Debt Validation
If a collection agency contacts you to pay a questionable debt or delinquent collection account, you may be a victim of unfair, abusive and illegal debt collection. You should always verify that you owe the debt before making any payment, and Debt Free League can help you exercise your debt validation rights. Our aim is to help our customers to dispute collection claims under the federal Fair Debt Collection Practices Act ‘FDCPA’ and other Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) laws to permanently stop debt collection.
In 2013, the Federal Trade Commission (FTC), which receives more complaints about debt collectors than any other industry, received more than 200,000 debt collection complaints. The largest source of complaints per month received by the Consumer Financial Protection Bureau (CFPB) has also been on debt collectors. Also in 2013, the Consumer Financial Protection Bureau handled approximately 30,300 debt collection complaints, which consisted of:
– Continued attempts to collect debt not owed (34%)
– Communication tactics (23%)
– Taking/threatening an illegal action (14%)
– Disclosure about and verification of debt (13%)
– False statements or representation (9%)
– Improper contact or sharing of information (8%)
The Consumer Financial Protection Bureau believes the numbers of debt collection complaints are significantly higher in suspecting that many consumers file complaints directly with the actual debt collector not knowing that the conduct they have experienced violates the law. Debt Free League agrees with this observation as there are over 29 million consumers with debts in collection and many of our customers, who were victims of bill collectors, were previously unaware of their debt validation rights.
To help you gain a full understanding of how debt validation works, below we will explore what happens to a debt once it goes into collection:
What A ‘Charge Off’ Means
American consumers owe a whopping $11.62 trillion in debt, with an average $153,184 in mortgage debt, $32,511 in student loan debt, and 15,593 in credit card debt. However, only about one million consumers, who are afflicted by an economic hardship, such as unemployment or a medical problem, end up filing bankruptcy each year. In contrast, on credit card debt alone, banks charge off roughly $50 billion dollars!
Under Section 166 of the Internal Revenue Code, banks charge off or write off uncollectible debts as ‘worthless’ in order to take a tax deduction. (26 U.S.C. § 166(a)(1). Typically, installment accounts charge off after 120 days of non-payment and credit card accounts after 180 days of non-payment. But, some banks regularly write bad debts even sooner in order to benefit from the tax break.
You Still Owe the Debt
Regrettably, if your debt is charged off, the debt won’t disappear. This is the turning point when the bank either hires a collection agency to intensify collection activity, or more often than not, when they sell the debt for pennies on the dollar to a junk debt buyer. Then, this debt collector resells the debt or collects on it for a profit.
Debt buying by third-party debt collectors is so lucrative, that between 2003 and 2012, collection industry revenue increased by 600 percent! Additionally, collection violations of Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) laws have flourished.
Illegal Debt Collection
According to a Federal Trade Commission study, on average, junk debt buyers pay 4 cents for each dollar of debt, mainly credit card debt. The same study also found that only 6 percent of the debts purchased by some of the largest debt buyers came with any documentation. Plus, banks generally do not guarantee the accuracy of the information supporting the debts that they sell.
Consequently, collection agencies generally buy and illegally attempt to collect invalid debts. Some examples are debts not owed by the actual person being targeted or debts that can be only verified by a computer printout of a balance sheet with a debtor’s name, address, account number and the alleged balance owed.
Common violations of federal consumer protection laws also include loading default debts with illegal interest charges and fees, in violation of the Truth in Lending Act and attempting to collect rates not reflected on the actual credit agreement in violation of the Fair Debt Collection Practices Act.
Rampant Financial Fraud
Collectors generally flood the courts to win judgments based on false, forged, or misleading information. The Maryland State Collection Agency Licensing Board reached a $12.5 million collection misconduct settlement with a collector that filed lawsuits without proper licensing, knowingly filed false, deceptive or deficient affidavits, intentionally misrepresented the amount of the debts collecting impermissible compound interest, knowingly collected unauthorized attorney’s fees and prejudgment interest at unauthorized rates, and filed cases without valid title. As a result, the collector was ordered to dismiss 3,500 debt collection cases and credit over 6,200 consumers whose cases reached a judgment or were settled. In another case, a Maryland U.S. District Court judge to order over 27,000 of debt collection cases to be dismissed.
The Fair Debt Collection Practices Act
Fortunately, the Fair Debt Collection Practices Act ‘FDCPA’ allows you to dispute unfair and unlawful debt collection claims. A civil court judge, who presided over as many as 100 such cases a day, said “roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt”. Thus, the Fair Debt Collection Practices Act allows you to demand verification of an alleged debt.
Additionally, under the Fair Debt Collection Practices Act, any third-party debt collector, being a junk debt buyer, collection agency, or collection attorney, CANNOT:
- Threaten and harass you with verbally abusive or obscene language;
- Threaten to have you arrested, garnish your wages or seize your property;
- Pursue a debt not actually owed by the person being targeted;
- Fail to validate your debt in writing when requested pursuant to FDCPA guidelines;
- Report inaccurate creditor information to a credit bureau;
- File a collection lawsuit with no documentation of the purchased or assignment of the debt;
- Continue to call your place of employment when instructed not to;
- Ignore your cease-and-desist notice to stop telephoning you.
FDCPA Debt Collection Requirements
Under the Fair Debt Collection Practices Act, when any person or entity, who regularly attempts to collect consumer debts, contacts you in writing, they are required to inform you of the following legal disclosures:
This is communication from a debt collector. This is an attempt to collect a debt and any information obtained will be used for that purpose.
The above disclosure, also known as the “mini-Miranda”, is required in the initial communication with the consumer per Section 807(11) of the Fair Debt Collection Practices Act. Additionally, per FDCPA Section 1692g(a), the debt collector is required to send you a written notice known as a “validation notice”, within five days of their initial attempt to collect a debt.
Your debt validation rights should be outlined in the validation notice with the following similar language:
Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume the debt is valid. If you notify our office in writing within 30 days from receiving this notice that you dispute the validity of this debt or any portion thereof, this office will obtain verification of the debt.
If you dispute the validity of a debt, under FDCPA Section 1692g(b), the debt collector is required to cease collection until they provide you the required debt validation information.
Make Collectors Prove the Alleged Debt
The aim of our debt validation strategy is to stop faulty or fraudulent collection claims to help you:
● Permanently stop debt collection
● End undesirable collection calls
● Prevent debt collection lawsuits
Debt Free League disputes on your behalf alleged debts under a host of Unfair and Deceptive Acts and Practices (UDAP) laws, such as the Fair Debt Collection Practices Act, Truth in Lending Act, Fair Credit Billing Act and Consumer Credit Protection Act.
Our complex validation process demands for the third-party debt collector, whether the debt buyer, collection agency, or law firm, to prove their licensing and collection jurisdiction. We also demand documentary evidence to confirm the alleged debt is valid, verifiable, and legally collectible.
If the collector cannot validate the disputed debt as required by law and cannot prove the debt is not defective, they must legally cease collection of the debt! Otherwise, they may be violating the Fair Debt Collection Practices Act as well as other federal and state consumer protection laws.
You Could Win a $1,000.00 Settlement!
If any third party debt collector, such as a debt buyer, collection agency or collection lawyer, violates any provision of the Fair Debt Collection Practices Act, you may be able to sue them are entitled to statutory damages of $1000, plus punitive and economic damages, if awarded. In addition, the collection agency will be required to pay the attorney’s fees and costs.
Feel free to contact Debt Free League at (800) 380-4094 if you believe that a debt collector violated your legal rights. We will gladly provide you a complimentary referral to an experienced legal professional, who can provide you a complete explanation of your rights.
Consumer Protection Laws We Use:
The Fair Debt Collection Practices Act ‘FDCPA’ (15 U.S.C. § 1692) – This law outlines abusive collection practices, promotes fair debt collection and provides consumers an avenue to dispute and obtain validation of debt information to ensure the information's accuracy. The law also prescribes penalties and remedies for violations of the Act.
The Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act of 2009) – Known as the ‘Credit Cardholder’s Bill of Rights, this law amends the Truth In Lending Act, the Federal Trade Commission Act and the Electronic Funds Transfer Act, providing comprehensive credit card reform and upholding fair and transparent practices relating to the extension of credit.
The Truth in Lending Act ‘TILA’ (Regulation Z, 15 U.S.C. §§ 1601, et seq., 12 CFR 226.13) – This 1968 federal law promotes the informed use of consumer credit, by requiring disclosures about credit terms and standardizing how the costs of borrowing are calculated and disclosed.
The Fair Credit Billing Act ‘FCRA’ (15 U.S.C. § 1637) – An amendment to the Truth in Lending Act, this federal law aims to protect consumers from unfair billing practices and provides a mechanism for addressing billing errors in open ended accounts, such as credit cards and charge cards.
The Consumer Credit Protection Act (15 USC Chapter 41) – This federal law provides consumer safeguards in credit utilization by requiring creditors to provide full disclosure of the terms and conditions of finance charges in credit transactions or in offers to extend credit.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L.111–203, H.R. 4173) –
Nicknamed the “Dodd-Frank Act”, this federal law, in response to the U.S. housing crisis, regulates the financial industry to prevent another financial crisis by creating financial regulation that enforces transparency and accountability and new consumer protection rules. The law also charges the Consumer Financial Protection Bureau to assess potential risks to consumers and examine if debt collectors are complying with financial law requirements.
Got Debt Validation Questions? CALL: (800) 380-4094
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Sources:
*Creditcards.com Credit Card Statistics, Industry Facts, Debt Statistics
*Federalreserve.gov Consumer Credit G.19
*Title 26 Internal Revenue Code § 166. Bad debts
*Federal Trade Commission The Structure and Practices of the Debt Buying Industry
*CFPB Annual Report 2014 Fair Debt Collection Practices Act
*Maryland State Collection Agency Licensing Board Agreement Violations of federal and state debt collection laws
*District Court of Maryland Dismissal of thousands of debt collection cases
*New York Times Problems Riddle Moves to Collect Credit Card Debt
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