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Question:
APR 23, 2012

Debt Validation

What is debt validation and how do I do it? Also, how do I know if a debt is properly validated?

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Debt Validation
Bill's Answer: Bills.com Resident Expert

Ask for a debt validation when a collection agent contacts you in an attempt to collect a debt.

Information on Collection Agencies and Statutes of Limitations

A collection agent is either a creditor or is a representative of the original creditor. Both collection agents and creditors are bound by federal and state laws concerning the collection of debt. Specifically, the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) are key laws regarding these issues.

For more information about statutes of limitations, see the following Bills.com resources:

Assignment of Debt

Most consumer debt contracts give the original and subsequent creditors the right to assign the debt. A collection agent buying a debt will do so for 5 to 50 cents on the dollar. The collection agent has the right to collect the entire balance due plus interest (state laws set the rules in this area), but does not necessarily expect to collect the full amount.

A third party purchasing a collection account must abide by previous contracts between the parties. If a debtor creates a settlement agreement with a creditor, all subsequent assignees of the collection account take the account subject to its terms.

Therefore, if a debtor has a legal contract with a previous debt collection agency, then any current party attempting to collect the debt is bound by the terms and conditions of the contract. Assuming that a contract stipulated no interest to accumulate or other fees, then the current agent may ask for immediate payment in full plus additional fees, but the debtor has no obligation to agree to the new terms.

Collection agents can buy a fully documented account, which includes all of the invoices and records of the original creditor’s collection efforts. Or, the collection agent can buy a bare account with little documentation. A fully documented account is worth a lot more than a bare account. More on bare and fully documented collection accounts in a moment.

How to Ask For a Debt Validation

If a collection agent demands payment of a debt an individual does not owe, or more than they owe, under federal law the individual can dispute the debt in writing. The formal terms for this process are “debt verification” or "debt validation."

A debtor 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 that a debtor owes the collection agent money does not necessarily mean the collection agent owns the right to collect the debt, or that the debt is even owed.

According to FDCPA Section 809(b), 15 U.S.C. § 1692g(b), if the consumer notifies the debt collector in writing within the 30-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.

You can find a sample debt validation letter at the Bills.com debt self-help center.

If the debt collector has a bare account and the consumer seeks a debt validation, the collector has no means to validate the bare account debt. Without validation, the account is non-collectible if the debtor asks for the validation and does not receive it. That is why is is wise for a debtor to ask for a debt validation when a debt collector attempt to collect on an old debt — the chances on the debt account still containing the full documentation diminishes with each passing day and with each debt collector who handles the file.

What is Proper Validation?

Not much, unfortunately. Under the Fair Debt Collection Practices Act, if a creditor cannot verify a debt it may not collect the debt, contact the debtor about the debt, or report it to the credit reporting agencies. Federal appellate courts conflict over what Congress meant when it wrote the debt validation portion of 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)

Regarding the 30-day rule, if the consumer notifies the debt collector in writing within 30 days of the initial notice that the debt, or any portion thereof, is disputed, the debt collector must cease collection of the debt, or any disputed portion thereof, until verification is mailed to the consumer. 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. However, during those 75 days, it may not report the debt to the consumer credit reporting agencies or attempt to collect the debt.

Recommendation

Send the debt validation letter immediately because there is a 30-day time limit on the letter you received. The collection agent, in turn, must respond with a proper and complete validation. Until it responds with a validation, the collection agent may not contact the consumer about the debt, or collect the debt.

To learn more about your rights as a debtor, read the Bills.com resource Collections Advice.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Comments (161)


Ken I.
Seal Beach, CA  |  April 23, 2012
I had send validation letter to collection agency that had purchased debt from original creditor and they responded back me with proof of purchasing debt (bill of sales) and copy of Final Charged Off Statement from original creditor that only states amount but no details of charges and I have never received this charge off statement form original creditor. My question is, is this significant enough as debt validation? Should I send Notice of Insufficient Validation? What should be my next move?
Bills.com
April 23, 2012
See the section "What is Proper Validation?" above for a discussion of the proper validation issue. If you believe the collection agent did not receive sufficient validation from the original creditor, then you have nothing to lose by sending a notice of insufficient validation.
Maurice S.
Montclair, NJ  |  April 17, 2012
On April 8, 2011 I received a collection notice from one collection agency. On April 21, 2011, I requested validation, but received no response. Subsequently, on August 21, 2011, I received a notice from a different collection agency attempting to collect the same debt. I requested validation on September 16, 2011, but received no response. On April 5, 2012, yet another collection agency sent a collection notice attempting to collect the same debt. I requested validation on April 17, 2012. With respect to my credit report, it shows "charge-off" entries for the account since April 2011 (i.e., the month initial validation was requested). It seems as if the creditor refers the account to a different collection agency after validation is requested. Clearly, it would be a violation of the FDCA for the original collection agency to continue collection efforts after receiving a validation request. After validation is requested, is it permissible for the creditor to refer the account to another collection agency so that new collection agency can do what the original collection agency could not (i.e., continue efforts to collect the debt after receiving validation)? It doesn't seem like the creditor should be able to circumvent the FDCA in this manner. Also, is it a violation for the FDCA if the creditor (as opposed to the collection agency) reports negative information to the credit bureaus after validation is sent to the collection agency retained by the creditor?
Bills.com
April 17, 2012
I'm not sure if you are referring to the Fair Credit Reporting Act (FCRA) or the Fair Debt Collection Practices Act (FDCPA) when you refer to the "FDCA."

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.
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Ken G.
Beaverton, OR  |  April 17, 2012
This is not uncommon. Unfortunately, however, there is no FDCPA violation. What precise section of the FDCPA do you believe was violated? Simply selling an account is not a collections attempt under the Act.
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Maurcie S.
Montclair, NJ  |  April 18, 2012
It is my understanding that under the FDCPA, once debt validation is requested, further collection efforts must cease. My concern is that the creditor could circumvent this rule by re-assigning the account to a different collection agency once the previous collection agency has received a debt validation request. By doing this, the collection efforts are able continue on the account — albeit from a different collection agency — even though the the debtor has requested debt validation. This seems to go against the spirit of the FDCPA. Also, it is my understanding that reporting negative history to a credit bureau after receiving a timely debt validation request is prohibited by the FDCPA. By sending the debt validation request to the collection agency, the collection agency would be prohibited from reporting any negative information to the credit bureaus. However, would this prohibition also extend to the creditor? If so, and the creditor did report negative information to the credit bureaus after the collection agency (which was hired by the creditor) received a debt validation request, this would arguably be a violation of the FDCPA.
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Ken G.
Beaverton, OR  |  April 18, 2012
First, the FDCPA does not apply to original creditors. (Editor's note: The following states have FDCPA-like laws that apply to original creditors: Arkansas, California, Colorado, Connecticut, District of Columbia, Florida, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New York, North Carolina, Oregon, Pennsylvania, South Carolina, Texas, Vermont, West Virginia, and Wisconsin.) It applies to debt collectors only, and even then there are exceptions as specifically stated in the Act. While we might think a collections agency should not be permitted to sell a debt that they have not been able to validate, the simple fact is that they can -- and often do. You have no recourse under the Act whatsoever should they choose to do so and that is extremely unlikely to change in the near to distant future as the debt is, basically, property and exercising prior restraint on one's chosen disposal of their property would be legally very challenging.

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.
Henry O.
Brooklyn, NY  |  April 16, 2012
An attorney who alleges he was retained by CACH contacted me regarding a debt I still owe Washington Mutual (It was acquired by Chase several years ago). A different attorney, from a different state, also alleging to have been retained by CACH, contacted me a short while ago about the same debt. Besides debt validation, shouldn't I also ask each one of them to document that (1) they were truly retained by CACH, and (2) that CACH should show proof of assignment of the alleged debt? On the other hand, if I do ask them to show CACH's proof of assignment, don't I implicitly acknowledge that I owe the debt before I find out what records they have in their possession to document I owe the debt?
Bills.com
April 16, 2012
Validate the debt with both collection agents immediately. That is step one. If one or both validate the debt, then I urge you to consult with a lawyer in your state who has consumer law experience.
Nick W.
Buffalo, NY  |  April 09, 2012
Hi. I just stumbled across this page when researching my student loan debt. I am a recent college graduate, and different companies are sending me notices that I owe back student loans. I keep copies of all my loans that I took out, and so far, everything seems to match up. My question is: Is there any reason to request validation of my debt? What harm could it cause? If i send a request for validation letter, and they do not respond until the first payment is due what do i do? Thanks
Bills.com
April 09, 2012
A debt that cannot be validated may not be collected. The general rule is, when a collection agent first starts the collections process, the consumer should validate the debt as a matter of course. At minimum, it delays the collection process for a month or so while the collection agent asks for and then processes the validation from the original creditor.

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.
Tiffany C.
Auburn, NH  |  April 09, 2012
I recently received a phone call from a debt collection agency who claim I owe appx $150 on an account that was recently sold to them. All they would tell me was the amount, who the debt was originally with, and eventually, they let out that the account was opened in 1998. In 1998 I was 14. As far as I am aware, the statute of limitations in my state (NH) is 3-6 years, depending on the type of debt. I did receive a verification of debt letter from them this week, which again included the amount and who the debt was purchased from (they are the 2nd or 3rd debt agency, at a minimum). I also called the original creditor, as I was at a loss for what this was for, who stated they have no file on me, and have no files kept in their system prior to 2004. Therefore, nothing must have been ordered from them in my name following that date. As I have received the debt validation letter as required, how am I to respond and proceed? Thank you so much!
Bills.com
April 09, 2012
I assume you sent the collection agent a debt validation letter, and it replied with a poor excuse for a validation.

Send the collection agent a notice of insufficient validation. Why? It appears the collection agent did not receive a validation from the original creditor stating the debt was yours for the amount indicated in the collection agent's claim. You can find a sample notice of insufficient validation on the Bills.com Debt Do-It-Yourself page. Send the notice Certified Mail so that you have a receipt it was delivered. Keep all of your documents, letters, receipts and so forth regarding this debt in one file folder so that if you need to refer to them in the future, you have everything in one place.
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Ken G.
Beaverton, OR  |  April 09, 2012
Again, there is confusion about what is or is not proper validation. In the US Court of Appeals, the Third Circuit 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)). In every other circuit the bar is set much lower. As long as the collection agency a) contacts the original creditor, verifies the amount owed with said original creditor and provides a breakdown as to how the amount claimed was reached, proper validation has occurred. That the collection agent must provide contracts, past statements or anything else is a wicked myth that refuses to die. The FTC has also given a direct opinion on the matter in an advisory dated March 10, 1993 in the form of the Wolman-LeFevre letter.
Bills.com
April 09, 2012
Thanks, Ken. It is unclear if Tiffany's collection agent sent her a validation from the original creditor. A "validation" from another collection agent is meaningless.

Tiffany stated she contacted the original creditor, which told her it has no record of the debt due to its age. My guess is if the original creditor has no records of Tiffany's account, it will be unable to validate the debt.
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Ken G.
Beaverton, OR  |  April 09, 2012
I tend to agree. I have seen, though, cases where the initial CSR or even the collections staff of an original creditor not really knowing about old accounts -- especially those charged off to P&L. What I would probably do is write a letter per your original suggestion to the collection agent and challenge them on having received confirmation from the original creditor. At the same time I'd put them on notice that when contacted by the consumer the original creditor disclaimed any debt being owed. Given the age of the debt, a cease & desist might work wonders.
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Tiffany C.
Auburn, NH  |  April 10, 2012
They contacted me by phone, asking if I was Tiffany (maidenname) and I confirmed. They then told me who they were. They had my address, and told me the amount of debt, the original creditor (Franklin Mint), that the account was opened in 1998, and when I informed them of my age at the time and requested more information (What did I supposedly buy, and when? To what address was the item mailed?), they said they would send me a debt validation as I wished to challenge it, and hung up on me. I received the letter a couple of days later. One page includes "Verification of Debt" as the title, the date, my maiden name, their name(s), the account number in collections, the name of the creditor they purchased it from, the amount of the debt when purchased as well as the current debt (a few dollars more), a statement that the debt will continue to increase due to fees, their customer service number and the name of the previous creditor, which on one page says the Franklin Mint, and the other another collections company. There's no information about what was purchased or when (I understand that's not required, which is ridiculous), but again, Franklin Mint stated it must have been pre-2004. There's nothing from the Franklin Mint other than their name having been tossed in there. Actually, looking at the first page, it looks like this is a dummy verification of debt, and that they'll obtain and send me the verification of debt or judgement after I dispute it in writing. On to that step. I will certainly send all further correspondence via certified mail and keep all receipts for tracking. Thanks for the tips!
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Ken G.
Beaverton, OR  |  April 10, 2012
I don't really see any problems here. Even though kids all the time order stuff from the Franklin Mint, the following three facts sufficiently enable you to safely write them a cease & desist and prohibit them from contacting you further:
  1. The statute of limitations has long passed so they cannot successfully sue you;
  2. The credit reporting time period (7½-years since the date of first delinquency) has long run and they cannot report this debt to any credit bureau; and
  3. You were a minor at the time and incapable of entering a legally binding contract.

Why continue to waste time with these people?

Wilma F.
Chicago, IL  |  March 11, 2012
In the "Recommendation" section, you state: "The collection agent, in turn, has 30 days to respond with a proper and complete validation." Based on this information, in my debt validation request letter, I stipulated that the collection agency had 30 days to supply the requested information. It is now 60 days since the agency received my letter, and to date, I have not received the requested documentation. I have not been able to find this requirement online in any law or act. Would you please point me to the exact source of this information so that I can cite this in my "cease and desist" follow-up letter? Thank you.
Bills.com
March 12, 2012
I edited our original answer above to clarify the law on validation.
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Aretha T.
Birmingham, AL  |  March 12, 2012
Hello Bill, I started working on my credit file to strengthen the score. After clearing almost everything up, I received a letter from a Collection Agency about a debt. It gave me the right to validate the debt and I did of course. However, I rechecked my credit file and the Collection Agency appeared on my credit file. The Collection Agency is yet to validate the debt. How do I have the debt removed from my credit file?
Bills.com
March 12, 2012
Dispute the derogatory item you mentioned.
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Aretha T.
Birmingham, AL  |  March 13, 2012
The report was disputed but it came back stating that they received info from Collection agency that debt was valid.. However, I am yet to receive the validation of debt. So what do I do now?
Ken G.
Beaverton, OR  |  February 28, 2012
You may want to revisit your statements of what constitutes proper debt validation. It is pretty much settled law that a debt collector is not at all required to provide account statements, loan agreements or credit card applications in a proper validation. This issue has been visited by just about every federal Circuit Court of Appeals and pretty much the common denominator is that a debt collector needs to provide absolutely nothing in the way of documentation absent the existence of a judgment.
Daniel S.
February 12, 2012
I received a debt collection notice from a collection agency for an unpaid utility bill from six months ago, around the time I moved and closed the account with the utility company. It's possible that this was the amount I owed the utility company at the time I closed the account, but I have paid every single bill from this company on time and to my knowledge, have no unpaid bills that I owe them. I never received a bill from the company in the amount that the collection agency is stating I owe. I am willing and able to pay the bill in full (and would have at any time had I received any communication from the utility company), but this is the first I'm hearing of this unpaid amount. I think it's very unfair that my credit might suffer as a result of the utility company failing to inform me of a bill I owed them. I also am not sure if the amount the collection agency is stating I owe includes any late fees, interest, collection fees, etc. but the amount is somewhat higher than most of my bills from this company had been. 1) Should I simply negotiate with the collection agency to pay the amount in return for their not reporting this to credit agencies even before requesting validation of debt? So far this has not appeared on my credit report. 2) If the collection agency can prove that they are entitled to collect the debt, can I still refuse to pay anything over the original owed amount (I don't believe I should have to pay late fees, interest etc. on a bill I never received). In other words, can I still dispute the debt on the basis of non-receipt of the original bill and negotiate with the collections agency after I get a valid debt verification letter?
Bills.com
February 14, 2012
Not receiving the original bill is, in my opinion, not a valid issue legally. Certainly, it is a moral issue, and an argument you can make when negotiating, but I do not see a solid foundation to base a case upon. That said, your state's public utility commission may have consumer friendly rules that require a utility to present an invoice to a consumer in a certain number of days. Call your state's PUC to learn what, if any, consumer protection laws may help you here.

Regarding your questions: Yes, validate the debt, however I do not see any language in the FDCPA that concerns the debtor not receiving the original invoice as a reason for the debt to be invalid. If the original creditor validates the debt, then by all means negotiate a pay for delete.
Danielle R.
Sacramento, CA  |  February 11, 2012
I filed bankruptcy 4 years ago and included two out of three accounts from Patelco in the bankruptcy. I recently request a debt validation in attempt to clear them off of my credit report. I before that called ahead of time and asked if they had any records of my accounts and the rep advised after three years their records are purged and would not have any record. Their response to my request to validate a debt was that I included them in bankruptcy and they will not be deleting the record. Is that a valid response or do they have to send original signature or statements? And can I now follow up with the CRA to dispute it with them?
Bills.com
February 11, 2012
Debt validation or verification is the process a consumer follows when challenging a collection agent or original creditor's right to collect a debt. In your case, I assume the debt in the two Patelco Credit Union accounts were discharged in your bankruptcy four years ago, and no one is trying to collect on these discharged debts today. If someone is, then consult with your bankruptcy lawyer about this violation of federal law.

I think you are really asking about disputing a credit report. See the link I mentioned to learn the steps.

You are really asking me Patelco's record retention policy on debts discharged in bankruptcy. It sounds like you received contradictory answers to that question. A dispute costs you your time and a postage stamp, so the upside to a dispute is high.
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Danielle R.
Sacramento, CA  |  February 25, 2012
Thanks for the reply. I have another question. I recently sent a debt validation to Kay Jewelers and they sent me a letter back asking for my drivers license. Can they do this or are they required just to send me a debt validation?
Linda M.
Chesterfield, MO  |  February 08, 2012
I just received a phone call from a collection agency about a $200 bill from 1989! The caller had my old address from 23 years ago to confirm she was talking to the right person. She could not provide any verifying information on the debt other than it was with the NYN Company on an old store credit card. I suspect this is an old case from the 80's that I disputed back then as an error on an old credit card. At that time after receiving a collection letter I sent my "cease and desist" letter requesting they drop any further collection attempts without proof that I owed the bill. Today is the first time I have heard that this old dispute may still be active. The agency calling today stated it was re-entered into the system in 2001 as an active case. Does this mean a third party agency bought the debt? What can I do to prevent further harassment for a debt that was never mine in the first place? After I insisted on some type of documentation on the details of the debt they claim I owe, the phoning collection agency stated they could not provide that information but would take me off their call list. Does this mean they will really drop the case or will it rear its ugly head again in some other fashion? I did not give them my current mailing address but they obviously now have my cell number. If they make further attempts to contact me for this 23 year old case what should I do? DO I give them my mailing address so they can send a collection letter which I will then dispute AGAIN and send another cease and desist letter?? Or am I better off not responding with any further information assuming they cannot validate the debt anyway, and hope they will drop the matter entirely? They are still trying to collect on a 23 year old $200 debt? I am more than willing to pay a debt I truly owe, but I will not pay a dime without proof I am responsible for this bill.
Bills.com
February 08, 2012
Your case illustrates the power of a timely debt validation, which we outline how to do on this page. Learn the mailing address of the collection agent. Send them the collection agent a debt validation letter Certified Mail so that you have a record of the collection agent receiving your request for validation.

The collection agent all but admitted it cannot validate the debt. As a practical matter, I doubt the original creditor will be able to validate the debt.

This debt may not appear on your credit report. If it does, dispute it.
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Linda M.
Chesterfield, MO  |  February 08, 2012
Thanks for the fast response! I have downloaded all the debt dispute/validation documents available on your website. Thanks for that great service! My question is do you feel I should proactively pursue this NOW by attempting to get the collection agency's address and mailing a debt validation letter or should I wait and see if any further attempts are made by them to contact me? I got the sense when she said they would take me off the call list that it would not be worth their effort to pursue since I was not going to offer up any payment based on one vague phone call. Do I let sleeping dogs lie if they truly stay sleeping from this point forward? Obviously if I receive a formal collection letter or my credit report is affected (I have a credit reporting service to alert me to any negative entries) I will initiate an emphatic dispute. Does a collection phone call hold the same significance as a formal collection letter that I receive in the mail?
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