Thursday, December 22, 2011

What To Do When a Collection Agency Validates Your Debt

We've discussed in depth what a debt validation is and why its crucially important to fire one off the second you hear from a collection agency. In a previous post I mentioned that I would discuss what to do if a collection agency responds to your debt validation letter. One of my readers has been kind enough to point out that I never did that. Sorry guys. Let's take care of that now.

Responding to a Debt Validation Letter

Over the past 10 years or so, consumers have become much better informed about their rights against bill collectors. While its always a good thing for consumers to know and defend their rights, it started costing the collection industry big bucks when every Joe Schmo out there sent a validation letter as soon as the collector contacted him.

The answer to this ever-growing problem was automated validations (You had to see that one coming). Not all collection agencies use a computer program to churn out automated debt validations, but many do. The goal of this, of course, isn't to actually follow the letter of the law and validate the legitimacy of your debt. The goal is to make you give up, tuck your tail between your legs and trudge to the bank to pay off the account.

But we aren't going to do that are we? Didn't think so.

The Automated Debt Validation Letter

The automated debt validation response that you're likely to receive from a collection agency isn't going to give you any details. As a matter of fact, it isn't going to give you much of anything other than how much you owe – a fact any debt collector would have been more than happy to scream at you over the phone. Let's look at an example of the typical automated debt validation response for a defaulted credit card debt, shall we?

Mr. Doe:

Our records indicate that you requested a debt validation on 01/01/2012. Per our records, the amount you owe is $xxxx. Please review the enclosed contract from the original creditor and contact our office immediately to discuss payment arrangements

Bill Collector

Not all validation responses are the same, but this one incorporates what you're most likely to encounter. This debt collector has included the amount you owe (like that's a big secret) and a blank credit card agreement. The debt collector calls the blank credit card agreement a "contract." This is a psychological ploy to make the uninformed consumer believe that the collector has just sent him a copy of his contract with the original creditor and therefore must have adequately validated the debt.

And more often than not, the blank credit card agreement the collection agency sends isn't even the same agreement that you signed. Unless you have the original agreement handy, there's no sure way of knowing, but that would certainly be an interesting fact to bring up in court.

What the Law Says (and doesn't say) about Proper Debt Validation

This is where things get really sticky. I've seen it everywhere that a response from a collection agency isn't a "legitimate" validation unless it contains a copy of the contract the debtor signed with the original creditor (bearing the debtor's signature) and, in the case of credit cards, the signed credit card slip for every purchase made.

I really hate to burst your bubble, but the law does not require a collection agency to find that for you. Here's where the FDCPA fails you: it does not define what constitutes a legitimate debt validation. That is not an oversight on the part of the Federal Trade Commisison. Trust me when I tell you that slip up was intentional. You see, if the FDCPA clearly defined debt validation, then collection agencies would legally have to provide exactly what the FDCPA required. Because most of them can't provide anything even resembling a legitimate validation, their lobbyists work hard to ensure that they never have to.

That does not mean that you're out of luck. While the FDCPA doesn't define validation it does note that the collection agency must provide you with the name and contact information for the original creditor. It's not much, but its a start – especially if the collection agency "validated" your debt without providing you with this information.

FTC Opinion Letter on Debt Validation

Just because the FDCPA does not formally state what a collection agency has to provide you with, that doesn't mean that some of the head knockers over at the FTC don't have their own opinions as to what does and does not constitute validation. This letter from Jeffrey Wollman clearly sides with the consumer on the issue:

FTC Opinion Letter

How Do I Respond When the Collection Agency Validates?

If the collection agency sends you their basic "Here's what you owe" letter and a blank credit card agreement in response to validation, its a good idea to point out that no reasonable person would consider that validation. Here's a sample response for the above situation. Remember, you should always tailor your letters to fit your specific situation.

To Whom It May Concern:

I requested a validation of the debt your company claims I owe on xx/xx/xxxx. In response, I received a letter noting the amount that I allegedly owe and a blank credit card agreement. Consumers have the right to request a validation of debt to ensure that the company collecting the debt has not made an error. Sending me notice of the amount I supposedly owe does not prove that I owe the debt, it merely proves that your company seeks to collect the specified amount. In addition, the blank credit card agreement merely illustrates the rules and regulations applicants must agree to when applying for that card. It does not contain my signature and, as such, has nothing to do with me.

Please note I am not requesting a verification of your records or a verification of the credit card company's current policy. I am requesting proof that I incurred this debt, how much was incurred and that you have the right to collect it. Proof of my liability is my legal right under the Fair Debt Collection Practices Act.

John/Jane Doe

Even if the collection agency doesn't send validation, you're accomplishing two things with this letter:

1. You're demonstrating that you know your rights and you won't be easily bullied. You'd be surprised how many people manage to avoid lawsuits simply because the collection agency knows they are well informed and thus more likely to pose a threat to the company's bottom line in court.

2. Should the issue end up in a courtroom, your letter will pass through the judge's hands (provided you remember to keep your paper trail!). The letter tells the judge, in no uncertain terms, why the collection agency's validation wasn't a real validation. Sometimes, a simple consumer letter explain your debt validation issue far better than a consumer law attorney ever could. 


  1. I have a question when it comes to credit validation. I sent out a validation letter to a collection agencies. It has now been over thirty days and I did not receive any documentation from them. It still remains on my credit report. When I contacted the credit bureau regarding this issue I was told that even though the collection agencies did not respond to my letter and I have proof because I sent it certified mail. It does not require the credit bureau to remove it from my file. I would like to know is this true?

  2. To get the pending payments, the 'outside agency' working as debt collection service are approached.These debt collection services work through calls or letters mostly but we need to take care of how their success rate is.We should not get swayed by what they say.It is always good to hire a professional debt collector to get the amount back.

  3. Good stuff... I am disputing a debt right now. The first response I got back from the collection agency after my initial dispute letter was a computer generated verification of debt similar to the one in your post. I fired off a follow up letter similar to the one you have in your blog about two weeks ago. I am still waiting on their response.

    How do debt collectors typically respond to a follow up dispute letter like yours? Has you or anyone you know had a debt removed from their credit report by sending a letter like you have in your blog? If they don't respond with some kind of valid proof (copy of contract signed by me, etc.) after the second letter what would be the next step to take?

  4. what happens if, on the original letter recieved from a debt collector, They DO NO put anything in writing about "(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;"

    I got a letter that had no warning about the 30 days


  5. This comment has been removed by a blog administrator.

  6. As a consumer and collector I found this site informative but disheartening because if people paid their bills they wouldnt have to worry about collections and for it to go to an outside company they have really neglected their responsibilities. One collection agency shouldnt speak for them all just as once customer doesnt speak for all so instead of demonizing the collecion agency how about suggesting at some point that consumers take responsibility for their actions and work with the CA's to resolve the debt. My small company takes pride in working with customer with a customer service attitude instead of a collector's mentality and at the end of the process most of our customers thank us and ask us to buy more of their debt. My point we teach them how to handle the debt because we all have issues at some point in life and need help but to teach people how to avoid their responsibilites is why the USA is in such deplorable conditions morally.

    Consumer and Collector

    1. Thank you for taking the time to weigh in on this and provide a viewpoint from the other side. It's easy to get sidetracked by big collection outfits that flagrantly violate the law. All the smaller, mom-and-pop operations that I've had dealings with for my clients have been extraordinarily nice. This was shocking in the beginning but now I've come to expect it.

      If you ever feel like expanding upon that, I've been looking for a collector to make a guest post to show readers the other side of the equation and put a human face on the debt collection industry.

    2. Firs of all, how can you state that EVERONE who has had to deal with a collection Agency, paid their bills, they would not have a problem? Some people including myself, do pay bills on time, and am dealing with a fraudulent account in my name. I am looking for information to address this issue and have it removed form my credit report. So it is WRONG of you to state that "if people paid their bills", does not apply to ALL PEOPLE.

  7. I have requested and recieved a cut and paste validation letter from a collections company which does not list the original creditor. My question is, can the collections company demand payment without listing the original creditor? In addition, I have payment demand letters from the same collector prior to the validation date. Are they legally able to contact me and purchase my debt once they "believe" they can recoup the funds?

    1. Collectors only have to include the name and contact info for the original creditor if you ask for it. So yes, they can collect without giving you that information. I'm a bit confused as to what you mean by, "Are they legally able to contact me and purchase my debt once they "believe" they can recoup the funds?" since a collection agency can contact you anytime as long as you don't have a validation pending. In this case, the CA met the legal validation requirement, even if the validation itself was nothing more than bunk.

  8. I need some advice from someone knowledgeable...

    I have been dealing with a bill from multiple physical therapy visits since November of 2012. The medical provider uses some contracted billing company in another state. To make a long story short, either the billing office submitted a claim incorrectly or insurance processed it incorrectly, but that left me owing $116.58 to the provider. I repeatedly contacted them and the insurance company and both parties blamed the error on the other. The provider's billing service told me they were trying to communicate with insurance to fix it. I offered to pay the portion of that total that I knew I owed as part of my coinsurance, but a lady who said her name was Pam told me not to worry. Finally I called and said I am just going to go ahead and pay this amount that I owe, and then when you get reimbursed by insurance I wont owe anything. They took my payment, said that was fine, and turned over the balance of $60.71 to a collection agency 6 days later.

    I started contacting the collection agency after I found out from the medical billing office before the collection agency even contacted me. I told them that I was willing to pay what I believed the insurance owed and I would pursue reimbursement from the insurance company later to ensure my credit was not affected. I left them 2 messages and heard nothing. Then a week later I got a letter from them stating 3 different amounts. The problem was that the amounts were wrong! I agree that I (for my insurance company) owed $60.71, but they were trying to collect $97.16. I called to ask what was up with the difference, as I assumed there were fees, but they told me they charged no fees at all and that was the amount reported to them by the medical provider's billing office.

  9. I immediately told them that was incorrect, and I asked them what needed to be done to fix it. The CA rep told me he would note that I disputed the amount and put a "hold" on any further activity while they verified the accuracy. He told me it was not necessary to send a letter disputing the amount, but I did send one by UPS with a signature required. In teh letter I described to them the error, showed them my orginal statement from the provider showing the correct amount, and asked them to obtain the correct amount and update their records.

    I then contacted the provider to see if they could provide any insight. They offered to go ahead and send the CA my entire account history showing the balance of $60.71 as what I owed. Well, they sent it to the CA, but to my dismay, instead of correcting the amount of $97.16 to $60.71, they added the two together as if it was a new amount!

    I immediately called them again, and they basically said there is nothing we can do until the provider sends us proof that you only owe 60.71 and not the additional 97.16. But that is what they just got! I called the provider back again for help; they sent another account history statement a few days ago showing 60.71.

    I went ahead and paid the CA 60.71, because I agree that I owe that amount on behalf of my insurance company. However they are still trying to collect 97.16! Today I got a piece of mail from them and I opened it up to find a cover page that says "this is an itemization of your accounts." It is followed a 4 computer print screens of account balance pages for different service dates where I had physical therapy. The first shows 82.58 and then there are 2 for 7.29 followed by the 60.71 balance that they ADDED when they should have made a correction. Then behind all that was the same account statement from the provider that I had already sent to the CA showing a total of 60.71 as if that was supposed to be the proof of what they are trying to collect!

    I just typed up a letter to send in response stating that they did nothing but verify that I only owe 60.71 with that letter and that they need to update my balance to $0 since I paid 60.71. I also told them that if they do not make the correction that I will be contacting an attorney to take legal action. Of course I wont be able to send this until Monday, but I was hoping you may have advice.

    I can find nothing regarding what to do if a company is just plain stupid and keeps trying to collect the wrong, higher amount even after they have seen that it is not right.

    Have I handled this incorrectly so far? Is there any advice you can give me on what to do next? Thanks!!!!

    1. Elisha,

      Dealing with the collection agency isn't likely to get you very far. You need to take this problem to the medical office where the problem began. Call the billing department and tell them what you just told me. Regardless of what creditors say, they have the ability to call off the dogs, so to speak. If there has been an error, the original creditor has the ability to amend that error with the collector, even if they sold the debt outright.

      In all likelihood, the collection agency is collecting the debt on a contingency and the medical provider still legally owns it. If billing doesn't help you, go see the office manager of the practice, explain the full situation again and ask for help. If that gets you nowhere, write a letter to the doctor you saw explaining everything that has happened so far and the grief his practice has caused you due to their repeated errors. I have found from personal experience with a very similar situation, that if the doctor steps in the problem gets solved very quickly.

      If none of the above helps you, consider visiting with an attorney in your area and filing a lawsuit. You can generally ask for attorney's fees in your suit. It's likely that the medical practice will quickly shape up and fix the problem when faced with legal action. After all, its easier for them to correct their error than dedicate vital time and resources to defending a lawsuit over such a small debt.

  10. I sent a debt validation letter to NCO and received the following response:
    "Please be advised that accounts xxx-xx are on hold pending closure in our office. According to our files we have not reported account xxx-xx to a credit bureau."
    Does this mean I don't actually owe or have to pay? Thank you for your assistance!