Wednesday, July 21, 2010

What Is Debt Validation?

What is "debt validation"?  You will need to know what this is if you decide you want to repair your credit or get collectors off your back.  I am going to explain it to you based on what the law expects from debt collectors. You will request these things from the collectors in a letter to them, sent CMRR (Certified Mail Return Receipt).  This is what the FDCPA constitutes as Validation:
  1. They need to identify the Original Creditor
  2. They need to disclose what the money they say is owed, is for
  3. They need to explain how they calculated the total they allege is owed
  4. They need to send the contract with your authentic signature agreeing to pay them what they say you owe
  5. They need to prove that the alleged account is not out of the Statute of Limitations
  6. They need to supply their license numbers and registered agent information
  7. They need to show they are licensed to collect in your state.
 Number 1 is self explanatory.  Number 2 is possibly a credit card, loan, services rendered, etc.  Number 3 is to make sure they are not adding additional fees.  They are only allowed to go after monies owed to the original creditor, not their added collection charges and junk fees they make up to pad their desired profits.  Number 4 is the contract between you and the original creditor.  They will never send you a contract between you and them because they don't have one, unless you signed an agreement with them ~ which you should NEVER EVER  do! 

Number 5, every state has a statute of limitations. This is the the length of time that the state allows a debt to remain active.  It starts at the date of last activity, the date that you last made a payment.  California is 4 years.  You can look up your state statutes to find out their limit.  The last two items (numbers 6 and 7) do not apply to every state.  Some states do not require collectors to be licensed to conduct business in their state.  These states are: California, Georgia, Iowa, Kansas, Kentucky, Montana, Oklahoma, Pennsylvania, and South Carolina.

One thing that is great about validation is that Collector's rarely have a copy of the original contract from the original creditor.  But more importantly, they don't have a contract with you!  Why would you agree to pay a company monies that they claim you owe when you never entered into a contract with them?

Validation is a great weapon against third party collection companies.  You see, the law says that until they provide validation when requested, they cannot legally continue collection activity.  Actions that are considered "collection activity" are things like:
  • Sending you a bill
  • Calling you at work, home or cell
  • Contacting people who they think may know you
  • Contacting your employer
  • Reporting to the credit bureaus after you put them on notice to validate
  • And my favorite(!) Verifying with the credit bureaus
Any of these activities by them after you have requested validation from them and have the green card from the post office back, is a violation of the law.  Your follow up letter to them should include that they have violated the law, call them out on each violation and attach a $1000 penalty for each one.  You can demand that they now either provide full validation or remove the item from your credit report and pay you a reduced amount to make you go away.  Let them know you know your rights and advise them that you are reserving the right to sue them for those violations and damages and mental anguish, for which there is no maximum limitation.

It would serve you well also to include a limited cease and desist phrase in your letter.  This tells them that you will only allow communication from them in writing from now on.  It will benefit you to keep everything in writing.  Paper trail.  Evidence you'll need, should you sue or counter sue them.

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