Understanding Debt Validation

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 consider paying the debt, know that you have a right to request that the bill collector provide adequate proof of the (alleged) debt. This is your right under the FDCPA - Fair Debt Collection Practices Act.

Many people will pay a collection account and risk renewing the statute of limitations only to find after that it is too late and that they had an absolute defense to the a debt. You'd be surprised how often a collection agency cannot validate a debt and therefore cannot legally enforce collections. 

In addition, many debts are assigned to collection agencies every day that are expired. While its not barred in all states to collect on an expired debt, it is an absolute defense -- BUT, you need to assert that defense to stop collections.

What is debt validation?

It's a powerful first step in dealing with any bill collector. By law, when a collection agency begins collecting on a debt - there is a waiting period (30 days) where the debtor is allowed to question the records that support the debt. Generally, a first notice will be sent by the bill collector advising you of their purchase or assignment of the debt.

You should never ignore this notice -- especially if the debt collector has your valid address or perhaps even your employment. They wont go away and you'll lose valuable time in utilizing VOD. 

When this notice arrives, immediately send a return letter asking the collector to please provide you with proof of the alleged debt. This accomplishes two things. Your basic right to fair billing and credit repair by accident. 

If the debt has been assigned to a collector with no records then the VOD will stop them in their tracks and remove the item from your credit reports. If the debt cannot be verified, it cannot remain on your credit either. Continuing to report a debt that cannot be validated could be seen as a collection tool and perhaps lead way to damages. 

A validation of debt letter should always be sent with proof of delivery. A phone call will not preserve your rights. All communication with a collector should be in writing. 

What law gives you this right?

The FDCPA, specifically, subsection 809 which reads:

§ 809. Validation of debts [15 USC 1692g]

(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. 

(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. 

What this subsection tells us, is that the first notice you receive from the collector should always contain the basic details of the debt (balance, debtor, creditor etc.) and your right to dispute the debt. 

Normally you will see a mini-miranda warning in the first communication that will read something like "this is an attempt to collect a debt and..." That mini-miranda lets you know that it is an attempt to collect the debt and if you dispute any portion of the debt, then please notify the collection agency. 

That's your call to action to assert the VOD. Expert's would never recommend paying any debt prior to validating it. 

What if the debt is validated?

In that case you would clearly know the debt is legitimate and perhaps you'd want to settle it. This too, depends on what you're looking to accomplish. Are you in fear of being sued and want resolution?

Do you need the item off your credit reports and want to try and settle the rating as well? All of this would go into why you'd deal with the collection agency. Collection agencies often settle debts - especially very old ones - although normally you would not want to settle expired debts. If your debt is not expired but is quite old, then that could be a good bargaining point for you.