- Ask for debt validation when a collection agent attempts to collect a debt.
- If a creditor cannot verify a debt it may not collect the debt.
- Send a debt validation letter immediately, because there is a 30-day time limit.
What is debt validation and how do I do it? Also, how do I know if a debt is properly validated?
Ask for a debt validation when someone attempts to collect an old debt from you.
Collection agents are bound by federal and state laws concerning the collection of debt. Original creditors must also follow debt collection rules when attempting to collect a delinquent debt. The Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) are key federal laws regarding these issues. Many states have consumer protection laws that overlap with both acts, and have stricter rules protecting consumers.
Assignment of Debt
Most consumer debt contracts give the original and subsequent creditors the right to assign the debt. Assignment is legalese for “sell the rights to the contract.” Collection agents buy most debts for 5 to 50 cents on the dollar. The collection agent has the right to collect the entire balance due plus interest, but does not necessarily expect to collect the full amount. State laws set the interest and fee rules collection agents can tack onto a debt.
How to Ask For a Debt Validation
If a collection agent demands payment of a debt a consumer does not owe, or more than they owe, the consumer can dispute their responsibility for the debt or the validity of the amount. The formal terms for this process are “debt verification” or “debt validation.”
A consumer should, as a matter of course, validate a debt when a collection agent attempts to collect the debt. Why? Just because a voice on the telephone claims someone owes the collection agent money does not necessarily mean the collection agent has the right to collect the debt, or that the debt is even owed.
A disputed debt could be:
- One already paid
- One you do not owe
- An amount different from what is demanded
- Related to a hospital stay. If you informed the hospital you could not pay for the care, the hospital should have considered payment under its charitable care policy.
- A time-barred collection (see the statute of limitations Quick Tip above)
- One discharged in bankruptcy
Here is a template of a debt validation letter to help you get started: 
Edit our sample debt validation letter to fit your needs. Then, send it Certified Mail to the collection agent who demands you pay the old debt. Be sure to send this letter within 30 days of receiving notice of the attempted collection. Keep careful records of your debt validation. Repeat this process if the collection agent sells the collection account in question to a different collection agent. (See the comments from readers below for examples of collection agents that seem to sell the accounts of people who ask for debt validations.)
To learn more background information about debt validation and what information you can expect to receive from a collection agent, read on.
Debt Validation Statutes & Case Law
Debt validation rules are set by Congress in statutes and by federal courts in case law. As with other laws, Congress writes the rules, and then the courts interpret them. Here, it is important to understand both because some federal appeals courts interpreted the verification rules narrowly.
We discuss both the statutes and the case law here because other personal finance Web sites focus on the statutes only, and others offer incomplete discussions of the case law. Some discuss only state appellate law, which applies in that state only. You need to understand both the statutes and the case law to get a complete picture of your rights.
Debt Validation Statutes
Let us look at the statute first. Here is FDCPA Section 809(a) (15 U.S.C. § 1692g(a)):
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“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.”
According to the statute, after receiving the notice of dispute from the consumer, the collection agent must:
- Suspend collection activities regarding the claimed debt until the collection agent receives verification of the debt or receives a copy of the judgment against the consumer
-
Provide verification, by mail, to the consumer, including:
- The name and address of the original creditor
- A statement from the original creditor the debt is valid
- The amount of the original debt
- Copies of judgments (if any)
- Not report the debt to the credit reporting agencies, including Equifax, Experian, and TransUnion, according to some interpretations of the statute. Or, according to other interpretations, may report the debt to the credit reporting agencies as “disputed.”
If the collection agent is collecting more than one account from a consumer, the consumer must instruct the collection agent how to apply any payments made to each debt. The collection agent may not apply a payment to a disputed debt.
Debt Validation Case Law
If all federal appeals courts had been asked to interpret the debt validation law and did so consistently, we would have a fair understanding of how validation is supposed to work, what information collection agents are supposed to give consumers when validating a debt, and a uniform application of the rules.
| States following the 3rd, 4th, 9th & 11th standards |
|---|
|
Alaska Arizona California Delaware* Guam Hawaii Idaho Maryland Montana Nevada New Jersey* North Carolina Northern Mariana Islands Oregon Pennsylvania" South Carolina Virgin Islands* Virginia Washington West Virginia |
| * Must provide dates the debts were incurred to residents in these jurisdictions. |
However, four federal appeals courts that Bills.com could find weighed in with definitions of validation that appear tighter than what Congress may have had in mind when writing the FDCPA.
- In the Third Circuit, the court articulated this standard: “computer printouts which confirmed amounts of debts, the services provided, and the dates on which the debts were incurred constituted sufficient verification” (Graziano v. Harrison, 950 F.2d 107, 113 (3d Cir. 1991))
- The Fourth Circuit uses a much lower standard: “[v]erification only requires a debt collector to confirm with his client that a particular amount is actually being claimed, not to vouch for the validity of the underlying debt” (Chaudhry v. Gallerizzo, 174 F.3d 394 (4th Cir. 1999))
- The Ninth Circuit follows the Fourth Circuit’s lower standard (Clark v. Capital Credit & Collection Servs., 460 F.3d 1162 (9th Cir. 2006))
- The Eleventh Circuit sets the bar even lower: “verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed; the debt collector is not required to keep detailed files of the alleged debt” (Azar v. Hayter, 874 F.Supp. 1314, 1317 (N.D. Fla.), aff’d, 66 F.3d 342 (11th Cir. 1995), cert. denied, 516 U.S. 1048 (1996))
Although this has no legal weight or precedent, FTC counsel seems to follow the Fourth Circuit standard, too. (Wolman-LeFevre letter dated March 10, 1993)
We could find no cases in other nine circuit courts regarding debt verification, and no federal cases contradicting the four mentioned. The US Supreme Court has made no decision in this area.
Therefore, in states in the US Third, Fourth, Ninth, and Eleventh Circuit Courts, collection agent must provide two or three pieces of data in writing when a consumer asks for a debt validation:
- Confirmation from the original creditor the consumer owes the debt
- Confirmation from the original creditor the amount demanded is accurate
- Dates the debts were incurred, if the consumer resides in Delaware, New Jersey, Pennsylvania, or the Virgin Islands (Graziano v. Harrison as cited above).
It is unclear if the other circuit courts would require a collection agent to provide the dates the debts were incurred, or an itemization of the collectors’ added charges, which is what the FTC has recommended Congress add to the FDCPA.
If you live in one of the other nine circuits, then you can argue the collection agent must follow the statute, and not the standards set by the Third, Fourth, Ninth, and Eleventh Circuit Courts.
Must a Collection Agent Cease Collecting When it Receives a Verification Notice?
Collection agents must cease their collections activities when they receive a verification notice. A collection agent may resume these activities when it mails a copy of the verification to the consumer.
The 30-day period during which a consumer has a right to request a verification is not a grace period. A collection agent may continue their collection activities, including filing a lawsuit against the consumer.
In a 1997 opinion, the Seventh Circuit states "[t]he debt collector is perfectly free to sue within the thirty days; he just must cease his efforts at collection during the interval between being asked for verification of the debt and mailing the verification to the debtor." Bartlett v. Heibl, 128 F.3d 497, 501 (7th Cir. 1997) (Posner, J.).
The Sixth Circuit stated "[a] debt collector does not have to stop its collection efforts [during the thirty-day period] to comply with the Act. Instead, it must ensure that its efforts do not threaten a consumer’s right to dispute the validity of his debt." Smith v. Computer Credit, Inc., 167 F.3d 1052, 1054 (6th Cir. 1999).
There is no time limit on when a collection agent must respond to a verification. It may, for example, respond with its evidence 75 days (to pick a number out of the air for the sake of argument) after receiving the consumer’s debt validation request. It is unclear if, during those 75 days, the collection agent may not report the debt to the consumer credit reporting agencies, or if it must report the debt as “disputed.”
Conclusion
Send a debt validation letter immediately because there is a 30-day time limit for doing so. The collection agent, in turn, must respond with validation. As discussed above, what is complete and proper validation depends on your state of residence. See the Bills.com resource What if a Collection Agent Does Not Validate a Debt? if the collection agent does not comply with your debt validation request.
Comments (179)
Oakland, CA | January 11, 2013
January 15, 2013
- Consult with a lawyer who has consumer law or civil litigation experience. If the school promised to help you find a loan, and you dropped out shortly after enrolling because it failed to fulfill its promise, then you owe the school nothing. The $6,000 debt should not exist.
- Assume for a moment you have legal liability for the debt, the California statute of limitations for a breach of contract is 4 years. Here in 2013, we are long passed the California statute of limitations. Should the school or its collection agent file an action against you (a lawsuit, in other words), you have the affirmitive defense of statute of limitations you can assert. If you assert this defense at trial and the court looks at the timeline here, it will dismiss the case.
No outsider can answer the question, "Will creditor X file an action against me," because creditors and collection agents are unpredictable. I have seen collection agents sit on collection accounts totaling tens of thousands of dollars, and other collection agents file small claims cases for $500 accounts.
My advice? In your debt validation letter, explain that if the collection agent files an action, you plan to assert all available defenses including breach of contract and the California statute of limitations.
Fort Worth, TX | November 19, 2012
November 19, 2012
Second, you mentioned you reside in Texas. Read the Bills.com article Payday Loans & Hot Checks in Texas to learn why the collection agent's statement your spouse could expect to be served a summons at his place of employment is possible under law.
Third, the Texas statute of limitations is four years for a breach of contract, as you mentioned. However, that does not mean the creditor is prohibited from filing a civil lawsuit against your spouse. However, it does mean that if your spouse mounts a defense against the creditor, and the court believes the statute of limitations defense, the case will be dismissed.
Gainesville, VA | August 01, 2012
I want to clean up my credit report. Could you advise me on the steps? Appreciate any help, thanks
August 03, 2012
Regarding your date questions, original creditors or collection agents may not reset the date of first delinquency on a debt. To do so violates the Fair Credit Reporting Act. If a collection agent resets the date of first delinquency, file a dispute with the creditor reporting agency or agencies that publish the incorrect date.
You asked how to improve your credit report. Read the Bills.com article How to Improve Your Credit Score to learn what steps you can take to clean up your credit report, which will increase your credit score.
Clarksville, TN | July 13, 2012
July 13, 2012
My advice? Keep careful records of your debt validation letters. If the collection agents are alter egos of each other, you may have a cause of action against the company for an intentional infliction of emotional distress claim, or a similar claim based on your state's particular laws.
Sun City, CA | July 26, 2012
July 26, 2012
Regarding your statute of limitations comment, unless you reside in Wisconsin or North Carolina, an original creditor or collection agent may attempt to collect a debt after the statute of limitations for contract breach expires in your state. If an original creditor or collection agent files a lawsuit against you, you may raise the statute of limitations defense to ask the court to dismiss the case. Unfortunately, some Internet commentators concatenate this into, "The creditor can't collect the debt if the statute of limitations has expired," which is wishful thinking and a false statement in all but two states.
My advice? Send Resurgent a notice of insufficient validation. Keep complete records about this collection account, and in particular, your proof of when you sent debt validation and insufficient validation notices.
Phoenix, AZ | May 30, 2012
May 30, 2012
Phoenix, AZ | May 30, 2012
May 30, 2012
Beaverton, OR | May 30, 2012
Phoenix, AZ | May 30, 2012
May 30, 2012
See the Bills.com resource Arizona Collection Laws to learn more about the statute of limitations and other rules in that state.
Under the FDCPA, a collection agent must file an action in the state where the consumer/debtor resides. In this case, this would be Arizona. An Arizona judge would want to follow Arizona laws when deciding on this case. However, statutes of limitations laws are tricky because the contract signed may have a clause saying in effect, "We will agree to use State X's laws if we ever have to litigate this contract." Therefore, it is possible neither Arizona nor California's statute of limitations laws apply. Go back to the contract to see which state was agreed to in the choice of laws clause.
My advice? Validate the debt. If the original creditor does validate the debt (which I doubt will occur), then follow-up and send a cease communications letter.
Beaverton, OR | May 30, 2012
Seal Beach, CA | April 23, 2012
April 23, 2012
Montclair, NJ | April 17, 2012
April 17, 2012
It is common for original creditors to sell all rights to a collection accounts to collection agents. It is also common for collection agents to buy, sell, and trade collection accounts amongst each other. If, as you suspect, the original creditor still owns the account and is re-assigning it to different work-for-hire collection agents (who do not own the account) for the purposes of harassing you, then I think you have an argument for a FDCPA violation.
If you are dealing with collection agents who are playing the game of hot potato with your account, then I do not see a FCRA or FDCPA violation. Consult with a lawyer who has consumer law experience to learn if you have a cause of action against any of the collection agents or the original creditor.
Beaverton, OR | April 17, 2012
Montclair, NJ | April 18, 2012
Beaverton, OR | April 18, 2012
Regarding credit reporting, again, the original creditor is not bound by the FDCPA and may report as they see fit as long as they are compliant with other relevant legislation such as the FCRA. As for collections agencies, since credit bureau reporting has been determined to be a collections activity, they may not report subsequent to a timely placed request for validation. Where there is some disagreement is whether they must remove credit bureau tradelines placed prior to a request for debt validation once you have made your debt validation request.
Remember, your debt validation request must be timely made.
Brooklyn, NY | April 16, 2012
April 16, 2012
Buffalo, NY | April 09, 2012
April 09, 2012
In my opinion, there is little reason to validate a debt an original creditor is trying to collect because, well, it is the original creditor.
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A couple of months ago, the school contacted me and claims that I owe them over $6,000. I responded to them in writing within 30 days to dispute the debt and they never responded.
Today, I received a collections notice on behalf of the school from a collections agency. I plan on disputing it right away. Should I include in the dispute letter that the statute of limitations is up? I live in California where the statute of limitations is 2-4 years. How likely do you think it is that they will get the debt verified and take me to court?
If the affirmative defense is used, then the case would be thrown out right?