If a collection agent is unable to validate a debt, can the debt be collected?
A couple months ago we received a letter from a lawyer attempting to collect on an outstanding debt. We then responded to the lawyer, by USPS Certified Mail, disputing the amount owed and requested detailed verification of the debt be provided in writing within 30 days of receipt of our letter, and if the proof could not be provided that the debt be removed from our credit report. Since that time, we are now approximately 60 days past the requested 30 day response date for debt verification and have not received any written communication from the lawyer in question. At this point we are unclear on what to do next. Can you provide direction on what are our options?
This is a classic case of a collection agent being unable to verify / validate a debt. This is a common occurrence. Here, the collection agent happens to be an attorney, but the law applies equally to all who try to collect a debt.
To understand the basics of verifying or validating a debt (the terms are synonymous) see the Bills.com resource Debt Validation.
Under the Fair Debt Collection Practices Act (FDCPA), if a creditor cannot verify a debt it may not collect the debt or otherwise contact the debtor about the debt. If the collection agent does not contact you further about the debt, it is safe to assume your collection account was a bare account, and therefore is non-collectable.
Is it worth your time to validate a debt? Yes! Collection agents cannot validate 41% of the accounts less than 3 years old. Collection agents cannot validate 64% of the accounts 6 years of age or older. Overall, the debt industry can validate about half of all accounts (The Structure and Practices of the Debt Buying Industry (PDF). The least likely accounts to be validat-ed are med-ical, tele-com-munica-tions, and utility debts.
Should the present owner of your collection account sell or assign the account to another collection agent, you may be contacted again. Like before, validate the debt. If the account contains no documentation, that collection agent may not collect the debt, contact you about the debt, or report it to the credit reporting agencies.
I hope this information helps you Find. Learn & Save.
Best,
Bill
Dealing with debt
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Housing debt totaled $12.612 trillion and non-housing debt was $4.891 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Each state has its rate of delinquency and share of debts in collections. For example, in Texas credit card delinquency rate was 4%, and the median credit card debt was $438.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.
As you can see, there is no time limit for the collection agent to respond. You can send a dispute to the credit reporting agencies, but that should not be necessary if the collection agent is complying with the FDCPA.