If I Know I Owe The Original Creditor, Why Ask The Collection Agency For Validation?

January 1st marks a fresh start to new beginnings. Financial goals are often made of improving our credit and improving our financial health. So... we embark on an action plan to get our credit together! 

Funny thing is; we're not the only ones making strides to increase our bottom line; our creditors are too. The beginning of the year is the time we'll start to receive all types of phone calls, and dunning letters demanding payment, offering 50% or more off settlements and requests to call in to discuss payment arrangements. Most of these communications will come from collection agencies, and with tax time coming up; being able to just pay them off and be done with them seems sooooo appealing, right? You call, pay them and feel so accomplished! Good credit in no time!

WRONG!  This way of thinking is so common and so wrong! But if you feel this way, this is not an attempt to poke fun because; I felt the same way too! Gosh, I can't imagine the amount of money I've lost paying creditors - collection agencies - when I didn't have to!

I say it all the time; Financial Illiteracy is EX-PEN-SIVE! So, let's take a moment to break this down and educate ourselves.

When you receive any communication for a debt the first thing you should do is check your state's statute of limitations. Each state has a specific amount of time a creditor has to enforce a debt through the court system. This basically means suing you for a judgment. They can still attempt to collect but if someone can't MAKE you pay; why pay them? That money can be applied towards more current debts.

The next thing you want to do is look up the company that sent the letter. I do this for 2 reasons. A. I want to see who I'm dealing with. Are they legit, are they local, are they 'sue happy'; are they known to give steep reductions on debt; B. To see if there have been any cases brought against them for violations of the Fair Debt Collection Practices Act already, this lets me know what to look out for in case I can sue them as well. If your debt is NOT outside of your state's statute of limitations it's good to know how 'wolf-like' the company you're dealing with are.

Then, you write a Debt Validation Letter. This is where I get the most hesitation. "I know I owe the debt; I know the amount is right, why do I need to validate; can't I just get it over with and pay already?!" No you can't (I say this with love).

Asking a collection agency to validate (prove) the debt is your legal right. Look right here on the FTC's website for the Fair Debt Collection Practices Act and click on 809: Validation of debts. It's all there! Exercise your right.

The number one reason you want to ask for validation is to see if the collection agency is legit. Go ahead and Google Fake, Phony, Scam AND Collection Agency. You will see a ton of cases pop up of consumers who've been duped, companies that have been fined and individuals who have been prosecuted. You cannot take the phone call or letter at face value. You may wonder "Well if they were a phony collector how would they know my name, my debts and the exact amount I owe?"  Well, considering the number of private companies, financial institutions and government entities that have been hacked in the past 5 years it's really not that difficult. To generate a fraudulent letter using a legit company's name and logo, directing you to another 'customer service' center, using data they either illegally purchased from a hacked database, or that they have personally hacked themselves is pretty easy. Validation Protects You.

Another reason you want to validate is to see if the collection agency truly represents the original creditor. Just because some random stranger calls you up claiming to represent a company and now wants you to pay them, doesn't mean they're telling the truth. This is not to say that collection agencies lie (although a lot of them do), but that debt can transfer to many hands, especially a bad debt, you want to ensure the collection agency has legally been assigned your debt. How do you do this? Ask for proof. Request a copy of an agreement or a statement from an officer from the original company, notarized and on company letter heard; again, protect yourself. If the debt has been purchased you want proof of that too.

Another item you want to validate is the amount due. Just because the amount 'looks' right does not mean it is right. Ask how they got to that amount, even if it matches the final bill issued by the original creditor; heck how did they get to that amount? Remember validation doesn't just ask for proof of who owns the debt but also how much is truly owed. This is because fees and interest have been added and it's good to know how much. Think about it, if you are going to offer a settlement; wouldn't you want to know how much of that amount due is principal, interest and fees? I negotiate off of principal all day long. Your added fees are irrelevant to me. Also, if the debt was purchased they bought it for significantly lower than what they're asking you for; YES this includes the settlement offer as well. If they are offering you 50% off how much do you think they purchased it for? Further, I can't tell you how many times my clients have gone to the original creditor on assigned debts and have gotten a better deal once the collection agency's fee, creditor's added fees/interest were deducted. So, ask for a full accounting of how your account arrived at the balance that is showing.

Hopefully this is reason enough for you to request a debt validation rather than just paying a debt.  I go so much deeper than this in my workshops because collection agencies are so crafty these days!  Attorneys will try to sue you when they receive this letter, knowing they are legally required to validate the debt prior to seeking any further collection activity.  They will sell the invalidated debt to another collection agency to avoid providing you with information that they more than likely do not have.  They will give you partial documents such as original statements from the original creditor without giving you proof that they were assigned or own the debt and you are required to pay them.  

Here's something I do per the FCDPA.  I say I am DISPUTING the debt and require validation rather than just saying I want to validate the debt.  Why?  Because if I am disputing the validity of the debt they have to provide me with documents proving otherwise.  I have so many of my spiritual clients that feel badly about this, but you are NOT lying.  You entered into an agreement with the original creditor right?  Did you make an agreement with ABYZ Collection Company?  NO.  So, ask that they prove they have the legal right to collect form you.  

Now, I'll be lying if I stated that many professionals in my industry don't send these letters to send collection agencies scrambling away with their tails between their legs.  This is because when debt transfers hand documentation gets lost and they are often not able to validate.  That works to your advantage.  Per the FDCPA (remember I asked you to read it?) it states all collection activity must STOP until they are able to validate.  So, you just got away from paying this invalidated debt and can put that money towards other efforts that will help you meet your goals this year :).

Many representatives in the debt collection industry HATE validation letters and state they are stupid, they are a trick to avoid your responsibilities, or they single you out for more aggressive collection activity.  That's bull.  Consumers are the protected class, not the debt collection agency, so it is their responsibility to ensure they have all the legal documentation that proves we should be paying them.  As far as more aggressive collection activities, if you don't respond, that's far more worst than asking for validation; either way you can get sued. So what would they recommend?  That you just pay any ole body?  That's even more stupid. There's already case law that has found that a collector cannot sue without providing the basic information I described above.  So, if they are not able to validate and you still want to pay, can you?  Absolutely, it's your personal choice. If it is within your state's statute of limitations, yes; if it's past NO!  If they are offering a real deal and agree to remove it from your credit report, YES.  

Hope this helps!

And if you're in the Chicago area and would love to be financially empowered by learning more about your legal RIGHTS, contact me about our Credit Power Workshops starting February 6, 2015. It is NOT to be missed :).  See you there!

Bonus:  Sample Validation Dispute Letter

Date

Your Name
Your Address

Collection Agency
Collection Agency Address

Re: Acct # XXXX-XXXX-XXXX-XXXX

To Whom It May Concern,

I am sending this letter to you in response to a notice I received from you on (date of letter), (adjust if you found out about them by reviewing your credit report). Be advised this is not a refusal to pay, but a notice that your claim is disputed and validation is requested.

Under the Fair Debt collection Practices Act (FDCPA), I have the right to request validation of the debt you say I owe you. I am requesting proof that I am indeed the party you are asking to pay this debt, and there is some contractual obligation that is binding on me to pay this debt.

This is NOT a request for “verification” or proof of my mailing address, but a request for VALIDATION made pursuant to 15 USC 1692g Sec. 809 (b) of the FDCPA. I respectfully request that your offices provide me with competent evidence that I have any legal obligation to pay you.

At this time I will also inform you that if your offices have or continue to report invalidated information to any of the three major credit bureaus (Equifax, Experian, TransUnion), this action might constitute fraud under both federal and state laws. Due to this fact, if any negative mark is found or continues to report on any of my credit reports by your company or the company you represent, I will not hesitate in bringing legal action against you and your client for the following:


Violation of the Fair Debt Collection Practices Act
Defamation of Character

I am sure your legal staff will agree that non-compliance with this request could put your company in serious legal trouble with the FTC and other state or federal agencies.

If your offices are able to provide the proper documentation as requested in the following declaration, I will require 30 days to investigate this information and during such time all collection activity must cease and desist. Also, during this validation period, if any action is taken which could be considered detrimental to any of my credit reports, I will consult with legal counsel for suit. This includes any listing of any information to a credit-reporting repository that could be inaccurate or invalidated. If your offices fail to respond to this validation request within 30 days from the date of your receipt, all references to this account must be deleted and completely removed from my credit file and a copy of such deletion request shall be sent to me immediately.

It would be advisable that you and your client assure that your records are in order before I am forced to take legal action.
CREDITOR/DEBT COLLECTOR DECLARATION

Please provide the following:

• Agreement with your client that grants you the authority to collect on this alleged debt.
• Agreement that bears the signature of the alleged debtor wherein he/she agreed to pay the creditor.
• Any insurance claims been made by any creditor regarding this account.
• Any Judgments obtained by any creditor regarding this account.
• Name and address of alleged creditor.
• Name on file of alleged debtor.
• Alleged account number.
• Address on file for alleged debtor.
• Amount of alleged debt.
• Date this alleged debt became payable.
• Date of original charge off or delinquency.
• Verification that this debt was assigned or sold to collector.
• Complete accounting of alleged debt.
• Commission for debt collector if collection efforts are successful.

Please provide the name and address of the bonding agent for «COLLECTIONAGENCY» in case legal action becomes necessary.

Your claim cannot and WILL NOT be considered if any portion of the above is not completed and returned with copies of all requested documents. This is a request for validation made pursuant to the Fair Debt Collection Practices Act. Please allow 30 days for processing after receive this information back.
Best Regards


[Your Signature]


cc Federal Trade Commission

Repairing Your Credit? START HERE!

I've been asked several times about where to get started in the credit repair process.  It’s really about organization prior to getting started really, and knowing your consumer rights so that you can know what you’re asking for and what you should expect to receive in return. 

So, let’s get organized!  Develop a filing system for each credit bureau. Label each one (Equifax/Experian/Transunion). 

Each credit bureau folder will have a copy of your credit report inside of it as well as a copy of each dispute letter you've sent to that bureau & the certified return receipt/green card (if applicable).  Each folder should have a tracking sheet stapled to it that tracks:

Type of Letter	Date Sent	Items Disputed	Response	Notes
EX: Verification	11/30/14	Walmart, Cap One, Midland Funding	Walmart – Deleted Cap One- Verified Midland - Updated	Send Method of Verification for Cap One, send Midland a Validation letter

If you are disputing anything directly with an original creditor or a collection agency; you can designate a separate folder for them as well.

It’s also important to KNOW YOUR RIGHTS!  You are using consumer rights laws to dispute information in your credit file to ensure that every single credit trade line is 100% accurate, 100% verifiable, and 100% timely.

Here are the links to review the rights/laws used the most throughout the process: 

Fair Credit Reporting Act (FCRA): http://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-credit-reporting-act

Fair Debt Collection Practices Act (FDCPA)
http://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text

Wage Garnishment Laws by State
http://www.small-claims-courts.com/Wage-Garnishment-Laws.html

Before you even begin selecting a debt to dispute; know what to send to whom.  We hear ‘verification letters’ and ‘validation letters’ and they often get misconstrued so let’s clear that up.

Verification letters are sent to credit bureaus only.  This is based off of the FCRA section 611 Section a(1)(A).  Validation letters are sent to collection agencies pursuant to the FDCPA section 809.  Investigative letters are sent to original creditors AFTER the credit bureaus have verified the debt as valid based off of Section 623(a)(8) of the FCRA.  You would send a letter to the original credit asking them to conduct an investigation to ensure that the item being reported on your credit is accurate.

Now, we decide what to dispute. If the item is truly reporting inaccurately, then it’s fair game.  If you’re disputing your negative info to determine if it is verifiable, please realize that not every negative item is worth going after.  Check your statute of limitations for your state. This is the time frame that your state allows a creditor to sue you to enforce a debt via a judgment for wage garnishment, bank levy etc.  You still owe the debt; but they are not able to enforce payment on the debt via a lawsuit.  Here are statute of limitations by state:

State	Oral	Written		Promissory		Open-ended Accounts		State Statute: Open Accounts
AL	6		6		6		3	§6.2.37
AR	5		5		5		3	§4-3-118
AK	6		6		3		3	§09.10.053
AZ	3		6		6		3	HB 2412
CA	2		4		4		4	§337
CO	6		6		6		3	§13-80-103.5
CT	3		6		6		6	Chapter 926 Sec. 52-576
DE	3		3		3		4	Title 10 Sec.8106
DC	3		3		3		3	§12-301
FL	4		5		5		4	§95.11
GA	4		6		6		4**	§9-3-25
HI	6		6		6		6	HRS 657-1(4)
IA	5		10		5		5	§614.1.5
ID	4		5		5		4	§5-216
IL	5		10		10		5 or 10 #	735 ILCS 5/13-206
IN	6		10		10		6	§34-11-2-9
KS	3		5		5		3	§60-512
KY	5		15		15		5	§413.120 & 413.090
LA	10		10		10		3	§2-3494-4
ME	6		6		6		6	§14-205-752
MD	3		3		6		3	§5-101
MA	6		6		6		6	§260-2
MI	6		6		6		6	§600.5807.8
MN	6		6		6		6	§541.05
MO	5		10		10		5	§516.120
MS	3		3		3		3	§15-1-29
MT	3		8		8		5	22-2-207
NC	3		3		5		4	§1-52.1
ND	6		6		6		6	28-01-16
NE	4		5		5		4	§25-206
NH	3		3		6		3	382-A:3-118
NJ	6		6		6		6	2A:14-1
NM	4		6		6		4	§37-1-4
NV	4		6		3		4	NRS 11.190
NY	6		6		6		6	§2-213
OH	6		15		15		6	§2305.07
OK	3		5		5		3	§12-95A(1), (2)
OR	6		6		6		6	§12.08
PA	4		6		4		6	42 Pa. C.S.5525(a)
RI	10		10		6		4	§6A-2-725
SC	3		3		3		3	SEC 15-3-530
SD	6		6		6		6	15-2-13
TN	6		4		6		6	28-3-109
TX	4		4		4		4	§16.004
UT	4		6		6		4	78-12-25
VA	3		6		6		3	8.01-246
VT	6		6		5		4	§9A-3-118
WA	3		6		6		3	4.16.040
WI	6		6		10		6	893.43
WV	5		15		6		4	§55-2-6
WY	8		10		10		8	§1-3-105

**In GA credit cards have a 6yrs SOL                                 #In IL, 5yrs if Oral; 10yrs if Written

(For more info visit: http://protectingconsumerrights.com/debt-collection-problems/statute-of-limitations-by-state/)

So, now that you have your rights; let’s get to analyzing those reports. I have another post on how to obtain and read your credit report here: http://mnhcreditsolutions.blogspot.com/2014/08/how-to-get-read-understand-your-credit.html

Step 1: Opt out of prescreened offers; no sense in giving access to your report without your permission.  Go to www.optoutprescreen.com

Step 2:  Review all of your personal information to ensure it’s all reporting accurately.  Your name addresses, etc.  Although this has no impact on your score; all of this info was reported by the creditor when they supplied your information to the bureaus.  If you see anything wrong; have it updated.  NOTE:  If my clients have moved often, I always have them remove older addresses for purposes of identity theft, so I often suggest this as the first letter that goes out to the bureaus; asking for older addresses to be removed.

Step 3:  Make a list of the items reporting negatively on your credit.  Organize them by type:

Credit Inquiries, Late Payments, Past Due Payments, Collections, Court Judgments, Loan default, Repossession, Foreclosure, Bankruptcy, etc

Make sure to notate the date of last activity, recording date, closed date, and date of last payment.

Date of last activity is the last activity on the account; in some bureau reports it’s the date of last payment; in others it’s truly the last date any activity was reported.  The reporting date lets you know the last time the creditor supplied or reported information about that line item to the bureaus.  Closed date is when the account was closed, and date of last payment is self-explanatory. This lets you know what date to start counting from to be removed from both your credit report and when your state’s statute of limitations begin.

Now let’s go over the easier items to remove:  Outdated accounts; Late payments on closed accounts 3+ years old; Paid accounts that used to be late; Settled charged-off accounts; Authorized user accounts; Accounts that don’t belong to you; Verifiable inaccuracies.

Harder to remove accounts:  Public Records, Unpaid Judgments, Unpaid Tax Liens, Child Support, New negative item: New Foreclosures, New Repossessions, New Late Payments, New Bankruptcies.

I will state that focusing on older items will get them removed; but it will not significantly boost your score because… well its old!  Negative debts fall under your Payment History, which is 35% of your score.

If we were to break down how the age of the debt factors into that 35% it would be:

Debts that are 0-12mths old affect 40% of that 35% Payment History

Debts that are 12-24mths old affect 30% of that 35% Payment History

Debts that are 24-36mths old affect 20% of that 35% Payment History

Debts that are 36-48mths old affect 10% of that 35% Payment History

Debts older than 4yrs have very little to no effect on your Payment History.

This is why a lot of financial experts state that negotiating payment for deletion is key for newer debts. It works 40-60% of the time and it does give your score a nice little boost and works primarily for collections.  For original creditors your negotiations would be based on getting the credit trade line updated to ‘Paid As Agreed’ or ‘Paid In Full’ taking off the charge offs and/or late payment statuses, which will give your score a boost.  If that fails; and you want to pay them just to get them out your hair; pay them; take the hit to your credit (paid charge offs and paid collections look better than unpaid to lenders) and then dispute with the credit bureaus for a deletion. If the account is a current creditor but with late payments on it you can rely on your prior positive payment history with them; your current relationship with them, or inform them of what you were going through to cause the last payments and how you have rectified the situation; asking them to delete the late payments as a courtesy – this is called a Goodwill Letter.

What are some common reasons you can use to dispute:

Not mine

I have no record of being late on x/xx/xx date

Wrong Amount (balance, high limit, credit limit, charge off amount, or any other figure)

Wrong Date (Activity, Open, Payment, Filing date (public records))

Account number is wrong

Status is incorrect (not in charge off, not in collections, etc)

Original Creditor is wrong

The charge-off amount is wrong.            

Account is outdated

Past Statute of limitation for reporting

Never contracted with the company (another way of saying not mine)

Inaccurate/Incorrect

Most start out with ‘Not Mine’ and if it comes back as verified they start to attack the other items within the credit trade line.

Key points:

·         Letters to credit bureaus you can send regular mail, I recommend Certified Mail or First Class Mail; no return receipt necessary.

o   Attach a copy of your ID/ Utility Company with current address; SSN Card for Identity Purposes,

·         Letters sent to Collection Agencies/3^rd Party Debt Collectors should ALWAYS be sent Certified Mail Return Receipt, do not sign the letter; do not sign the letter; do not sign the letter!

·         Letters sent to Original Creditors (Investigative Letters, Goodwill Letters) should be sent Certified Mail Return Receipt

·         It can take several rounds of disputes to get an item removed from your credit report.  To re-dispute you have to give bureaus a new/different reason with each dispute. First one can be ‘Not Mine’; Second one can be ‘Wrong Status”; third one can be ‘I was Never Late” etc.  Keep track of the reason you used for each dispute in the notes section of your tracking form along with a copy of the dispute letter.

·         The best disputes are ones that follow the 1-2 PUNCH approach.  Namely you dispute with both the original creditor/collection agencies AND the bureaus.

·         Use your Consumer Rights Laws to your advantage!

·         BE PERSISTENT!

 Good luck! And of course, if you would like assistance, please feel free to email or call me.  I LOVE helping people improve their credit scores.  My letters are customized to the client and bring RESULTS!