Step 1:

The Initial Collection Activity

The first step of the debt validation (DV) process really begins with the collection agency or attorney (also referred to as a debt collector). Usually, collection activity on a delinquent account begins when a debt collector (CA) contacts you by phone or mail, letting you know that they will be collecting your debt. Once this initial communication and collection activity occurs, the DV process has begun. At this time there are specific requirements with time frames placed upon the CA, along with certain provisions for consumers to protect their rights, again with limited time frames. Basically, when initial collection activity begins the DV process is set in motion...whether you realize it or not.

A debt collector (CA) must adhere to section 15 USC § 1692g(a) of the Fair Debt Collection Practices Act (FDCPA) and notify the debtor (within 5 days of their initial communication) in writing of his/her right to request validation. See the section below, "The Debt Notification Letter - Your Right to Request Validation" for details. In fact, the language of this letter must be understandable by even the 'least sophisticated consumer' as described below in the section: "The Least Sophisticated Consumer Standard". Often, debt collectors don't comply with this standard and thus violate the FDCPA.

Sometimes you may never receive an initial communication and you may simply find out about the collection when checking your credit report. This situation is a common occurrence and should be addressed proactively and aggressively. See the section below, "What if I Never Received an Initial Communication" for more details.

The FDCPA gives consumers a 30-day right to request validation of the debt upon receipt of an initial debt collection notice from a CA. Don't miss your 30-day time frame. See Step 2 below.

Step 2:

Send a Debt Validation Letter Within the 30-Day Validation Request Period

15 U.S.C. § 1692g(a) requires a CA to send a debt notification letter stating, among other things, that unless the debtor disputes the validity of the debt within 30 days from receipt of the debt collection notice, the CA will assume the debt is valid. Since DV comes with a time frame, send your DV letter right away so it is within the 30-day validation request period.

Make sure to send it certified mail return receipt (CMRR). When the CA receives your DV letter, you will receive a green card - the signed return receipt, from the post office, stating when the CA received your letter.

Use an Affidavit of Mailing to Send Your DV Letter

To further establish evidence that you sent the CA a DV letter on a specific date, it's a good idea to have someone else mail your DV letter and sign an affidavit in front of a notary public, proving they did mail it. While using CMRR establishes that the CA received your letter, it doesn't confirm what the letter was. After all, you could have sent them a birthday card and claim it was a DV letter. In court it would be your word against the CA's.

A signed and notarized 'Affidavit of Mailing' by another person (spouse or friend) solves this issue. For the affidavit to be admitted as evidence though, the person who signed it had better be able to appear in court to testify that they indeed sent the DV letter on the date they said they sent it. Without this 'witness' being available for cross examination, it is unlikely that the affidavit alone would stand up in court as evidence. However, if the witness can't be there, if you have a signed affidavit along with the returned receipt from the certified mail, this will pose a strong argument that the actual DV letter was sent on that date. However, it is still better, and iron-clad evidence, if the witness can be there.

Send 2 original sets. Have the person signing the Affidavit of Mailing send your DV letter with their signed affidavit using CMRR. Have them send another set of signed originals using first class mail, including with this set a cover letter stating that a duplicate set of the enclosed documents were sent via CMRR. All of these documents are available with instructions in the DV Sample Letters section.

The purpose of sending this second set is to avoid the possibility that the CA doesn't sign for or accept certified mail. There is no legal requirement that they have to accept and sign for certified mail. This way, with a signed affidavit saying that the enclosed DV letter was sent via both regular first class and certified mail, will establish that the CA indeed received your letter.

Step 3:

Disputing with the Credit Reporting Agencies

Once the debt collector (CA) receives your request for validation, they must cease collection efforts until they supply validation. This provides a great opportunity to send a dispute letter to the credit reporting agencies, because the CA cannot verify the accuracy of the account with them, and the item will be deleted from the credit report. See, "What is Credit Restoration". If the CA does verify the item with the credit reporting agencies without first validating the debt to you, then they have violated the FDCPA and you can sue them. See, "Prove a Debt Collector is in Violation and Win $1000."

Step 4:

When the Debt Collector Sends You Insufficient Validation - Follow Up with Another Letter

Once the CA receives your DV letter, they can only contact you when providing documentation validating the debt, or to tell you that they are terminating efforts to collect the debt. Because the letter contains a 'cease collection communication' statement, the CA must comply with the FDCPA and legally stop any further contact, including phone calls and collection letters. If they do not comply, they have violated the FDCPA. See "Prove a Debt Collector is in Violation, and Win $1000."

If a CA sends anything, you will probably receive a printout from their computers regarding some basic account information; this does not satisfy the requirements of the FDCPA. Send them this follow-up letter, stating that their response doesn't meet the requirements of the FDCPA, and that they must cease all collection efforts.

A seemingly wise debt collector will use the argument of Chaudhry v. Gallerizzo 174 F.3d394, 406 (4th Cir. 1999), cert. denied, 528 U.S 891 (1999) by citing this case's verdict:

"verification of a debt involves nothing more than the debt collector confirming in writing that the debt being demanded is what the creditor is claiming is owed. The debt collector is not required to keep or provide detailed evidence of the alleged debt."

On it's face, it appears clear-cut. Interestingly, it does appear to require that the information come directly from the creditor:

"...the debt being demanded is what the creditor is claiming is owed" (emphasis added).

Therefore, unless the documentation the CA provides has clearly originated with the original creditor, the CA hasn't complied with their own supposed standard.

Step 5:

Watch and Wait

This final step in the process is really not a step at all. You have done what you need to do and now must wait to see if the CA validates the debt or not. They don't have to, but then they can't continue collection efforts either. So really what you're hoping for is for nothing to happen, except to see the collection account deleted from your credit reports as a result of disputing it as described above.

If the item is validated, then you gave it your best shot and can deal with the CA as you see fit, maybe settling the debt as described in the Debt Settlement Process.

 

Key Elements of Debt Validation

The following links to the sections below provide vital information to help you better understand the debt validation process and your rights.

A Debt Collector is Not Required to Validate a Debt

Can I Dispute the Debt After the Validation Request Period?

What if I Never Received an Initial Collection Notification?

The Debt Notification Letter - Your Right to Request Validation

The Least Sophisticated Consumer Standard

The CA Must Provide Sufficient, Adequate Proof

What if the CA Does Provide Adequate Validation?

Collectors May Not Infringe Upon Your 30-Day Validation Request Period

A Debt Collector Has the Right to Sue, But Must Stop Litigation Upon Receipt of a Debt Validation Letter

 

A Debt Collector is Not Required to Validate a Debt

A debt collector (CA) probably won't send you a letter stating they received your request. That's OK, because when you send a DV letter certified mail return receipt, the Post Office will first give you a receipt at the counter and then later, when the CA receives the letter, send you a green card. Keep the card; it proves that the CA signed for and received your letter.

Don't be surprised if you never receive a response to your DV letter, as a CA is not required to send you anything. They are not even required to remove a negative listing from your credit report; however, if you send a dispute letter to the credit reporting agencies (CRAs) and the CRAs ask the CA for verification, a CA is not allowed to verify the information until they provide you with sufficient validation.

Most times, when a CA does not validate your request they sell your debt to a different CA. The new CA will most likely send you an initial collection notification and you should repeat the DV process again. If the old CA was not able to prove you owe the debt, the new CA will most likely fail to supply valid proof. If the CA was assigned by the original creditor, the CA will probably give the collection account back to the original creditor, in which case, you cannot use DV and should try and settle the debt.

Can I Dispute the Debt After the Validation Request Period?

Technically, you can send a debt validation letter after the 30-day validation period. However, the debt collector (CA) is neither legally required to respond to your validation request, nor required to stop collection activity on the account. To exercise the rights given to you by the FDCPA, you should send your validation letter within 30-days of receiving a written collection notice from the CA.

If you find that you are after the 30-day period, it is still a good idea to send a DV letter to the CA anyway. CAs, especially collection agencies (no legal training), are not a sophisticated bunch. While they tend to be unprofessional and borderline incompetent, most are somewhat informed about the FDCPA and consumer rights; enough, so that they will recognize when a debtor is exercising their rights in an informed and competent manner. Sending a DV letter just might scare them off from continuing any collection efforts with you anymore. From industry publications they read about some of the 'horror stories' of other collection agencies being sued and having to pay fines for what they feel are 'loop-hole violations'. So, many of them take the path of least resistance and focus their efforts on the ignorant and naive debtors, rather than fight an informed one and run the risk of a law suit.

What if I Never Received an Initial Collection Notification?

If a debt collector (CA) neither contacted you by phone, nor sent you an initial notification that they were collecting your debt, you probably checked your credit report and found a very unfamiliar collection. The question arises: If a consumer was never notified by the collection company, when did the 30-day validation period commence? You can allege the initial contact was during review of the credit reports and thus, a debt validation request would be timely.

Keep in mind that a CA rarely sends a collection notification to consumers via certified mail return receipt; meaning, the CA would have no proof that a consumer received a debt collection notification. They would have a very difficult time proving to a judge when the initial 30-day validation period began.

The Debt Notification Letter - Your Right to Request Validation

Pursuant to the FDCPA, if a debt collector (CA) does not contain the following information in a written debt collection notice, they have violated the FDCPA and you can sue them. See, "Prove a Debt Collector is in Violation and Win $1000."

 

FDCPA Section 809. Validation of debts [15 USC 1692g] (a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing— the amount of the debt; the name of the creditor to whom the debt is owed; 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; a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

 

The Least Sophisticated Consumer Standard

A debt collector must not confuse a debtor by sending any communication that contradicts a debtor's rights under the FDCPA. The following excerpt from the law has been the basis of many court cases establishing whether or not a debtor's rights were violated in the communication of the debt collector's (CA's) 'debt notification letter'.

 

FDCPA Section § 809. Validation of debts [15 USC 1692g] (b) ...Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.

 

All consumer protection laws share a similar goal of protecting even the most unsophisticated consumer. The least sophisticated consumer standard helps ensure that consumers are not taken advantage of by companies who may try to ensnare them by using subtle, but harmful schemes. Because past debt collection companies have used documents that included 'fine print' or legalistic verbiage to confuse consumers, most of the courts have adopted the least sophisticated consumer standard when evaluating a case's outcome, even if the consumer is very sophisticated.

An unsophisticated consumer is one who is "uninformed, naive, or trusting" as established in Veach v. Sheeks, 316 F.3d 690, 692 (7th Cir.2003). On the other hand, consumers are expected to possess "rudimentary knowledge about the financial world" and are "capable of making basic logical deductions and inferences." Pettit v. Retrieval Masters Creditors Bureau, Inc., 211 F.3d 1057, 1060 (7th Cir.2000).

The case of Gammon v. GC Services Limited Partnership, 27 F.3d 1254, 1257 (7th Cir. 1994) helps explain the least sophisticated consumer standard as it applies to debt collections.

"...the Second Circuit explained that the widely-adopted least sophisticated consumer standard was grounded in an effort to effectuate the goal of consumer protection laws by protecting consumers of below-average sophistication or intelligence who are especially vulnerable to fraudulent schemes...It pointed out that courts have held that even the least sophisticated consumer can be presumed to possess a rudimentary amount of information about the world and a willingness to read a collection notice with some care. Thus, it concluded, the standard effectively protects debt collectors against liability for bizarre or idiosyncratic interpretations of collection notices."

As shown below in the following examples of court rulings, many of the CAs were not necessarily trying to 'pull a fast one', but simply didn't follow the letter of the law, and in so doing were found to be in violation.

Case Law Examples of Violations Due to Confusing the Debtor

Spears v. Brennan Indiana Court of Appeals, 745 N.E.2d 862.

The debt collector must adhere to 15 U.S.C. § 1692g(a) and must not mislead the debtor by indicating the debtor does not have 30 days to validate the debt.

“...obliges the debt collector to refrain from confusing the debtor by undercutting the required [debt collection] notice or implying a different obligation.”

 

Johnson v. Revenue Management Corp., 169 F.3d 1057 (7th Cir. 1999)

For example, a clear-cut demand that the debt must be paid “immediately” would undercut the debt collection notice and violate the FDCPA by implying that the debtor does not have 30 days to dispute the validity of the debt. However, this sort of demand is OK if the debt collection also includes a statement that illustrates that "the debt is due immediately only when the debt is uncontested.” This statement informs the debtor of their right to validate.

The debt collector states:

"...if you fail to make prompt payment we will have no alternative but to proceed with collection, which may include referring this account for legal action or reporting this delinquency to the credit bureau" (emphasis added).

 

Bartlett v. Heibl, 128 F.3d 497, 501 (7th Cir. 1997)

Another example of a debt collector implying that the debtor has no right to validate. The debt collector states:

"...if you wish to resolve this matter before legal action is commenced, you must do one of two things within one week of the date of this letter: pay $316 toward the satisfaction of the debt, or get in touch with Micard (the creditor) and make suitable arrangements for payment. If you do neither, it will be assumed that legal action will be necessary" (emphasis added).

 

Fields v. Wilber Law Firm, 383 F.3d 562 (7th Cir. 2004)

According to the FDCPA and other case law, a debt collector is not only responsible for correctly calculating the debt amount but they must also clearly inform the debtor of the current balance and how all the fees were accrued. A debt collector is legally allowed to add reasonable attorney fees onto the original balance; however, the new debt amount (original balance plus attorney fees) and how it was calculated must all be stated in the debt collection notice. The appeals court explains:

"Even if attorneys' fees are authorized by contract, as in this case, and even if the fees are reasonable, debt collectors must still clearly and fairly communicate information about the amount of the debt to debtors. This includes how the total amount due was determined if the demand for payment includes add-on expenses like attorneys' fees or collection costs. A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt."

 

Veach v. Sheeks 316 F.3d 690, 692 (7th Cir.2003),

Let's examine why a debt collector is not allowed to falsely state a debt amount. In the case of Sheeks, the original creditor, hired an attorney to collect on a Veach's debt. The attorney sent Veach a written notice that listed the remaining principle balance which included treble damages, reasonable attorney fees, and court costs. (treble damages are three times the amount that a court would normally find the injured party entitled to). The problem was that the debt collection attorney:

"took it upon himself to hold Veach liable for [statutory] penalties that had not yet been awarded, penalties that for FDCPA purposes should have been separated from the amount of debt...The 'amount of debt' provision is designed to inform the debtor (who, remember, has a low level of sophistication) of what the obligation is, not what the final, worst-case scenario could be."

In simple terms, the court did not allow the attorney to add any future treble damages that 'might' be awarded assuming Veach lost. The court regarded this as falsely stating the amount of debt and held that:

"the attorney violated §1692g(a)(1) by stating the amount of the debt as an estimate of future potential liability in a court action rather than as a statement of the current amount of the debt."

Now let's examine why a debt collector is not allowed to vaguely state a debt amount. A debt collector must not only correctly state the debt, but clearly state its details. In the case of Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, and Clark, L.L.C., 214 F.3d 872, 875-76 (7th Cir.2000), the debt collector sent Miller (debtor) a debt collection notice that included the unpaid principle balance. The notice also mentioned that the amount of debt fluctuated each day because of interest and fees. The debt collector assumed that because the debt would always be different, they could simply provide a toll-free number the debtor could call about the current, correct debt amount. The district court disagreed, determining that:

"The unpaid principal balance is not the debt; it is only a part of the debt; the Act [FDCPA] requires statement of the debt. The requirement is not satisfied by listing a phone number.It is notorious that trying to get through to an 800 number is often a vexing and protracted undertaking, and anyway, unless the number is recorded, to authorize debt collectors to comply orally would be an invitation to just the sort of fraudulent and coercive tactics in debt collection that the Act aimed (rightly or wrongly) to put an end to (emphasis added)."

The court added their own opinion of what should have been done to accommodate the least sophisticated consumer:

"What they certainly could do was to state the total amount due--interest and other charges as well as principal--on the date the dunning letter was sent. We think the statute [FDCPA] required this (emphasis added)."

Let's come back to the case of Fields v. Wilber Law Firm, 383 F.3d 562 (7th Cir. 2004). Here we see that even though a debtor initially signed and authorized reasonable attorney's fees when taking on the debt and even if the fees are reasonable,

"debt collectors must still clearly and fairly communicate information about the amount of the debt to debtors. This includes how the total amount due was determined if the demand for payment includes add-on expenses like attorneys' fees or collection costs."

More specifically, when a new debt amount is different from the original balance, the debt collector must state the new amount, legal status, and how the new balance came to be. §1692e(2)(A) states that it is a violation to falsely represent:

"the character, amount, or legal status of any debt[.]"

For example, let's say an unsophisticated consumer has lost a bill and forgot the amount of the debt completely. In this circumstance, the debtor (or debtor's spouse, or someone else paying bills for the debtor) might logically assume that she simply incurred nearly $400 in charges. By leaving the door open for this assumption to be made, Wilber's letter was misleading because it gave a false impression of the character of the debt. It is unfair to consumers under the FDCPA to hide the true character of the debt, thereby impairing their ability to knowledgeably assess the validity of the debt.

The CA Must Provide Sufficient, Adequate Proof

The level of court evidence required may be different for each court case; however, the case of Spears v. Brennan, which aside from being newer than Chaudhry v. Gallerizzo, directly contradicts the decision:

"...specifically, Brennan claims that a copy of the consumer credit contract between Spears and American General attached to the notice of claim provided sufficient verification of the debt within the meaning of 15 U.S.C. § 1692g(B). We cannot agree. The contract in no way provides sufficient verification of the debt. A review of the document reveals that it identifies only the terms of Spears’ loan, including a 17.99% annual interest rate and the original loan amount of $2,561.59. The loan agreement contains no accounting of any payments made by Spears, the dates on which those payments were made, the interest which had accrued, or any late fees which had been assessed once Spears stopped making the required payments. "

You can also state Coppola v. Arrow Financial Services, 302CV577, 2002 WL 32173704(D.Conn., Oct. 29, 2002). Here the debt collector had to provide the source of the debt, the amount the junk debt buyer paid for the debtor's debt, how the amount was calculated, and documents confirming the authority to collect the debt.

"...must provide her “full name, present or last known address, and...[her] present or last known place of employment...

...please set forth a plain English transcript of the “contact history,” media, or credit records defendant is asked to produce herewith, including meaning of code numbers and abbreviations from top to bottom...

...Identify each consumer reporting agency (credit bureau) to which defendant reported plaintiff’s debt and the dates of each such report....

...Provide an itemized calculation of the amount claimed due in your demand letters to plaintiff (interest, principal, collection charge, other components if any)...

...Identify the parties to the purchase and sale agreement whereby defendant acquired plaintiff’s former Home Depot account. If a broker was involved, identify that entity...

...Identify all assignees of plaintiffs’ former Home Depot account in and since 2001. If any assignee is a trust, identify each trustee thereof..."

Now we're reduced to a foreign decision standoff, with Chaudry saying one thing, and Spears and Coppola saying quite another. Result? Neither one trumps the other. The judge is going to decide based on other factors - and is probably slightly annoyed with the debt collector for even bringing up the Chaudry case.

Sufficient validation means a debt collector may need to include some or all of the following:

• Signed contract/credit application between debtor and original creditor (shows proof an agreement between the debtor and original creditor )
• Copies of all signed charge slips (shows proof of ALL debtor authorized charges applied to the card)
• Copies of all statements from the day the account was opened until the day it was charged off. (shows proof of all charges and any fees applied to the account)
• If the debt was sold, a copy of the sales agreement between creditor and purchaser as well as how much the debt was purchased for must be provided (shows proof that the creditor has given the debt buyer a contractual right to the debt)
• If the debt is on assignment to the debt buyer (contingency), a copy of the agreement between creditor and the debt buyer must be provided. (shows proof that the debt buyer is working for the creditor)
• Full accounting of all payments made AFTER the account went into default. (If payments were made on the debt to a previous debt buyer and then the debt was sold to another debt buyer, the new CURRENT debt buyer must provide a full accounting as to where and how those payments were applied to the debt.)
• The complete chain of evidence (shows the different JDBs who have owned the debt and how long it has taken to get to the current debt buyer.

Generally, debt collectors must be able to prove:

1. Without doubt that you are the debtor.
2. They legally own the debt and/or have been authorized to collect it from you.
3. The full amount of the debt that they are pursuing is accounted for and documented by your original creditor.
4. They can provide a copy of the original legal contract you signed with your original creditor.

What if the Debt Collector Does Provide Adequate Validation?

If the debt collector does provide adequate proof that they own your debt and they have not violated any part of the FDCPA, you can no longer use debt validation and should resort to a different debt reduction strategy. If they have offered you a good settlement on your debt, it may be wise to take the offer. If you have many other debts, you might consider a Chapter 13 bankruptcy.

Debt Collectors May Not Infringe Upon Your 30-Day Validation Request Period

A demand that the debt be paid immediately would violate the FDCPA by implying that the debtor does not have 30 days to dispute the validity of the debt, unless accompanied by additional reconciling language, such as that payment is due immediately "only when the debt is uncontested.” As seen in Spears v. Brennan Indiana Court of Appeals, 745 N.E.2d 862 No. 49A02-0003-CV-169, the 15 U.S.C. § 1692g(a) of the FDCPA

"obliges the debt collector to refrain from confusing the debtor by undercutting the required notice or implying a different obligation.”

In this case, Brennan (debt collection lawyer) sent Spears (debtor) an initial communication letter followed up six days later with a summons notice (lawsuit), which Brennan was legally allowed to do. The hearing was rescheduled only 34 days after Spears received the debt collection notice on October 24, 1996. Since the hearing could well have been scheduled outside the 30-day debt validation request period, Brennan infringed upon Spears' statutory rights and violated the FDCPA. See, "Prove a Debt Collector is in Violation and Win $1000."

It was now up to Brennan to prove that he scheduled the November 27, 1996 hearing (34 days after Oct 24, 1996) and obtained a default judgment against Spears outside the 30-day debt validation request period. Brennan could not prove the date on which Spears received the dunning letter and was not entitled to summary judgment.

A Debt Collector Has the Right to Sue, But Must Stop Litigation Upon Receipt of a Debt Validation Letter

The case of Johnson v. Revenue Management Corp., 169 F.3d 1057 (7th Cir. 1999) proves that the debt collector is entitled to file suit [against the debtor] whenever it chooses, even within the 30-day validation request period. However, in Bartlett v. Heibel, 128 F.3d 497, 501 (7th Cir. 1997), the courts determined that if the debtor requests proof of the debt or the name and address of the original creditor within the 30-day period (even after receiving a summons), the law requires the collector to suspend any efforts (through litigation or otherwise) to collect the debt until they mail the requested information to the debtor.

Let's further clarify using the case of Spears v. Brennan Indiana Court of Appeals, 745 N.E.2d 862 No. 49A02-0003-CV-169. Once Spears received the summons he wrote a DV letter. Even though the hearing was already scheduled, it was Brennan's duty to comply with the FDCPA and stop all collection efforts and stop pursuing all litigation activity until he provided written validation to Spears.

Later, Brennan maintained that there was no violation of the FDCPA because he

“sent adequate verification of the debt."

The Appeals Court did not agree. Therefore, Brennan violated 15 U.S.C. § 1692g(b) when he failed to cease collection of the debt by obtaining a default judgment against Spears after Spears had notified Brennan in writing that he was disputing the debt but before Brennan had mailed verification of the debt to Spears. See, "Prove a Debt Collector is in Violation and Win $1000."

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