Last updated Nov. 19, 2018.
Attempts to collect invalid debts are on the rise. One recent analysis of Consumer Financial Protection Bureau (CFPB) data showed a 65.8% increase in complaints alleging illegal debt collection efforts from the first three quarters of 2016 to the same period in 2017. These issues arise across the country, but the same analysis listed California among the top 10 states for illegal debt collection activity, based on complaints per capita.
Fortunately, the Fair Debt Collection Practices Act (FDCPA) offers extensive protection to consumers facing debt collection efforts by collection agencies, debt buyers, and other third-party collectors. The FDCPA requirement that debt collectors validate debts they are attempting to collect or are reporting to credit reporting agencies can be an especially powerful tool — if you understand how to use it effectively.
Article at a Glance
- The FDCPA imposes various obligations on third-party debt collectors when they attempt to collect a debt.
- If you send a debt validation letter in California to a debt collector, it must cease all collection activity until it has verified the debt.
- Sending a debt validation letter to one debt collector doesn’t prevent it from reselling the debt to another debt collector, which can begin collection activity for itself.
Debt Collector Obligations
The FDCPA imposes many obligations on third-party debt collectors. One core requirement is that, within five days of initial contact, the debt collector must send a written notice that includes the name of the creditor and the amount of the debt. This notice must also include a statement that:
- The creditor will assume the debt is valid unless the consumer disputes its validity within 30 days;
- If the consumer does dispute the debt, the collector will provide verification of the debt or a copy of the judgment, and;
- Upon the consumer’s written request within the 30-day period, the collector will provide the name and address of the original creditor (if different).
Once the consumer disputes the debt or requests the name and address of the original creditor, the debt buyer or collection agency must stop collection activity until the verification or requested information is provided.
See also: Struggling with Debt? You Need a Plan
Preparing and Sending a Debt Validation Letter in California
A debt validation letter is one way to trigger the debt collector’s obligation to validate the debt it is attempting to collect. There are many reasons you might want to send a debt validation letter in response to contact from a debt collector, including:
- You don’t recognize the debt;
- You aren’t responsible for the debt;
- You believe the amount of the debt is incorrect;
- The debt has been paid; or
- The debt has been discharged in bankruptcy.
How to Write an Effective Debt Validation Letter in California
Often, consumers are inclined to say too much in communications with debt collectors. When drafting a debt validation letter, it’s important to avoid providing information or admissions that might assist the debt collector.
Remember that the purpose of a validation letter isn’t to provide evidence to the collector that the debt is invalid, or the amount is incorrect. Rather, the objective is to bounce the issue back to the debt collector, triggering the obligation to verify, and putting collection efforts on hold in the interim.
You don’t have to create a letter from scratch. The CFPB offers debt validation letter templates and templates for other communications with debt collectors on its website.
Sending the Debt Validation Letter: Keep Good Records!
Not every debt collector follows the law. So, it is important to keep good records throughout communications with debt buyers and collection agencies. When you send a debt validation letter, use certified mail with a return receipt requested, and keep a copy of your letter with the proof of mailing.
After a Debt Validation Letter in California
Your request to validate a debt doesn’t obligate the debt collector to provide information and verification. Instead, it leaves the debt collector with a choice: validate the debt or stop trying to collect. Sometimes, the debt collector will decide that it isn’t worth the time investment to verify your debt. In that situation, a debt buyer may simply stop trying to collect from you, or a collection agency may return the file to its client.
When that happens, it isn’t necessarily the end of efforts to collect that debt. A debt validation letter applies only to the collector who received it. So, a debt buyer who doesn’t want to go to the trouble of validating (or can’t validate) may repackage the debt and pass it along to another debt buyer. Similarly, a debt passed back to the original creditor by a collection agency may be placed with another agency.
If the collector proves that the debt is yours, the amount is correct, and the collector has the right to collect on the debt, then collection efforts may resume. However, if the collector cannot or will not validate the debt, then it must cease collection action, and must not report the debt to the credit bureaus.
You Don’t Have to Fight Debt Alone
Our attorneys have helped tens of thousands of California consumers regain control of their financial lives through bankruptcy. If you’re struggling with debt, contact Borowitz & Clark today for a free consultation.