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Debt Validation

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Daniel Cohen
UpdatedMay 20, 2024
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    10 min read
Key Takeaways:
  • 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.

Validate or Validation - It's the same thing

The FDCPA and FTC use the word verify to describe this process. Bills.com and other personal finance Web sites call it validate or validation. These terms refer to the same process and are interchangeable.

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.

Learn about Statute of Limitations

Consumers with old delinquent debt often ask how their state statutes of limitation may impact their rights. See the Bills.com resources Statute of Limitations Laws by State and How to Tell Which Statute of Limitations Applies to Your Situation to learn more about this issue.

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. If a collection agent cannot validate the debt, it may not collect the debt or report it to the consumer credit reporting agencies. A collection agent is stopped dead in its tracks if it cannot validate a debt.

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
Take the time to Validate your Debts

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 validat­ed are med­ical, tele­com­munica­tions, and utility debts.

Here is a template of a debt validation letter to help you get started:

Download

Edit our sample debt validation letter to fit your needs. Then, send it USPS 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)):

  1. “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 —
    1. “the amount of the debt;
    2. “the name of the creditor to whom the debt is owed;
    3. “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;
    4. “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
    5. “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.

Source: Bills.com

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.

Get Debt Help

Dealing with debt? A Bills.com debt resolution partner might be able to help.

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.

Struggling with debt?

If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q4 2023 was $17.503 trillion. Student loan debt was $1.601 trillion and credit card debt was $1.129 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

The amount of debt and debt in collections vary by state. For example, in Wyoming, 24% have any kind of debt in collections and the median debt in collections is $2680. Medical debt is common and 17% have that in collections. The median medical debt in collections is $1515.

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.

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10 Comments

PPai, Feb, 2023
A debt collector sent me a collections letter for my previous cellphone carrier with an amount I neither owed nor recognized. I sent them the debt validation letter and email. They have responded to my email with copies of my two most recent bills from that cellphone carrier. The amounts are not tallying with their original letter and I have credit card statements to prove that I had already paid these bills. What should be my next steps to respond to this debt collection agency?
VValerie Denise, Feb, 2023
What if a lawsuit has been filed against you in Court?
EElim Shin, Jun, 2021

What if you ask for validation little after 30 days?

JJosh, Aug, 2021

Hello Elim,

Thank you for reaching out. According to the article, the verification letter must be sent immediately because there is a 30 day limit for doing so. If you need assistance regarding your finances please reach out to our partner affiliates they may be able to assist. 


Regards, Josh

PPhil, Nov, 2020

I had a collection agency file a claim on my credit report for an internet bill they were claiming that I owed. Despite the collection agency having my correct phone number and address, I never received any notice about it until I saw the claim on my credit. The claim had a huge negative impact on my score obviously. I requested that they validate the debt and they were unable to do so. They sent me a letter stating they were unable to validate and they had ceased all actions to collect. The claim was also removed from all of my credit reports. This is all good, however on the collection agencies website the debt is still shown as active. I am concerned they could sell the debt to another collection agency and I will have to go through the whole process again. The amount is very small, I would just pay it to end it all, but I am worried they would then be able to say I acknowledged I owed the debt even though I don't, and then just file a new claim on my credit. Is there a way to have the collection agency actually close the account so it doesn't get sold or transferred and wind up on my credit report again?

DDaniel Cohen, Nov, 2020

Interesting question, Phil. This collector can't collect on the debt, but I do believe they could sell the debt. 

Perhaps a good first step is to ask them if they sell debts they can't validate. However, if they say no, it could happen down the road. You could negotiate a killing of the debt, while be clear that you are not responsible, but just want to preclude it ever hitting your credit report again. If you puruse this, it is crucial to get an agreement in writing that makes it clear that whatever the price you pay (and I don't think you need to pay 100% of the debt), the debt will be at $0 and the matter closed.

MMari, Apr, 2020

I had an old debt for a medical bill that went to collections in 1996. I paid the debt off at the collection agency office back in 1996. Today I was looking at the County court index cases and find that the collection is listed as an “open” case. It also says the file was pending to be purged in 2007. I have never received any phone calls or letters from the collection agency regarding this debt since I paid it off in full in 1996. I don’t understand what the case says “open”. I no longer have my payoff receipt, but like I said the collection agency has never contacted me. What should I do to have the case closed. Should I be worried about this?

DDaniel Cohen, Apr, 2020

I don't think you have any need for concern. Not only is the debt paid off, but it debt is so old that were someone to try and collect on it you could almost certainly use the statute of limitations on debt as an affirmative defense.

I suggest you speak with the clerk's office at the County Court to hear their thoughts.