Fighting Collections - They Are All Fraudulent!

I'm going to warn you right from the start that this is going to be a fairly long post. But I believe it will be an easy read and you will learn some very important information. Some of it may seem unbelievable but I assure you that it is true. Look, I've been doing this for over 31 years now. I can prove what I'm saying and I have proven it in court for quite a few of my lawsuit clients.  So grab your munchies and something to drink and let's start class!

It amazes me that people pay collection companies when they really don't owe the debt. Maybe they feel they have a moral obligation or they are stressed out and think paying them is the only way to make them go away. Maybe they've been convinced that they owe it and no one has taught them the truth about collections. Maybe it's a combination of the above, or all of the above, or some other reason that makes sense to them. Almost no reason makes sense to me.

Talking about collections with me makes me just go off, spewing out one fact after another and sometimes I get so riled up I get potty mouth. Yep, I do blow it occasionally when it comes to collections. Their fraudulent behavior and bullying, harassment, lies and stubbornness sometimes sets me off.  I'm going to teach you about collections today and I promise I will try my hardest to keep my words clean so as to not offend anyone or put bad language in front of youngsters that may read this.

Let's start from the beginning and we'll assume the original account is a credit card account, (but this scenario applies to most types of collection accounts including medical, utilities, insurance, cable/telecommunication accounts as well).

When you are approved for a credit card account, you are given plastic and a credit limit. When you spend using that card, the bank/card issuer convinces you that they lent you money/credit limit for you to spend. But that's not the truth. Banks are not allowed to lend money from their assets nor their depositors' assets.  It's also completely illegal to lend credit.  So now that you know that banks can't lend money or credit, what are they lending you?  The answer is NOTHING! 

What actually happens is that credit card agreement with your signature becomes a negotiable instrument. Your signature gives it energy and value. Title 12 instructs banks to treat negotiable instruments as cash. In accounting, a bank treats it as "cash equivalent" and that means that YOU FUNDED THE ACCOUNT!  The instrument has your signature on it. You own it. But they NEVER disclose that to you. You are actually making a loan to the bank but they trick you and convince you that they lent you something, totally ignoring that you were the one lending something.

Let's skip over to contract law for a moment. In order for a contract to be valid, there are 4 main elements, in addition to being bilateral - meaning 2 signatures, 1 from each party. The 4 essential elements are Offer, Acceptance (you have these two in your contracts), FULL DISCLOSURE, and EQUAL RISK. Your credit card account contract is missing the last 2 essential elements for a valid contract.

To have full disclosure, they would need to inform and advise and disclose to you that YOU are the one who is funding the account. They would have to disclose to you that the account is going to be insured in case of asset loss for the bank's favor and that you will be paying the insurance premium for that asset loss insurance (known as "credit default swap"), and get your written consent to the amount of the premium. They would need to disclose that they will most likely only service the account and transfer "ownership" to a special purpose vehicle such as an asset backed trust. They would need to disclose that this is securitization and that by separating the payment stream from the note, the contract is void. 

To have equal risk, both parties must have something to lose. What do the banks have to lose? They don't lend anything. They are insured against loss, they sell it and transfer it, they get tax credits. WHAT DO THEY HAVE TO LOSE? The only thing I can think of is insane amounts of illegal profits that they really aren't entitled to. But really that doesn't fit either because they insure everything! They can't lose!  Anyhow, I hope I've explained why the banks don't really have a valid contract.

Now, moving on to the creation of collection accounts and the fraudulent nature of them. 

You have your credit card account and you're using it and paying it regularly and consistently and then something happens that causes you to be late. You get hit with fees. You catch it up and use and pay and use and pay but you get to a point where you just can't keep up with the payments and you default on your agreement. The account gets further and further behind. So you try to work something out with them but still you can't keep up.

Let's say you asked me to try to talk to them about the account. So I call them up and say that I want to discuss account number  1234XXXX, and see what can be done to save the account and get back on track.  They ask me if I am Mary Doe and I tell them, no, I'm Shannon, Mary's friend, or sister, or whatever. They will then tell me that they cannot discuss the account with me or anyone except Mary unless she has given specific authorization or a Power of Attorney to speak with them on her behalf.  This is important to understand. They CANNOT share any information about Mary's account with me or ANY PERSON (corporations are also defined as a "person") without a request, agreement, authorization, or Power of Attorney specifically naming that person as authorized to communicate and receive her account information. THIS IS IMPORTANT!

Well Mary can't catch up the account and at 180 days, the bank needs to remove it from their books and they charge it off.  But wait! Remember that they insured that account in case of loss due to default or other credit/asset loss?  They never tell you this but at approximately 90 days, they are allowed to file an insurance claim for that asset loss. The insurance company then issues a check for the amount of loss they claim they will or have incurred. The account is now PAID OFF IN FULL.  Remember who paid the insurance premium?  That's right, it was you - whether you knew it or not you were charged the premium and you paid it. Or maybe I should say your negotiable instrument paid it. 

That insurance payoff happened at approximately 90 days of default. Remember I told you that the banks charge off the account at 180 days? That charged off amount is the balance they report to the credit bureaus, or an amount near the amount of the charged off amount. IT'S A HUGE LIE!  The account was paid off by insurance that YOU paid for. The balance is $0! They charged off NOTHING! Scam! Fraud! Lies! Schemers!  Your credit reports should ALWAYS show the charged off account has a $0 balance. Oh heck no! It shouldn't even be a charge off. You paid off that account in full at approximately 90 days of default. And that's not even taking into consideration that you funded the stinking account in the first place so you never really were in default and didn't even need insurance to pay it off. I swear! Now you know why I get so worked up. But oh, it doesn't end there.

When they do their charge off of the account, next they recoup some more money by filing a Profit and Loss on their taxes. This allows them to take a deduction or receive a credit for that asset loss.  Funny how they conveniently forget that they never lent a dime, never lost a dime, actually made money (from your payments and insurance payouts), and still benefit from the P&L. You'll see that P&L on your credit reports quite often under "Account Status." 

Now that they've squeezed out as much money for that account as possible for the time being, they use the credit reports to try to extort that fake balance out of you. Some people fall for it and you will see a Paid Charge Off on the credit reports. Many times people pay them because of the threat of being sued. Oh the greed of the banks!  

Banks don't always hold onto charged off accounts. Sometimes they crunch the numbers and figure that it's more beneficial to sell off the charged off accounts. This is where the 3rd party collection company enters the picture. They usually bundle up a lot of charged off accounts and sell them as debt portfolios.  Then "debt buyers" purchase them. I really hate the title of "Debt Buyers." They don't buy debt, they buy YOUR INFORMATION.

Now please recall the little scenario of me trying to talk to the bank on Mary's behalf. Do you remember why they wouldn't talk to me or anyone else about her account?  They, by law, cannot share any information with any person without Mary's consent. They can't share info or communicate or negotiate without her authorization or a Power of Attorney, or an agreement such as a company stepping in and paying off the account  for which she would have contracted to now pay them. An example of this would be similar or the same as a refinance.

When banks sell off their portfolios of charged off accounts to a 3rd party collection company or misnamed "debt buyer," they are selling the account information only, because remember, the account has not only been paid off by insurance, but also charged off and received tax credits. But, they NEVER contact the account holders and get their consent to share that information  with any other party. They do it behind your back! They do it without your consent and without your knowledge.

I declare that this is collusion between banks and collection companies to perpetrate identity theft on account holders.  Collection companies get these accounts, create new accounts that you know nothing about then send you a bill claiming you owe them. Wait!  Where's the contract? Contract law requires a valid bilateral agreement between you and another party. It requires offer and acceptance. When dealing with a collection company, there is No upfront offer and acceptance. There is no full disclosure - they ALL know that the true account balance is $0 and I've confirmed that with a broker for debt portfolios. They KNOW! Lastly, it's obvious that there is NO EQUAL  RISK! It is impossible to have a valid contract with these debt collectors. It is also highly likely that collection accounts are insured as well. I'd guess that I'm about 95% sure of it.

WHAT A HUGE SCAM ON CONSUMERS! GRRRR!  I know some of you are feeling what I feel when discussing this huge fraud on consumers. It's an outrage!  It's intentional and willful and corrupt.

I'm not advocating not paying your bills because it all starts off with a failure to disclose, no real lending, no truly valid contract, etc. I believe that in this society, you have to play the credit game in order to achieve the American dream of home ownership and purchasing cars, or personal loans, renting a place to live or renting a car, turning on utilities, getting insurance, getting a cell phone, or whatever. You need good credit to obtain additional credit or financing for major purchases. I'm just  wanting you to be aware and awake. I just want you to understand about collections and learn to fight back. I don't ever advise anyone to pay a collection account though. It's all a sham. 

Demand validation of these collectors. Demand they produce a valid contract. Demand they produce a signed authorization. They shouldn't be on your credit report for any reason but since they are, they certainly should not be there without an authorization to collect information and make communications about you and an alleged account. They can NEVER truly validate. There is no valid contract and there is no POA or signed authorization. They've never lent anything to you. They are not named on original contracts with original creditors so they don't even qualify to subrogate/substitute themselves on to a contract. They have no interest to protect. They haven't been aggrieved and are not entitled to seek redress. 

I hope you've learned a lot from this post. I hope it gets you fired up to fight back. I hope the information helps you to see success against these 3rd party collectors to get them off your credit reports and out of your lives! 

If you have collection accounts that you need off your credit reports and you don't want to take on the fight alone, contact me because I love my work. I love fighting to get these thugs off your reports and out of your lives. 

Disputing 3rd Party "Debts" After The 30 Day Requirement Has Passed

Many times consumers get letters in the mail from debt collectors saying that they have some debt with this company and they need to pay the bill. Some will claim they are offering this great one time settlement offer saving you 40% or 50% off the total if paid by some date.  Really?  Should you take them up on it when I can show you how to save 100% of that ridiculous bill?

The letter, which is called a Dunning letter, is required by law to have language in it that says you have the right to dispute this debt within the next 30 days.  But what if you decided to blow them off and throw away the letter? Do you lose your right to dispute it after the 30 days has passed? Let me explain how this law actually helps you.

Here's the thing about this law. Its FDCPA §609 or 1692(g).  This law says that they must inform the consumer of their right to dispute the alleged debt and if the consumer does dispute it during the 30 day period, then the collector must stop all collection activity. Now, it doesn't say that they can't furnish information on the credit report in the first 30 days, but if they do, your best chance of making this never go on or make it come off quickly from your credit report, is to dispute in the first 30 days.  This is because furnishing information on someone's credit report is considered collection activity.

But if you don't respond in that first 30 days, the law does not say that you can't ever dispute it.  I've had collectors tell my clients that they don't have to validate because it wasn't disputed within the first 30 days.  They are absolutely correct. But, these punks are spinning the truth. You see, there is nothing in the FDCPA that REQUIRES them to validate. Nope, not at all. BUT...what it does say, is that if a consumer does dispute, they MUST cease all collection activity until they validate - if they choose to.  If they choose not to validate, then, that's fine, it means they choose to delete it. Its one or the other.

The FDCPA also says that if a consumer disputes, they have to notify the credit bureaus that the account is disputed. Here's the fun part of that. The bureau employees are so uneducated in the FDCPA they don't get that they are going to help the collection agency violate the law. They put a comment on there that the account is in dispute. I really crack up at this.

The FDCPA just told them that they have to stop collection activity if the consumer disputes. So, the collection agency notifies the bureaus that its in dispute and a dispute comment goes on the report.  What does this mean? How is that a violation of the law?  Well, when they tell the bureaus the account is in dispute, they are not supposed to be instructing them to put a dispute comment on there, they are supposed to be deleting the account from the credit report.

What they have effectively now done is continue collection activity (because its still on the report) but now they are broadcasting to anyone who sees the report that they are breaking the law. Do you understand this? Its simple. They just need to delete  it!  

So, even if you have missed that 30 day period, your right to demand validation or dispute is not revoked. You can dispute at any time. Its just that they've been better trained at removing them from credit reports when they get a dispute during the first 30 days, than they are educated about how to handle disputes they get after the first 30 days. They obviously  are not taught well that any dispute at any time, means that for a 3rd party collector, it absolutely must be removed from the credit report until they fulfill validation.

I sure hope you understand this and use it to your benefit!  Dispute away, tell them to remove it until its been validated, and if they just put a "dispute" comment on there, well, if you sue them, you just earned an easy $1000 bucks!

Feel free to comment on this or email me with questions.  I'm here to help you successfully get rid of the ugly stuff on your credit reports and get it looking pretty again!

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How To Write A Validation Letter

I get a LOT of emails asking how to write a validation letter so I'm going to try to explain it again here.  Validation letters are NOT sent to Original Creditors.  Validation letters are NOT sent to Credit Bureaus.   They are ONLY sent to 3rd Party Collectors.

When you get a letter from a collection company, the first time you receive one from that company, they should be very clear that you have a right to dispute their claim within 30 days.  This does not mean that they won't be putting it on your credit report or that they haven't already put it on your credit report.  But it does mean that they will have to immediately stop collection activity when they receive your dispute or what we call a Validation letter.

Sometimes you never get that first letter or maybe you did and you ignored it, but you have a copy of your  credit report and you see a collection account on there.  You will want to dispute this with a Validation letter as well.  Even though you may not have disputed within the first 30 days of being notified that this collection company is hot on your trail, or you never knew about it until you saw your credit report, once they get the Validation letter from you, they must stop all collection activity.

A Validation letter is demanding proof that you owe them something.  You have the right to challenge their claim and make them stop collection activity pursuant to the FDCPA (Fair Debt Collection Practices Act).  Collection activity can be phone calls where they are pressuring you to pay something, another "bill" saying to pay, and even verifying the alleged debt or updating the alleged debt on your credit report.  They must stop ALL collection activity until they prove the alleged debt is yours.  The only things they are allowed to do at this time are to 1. Prove the alleged debt is yours; 2. Mark the alleged account as "In Dispute" on your credit report; or 3. Send you a letter stating they are closing the file and removing it from your credit report - or similar language to that effect.

A Validation letter should always be sent Certified Mail and preferably with a Return Receipt.  These are some of the things that you will want to keep for your "paper trail" if you end up in court against these suckers.  So, always keep a copy of each letter sent and the certified receipt showing they got your letter. Also, keep every letter they send you. You will be able to find violations they commit and also whether or not they responded and if they sent all the information you demanded in your Validation letter.

Validation letters can be short and to the point, or long and full of laws, or anywhere in between.  The best Validation letters are the ones you write yourself. The worst to use are the ones you find all over the internet or in some book where you said everything they did, word for word.  You want to make the letter your own. Put it in your own words. If you're pissed off and feel like letting them know, well then make sure your letter gets that across to them. I believe its absolutely fine to not be nice in a letter to any collection company. They are ruthless, rude, law breaking  scum, so why would you have to be nice to them?  Write from your heart while you make sure you demand they try to prove their claims.  If that's not you, if you just would  rather be nice or plain matter of fact, that's perfectly okay too.

The letter to them will start off with a Dear Sirs, or To whom it may concern, or some sort of generic salutation. Then you tell them you either received their letter claiming you owe them something or you have a copy of your credit report and saw that they are furnishing information on it that they think you owe them something.  Then you tell them you don't believe you owe them anything and you are disputing their claim and you demand that they stop all collection activity pursuant to the FDCPA.  You don't have to put that its pursuant to anything if you don't want, but whether or not you say that, it is pursuant to the FDCPA and they know it.

Make sure you reference the alleged account number that they assigned to the alleged debt. Now you can tell them what you want them to provide to you.  You definitely want a copy of the alleged contract that shows you agreed to do business with them.  You want a copy of the contract between you and the alleged original creditor. You want a full accounting - meaning, how did they determine how much they claim you owe them.  They usually have added extra charges for interest and collection fees so they need to explain exactly how they got to the amount they are telling you to pay them.

They also need to provide proof that they have a right to collect the alleged debt.  This means they will need to show the contract between them and the original creditor, or whoever they got the alleged account from, and the full chain of assignment. This means, if they are not the first collector claiming you owe this alleged debt, they need to show every single collection company that had it from the original creditor, through every 3rd party scum bag, to them.  Now if you are in a state that requires collection companies to be licensed and/or bonded, they need to provide copies of those items as well.

Another important item that they should be able to provide to you, is the date of the last payment and proof that the alleged account is not outside the Statute of Limitations. If the alleged original account is Time-barred, this is a fantastic way to get rid of them fast.  Some companies don't care and will continue to try to collect and may even sue you on Time-barred debts.  As long as you make no payment to them, make no payment arrangement with them and never admit you owe the alleged debt, it will stay time-barred.  You have to be very, very careful here. In some states, just acknowledging that you ever owed the alleged debt is enough to start the Statute of Limitations clock all over again, so DON'T DO IT! Don't admit Anything - Ever! Don't make a payment to these fools - Ever! Don't agree to a payment plan - Ever!

The next thing I believe you should tell them, and I think its very important to say it in writing, is that under no circumstances do you authorize or give them consent to furnish any information to your credit reports nor to take any action that would result in an inquiry on your credit report from their company. You should tell them this whether they are on your credit report or not.  In order for a company to inquire or furnish information on your credit report, you must give your authorization for them to do so.  Read my previous post, just before this one, so you understand what it takes for them to be able to have anything to do with your credit report.

Now, if they are already furnishing information to your credit report, also demand that they provide a copy of your consent and/or authorization that allows them to furnish or inquire on your credit report. Remind them that without this proof, they must remove all traces of their slander from your credit reports.

You really don't need much more than this in your validation letters. If your want to, you can use case law or the actual laws that give you the right to demand everything you have told them to provide to you, just to give your letter even more weight. You can use something you find on the internet and request the same things those letters say, but again, put it in your own words.  Don't use a form letter and don't copy word for word from those letters. They just don't have as good of an effect or result  as your own letter will have.

Okay, now you've come to the end of your letter. Here is something super important. NEVER, NEVER, NEVER sign your name to the letter.  You may type it or print it, or stamp it, but Don't Sign in YOUR Handwriting!  Also, NEVER, NEVER, NEVER give them your social security number. And nowhere in your letter at all, NEVER, NEVER, EVER admit that you owe them diddly nor that the alleged original account belongs to you.  

You don't ever want to acknowledge anything other than you received their correspondence and/or you see that they are reporting on your credit reports. They are the ones that should be sending you proof.  You have NO obligation to send them copies of ANYTHING or to disclose anything to them. No copies of old bills, no social security number, no utility bills, no driver's license, no birth date, no whatever they claim you need to send them as proof of anything.  You are not the party needing to prove something - THEY ARE! 

If they are requesting you send them something, it means that they don't have what it takes to even come close to resembling validation. The minute they start asking for you to provide any type of information is time for you to tell them you know they obviously are fraudsters and have no proof of any alleged debt and they need to go pound sand.

So, this is how you write a Validation letter. Hopefully you will craft an excellent one that successfully gets them out of your life and off your credit reports. I'd like to tell you that you will probably be a lot more successful if you can respond to their initial letter within the 30 period. But if you've missed it or never received that "Dunning" notice, don't worry. You still retain your rights, you just need to exercise them and be consistent. Don't accept their claim of validation, don't accept anything other than they are ceasing the game with you and always respond until they give up and go away.

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Challenging Chaudhry v. Gallerizzo From A Collection Agency

If you have been working on repairing your credit and you have sent validation letters to collection agencies, you probably have received or will receive a semi-form letter back saying that they have verified the account and they are correct.  Then they will put in a little modified excerpt from the Chaudrhy v. Gallerizzo case decision to justify their laziness and to deceive you into just accepting their false claim against you.  The modified excerpt looks like this:

"verification of a debt involves nothing more than the debt collector confirming in writing that the debt being demanded is what the creditor is claiming is owed. The debt collector is not required to keep or provide detailed evidence of the alleged debt."

When I see this in a response for one of my clients, I crack up because it just blares out to me that they don't have anything.  You see, the Chaudrhy decision is not about validation with a collection agency!!  They take a small piece of the decision and quote it, but they fail to tell you that it has nothing to do with them, has nothing to do with validation, and further, you didn't request "verification", you requested "Validation" and that is something different.  

Just so you know, the Chaudrhy decision was about legal fees.  The verification of the legal fees was being challenged and the court said that the law firm just had to confirm in writing that the fees they were claiming were the fees that were owed.  Legal fees are not collections, unless it has been assigned or sold to a collector.  Legal fees are fees that the attorney charges for services rendered.  Since when do collectors render services that you "hired" them to perform for you?  I'll answer that for you --> NEVER!!

The best way to challenge this type of letter is to send a follow up letter letting them know that you are not an uninformed idiot and that their feeble attempt at validation doesn't even come close to the legal requirements set forth in the FDCPA and appropriate case law.  I usually use some of that language in my response letters and then I follow up with laws to defend my demand for validation and what is required.  They are in the business of collecting and they are supposed to know the law, yet they are usually fairly ignorant, deceptive to consumers and flagrantly in violation of the law.

Here is a sample of what I put in my letters that you can modify and use against these obnoxious criminals. (Yes, I consider them criminals because they consistently break the law and commit extortion, mail fraud, violation of the RICO Act (racketeering, etc.), and violating both the FDCPA  and FCRA, among other illegal acts.)

 Dear Sirs, (you can put in the name that they may put on their letter or say To Whom it May Concern, what ever is your fancy)

I am in receipt of your letter dated 01/01/13 in which you claim you have verified the account which I am disputing and in which you attempt to quote a portion of the Chaudrhy case decision to justify your response or to attempt to deceive me, or both.  Please understand, your feeble attempt at validation is a joke.  In fact, you claim you verified when I didn't request verification, as we both know that verification is merely requesting that you have the right name, address, account number and original creditor.  Further, your verification doesn't meet the criteria as defined in Black's Law Dictionary which includes being able to testify to the verification under oath.  I Demanded Validation, which you did not provide.

Since  you are supposedly professional collectors, you should be aware that if you fail to validate, you are barred from "verifying" with the bureaus as that is collection activity, which is barred until full validation has been accomplished.  The Chaudrhy case is not about debt collectors and validation, it is about attorneys' fees.  Maybe your incompetence and laziness has prevented you from actually reading the entire case and the entire court decision.

I am requesting from you AGAIN, Validation.  Here is what I want from you:  The alleged contract with both my wet ink signature and your employee's signature establishing that we have agreed to do business together.  Provide proof that at least the four main elements of a contract have been met.  Provide me with the alleged contract between the alleged original creditor and me, and proof that at least the four main elements of a contract have been met.  Provide me with proof that you have the legal right to collect this alleged debt.  Provide a full accounting for the alleged account - all charges, payments, interest accrued, all fees, and the corresponding dates for which every event occurred.  (Spears v. Brennan).  Prove also that this alleged debt is not time barred, or in simpler terms for feeble minds, outside of my state's statute of limitations.

Please be aware that because you put on the bottom of your letter that it was an attempt to collect a debt, you are already in violation of the FDCPA, and until you validate, you are guilty of mail fraud, racketeering, extortion, and a slew of other felony violations of the law.  So, until you fully and legally validate as I have requested, or rather, have demanded from you, you are required by law to cease all collection activity.  Should you fail to validate within ____ days, you are to delete any and all references and reportings of this fraudulent and alleged debt from every credit bureau and or repository to which you have reported it to and you are banned from ever selling or assigning this alleged debt to another collector, as that would be another violation of law by conspiring to harass and extort again, along with other violations of law.

I then go on to quote some samples of collection activity, give them a certain number of days in which to comply with my demand for validation and usually put in a limited cease and desist.  Sometimes I add some more case law to back up my requirements for validation.  I also usually put in there that I am not requesting verification but am demanding validation pursuant to the FDCPA 15 USC 1692g Sec. 809 (b).  Then I end it with a Sincerely, and my client's name.

So, don't be afraid to send another letter challenging their arrogance and deception.  You don't have to be sweet and nice, because, when are they?  And why would you be nice to law breakers?  I don't care if the original debt was actually yours. It doesn't matter anymore.  You don't owe it to the original creditor anymore because they charged it off and got tax credits, got reimbursed from the insurance that they had on it, and they made profit by selling it.  They made money 3 times just in those ways, but they also made money from every dime you paid on it since it was created out of thin air and they never actually lent any real money to you in the first place.

So, fight, fight, fight, and challenge, dispute and challenge some more.  Its your legal right and like I always say,  "just like when you're a defendant in court, the burden of proof is not on you, it is on them."  Make them prove it.  Oh, one last thing.  They can't legally prove it!  If you want to know why, read some of my other posts regarding AmJur and "Subrogation."  You will be pleased with what you learn!

If you have any questions or comments, please hit the comment button below. (I love questions and comments).   I will respond to you.  If you have questions that you don't want to post on here, you can email me.  The link to that is up at the top right of this blog!

If you have found this blog helpful to you, please consider donating as a sign of your appreciation for information I have freely given to you.  The "Donate" button is on the right side bar.  Thank you for your generosity.

You Have Rights When It Comes To Your Credit Report

You do know you have the right to repair your credit don't you?  Well, the bureaus and many creditors would love for you to believe that what is put on your report has to stay there for 7-10 years. That is absolutely not true! In fact, there are tons of laws written to protect YOU, not them!

You have the right to challenge and dispute Anything on your credit reports that you don't agree with. It doesn't matter if it is basically true or not, you have that right. Just because you once signed a contract with a creditor, doesn't mean you can't dispute that item, especially if it has been sold to a 3rd party collection agency. Further, if anything is not correct, and I mean ANYTHING, that they put on your credit report, you can get it removed.  The law says that they have to report Only 100% Accurate information. I have seen enough credit reports over the last 2 decades to know that if you have negative credit, then you have some mistakes on your credit report.  

Think bad credit has to stay for 7-10 years? Nope, it doesn't. What the law actually says is that it cannot stay on longer than 7-10 years. It does not say anything Has to be reported at all. The limit is for the provider of the information and the credit bureaus, not you! But, all states have statutes of limitations. Your state may be less than the 7-10 years. Mine is. Mine is 4 years. What is significant about that is collectors/creditors cannot report you after the statute of limitations because it is time barred and one of the actions considered as collection activity, which is prohibited after it is time barred, is reporting on your credit report. If you dispute a time barred credit line and the reporting party verifies with the bureaus, that is also considered collection activity and it is not allowed, by law!

You have a right to a free credit report from every bureau every single year. You can use these free reports to start cleaning your credit.  You can challenge bad credit based on wrong dates, wrong amounts, wrong types of accounts, heck, many times what you need to dispute is with a collector or collection agency.  You had better dispute those. You never signed a contract with them, you signed with an original creditor. You by law, don't owe them a dime!

3rd party collectors are considered "strangers to the transaction" and the law goes on to say that they are mere volunteers who paid an alleged debt, but not with your permission or a request from you to do so. AmJur states that "the right of subrogation [the right to substitute] does not exist for a stranger to the transaction. This means not only do they not have the right to collect from you, they really don't have the right to report on you. They have NO CONTRACT with you.

Start cleaning your credit - its Your Right!  Start by getting your credit reports from Experian, TransUnion, and Equifax. Send letters to every collector demanding validation and make sure you remind them that they have no contract with you. Make sure you keep a copy and make sure you mail it certified with return receipt. That is important because it is your proof that you have put them on notice. When you do, you further protect yourself from them because the law says that until they validate the alleged debt, they must cease all collection activity. Remember, verifying with credit bureaus is considered collection activity, so it is against the law if they do it.

Once you get your green cards [return receipts from the post office] back, send off letters to the bureaus disputing the validity and accuracy of each of the collectors you just sent the validation demands to. Warn the bureaus that you have demanded validation from each one and none have provided validation. Let them know that if any of them verify and they update the report to show anything was verified, they are now liable for damages as well. They knowingly let information that is barred by law onto your credit report.

You can improve your credit. You can remove negative entries from your report. You don't have to wait 7-10 years, so don't. Do it now or get someone to help you do it. It does take commitment and consistent effort, but it is your right and so much better than paying off alleged debts to some grimy collection companies that have no legal right to demand anything from you. Play the game and beat them - that's your right too!

Short Sales and 3rd Party Collectors

I don't have time to write that often here because I am an active realtor in California.  But sometimes, I just have to take the time to let you know some important information that is affecting many people throughout the country, as well as in my state.  I'm in the process of closing escrow on one of my short sale listings.  Not a bad one, but it has taken about 6 months, which is a pretty common length of time.  Now, let me tell you a little about this transaction.

This property has 2 loans.  Both were originally Countrywide loans, and of course since they basically went belly up, Bank of America took ownership.  So, after that happened,  my client got a terrible loan mod, a bunch of ridiculous and incompetent things happened with the appropriations of the payments of that loan mod, and my client just said, "I give up, lets short sale this house." So, we got the package together, listed and marketed the property and got a buyer for the property.

Bank of America, I must say, was pretty decent during the processing and negotiation of the short sale.  Except for 1 thing.  They sold the second mortgage.  It didn't get sold to another lender, nope, it got sold to a 3rd party collector named Real Time Resolutions (RTR).  What a group of incompetent, greedy, scum sucking bottom feeders!  So, B of A approves a sale price and approves a payoff contribution for the second, RTR.  But no, RTR, greedy SOB's that they are, don't want a couple thousand dollars, they want the whole blasted amount.

Now, you know that they purchased a huge portfolio of loans for pennies on the dollar, and they would come out ahead by accepting the amount that was offered to them.  But they just say they would rather let the first loan foreclose on the property than release the "lien" for a couple thousand dollars.  Finally, after months of going back and forth, my processor got them to approve a lien release of $6000, almost double what B of A was offering.  That is okay, because I built a requirement of the buyer to pay the difference, into the purchase contract ahead of time, so it would be covered.  However, RTR didn't stop there.  That was just to release the loan so we could close the sale.

The kicker to their payoff demand, (which was 4 pages long - the audacity!) is that they want an additional $3500 within another 2 weeks, to settle the almost $60k 2nd, or they would reserve the right to harass my client to death for the full amount.  There are quite a few things massively wrong with their demand letter, and what I'm going to tell you here may help you relieve you or your clients' stress, if they are in the same situation.  I'm going to touch on 2 points that affect homeowners in this situation.

First, my state, California, is a Non-Recourse state.  What this means for homeowners facing foreclosure or short sales, is that, if the loan was used to purchase the home (called Purchase Money), the lender has no recourse to pursue the deficiency created by the foreclosure or the short sale.  In plain English, THEY HAVE NO RIGHT TO COMMENCE COLLECTION ACTIVITY FOR THE DEFICIENCY - amount not paid off!  There are a number of states that have enacted non-recourse laws or statutes to help homeowners who have lost their home or sold through a short sale.

The second issue with this stupid payoff demand letter is that they seem to think they have the right to collect at all!  They never lent any money to my client!  My client never signed any contract with them!  They bought a note.  73 Am Jur states that "The right of subrogation does not exist for a stranger to the transaction".  Subrogation means "to substitute" and "stranger to the transaction" means a party that is not on the original contract.  So, the right to substitute  a 3rd party collector into a contract, does not exist.  They have no rights since they did not loan any money on the original contract and were not mentioned on the contract or were any part of the contract.  This goes for loans that have been transferred, assigned, sold, or changed hands in one manner or another.

So, if these, umm, I want to try and keep it clean instead of calling RTR names they really deserve, if these morons try to collect on this deficiency, I will be sending them a couple letters.  I will of course send them a demand for validation, Certified Mail, Return Receipt, and a Declaration of Fraud that applies to collection agencies.  I will of course let them know again that if they even start to put anything on my clients' credit, they will be sued since this loan was purchase money and they have no recourse.  

My letters will also let them know that my client is not a mindless idiot that believes all the crap that they spewed throughout their demand/approval. Nope, my client is signing it (under duress I might add) in order to get this sale closed, but we are prepared to stick it back at them and they will either back off immediately (which has been the most common action by collectors when they receive my letters), or they will be forced to remove all negative reporting and pay up the fines that go along with the violations they commit.

The moral of my story is this:  if you or your client has a purchase money loan that is now in the hands of a 3rd party collector, you may be in a non-recourse state and are protected by laws or statutes and don't have to worry, even if the 3rd party collector spews false information about their ability and rights to pursue the deficiency at a later date.  And if not in a non-recourse state or the loan is the result of a refi, HELOC, or not purchase money, you or they need to understand that they may have to fight a bit through validation, but there are laws in place, and case law to back it up, that as a 3rd party collector, no money is or ever will be, owed to that collector.

Collections, Charge Off Required to Approve Short Sale - Part 3

Well, we covered dealing with the original creditors and collectors, now we're going to talk about the credit bureau.  This is what you are going to do to remove the collection entry from your credit report.

This process is what is called the 1 - 2 Punch.  After you send the letter to the collection company, and you will be sending that CMRR, which means Certified Mail, Return Receipt, you are going to wait to get that green card back. When you get that back, you know that the collection company has received your letter.  Now you will send to the credit bureaus, whomever is reporting this collection, sometimes just 1 or 2, usually all 3.  

You will dispute this by telling the bureaus that you do not now, nor have you ever, entered into a contract with scumbag collection company and that they need to see an actual contract signed by you to verify, or remove the entry immediately.  It is at this point that I also insert the definition of "verify" from Black's Law Dictionary into the letter.  What the definition of "verify" says is (and I'm going to paraphrase here) the person who verifies must have 1st hand knowledge (which they don't, they are 3rd party) and  be willing to testify under oath in a court of law.  That's a real simple example of what the law says, but that's the main gist of it.

I also tell them that should they claim to verify, according to the law they must provide verification proof. This means that they are supposed to send you the name, title, and contact information for the person who verified the entry.  The truth is, bureaus break the law here at this point all the time. There is case law against all 3 because of insufficient verification.  It's all done electronically and they can't provide that contact information.  So if you're trying to  prepare for a case against them as well, this is one of the violations they will almost always commit.

Now, the reason this is called the 1 - 2 punch is that the law says that collectors must cease collection activity when they receive a demand for validation.  Verifying with the credit bureaus is considered collection activity, according to the law (FDCPA).  So, many times you will remove this entry on the first shot out, because they can't verify within 30 days with the bureau, as a result of not being able to validate with you.  Oh, how I wish that was always the case.  The  truth is, credit bureaus and collection companies break the law - hard to believe, huh!

The bureaus will play the blame game and collection companies will play stupid.  That doesn't hold up in court though, so always keep copies of everything you send and document, document, document.  Okay, should you have to send a second or 3rd letter to the bureaus, include a Notice of Fraud. You need to put them on notice that they are now a party to fraud by verifying something that cannot be validated because you have no contract with the collector. Put in a self executing contract, that says they realize their actions or in-actions will cause them to be held liable and that you will sue them.

I'm not going to say that everything always comes off this way, but the truth is, most stuff does.  They don't seem to mind threats of being sued. I'm sure they see threats of suit everyday.  But, when you put the law in black and white, incorporated into your letters, there is a human being that is reading it and updating the file.  So, though there may be no decency left at the corporate level, hopefully you will get a data entry person reading your letter with some respect for the law.

I hope this helps many people fight back and improve their credit scores.  I hope that it helps ease the pain of some of the short sale drama lenders put people through.   Remember again, keep copies of everything you receive or send, keep your receipts and green cards from the certified mailings, and always document.  This includes phone calls: name of company, name of person speaking, time, date, what was said.  You may need it some day.  If they ever try to sue you, file a counter suit and show up at court and show your documented proof that you have tried to validate and they have refused to comply with the law. Then, not only should it be removed from your credit report, you'll make some money for your efforts and their lawlessness.

Collections, Charge Off Required to Approve Short Sale - Part 2

Here is where I'm going to show you how to remove the collection account you get after the short sale of your house closes. Timing of your response is important. Hopefully, you won't receive the first contact for about 6 months. If it's sooner, then you just start sooner. I say 6 months because that gives plenty of time for the lender to archive the file and not be able to produce what ever the 3rd party collector might try to get from them to validate.

As soon as you get the first letter in the mail, respond with a letter demanding validation. Do this within the first 30 days of receiving the letter. DO NOT SIGN THE LETTER IN YOUR OWN HANDWRITING! Make a copy for your file, send it CMRR and keep the receipt. Look for that green proof of service card to come back to you and keep it in the file.  That's all you will do for now.

If they contact you by phone to collect, you will send them a limited cease and desist letter. This letter tells them that all contact to you must be in writing and not on the phone.  If they call you after you have sent the letter requesting/demanding validation, they have committed one of their first violations worth $1000 to you.  Document the date and time of the call, company name and name of the person, plus title (if they have one) of who called.  Keep this in your file.

Should they send you a bill at this time, they have also committed a violation.  Keep that letter in your file along with the envelope it came in. You want to be able to show that the date you received it is after your demand for validation.  They may attempt to send some kind of validation instead of a typical bill. However, if they claim that you owe it with some kind of print out, it is just a cleverly disguised bill and still  not validation and still a violation.

You next respond to their bill or amateur attempt at validation with another letter. This letter to them will state that though you appreciate their effort, that is not validation and now they have violated the law because what they sent you was collection activity. Let them know that you are documenting everything and that unless they can validate within the next 15 days, they must remove any and all negative reporting and close the account. They must agree that they will not sell the account to any other party and a violation of that will cause them to be liable to a suit you may file.

In order to make this work you will be inserting a self executing contract into the letter.  With this letter, you will include a notice and declaration of fraud against the original creditor. You can actually send this with the first demand for validation you send them.  The reason I like to send it on the second letter is because I like them to rack up the violations, thereby increasing the amount that they will actually owe my clients.

You can actually repeat this process again and tell them last chance, you're feeling a bit generous. Give them another 15 days to respond, on point, hand signed, on letterhead and notarized.  The beauty of this is that you are letting them mount up violations on something they cannot possibly validate!

But this is only half of the plan of action! It gets better. Well better for you, worse for them, and possibly the credit bureaus.  Stay tuned for part 3 where I show you how to get it off your credit report!

Credit Repair - Dealing With Collection Accounts

The first step in credit repair is always to get a copy of your credit report. So I'm just going to assume that you have this. Let's deal with cleaning up your collection accounts.

First of all, one of the main things to keep in mind while dealing with the collectors who report on your credit report is that you need to have a paper trail. This is one of the reasons why you deal with them through the mail. STAY OFF THE PHONE! Besides not being verifiable, they are trained to negotiate you into paying them something, any little payment, anything they can get out of you. Their purpose for communicating with you is NOT the same as your purpose for communicating with them.

Your purpose is to get them to prove that you owe them. Your purpose is to get them to validate the debt. Your ultimate goal is to get it removed from your credit report. If they cannot legally prove it is your debt, you have no legal responsibilty to forward any money to them. They have to prove it is yours by supplying a contract, signed by you. They have to supply a complete history of your usage and payments for this account. They have to prove that your last date of activity is still within the statutes of limitations. They also have to prove that they have a legal right to collect on the debt and supply you with a breakdown of what they are charging you, including their fees.

So first, you need to send them a letter demanding validation of the account listed on your credit report. You do not need proof that they have your name, address, etc. Validation means proof of the account belonging to you. You will want to send this letter to them US certified mail with return receipt. (USCMRR). You get a receipt at the post office and when they receive it, they must sign for it. You then get that green card back, your proof of receipt. This then puts them on notice.

At this point, when you have received the green card back in the mail, you need to write a letter disputing with the bureaus. The reason you wait until after you have received the green card back is because once they have been put on notice that you are disputing the account, the law says that all collection activity has to cease until they provide legal validation.

The law considers the following things collection activity: Sending you a bill, calling you on the phone, calling people who may know you, reporting to a credit bureau, verifying with a credit bureau. The only thing they are allowed to do to your credit report is to note that the account is being disputed.

So, when you dispute with the bureaus, they will (or claim they do) contact the companies of the accounts you are disputing and attempt to verify that the information they have provided is accurate. Since verifying is legally considered to be a form of collection activity, they are not allowed to verify with the bureaus whether or not the information is correct. If they follow the law and do not verify, the tradeline is removed as requested by you.

Now, if they followed the law and the bureau followed the law, and people performed credit repair in this way, there would be a lot more good credit reports out there. Unfortunately, bureaus don't actually "investigate" and collectors don't usually give a crap about following the law. This is why credit repair does not happen overnight. But don't be discouraged. There is a good side to them breaking the law!

If you keep a paper trail - copies of all letters sent to both the bureaus and collectors, and receipts of when you mailed the collectors, you will build a nice file to use against them. Every violation of the law is accompanied by a nice little fine for the violator! Every time they report, verify, or continue regular collection activity (like sending you a bill instead of validation), they rack up fines you can charge them in court. Or you can use the huge amounts as a bartering chip. They can pay you a reduced amount and remove the tradeline from your report in exchange for you not suing them!

The courts will want to see a lengthy paper trail though. Not just 1 attempt to get something removed. They will want to see that you followed up 3, 4, 5, maybe 8 - 10 times with the collector trying to get them to validate. They will need to see your letters to the bureaus also disputing these tradelines. They will also need to see, from several copies of your credit reports over a number of months, the blatant disregard for the law that the collector shows by updating, verifying, and reporting the disputed tradeline, after being demanded to provide validation and not providing it.

Also keep everything they send you in your file. You will need to show the court what they have sent as supposed validation. Show the court the letters that request you send them information about the account you are disputing and requiring validation on. DO NOT SEND THEM ANYTHING! It is not your responsibility to provide them with information of the account. If they are accusing you of owing the money, then they should have everything they need! THE BURDEN OF PROOF IS ON THEM - NOT YOU!!

I love it when they request additional information on an account. This just proves to me that they do not have what they need for proper validation. This means that this account should be removed without too much trouble. Send a copy of the letter to the bureau with your next dispute. Show the bureau that they just said that they verified an account was accurate, yet the collector admits in writing, he doesn't have the information needed to know if it is accurate. How on earth can they truthfully verify that?

At this point, you can threaten to sue both of them if they do not remove the trade line. Usually it works. Not 100% of the time, because let's face it, they break laws on a regular basis. Generally you are dealing with minimum wage workers who have no clue of the law, and they assume that if they don't change it, you will not sue. In fact, they hope that they frustrate you into giving up.

Go back through all the letters and make a list for each collector and each  credit bureau. List every violation and the fine attached to each violation. When they see you're not giving up and you're not a mindless idiot, you're someone who has taken the time to know the laws and the fines that go with them, they will usually back down and remove the inaccurate tradelines, giving you the report, or a cleaner version of the report that all your hard work deserves!