.

I found your website and am very curious about the Debt Validation process and what the success rate is, if any. Also, if there are any negative repercussions that can come from this. In theory it sounds correct, however, I am a newbie at the collection game and am a little gun-shy. This account is also approaching the SOL for the state of Texas, where I live and while I know this was wrong I want it to go away. I am frustrated because things are finally starting to look up and here I am hit up again for money that is almost past the statue of limitations.

If I may I have a couple of quick questions….. I checked my credit report last night and Nelson, Watson and Associates are not on it anywhere, however, Palisades Acquisition is….. but Palisades Acquisition is not the original lender, it was originally XXXXX XXXX. In essence it appears to have changed hands three times. I feel that I have two decisions, I can attempt to settle, however, like you said, it starts the SOL clock all over and I am about three months away from paying one of my student loans off and maybe a DV could stall them until then, and then I could take that money and apply it towards the new bill…. I thought about what you said about the appearance of looking undesirable to them. I really don’t own much, but I do have a decent job and I don’t want my wages garnished. Any thoughts you wanted to throw my way would be appreciated. Thank you again and good luck towards your own endeavors to get debt free. You’re an inspiration to all of us in prison block D (debt)…. Can you believe all this trouble is over a $600.00 tab I racked up a few years ago?

Best Regards, Terry

Debt Prison response….

Debt validation is often used to get rid of junk debt buyers. JDB’s are agencies that often buy debt past the SOL or was absolved by bankruptcy. Since a lot of people don’t know what their rights are… many just pay up when they shouldn’t… and that’s how the JDB s make their money. Or maybe you never heard anything about this debt before and you want to know exactly from where and when it originated. Many consumers who take the time to research and write a debt validation letter (those who know their rights) end up never hearing from the agencies again (though the agency may sell the debt to another CA).

Debt validation is used to insure that the CA actually obtained the legal right to collect the debt from the original creditor. It should also be clear how much is owed and the dates of default etc etc… In your case the CA probably has the right and can produce such paperwork. You have the right to ask them to validate in which case they’ll send a letter stating that you owe certain creditor x amount of dollars. Likely this is what they’ve already done with the first letter you received. Debt validation won’t get rid of a legitimate collector with good paperwork and a SOL on their side. And remember that any response from you – admitting you owe the debt or are willing to make payments – resets the clock on the SOL, which in TX is 4 years on a contract.

You could choose to ignore the letters in which case the CA may seek a civil judgment against you. If you receive a summons for court you can go show up and dispute any part of the amount you feel like is questionable. If you are looking to prevent the CA from pursuing and want to stall them you could try a simple debt validation letter like this one only if the original letter didn’t already answer these questions.

Date

Your Name Address City, State Zip

Debt Collector’s Name Address City, State Zip Re: Account Number

Dear Debt Collector:

I am writing in response to phone call/letter received from you on date xx/xx/xx. Pursuant to my rights under federal debt collection laws, I am requesting that you provide validation of this debt. Note this is not a refusal to pay, but a request that your offices provide me with evidence that I have a legal obligation to pay you.

Sincerely,

Your Name

This is a basic DV letter and the original letter may have provided this info. If you are hoping to stall a civil court date I doubt such a letter alone would prevent them from filing. One thing that might keep them from filing suit is if they believe it would be a waste of their time. If they believe.. that even with a judgment against you it would be difficult to collect the debt… they may not bother suing you.

I’m not giving legal advice, but rather my opinion. I forget to throw that in sometimes.. not that it’s necessary but in the world we live in today it seems you can get sued for anything.

Yes it sounds like the Watson Assoc group works debt collection. And PA is a collection agency with a heck of a fancy name… Yes I would request validation of the debt immediately. Now likely this company has gotten these letters before and is expecting it. I would request validation by sending a registered letter (keep a copy of the letter for your records). I would use a simple letter like the one I emailed you before. You just want to make sure that PA has the legal right to collect this debt and that their paperwork is in order. Also, I would contact the original creditor and ask them if they sold the debt to PA.

Now you stated that the original amount was $600. You can dispute any amount above the $600 if you feel it is unfair or not legitimate. You can dispute any part of their claim you’d like and even your credit report. For example, if the original amount was $600, but now its $1500 due to interest and fees… well I’d inform them (if they validate) that I am willing to pay $600 through monthly payments (or lump sum if you could afford it) and nothing more. If they won’t agree to your terms you can just ignore them. If they pursue civil action, that would be another opportunity for you to lower the amount by persuading the judge that some of the balance is not legitimate. “Hey your honor… this debt was originally $600 and now its $1500… this isn’t right” You could explain about your struggle with debt and how you had to make hard choices and couldn’t pay all your debts back at once. As a result you’ve been focused on paying one back at a time. Meanwhile the creditors and collectors ran up your balance with interest and fees. Any paperwork you have would be helpful.

Just bear in mind that civil action is not the end of the world, but may be another opportunity to lower the amount you repay. Also, if the amount is $1500 they may not even pursue a civil suit because of the time and expense involved. So you can further delay payment (possibly) if you dispute any part of their claim. Also, if the law firm seems hell bent on going to civil court.. you could write a letter to them explaining your desire to cooperate if only they’d come around and agree to your terms. You could tell them that their terms are unjust and unfair, and that if they’d agree to dismiss the part of the debt you feel isn’t fair… you’d glad begin payment on the debt.

However, agreeing to repay the debt under any circumstances is a last resort just prior to civil court. And if you do write such letters make copies, send registered mail, and make sure you show these to the judge so that it appears that were trying to satisfy this debt but the CA’s are unreasonable.