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Law Pro
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Category: Consumer Protection Law
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Experience:  20 years experience in consumer advocacy, debt collection violations, contracts, construction
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What is the difference between debt validation and debt verification

Resolved Question:

What is the difference between debt validation and debt verification? What does a collection agency have to send me in order to comply by the laws of the FDCPA on this matter after I dispute a debt within 30 days of receipt of a letter from them?
Submitted: 2 years ago.
Category: Consumer Protection Law
Expert:  Law Pro replied 2 years ago.
There really is no difference - they are one and the same.

Under the Federal Debt Collection Practices Act, you are allowed to challenge the validity of a debt that a collection agency states you owe to them. You can send them a letter and the demanding the agency verify that the debt is actually yours and owed by you.

Verification is that they are pursuing the right individual for a particular debt owed to a company or individual.

Validation is usually where a consumer demands proof that the collection company owns the debt/or has been assigned the debt. (Bob is legally entitled to collect this particular debt from you.) This is basic contract law. It is very difficult to get a judgment without a direct contract between collection agency and the original creditor.


But a consumer can demand "verification" by requesting:

Please provide me with the following:

  • What the money you say I owe is for;
  • Explain and show me how you calculated what you say I owe;
  • Provide me with copies of any papers that show I agreed to pay what you say I owe;
  • Provide a verification or copy of any judgment if applicable;
  • Identify the original creditor;
  • Provide copies of any and all statements concerning the debt;
  • Prove the Statute of Limitations has not expired on this account;
  • Show me that you are licensed to collect in my state; and
  • Provide me with your license numbers and Registered Agent.

If you make a written request - at a minimum they must provide proof that the collection company owns the debt/or has been assigned the debt and a copy of the underlying contract if requested.



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Experience: 20 years experience in consumer advocacy, debt collection violations, contracts, construction
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Customer: replied 2 years ago.
I have requested an underlying contract before from a collection agency who was assigned this debt 10 months ago, all they sent me back was the name and address of the orginal creditor, and that this firm has been retained by National Collegiate Trust to collect the balance due on my account number. Then it stated the current balance owed, and that the account was originally opened as a Bank of America Student Loan. Shouldn't I at least see the contract or if the S.O.L. has expired? It feels that my rights are so limited on this matter.
Expert:  Law Pro replied 2 years ago.
You are entitled to demand and they to send a copy of the contract.

If they don't send such you can file suit for their not having complied with the Fair Debt Collections Practices Act.

FDCPA Section 809. Validation of debts [15 USC 1692g]

(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

 

Plus, they must show proof positive that you owe them this debt. It's not enough to send you a computer-generated printout of the debt. There is an opinion letter from the FTC to back this up:

http://www.ftc.gov/os/statutes/fdcpa/letters/wollman.htm

Nor can they ask you to pay for digging up records of your debt:

http://www.ftc.gov/os/statutes/fdcpa/letters/krisor2.htm

 

So, if a creditor can't validate a debt:

  • They are not allowed to collect the debt,
  • They are not allowed to contact you about the debt, and
  • They are also not allowed to report it under the Fair Credit Reporting Act (FCRA). Doing so is a violation of the FCRA, and the FCRA states that you can sue for $1,000 in damages for any violation of the Act.

The opinion letter from the FTC which clearly spells out that a collection agency CANNOT report a debt to the credit bureaus which has not been validated:

 

http://www.ftc.gov/os/statutes/fdcpa/letters/cass.htm


It also states that you can sue in federal or state court. So if you have them on a violation, then you have damages of $1,000 for the incident plus damages.

 



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Experience: 20 years experience in consumer advocacy, debt collection violations, contracts, construction
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Customer: replied 2 years ago.
I was told that since South Carolina is in the 4th circuit on this matter all the collection agency has to send is the name and address of the original creditor, and that the firm has been retained by National Collegiate Trust in this matter to collect the balance due on my assigned acct. number. Once again the Original creditors name is XXXXX XXXXX America Student Loan not National Collegiate Trust.
Expert:  Law Pro replied 2 years ago.
Explain:

I was told that since South Carolina is in the 4th circuit on this matter
Customer: replied 2 years ago.
The FDCPA does not define what constitutes proper debt validation, and the issue has not been fully resolved by the courts. In the leading case of Chaudhry v. Gallerizzo, the Fourth Circuit Court of Appeals adopted a relatively low standard: "Verification of a debt involves nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed; the debt collector is not required to keep detailed files of the alleged debt."[6] The Court further stated that a request for validation of the debt is primarily intended to eliminate such problems as collectors contacting the wrong person or attempting to collect debts which have already been paid. South Carolina falls under the Fourth Circuit of Appeals.
Expert:  Law Pro replied 2 years ago.
OK, now I'm understanding your statements.

Then, since NC is within the 4th Circuit - that is legal precedence and that's all they need to do. I am not going to research the case law certainly.

Also, North Carolina Unfair and Deceptive Trade Practices Act protect consumers from abuses by consumer debt collectors.

But, most other circuits demand otherwise -What is a proper validation? Account statements from the original creditor including payment history starting with the original creditor. Also, a copy of the original loan agreement or credit card application, or lacking that, account statements from the original creditor.

Under the FCRA, if a creditor cannot verify a debt it may not collect the debt, contact the debtor about the debt, or report it to the credit reporting agencies.




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Experience: 20 years experience in consumer advocacy, debt collection violations, contracts, construction
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Customer: replied 2 years ago.
I think you meant SC, do they have an Unfair and Deceptive Trade Practices Act protecting consumers from abuses by consumer debt collectors like NC?
Expert:  Law Pro replied 2 years ago.
Yes. Specifically:

Debt Collection FAQ


http://www.scconsumer.gov/faqs/fair_debt_collection_practices_act.htm


South Carolina Debt Collections Act § 37-005

 

http://www.scstatehouse.gov/CODE/t37c005.htm

Law Pro, Lawyer
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Experience: 20 years experience in consumer advocacy, debt collection violations, contracts, construction
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