Debt Validation

  • Debt validation will insure that the creditor is legally entitled to collect the debt from you. This is good to know before forking over money that could be used on legitimate creditors.
  • A Debt collector must provide you with the following validation
  1. Proof that they own the debt/or have been assigned the debt. This is basic contract law.
  2. Some account statements from the original creditor. If you really want to get tough, you can nail them down on the amount of the debt by requiring them to provide complete payment history, starting with the original creditor. This insures you of how they calculated the debt, what fees or interest have been tacked on, and how they determined these fees.
  3. Lastly,  a copy of the original signed loan agreement or credit card application. If account statements are provided it can fill this requirement.
  • What does the secondary creditor get out of collecting your debts? If a secondary collection agency is successful at collecting the money on the account, they usually keep a percentage of what is collected as payment for services. Original creditors sometimes sell debts in large portfolios to collection agencies. The companies do not spend much money for these debts, sometimes they pay less than a penny on the dollar. The original creditor then writes off the debt and the secondary creditor will obtain any fees collected. 
  • What is the difference between assigned and purchased debt? In an assignment the collection agency does not own the debt, and therefore you do not technically owe them any money. There is no way for a collection agency to prove that you owe them money because there is only an assignment of the debt and not a contract between you and the creditor
  • What gives me the right to validate the debt? Under the FDCPA the creditor must show proof that you owe the debt to them and not the original creditor. So if the creditor can not verify a debt they are not allowed to:
  1. Collect the debt
  2. Contact you about the debt
  3. Report it under the FCRA
  • Debt validation strategy:
  1. Refer to credit repair
  2. Look up the statue of limitations on the debt. If the debt is past the statute of limitations, send the creditor a letter informing them that they are trying to collect a zombie debt (this is debt which is past statue of limitations and you are no longer legally responsible).
  3. If the debt is not past the statute of limitations, send a debt validation request to the collection agency.The address should be listed on your credit report.
  4. The creditor has thirty does much like in credit repair. If they haven't sent you validation, and are still reporting this on your credit report, send a copy of your receipt for your registered mail, a copy of the first letter you sent, and a statement that they have not complied with the FDCPA and are now in violation. Demand they immediately remove the collection listing from your credit report or you are going to file a law suite, because they are in violation of the FDCPA, section 809 (b)
  5. This time wait apprx 20 days to hear back. If you still have not heard they will either remove it or not respond.
  6. Lastly, most collection agencies will give in to your demands and send you a letter agreeing to remove the listing. To insure this happens you will want to send a copy of letter to the three major credit bureaus. If you still get no response you can proceed with a law suite.