Debt Validation

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READER QUESTION

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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Bills.com Resident Expert
Feb 08, 2012
HIGHLIGHTS
  • 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.
BILL'S ANSWER

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 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 a proper validation? Account statements from the original creditor including payment history starting with the original creditor. Also, a copy of the original loan agreement or credit card application, or lacking that, account statements from the original creditor.

Under the FCRA, 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.

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, has 30 days to respond with a proper and complete validation.

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 (132)


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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.
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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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Shevily H.
Yonkers, NY  |  February 02, 2012
Hello I have been paying $50 a month to a collection agency on an amount of roughtly $2500 with a balance of $1900 I recently found a letter from the original creditor stating that I only owe $1027 is it too late after about a year of payments to ask a validation of the debt amount. I only want to pay the $1027 that I owe nothing more.
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Bills.com
February 04, 2012
It is too late to require a debt validation.

Contact the collection agency and reopen negotiations to settle the debt at for a lower amount.
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BridgetI was sent a letter regarding a debt that I have disputed for several years now. I have sent G.
East Providence, RI  |  February 02, 2012
I was sent a letter regarding a debt that I have disputed for several years now. I have sent 2 debt verification letters, to all of the companies that have indicated they own the debt. The last certified letter I sent was in July 2011 and I have not heard from them until I got another letter from a different company today, 2/2/12. What can I do about this? I'm concerned that when I go to apply for a mortgage I will be turned down due to this issue. Any advice?
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Bills.com
February 03, 2012
The most certain way to remove a debt from a credit report is to negotiate a pay for delete contract with the present collection agent. Otherwise, you can cross your finger, dispute the debt with the latest collection agent, and hope the debt is removed from your credit file at the moment the mortgage underwriter pulls your credit report.
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Sean S.
Charlotte, NC  |  January 31, 2012
Hello, I.have an old insurance bill on my credit report for $94. Date opened 9/2006 date reported 9/2011. I am trying to write a debt validation letter but I do not have complete account number. Can they try to say they can't verify it without complete account number on letter? My goal is to have it completely removed from my Credit report. I called original creditor and they couldn't find account. I live in NC so I believe it is past SOL. Please advise! Thanks
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Bills.com
January 31, 2012
I am not aware that a complete account number is required to request a debt validation. Your name and address at the time the account was open should be more than enough to track your account down.

Be sure to validate this debt because the original creditor all but admitted to you it cannot validate your collection account.
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Joesph D.
Brooksville, FL  |  January 23, 2012
The debt collector is scheduled to take me to court within the next three weeks. Is it too late to send a debt validation letter? What recourse do I have?
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Bills.com
January 23, 2012
You can send a debt validation letter, although the lender or collection agency does not have to restrict their activities unless you meet the 30-day limit. If you are in doubt regarding the debt, then send a letter to the collector stating clearly that you want proof of owing the money. If a court date has been set, then I recommend you consult with a lawyer regarding your options. If you believe you owe the money, then try to settle with the creditor before the court date.
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C A.
Naperville, IL  |  January 02, 2012
Can you still send a debt validation letter if you missed the 30 days to confirm that they actually have legal standing to collect on the debt? This is in regards to a very large outstanding private student loan. Thanks!
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Bills.com
January 03, 2012
The collection agency is required, by law, to answer your debt validation letter, if received within the 30 day period of initial notification. However, you can still write a debt validation letter, asking for all pertinent information about the debt. This will not stop the collection efforts. In any case, do not disregard further communication with the collection agency. It is possible they will pursue a court judgment against you.

If you are dealing with a large private student loan, then you should know if you owe the money. Contact the original lender and see who now owns the debt, and with whom you need to speak in order to negotiate a settlement. I recommend that you read the Bills.com article about private student loan settlement.
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Sarah G.
Salisbury, MD  |  December 22, 2011
I messed up my credit a lot when I was 18-20 )I applied and got a lot of credit cards, then I was hospitalized for a month and could not catch up). Anyway now I am in my late 20's and trying to clean up my credit. I have a lot of "bad" reports on my credit, but companies have bought and traded so many time some of them I have no idea who and what I owe. Can you tell me what I can do, if I do validation letter and they prove that I owe it, does my SOL start over and can I do validation letters if I don't have the 30 day notice from this companies. Thanks
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Bills.com
December 25, 2011
The debt validation letter does not restart the SOL (statute of limitations). Making a payment or recognition of the debt will start the SOL. It is wise of you to check the SOL on each debt, but remember, if there are court judgments, you then need to pay attention to how long the law allows a judgment in the state in which it was issued to remain in force. The SOL for a judgment can be much longer than that for a debt.

As regards the thirty day period, you have thirty days to respond to the creditor, after receiving a detailed notice from them, in writing, regarding the debt. For the details regarding the contents of the letter from the creditor see the FTC publication about Fair Debt Collection Practices Act, section 809. Even if you have not validated the debt, it does not mean that you owe it.

If you still owe money, and you may face legal action, then you may need to work on debt relief solutions. If you are paying off the debt, remember to try to negotiate a pay for delete, so that the credit line will not continue to appear on your credit report.

If you have larger debts then I recommend that you read the Bills.com article about debt relief.
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Aretha T.
Birmingham, AL  |  December 06, 2011
An independent processor, so she says, left a message this morning stating that I had 48 hrs to respond before she serves a summon for complaint. I called back and the office stated that they were an attorney office working for a PayDay Loan company and that I did not pay them back on a loan that I am very unaware of. However, she stated that they had attempted contacting me via e-mail but I normally delete anything that doesn't spike my interest such as this. This is my first time hearing that I owe a Payday loan. Do I have the right to submit a Validation of Debt or is it too late?
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Bills.com
December 06, 2011
The circumstances you described have all of the earmarks of a scam. See the Bills.com resource Fake Debt Collector to learn how to respond.
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