Why Debt Validation is So Important
Requiring your creditors to verify and validate your debt is an important tool everyone has when it comes to improving your credit score. Creditors are required to keep certain records on file about those who owe them money and to make those records available if a customer requests to see them.
When a creditor calls you and tells you that you owe them money, they are required by law to send you a written statement within five days of the first phone call you receive. If a collection agency does not do this, they are breaking the law under the FDCPA. Original creditors are exempt from the FDCPA, meaning if Capital One calls you wanting payment for your Capital One credit card, they do not have to follow the FDCPA statutes. If a collection agency such as Northstar Location Services calls you regarding your Capital One card, they do need to send you what’s known as a Dunning notice.
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What Should a Debt Validation Letter Say?
Under the FDCPA, consumers have 30 days from the time they receive (not the date on the letter) the Dunning notice to dispute the validity of a debt. Your debt validation letter should include:
- Your name, address and phone number
- Original account number or file number
- Statement disputing debt and requesting validation
- (Optional) Request for contact to halt
- (Optional) Electing consumer arbitration
Basic personal information is such as your name and address are alright to share with a collection agency since they have it anyway. You want to make sure that any further communication with you goes through this address. The account or file number works much the same way, it just allows your creditor to easily find your information.
Your debt validation letter should say something like “To whom it may concern, I request validation and verification of the alleged debt regarded by you as account number XXXXX”. Even if you know that the debt is yours, the collection agency, by law, still needs to be able to prove it. If they cannot prove it, they cannot keep trying to collect it.
If you want the collection agency to stop calling you, it is important that you say so in your letter as well – “Furthermore, I withdraw my consent to be reached by telephone and the only correspondence directed towards me should be physical mail only”. Under the FDCPA, collection agencies can keep calling you after you send the letter, but they must stop once they receive it.
Many credit card agreements have a binding arbitration clause somewhere in your original terms of service. This is a powerful tool against both collection agencies and original creditors since it prevents them from filing a lawsuit against you. If you elect arbitration for the dispute (assuming it’s in your terms and conditions), you will still owe the debt, but you will buy some time before you have to pay it and your creditor will likely not be able to file suit.
Adding “Furthermore, I am electing binding arbitration per the terms and conditions of the contract” is about all you need to do at this point.
Sending the Debt Validation Letter
When you send the debt validation letter, the easiest way is to use the US Postal Service and ship it via certified mail with return receipt requested (CMRRR). This usually costs around $6.50 but it requires a signature to be delivered and you get a card back with the signature on it, proving your debt validation letter was sent.
Save both the certified mail receipt you received when you purchased the postage and the green card you will receive in the mail after a few days. If any question regarding the letter being sent arises, you will have proof that your letter was sent.
Waiting for a Response
Once the creditor receives the letter, they must stop any collection activity immediately. Courts have recognized this to include phone calls, letters, initial credit bureau reporting, etc.
Contrary to popular belief, a creditor does not have to respond within 30 days or the debt goes away. They can take as long as they want, provided that they do not try to collect on the debt during that time. Generally, you can expect something in the mail after two weeks, but it might take far longer.
After a couple of months of not hearing anything, you may want to check your credit reports. If they cannot verify it for whatever reason, most companies will pull the tradeline and your job is done.
What If the Creditor Never Responds?
In some cases, a creditor may never respond to a validation request. If you hear nothing from them again, either phone calls or validation of the debt, check your credit report after 45-60 days of delivery and see if the account is still listed. If it is and hasn’t been updated since before your request, immediately file a dispute with the credit bureaus asking to verify ownership. No response within 30 days will lead to the bureaus removing the account from your credit report.
Let’s say it suddenly comes back as verified on your credit report, but you still have not received validation of your debt in the mail. This is a violation of the FDCPA and you’re going to need to file a lawsuit or go through with arbitration to get anything done. The good news is that once you do so, many companies are willing to play ball to avoid huge legal fees.
You can find more information regarding improving your credit and overall complete credit repair with this fairly all-inclusive guide to credit cleanup