Wednesday, October 8, 2014

Can a Debt Collector Refuse to Respond to a Debt Validation Letter?

If you're one of the many people who have received calls and letters from collectors regarding debts you weren't even aware existed, sending the collection agency a debt validation letter is one way to ensure the debt is yours before you pay it.

What many debtors don't realize is that, while federal law gives you the right to request debt validation, it doesn't require the collection agency to actually provide it. It merely prohibits the debt collector from continuing with any collection activity (except credit reporting) until it validates your debt. There are some situations, however, in which a collectors will ignore your debt validation request altogether.

1. The Validation Period Has Expired

A debt collector has all the time in the world to respond to your debt validation request, but you have a limited amount of time to send one. The Fair Debt Collection Practices Act notes that after its initial contact with you, a debt collector must send you a written statement notifying you that you have 30 days to send a validation letter.

You have 30 days to demand validation--don't squander it!

That doesn't mean that you can't request validation after the initial 30-day period expires: you can. After all, not everyone receives the collection agency's initial notification letter. Technically, the 30-day validation period begins when you first become aware of the debt. Proving that you weren't aware of the debt's existence, however, can be tough--especially if the collection agency is claiming it send you the required notification. So if the 30-day period has expired--regardless of the circumstances--the debt collector may use this as an excuse to ignore your debt validation request.

2. The Debt Collector Isn't a Third Party Collection Agency

The federal laws in the FDCPA that give you the right to demand validation only apply to third-party collectors. A third party creditor is any company that buys a debt from the debt's original creditor in order to collect it and make a profit. Collection agencies that recover debts on a contingency are also third-party creditors--even though they don't actually own the debt.

Some collection agencies, however, are owned by the debt's original creditor. Certain large credit card companies, for example, have a collections department owned and run by the original creditor itself. These "in-house" collection agencies aren't considered third party creditors and the FDCPA's collection laws do not apply to them. Thus, don't be surprised if they ignore your debt validation request.

3. The Collection Agency "Didn't Receive" Your Request for Validation 

Never send validation letters via regular mail.
If you send a debt validation letter but the collection agency never actually receives it, how will they know you even sent one? They won't. And then the validation period will expire and poof! The collector can now safely ignore any and all of your validation requests.

Of course, the odds of your letter getting lost in the mail are small. If you don't send it certified mail, return receipt requested, however, it doesn't create a paper trail. There's no proof that the collection agency received it and it may mysteriously vanish. Don't make this mistake. Send all communication with debt collectors via CRRR. Always.

4. Blatant Breaking of the Law

I almost hate to include this one because today so many collection agencies are mom and pop outfits that do their very best to uphold the letter of the law. Unfortunately, the following scenario does still occur and should be addressed.

Debt collectors (just like you hard-working folks) love loopholes. In the absence of loopholes, however, some collection agencies--mostly junk debt buyers--have been known to blatantly break the law. Because there is no time frame to adhere to, ignoring your debt validation letter isn't illegal--but, if you send your letter during the 30-day validation period, refusing to validate and continuing to conduct collection activity is.

Note: The one exception to this rule is credit reporting. A collection agency may report or update previous reports with the credit bureaus regardless of whether or not it has responded to your request for validation.

Why would a debt collector leave itself open for a lawsuit? It's playing the odds. Debt collectors know that filing a lawsuit without legal assistance is daunting for most people. If these debtors could afford an attorney, they likely would have paid their debts. In addition, few debtors truly understand their rights well enough to defend those rights in court without help.

Even if a small handful of debtors' sue and win, collection lawsuit awards are tightly regulated. In most cases, consumers can't expect to win more than $1000 per infraction (there are exceptions, but not many). If this gamble--even though its against the law--brings in more money than it costs, some collectors won't hesitate to take that risk.

5. Collection Agency Can't Validate--So It Doesn't

Debt collectors often buy debts in bulk. While this lets them pick up accounts on the cheap, it has its drawbacks. One common problem is that they may get very little information about the debt other than the debtor's name and how much he/she owes. They'll still pursue it, of course, but clearly aren't able to validate it.

The right thing to do for a collector that cannot adequately validate your debt is to cease all collection activity and "drop" the debt. They aren't supposed to sell it pending a validation, but many do so anyway.

Collectors rarely "drop" debts because there are no federal guidelines that establish what does and does not constitute legitimate validation. For this reason, a collection agency can send you a simple printout of how much you supposedly owe, call it validation and resume collection activity.

6. They Already Have a Judgment

If the collection agency has already sued you, won, and has a judgment against you, you can probably
Court judgment=validation not necessary
forget all about having your debt validated. They may send you a record of the judgment and they may not. Either way, a court of law has already deemed your debt legitimate and granted the debt collector the right to recover it. It's a fair bet that the collection agency will refuse to respond to any debt validation letter you send post-judgment. Any objections that arise at this point must be addressed by a court.

Related Posts:

Debt Validation After 30 Days

Does Requesting Debt Validation Restart the Statute of Limitations?

What To Do When a Collection Agency Validates Your Debt

Thursday, September 11, 2014

Q&A: I Changed My Name, Will Debt Collectors Find Me?

Dear Mr. Edwards,

Nearly three years ago I had a visit to the emergency room. I was sick for almost a month before letting my soon-to-be husband convince me to be seen, or rather force me. I had no insurance and was very hesitant to go. He paid the required $250 at the hospital with his credit card, and they told him that that was all that was owed for the entire visit and that we would not be billed for anything. What liars. 

Eventually I received a letter of collection for $500. I still have not paid it, as I've been either out of work or working part time, and now I am unemployed with a baby at home. At the time of my ER visit, I had a different last name and different address. I have since married, moved twice, and changed my phone number. My question is, will they still be able to find me in the next few years before the statute of limitations in my state goes into effect? 

What's more, will they have access to my husband's bank account and property and the ability to garnish his wages or place liens on his possessions? I am just so scared to track down my bill because I am afraid the amount has tripled by now, and there is absolutely no way we can pay it. But I am also worried that they can ruin my husband who has worked so hard for what he has, though it isn't much. Should I wait it out or take a risk and track down the debt? Please advise.

Thank you again for all your help.
God bless you.



I can understand your trepidation to go hunting down this debt. Hopefully I can ease your mind a little bit about some of your concerns. I'm going to separate my answer into sections. This makes it easier for you and future readers with similar problems to navigate between topics. 

Can the collection agency find you with a new name and address?

Technically yes, the collection agency can find you. The most likely method they'd use would be to locate you via your credit report. Your credit report should contain both your maiden name and your married name. It also contains your Social Security number which you probably provided at the hospital when you checked in. Just for future reference, I see no reason to provide an ER with your Social Security number if you're uninsured. They have to treat you regardless of whether or not you "remember" your SSN. 

When the hospital turned your debt over to the collection agency, it also turned over any information it  had on you: your full name, your address, etc. The collection agency plugged this information into its credit reporting software and boom! The software matches your information to the appropriate credit record. 

Changing your name, address and phone number may make you harder to locate for an individual, but for a collection agency with access to your credit reports, locating you wouldn't be rocket science. As soon as you update your name and address with your credit card company (or any other lender with whom you have an account that appears on your credit report), the credit card company updates its system to reflect your new information. That new informations subsequently gets reported to the credit bureaus and added to your credit report--which the collector, as a legitimate creditor, can pull and review at any time.

Can the collection agency enforce your judgment against your husband?

With the exception of government creditors, no creditor has the right to attach liens to property, seize property, garnish wages or levy bank accounts without first suing the debtor and obtaining a civil judgment. In most cases, creditors can't enforce your judgment against your spouse. Unless your husband was sued, he doesn't get garnished/liened/levied. 

The exception to this rule occurs in community property states. Community property states hold both spouses equally liable for debt. Now listen up, this part is important: Even if you and your husband live in a community property state, he is only liable for debts you incurred while already married. Your hospital bill was incurred prior to your marriage. 

So breathe easy. No collection agency can garnish him, seize property from him or freeze his bank accounts. Be careful though. A collection agency with a judgment against you can do those things to you, and if you share joint ownership of bank accounts and property, your husband's assets may still be at risk. State laws vary concerning what joint assets judgment creditors can and cannot seize. Wish I could be of more help there, but I don't know which state you live in. 

Check both you and your husband's credit reports 

Regardless of what you decide to do from this point on, you need to pull your credit report from all three credit bureaus. You can do this for free once a year without having to give a credit card number if you pull your reports through

Another issue you need to face head on is the prospect that your husband may have sustained some credit damage from this fiasco. Legally, he was only your boyfriend at the time you visited the ER and he was not (and still isn't) on the hook for that debt. He is, however, the one that paid the $250. Given the backwards and just plain ineffective way that many hospitals handle billing practices, its a good idea for him to pull his credit reports when you pull yours--just as a precaution. Credit reporting and collection mistakes are quite common.

What to do if you already have a judgment

It's very possible that the collection agency has already sued you and obtained a judgment against you. Any outstanding judgments should show up in the "Public Records" section of your credit report. Since you don't have a job, you aren't in danger of wage garnishment, but judgments are generally enforceable for ten years (some states differ, but not by much). If you get a job before the judgment expires and the judgment creditor still has its eye on you, you could face garnishment. And, like I mentioned previously, joint assets may be at stake. 

Depending on whether or not your state has a time limit for contesting judgments, you may be able to file a motion requesting a hearing to expunge an existing judgment. You have grounds to request such a hearing for a variety of reasons (once again, all this varies by state) but regardless of your state you should be able to contest the judgment if you were not properly served with a summons (which you clearly weren't). 

Waiting out the statute of limitations for debt collection 

You mentioned that you are flying under the radar waiting for the statute of limitations to expire, but we need to make sure that you're waiting out the right statute of limitations. 

Your original state's SOL freezes as soon as you leave the state and the SOL generally begins anew when you move to a new state (There are some exceptions, but this is the way it usually works). Now, if the creditor isn't aware of the fact that you moved away from your original state, the SOL clock continues to run until it expires. Its safer, however, to go by the SOL in the state where you live. 

Keep in mind that the SOL only protects you if you use it. A collection agency can still file suit after the SOL expires. If you don't respond to the summons and use the expired SOL as an affirmative defense, you could end up with a judgment on your record for a debt that was supposed to be time-barred. 

The likelihood of a lawsuit

Want more good news? You aren't a very good candidate for a lawsuit and the collection agency, if its found you, probably already knows that. You don't have a job and your husband is immune to legal action. The only real concern would be any major assets in your name, such as a home or car, that a collection agency could attach a lien to. 

Don't quote me on this because collection agencies are often unpredictable, but I strongly doubt they'd bother to sue you over a $500 debt (and no, it probably hasn't grown to immense proportions like you fear. We'll get to that in a minute.). That's a downright piddly amount compared to what some people owe and likely isn't even worth their time. 

Interest Charges on Collection Accounts

It makes sense to worry about interest on most collection accounts, but not on hospital bills. The Fair Debt Collection Practices Act states the following: 
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:(1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.
Put simply, a collection agency cannot charge you interest on a debt unless a signed agreement between you and the original creditor gave the original creditor the right to charge interest. This refers primarily to credit card companies. Once a collection agency has the debt, it can continue charging interest and the debt skyrockets. 

The same isn't true of hospitals. They aren't creditors per se, they are businesses to whom you owe a single debt for a single service. They can charge whatever they want for their services (and often do) and so they have no need to charge interest to make a profit. If the hospital didn't charge interest, the collection agency can't either.

Additional Collection Agencies and Junk Debt Buyers

It would be nice if after a certain length of time a debt--and any liability attached to it--just vanished into thin air. Unfortunately, that doesn't happen. If the collection agency cannot convince you to pay, it will simply pass the debt on to another collection agency and the cycle continues. 

Keep in mind that after the statute of limitations in your new state expires, you'll have an airtight defense against any lawsuits you know about, but junk debt buyers are notorious for intentionally serving summons papers to the wrong address in an effort to procure a judgment in their favor by default--especially if the SOL has already expired. Be wary.

Also, the credit reporting period expires 7.5 years from the date of your hospital visit. When that happens, federal regulations prohibit collectors from reinserting the information. That doesn't mean, however, that junk debt buyers won't try to change the debts and add the collection back on your credit file long after the credit reporting period expires. I strongly recommend that you print out your current credit reports and keep your original hospital bills in the event you ever need to dispute the account if it shows up as zombie debt years down the road. 

If you have any other questions, don't hesitate to let me know. Just post them in the comments section of this post and I'll find them. 

Best of Luck,

Wednesday, September 10, 2014

Does Getting Your Car Impounded Hurt Your Credit Scores?

If you want to see unbridled fury, you need look no further than the guy who's just watched as a tow
truck loaded up his car and headed to the impound lot. If you aren't familiar with impound lots, they're nothing more than prison for cars. And this is not a figurative statement. I've seen impound lots that had the whole metal-bars-and-barbed-wire thing going on. I guess they're concerned that someone, furious as having his car impounded, might just try to break in and take it back. If that's your plan, I'm sorry to burst your bubble of bright, shining hope here but stealing your car back?  Not gonna happen. It's car prison, remember? You'll have to pay bail.

Why Cars Get Impounded

The average American hears "impounded car" and automatically thinks of drug dealers and the cars  they use to smuggle and market their wares. Using this logic, as long as you aren't the Godfather, a drug mule or anything in between, you should be safe from having your car impounded. Right?


"Oh, that could never happen to me!" you say, but reality just isn't that kind. Below are just a few reasons your car could get towed to the impound lot. Remember, this is just a generalized list. Impound laws and procedures vary by state.

  • Road Rage (if you act on it in a dangerous or threatenng manner.)
  • Driving without a license
  • Driving 45 mph over the speed limit
  • Having expired tags and registration
  • Your car is evidence in a crime or contains evidence of a crime
  • You abandon your vehicle

Can't Pay Impound Fees? Tough Luck

The impound lot may be prison for cars, but the daily impound fees are closer to that of a swanky hotel. Basically, it could cost you several hundred dollars to get your car out of impound. This is true even if your car was impounded from the side of the road after you ran out of gas and made a 10 minute ride up to the gas station with a friend to get some (happened to me).

Impound fees increase every day that you don't redeem the vehicle. When you simply can't afford to pay your impound fees, one of two things will happen.

1. Your lienholder will pay off your impound fees and repossess the car itself. This only occurs if you still owe money on the car and have stopped making car payments since the vehicle was impounded. The lienholder then sells the car at auction.

2. The impound lot sells the car at auction.

Collections After an Impound

The fees your car incurs while impounded are your legal responsibility--even if the circumstances surrounding the vehicle's seizure were blatantly unfair. After a period of time which varies by state, the impound lot sells the car and applies that balance to your outstanding impound fees and, of course, any liens your car carries. If your car sells for enough money to cover these debts, its time to drop to your knees and thank your lucky stars that someone up there likes you. You no longer have a car, true, but you don't have a missing car and a huge debt load hovering over your head.

If the impound fees exceed the amount your car sold for at auction, you could find yourself in some serious credit trouble. The impound lot will likely turn your debt over to a collection agency. The collection agency will then add it to your credit report. And that's whe the real horror show begins.

How an Impound Affects Your Credit Scores

Although everyone's mileage will vary, you can expect to lose 100 points or more after a collection account for impound debt gets slapped on your credit report. The FICO scoring formula is kept very hush hush, so you won't know exactly how much an impound will hurt your credit score until it shows up on your credit report.

Impound fees can hurt your credit scores.

As much as it pains you to hand over your hard-earned cash to the very people who you may feel stole your car, paying off the collection account now can help you in two very crucial ways:

1. You won't get sued. 

Getting sued sucks. The consequences of a lawsuit suck even more. The collection agency wlll likely add its own legal fees to your unpaid impound fees--spiking your debt to unreasonable proportions. They'll then collect it a number of ways:
  • Garnishing your wages
  • Levying your bank accounts
  • Attaching liens to other property you own
  • Seizing certain assets (Have another car? Not for long)
And in case I forgot to mention it, court judgments in the collector's favor will also show up on your credit report. A judgment hacks away at your credit rating like a bad executioner. Court judgments aren't bound by the standard seven-year reporting period. A judgment over unpaid impound fees will remain on your credit report for the length of time the creditor has to legally enforce it: ten years in most states.

2. The collection for your unpaid impound fees will begin to age.

The Fair Isaac Corporation (the company responsible for the FICO credit scores that lenders use) knows that the most recently reported information on your credit report is the most accurate indicator of the credit risk you pose to lenders. This is good news for those with bad debts that haven't been updated in years, because the older the account, the less it hurts your credit scores.

Paying your delinquent impound fees may make steam shoot from your ears, but it helps ensure that the collection account connected to the debt doesn't get regularly updated by the collection agency. Federal law requires that the collector update the debt as "paid" with the credit bureaus, but afterward it will just sit there until the credit reporting period (seven years) expires.

Note: Paying a collection does not result in the collection agency removing it from your credit report any sooner. It also doesn't improve your credit scores. Paid collections for impound debt--or any other type of debt for that matter--are just as detrimental to your credit rating as unpaid collections.

If you don't pay up, the collection agency may just decide to "refresh" your impound debt on a regular basis--ensuring that it does the most damage possible to your credit scores before you either pay it or the credit reporting period expires.

How An Impounded Car Affects Your Credit

An impound itself doesn't have a direct effect on your credit scores. It's the consequences of not paying off the impound that's a problem. Worse still, impound fees increase by the day. So if you don't have the money to bail your car out of impound by the end of the first week, the fees might climb beyond your ability to pay.

Generally, the better your credit scores are when a derogatory item hits your report, the more damage that entry will do. For a person with credit scores above 750, a collection account and civil judgment are the credit equivalent of a nuclear bomb. Be smart when it comes to your impounded car--even if that means swallowing your pride and paying a debt you believe you don't rightfully owe. If you don't, you could lose the car and your decent credit rating. That's not a fair trade for your pride.

Related Posts:

Can a Collection Agency Put a Lien on Your House or Car?

Can a Collection Agency Take My House?

Make Yourself Judgment Proof