Debt Validation

I am interested in the credit repair process and I will be writing some articles about this.  I am not an expert and this is subject to change as I learn more.  There is a lot of confusing misinformation about this process and this is my attempt to add light on the subject.

When there is a negative item on your credit report, the first step should be writing a letter to the collection agency asking them to "validate" or "verify" the debt within 30 days.  There may be a distinction between those two words, but I haven't figured it out yet, so I will use them interchangeably.

The legal basis for a debt validation request is based on 15 USC 1692g § 809. Validation of debts.  Note that this section refers to the notification by the consumer after the debt collector contacts him.  This section requires that the debt collector include 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" § 809(a)(3) .

A sample letter to send is available at:  https://www.consumerfinance.gov/ask-cfpb/what-should-i-do-when-a-debt-collector-contacts-me-en-1695/

Now what happens if the collection agency doesn't respond?  Apparently they are not required to, if the consumer waits more than 30 days after first contact by the collection agency.  The collection agency is taking the position that since the consumer didn't request the section 809 debt validation within 30 days of first contact that the collection agency can assume that the debt is valid and they don't have to respond to the consumer.

I think it is stupid for the collection agency not to respond.  Instead, they should treat this as an opening to negotiate with the consumer and they should give an offer to settle the debt.  But the reason why the collection agency doesn't respond is that they are lazy.  They are not legally required to respond so they don't, but they still claim the debt is valid.  It is a passive-aggressive approach.

If the collection agency doesn't respond, then this is a reason to dispute the debt with the credit bureaus, but that is a topic for another post.

Note to self: write post about disputing with credit bureaus.

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I will jump right into a related topic, which is called "Notice of Dispute".  The relevant legal section is 15 U.S. Code § 1681s–2(a)(8), alternatively known as FCRA §623(a)(8).  In this section, you are asking the "furnisher" (aka the collection agency), to reinvestigate a dispute concerning the accuracy of information contained in a consumer report.

The difference between a Request for Debt Validation mentioned above and a Notice of Dispute is that the debt validation requires the debt collector to provide information or to stop actively communicating with the consumer (and it says nothing about a credit report) whereas the Notice of Dispute is about what is on your credit report (and says nothing about debt collection tactics).

A sample Notice of Dispute is at:  https://www.preventloanscams.org/623-dispute-letter/.

A Notice of Dispute can "technically" be sent only after the credit bureau investigates, but I don't see why as a practical matter it couldn't be sent before that.

I think the effect of this is that you are checking whether the collection agency is "brain-dead" or not.  If they didn't respond to the debt validation request then I don't know why they would respond to this.

If the collection agency does respond to either the Debt Validation or Notice of Dispute, then the only alternative may be to try to settle the debt, with a pay-for-delete letter, which is a topic for another post.

Note to self: write post about pay-for-delete letter.

There is another possible related topic called "Method of Verification" which relates mostly to the credit bureaus, but it may apply to the collection agency as well.

Note to self: write post about method-of-verification.

There is yet another possible topic about a follow up with the collection agency regarding demanding proof of a contract with your signature.  I don't know if I will write about this, but I may.

Note to self: possibly write another post about demanding more proof.

Now, what happens if after all of this, the collection agency tells the credit bureau that the information is accurate, but it won't respond to you?  Well, you have a reason to complain to the CFPB or to sue them.  But before doing that, it may be worth it to write more letters or even (gasp) call them (which is usually not a good idea).  If you do sue them, you run the risk that they will countersue for the debt.  But that is the topic of yet another post.

Note to self: write post about if all options fail and you have to complain to the CFPB or sue them.

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The Colorado version of the request for debt validation is CRS 5-16-109.  Similar to the federal version, it gives the consumer 30 days to ask for debt verification.  The collection agency is then required to either provide verification of the debt of to cease collections of it.