When Are Debt Collector Validation Letters Appropriate?

Credit repair is done by following an established and regulated process. Credit repair is similar to the process of discovery in a legal proceeding. Consumers are entitled to request proof that the evidence that is being used against them to report negative information to the credit bureaus is legitimate, and maintained as required by law. 

The official way that consumers begin this process is by first informing the credit bureaus that they do not agree with the information that the credit bureaus are reporting. This is done by filing a dispute with the bureau. This lets the credit bureaus know that a consumer is requesting that they perform an investigation into the referenced account(s) and then forward he results of that investigation in accordance with current consumer protection law.

The debt validation letter technique referenced in this module is another tool that credit repair operators can use for their clients after they have filed their initial dispute with the credit bureaus and received their response. It allows consumers to request that the debt collector itself (the data furnisher) investigate the data it is reporting about the consumer to the credit bureau (the data reporter).

The main difference between a collector validation letter and dispute letters sent to the bureaus is that the consumer is disputing the data furnisher in one (the debt collector validation letter), and the data reporter in the other (initial credit bureau dispute letters). Both of these disputes are based on the procedural and record keeping requirements that these two entities must adhere to in order to furnish and report data about consumers within the scope of current consumer protection law.  

If you believe your client’s account is a good candidate, you will tell the collector that you disagree with what they are claiming by requesting validation of the account. Both the bureaus and the collectors are required by law to respond to your client’s requests and to provide your client with certain information in their possession, some of which will be reviewed and rebuked through further dispute processing if it is not accurate. Be aware that collectors, however, are not required to respond to validation requests within 30 days like the credit bureaus are as they are granted an unlimited amount of time to respond. 

Consumers are entitled to review some of the information that is being used by other parties to furnish or report negative information about them onto their credit reports. This is so that consumers may know exactly what the basis of the negative claim is and can then appropriately respond to the information that the credit bureaus are reporting by filing disputes. Sending dispute letters to the credit bureaus, collection agencies, original creditors and others is the consumer’s way of requesting that the data furnishers and reporters certify their own evidence and then send them what they are legally required to provide.

Many times the evidence that they will provide to you or your clients will be inconsistent with what is being reported on your client’s credit reports, creating an information unbalance. If your client’s credit report says one thing, but the information provided to your client after you file their disputes says something else (or more commonly no acceptable response is received), then one of these sources of information is incorrect. If you client believes that the credit bureau is reporting inaccurate information, you can file a dispute for them to start the removal process. Inaccuracies like these will be challenged by filing a dispute and will often wind up being removed after the complaint phase, which can provide a small boost to your client’s credit score. If there are many negative accounts that are removed, then your client will usually receive a larger credit score increase than if only one or two negative accounts are removed.  

The laws that have been put in place to protect consumers are very clear. If the information being reported is inaccurate, then consumers have the right to have it removed. 

Getting collectors and the credit bureaus to honor these laws is where the service of credit repair and a successful dispute process comes into play. With research, organization, and time credit repair providers are arming themselves with the knowledge to be successful. By following a simple plan, they can remove negative information for themselves and their clients and really start to make a positive change in the financial futures of those around them.

When collectors buy a consumer’s account they are required to notify the consumer, who then has 30 days to file their request for validation. Often times, consumers are never notified when a collector buys their debt and are therefore unable to file a debt validation request within this 30-day window. If this is the case for you or your clients, you can go ahead and submit a debt validation request the same as if you were within the 30 day window of the collector notifying you of their collection activities. Even though you are outside the 30 day window, if you never received notification from the collector (dunning letter) then you will need to simply note that in your dispute letter and proceed as normal. Although some consumer protections will technically be unavailable, that will not keep the dispute process in this course from being successful when correctly applied.  

There are pluses and minuses to sending validation letters, and if your client has a collector trying to collect a newer debt then a validation letter could be one of the worst things you could possibly do. Exercise caution before sending a validation request letter. If your debt is still within your client’s statute of limitations for them to sue and collect you may be kicking the beehive without even realizing it.

What Happens When Debt Validation Letters Are Sent?

For collectors, failing to provide a consumer with a response to their validation request is not a big deal as once they receive the validation request, the collector then has an unlimited amount of time to respond. During this time, however, the collector is forbidden from reporting the negative information onto the consumer’s credit reports. They must comply with the validation request before they can continue to report the negative information. 

What this means is that  collectors are required to cease all collection activities (including reporting the account to the bureaus) until they respond to a request for validation. Unfortunately, although those are the laws and they are there specifically to protect consumer rights, many times collectors and credit bureaus continue to furnish and report negative and harmful information about consumers without honoring these established consumer protection requirements.

Collectors Are Not Bound To A 30-Day Response Time

For the most part, debt collectors now receive much of the information needed to validate a debt directly from the bank when they purchase the debt. Even though they probably have the information on hand and could easily respond to most validation letter requests, they still only validate around 50% of the debt validation requests they receive. 

Although it would seem that collectors should be required to maintain strict documentation regarding their collection activities due to the immense consequences that consumers will suffer if inaccurate negative information is reported onto their credit reports, this is not usually the case. Many times debt collectors simply purchase debt from a computerized data exchange network, send out an automated letter to the last known address of the consumer, and then automatically begin reporting the negative information onto the credit reports of unknowing consumers without ever reviewing or checking it for accuracy.

From the standpoint of the collector (and the law), collectors don’t need to invest a lot of time or money into investigating the legitimacy of the accounts before they start collecting them. They simply trust that the data they purchased from the original creditor is correct.

Often times however, it is not.

Eventually, consumers become aware of the negative information, many times only after being denied credit or suffering a similar unnecessary stress. By the time some notice and attempt to correct it, the negative information could have been affecting them for years already.

Because credit scores are often used to adjust pricing for certain products, like car insurance for example, some consumers lose thousands of dollars in unnecessarily higher fees before the issues are corrected.

Avoid these pitfalls by regularly reviewing your credit reports moving forward.

Collector Validation Letters

If you have verified that you or your client’s disputed collection account is a good candidate for a validation request letter, then the steps to get one printed out and mailed are here. 

Download the collector validation letter from the module 6 downloads section on the left, input you or your client’s information and then send the letter via USPS with tracking. 

After you do so, remember that the collector has AN UNLIMITED amount of time to respond to the validation request, but they cannot report information onto your client’s credit reports until they do so. They are not allowed to continue to report the information after validation is requested and before they provide it. 

Many times they simply do not provide validation at all, meaning the account must be deleted from the consumer’s credit reports since they cannot report it to the credit bureau until they provide the requested validation. If a consumer requests validation and does not receive it, and the item is not removed from their credit reports while they are waiting, then you can easily work with your client to file a complaint with a consumer protection agency, such as the CFPB, to have it removed.

Credit repair is a months long, time consuming process but debt validation letters can be very successful if used on the right accounts. If you believe that the account in question is a good candidate, download, customize and mail the letter on the next page.

[Your name]

[Your return address] [Date]

[Debtcollector name] [Debtcollector Address]

Re: [Account numberforthedebt,ifyou haveit]

Dear [Debtcollector name]:

I am responding to your contact about a debt you are trying to collect. You contacted me by

[phone/mail], on [date] and identified the debt as [any informationtheygave you aboutthedebt]. Please supply the information below so that I can be fully informed:

Why you think I owe the debt and to whom I owe it, including:

• The name and address of the creditor to whom the debt is currently owed, the account number used by that creditor, and the amount owed.

• If this debt started with a different creditor, provide the name and address of the original creditor, the account number used by that creditor, and the amount owed to that creditor at the time it was transferred. When you identify the original creditor, please provide any other

name by which I might know them, if that is different from the official name. In addition, tell me when the current creditor obtained the debt and who the current creditor obtained it from.

• Provide verification and documentation that there is a valid basis for claiming that I am required to pay the debt to the current creditor. For example, can you provide a copy of the written agreement that created my original requirement to pay?

• If you are asking that I pay a debt that somebody else is or was required to pay, identify that person. Provide verification and documentation about why this is a debt that I am required to pay.

The amount and age of the debt, including:

• A copy of the last billing statement sent to me by the original creditor.

• State the amount of the debt when you obtained it, and when that was.

• If there have been any additional interest, fees or charges added since the last billing statement from the original creditor, provide an itemization showing the dates and amount of each added amount. In addition, explain how the added interest, fees or other charges are expressly authorized by the agreement creating the debt or are permitted by law.

• If there have been any payments or other reductions since the last billing statement from the original creditor, provide an itemization showing the dates and amount of each of them.

• If there have been any other changes or adjustments since the last billing statement from the original creditor, please provide full verification and documentation of the amount you are trying to collect. Explain how that amount was calculated. In addition, explain how the other changes or adjustments are expressly authorized by the agreement creating the debt or permitted by law.

• Tell me when the creditor claims this debt became due and when it became delinquent.

• Identify the date of the last payment made on this account.

• Have you made a determination that this debt is within the statute of limitations applicable to it? Tell me when you think the statute of limitations expires for this debt, and how you determined that.

Details about your authority to collect this debt.

• I would like more information about your firm before I discuss the debt with you. Does your firm have a debt collection license from my state? If not, say why not. If so, provide the date of the license, the name on the license, the license number, and the name, address and telephone number of the state agency issuing the license.

• If you are contacting me from a place outside my state, does your firm have a debt collection license from that place? If so, provide the date of the license, the name on the license, the license number, and the name, address and telephone number of the state agency issuing the license.

I have asked for this information because I have some questions.  I need to hear from you to make an informed decision about your claim that I owe this money.  I am open to communicating with you for this purpose.  In order to make sure that I am not put at any disadvantage, in the meantime please treat this debt as being in dispute and under discussion between us. 

In addition to providing the information requested above, please let me know whether you are prepared to accept less than the balance you are claiming is owed. If so, please tell me in writing your offer with the amount you will accept to fully resolve the account.

Thank you for your cooperation. Sincerely,

[Your name]

Module 6 References

1. “What is a dunning letter?”; https://www.accountingtools.com/articles/what-is-a-dunning-letter.html 

2. “Fair Debt Collection Practices Act”; https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text 

3. “What information does a debt collector have to give me about the debt?”; https://www.consumerfinance.gov/ask-cfpb/what-information-does-a-debt-collector-have-to-give-me-about-the-debt-en-331/ 

4. “The Structure and Practices of the Debt Buying Industry”; https://www.ftc.gov/sites/default/files/documents/reports/structure-and-practices-debt-buying-industry/debtbuyingreport.pdf

5. “I Need More Information About This Debt Letter To Collector”; http://files.consumerfinance.gov/f/201307_cfpb_debt-collection-letter-2_more-information.doc