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What Constitutes Proper Debt Validation

The FDCPA does not clearly set standards as to what is proper debt validation but the court's have made rulings that can be used as guidelines.

Most people would be appalled at the thought of a total stranger calling out of the blue and demanding money. It is absolutely absurd. But this is what occurs when a junk debt buyer demands payment for debt and; unfortunately, many consumers pay without questioning the validity of the debt.

Debt validation provides a way for consumers dealing with debt collectors to verify the accuracy of a debt. But the question of what constitutes proper debt validation remains unclear. A few old credit card statements is insufficient proof. Even an original contract does not necessarily mean a debt collector has a right to collect a debt.

Debt Validation is not properly defined

The Fair Debt Collection Practices Act does not have a hard and fast rule on what constitutes debt validation. At a minimum, proper debt validation should include an account balance along with an explanation of how the amount was derived. But most debt collectors respond with an account statement from the original creditor as debt validation and that’s generally considered sufficient.

But there are states that have enacted their own debt validation laws which go a lot further than the federal FDCPA. States such as California, Massachusetts, New York and Texas currently have enhanced debt collection laws intended to provide protections beyond what is currently required by the Federal Fair Debt Collection Practices Act. Check with your state to see if any additional debt collection laws that address debt validation/verification exist.

What debt collectors believe constitutes debt validation

Most debt collectors believe proper debt validation is simply verification of your name and the amount owed. In the matter of Chaudhry v. Gallerizzo, 174 F.3d 394 (4th Cir. 1999), the court adopted a relatively low legal standard and ruled as follows:

“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.”

Debt collectors believe, based upon this case, debt validation is simply a matter of verification. But this case had a special circumstance where Chaudhry specifically requested an itemization of attorney fees and was provided a detailed validation response.

Chaudhry further requested additional itemization as he thought what had been provided was insufficient. The debt collector argued further detail of attorney fees would reveal privileged information. The court ruled what had been provided was sufficient. As you can see, debt validation is not “one size fits all.” It must be viewed on a case by case basis.

Significant Court Rulings on debt validation

In the matter Spears v. Brennan, 745 N.E.2d 862 (Ind.App. 2001), a signed contract was provided as debt validation and the court ruled as follows:

“The contract in no way provides sufficient verification of the debt. A review of the document reveals that it identifies only the terms of Spears’ loan, including a 17.99% annual interest rate and the original loan amount of $2,561.59. The loan agreement contains no accounting of any payments made by Spears, the dates on which those payments were made, the interest which had accrued, or any late fees which had been assessed once Spears stopped making the required payments. Indeed, the existing unpaid contract balance at the time Brennan sent the debt collection notice was at least $350.00 more than the original loan amount.”

According to this case, the debt collector must, at the very least, provide a full payment history and an explanation of how additional fees were calculated.

In the matter Fields vs. Wilber Law Firm, 383 F.3d 562 (7th Cir. 2004), the initial dunning letter from Wilber Law firm included an inflated total amount due. That inflated amount was an extra $250 for attorney’s fees. The actual amount of the debt was $122.06. The court found the total amount due could be misleading:

“An unsophisticated consumer could reasonably wonder why her bill was now $388.54, even assuming she had saved the original contract that specified she could be charged for attorneys’ fees. It would be difficult for such a consumer to understand how a relatively modest fee for services rendered had tripled in size… It is unfair to consumers under the FDCPA to hide the true character of the debt, thereby impairing their ability to knowledgeably assess the validity of the debt. One simple way to comply with § 1692e and § 1692f in this regard would be to itemize the various charges that comprise the total amount of the debt.”

Proper debt validation documents

Although these cases differ in nature, at a very minimum debt validation should include:

  • An itemized accounting of how the total amount of debt was calculated including fees and interest.
  • Account statements from the original creditor.
  • Payment history with the original creditor or a copy of the original signed contract between the original creditor and debtor.

Here is a sample debt validation letter.

However, under Section 809 of the Fair Debt Collection Practices Act, debt collectors are only required to take minimum actions. Here is what the FDCPA says:

§ 809. Validation of debts

(a) 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.

(b) If the consumer notifies the debt collector in writing within the thirty-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. Collection activities and communications that do not otherwise violate this title may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.

(c) The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.

(d) A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).

(e) The sending or delivery of any form or notice which does not relate to the collection of a debt and is expressly required by the Internal Revenue Code of 1986, title V of Gramm-Leach-Bliley Act, or any provision of Federal or State law relating to notice of data security breach or privacy, or any regulation prescribed under any such provision of law, shall not be treated as an initial communication in connection with debt collection for purposes of this section.

According to the above FDCPA Section, Debt Validation is defined as the debt collector contacting the original creditor to affirm the debt amount being requested is correct. It is highly doubtful the debt collector ever contacts the original creditor for any debt validation purposes.

If an original creditor statement and any other information is provided to consumers as debt validation, it was most likely already in the debt collector’s possession after the junk debt buyer purchased the debt. Junk debt buyers are not in the habit of obtaining, upon a consumer’s debt validation request, documentation directly from the original creditor.

Be Prepared to Seek Legal Action

As a consumer with rights under the FDCPA you have to be prepared to seek legal remedies in order to enforce your rights. Most junk debt buyers do not want to spend money pursuing or defending a lawsuit. They are looking for a quick resolution.

In legal actions you will discover junk debt buyers rarely, if ever, are able to prove a legal right to collect the debt because they ALMOST NEVER have the proper assignment of debt from the original creditor. Most debt collectors purchase debts for pennies on the dollar and have no relation to the original creditor and more importantly, the original creditor DID NOT assign or transfer the debt. The debt was purchased by them, not assigned to them.

Consumers must also be prepared to have a lawsuit brought against them if the debt is still under statute of limitations and enforceable by law. Consumers who are sued by debt collectors have a great chance of winning as long as they answer the lawsuit and do not allow a default judgment to occur. As stated above, junk debt buyers have a hard time proving they were assigned a debt.

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