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 -
- the amount of the debt;
- the name of the creditor to whom the debt is owed;
- (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;
- 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
- 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.
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 disputes 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.
John F. LeFevre, Attorney
Division of Credit Practices
This letter says it all - a printout is NOT sufficient evidence of a debt and the burden of proof is on the collector. Validating debts can be confusing because one never knows whether to seek out attention from the collector or to continue to hide. It all depends on your own situation. If you are already being hounded or hunted then you should do your best to make sure all of your rights are protected and followed by the debt collector and, check your credit report to be sure the agency is not abusing their right to check your credit (by hitting it many times with inquiries especially on an expired debt). Under federal law — the Gramm-Leach-Bliley Act — it’s illegal for anyone to: use false, fictitious or fraudulent statements or documents to get customer information from a financial institution or directly from a customer of a financial institution. See: Pretexting
State vs. Federal- who rules? Sec. 1692n.
Relation to State laws: This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter.
Finally, remember that we cannot possibly cover every scenario here and each person has their own unique situation wherein the debt may or may not be valid and some have large balances and others too small for creditors to worry about so do your research, know and live the Fair Credit Reporting Act and the Fair Debt Collection Practices Act and...always...remember to consider your own state rules.
Finally, here is a very long article about Validation, it is extensive and offers very valuable information about what exactly is considered "valid proof". It will open in a new window. Please read it as it is a great piece of information to help you in the validation process. What Constitutes Debt Validation
United States code: Title 15 chapter 41: Sec. 1609-1692g
For More information or to contact a Debt Collector Defense Specialist CLICK HERE.
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