Validation & Verification of Debt

In the event of your credit accounts enters collections, don't assume that paying the debt is the next step. Creditors and collection agencies can and do make mistakes and some of them don't operate entirely honestly. Therefore, if a collection agency contacts you, always validate the amount of the debt before you pay a penny.

Definition

Debt validation is the process of having a collection agency prove you really owe a debt. Under validation, the collection agency must send you a copy of the original agreement you had with the creditor. Verification is similar but the collection agency sends you a letter with the creditor name and address, along with the debt total. Validation is preferable because of the original documentation it provides.

When to Validate

Collection agencies normally send you a letter telling you your debt has gone to collections and that they want you to pay what you owe. Watch for another letter within five days of the first notice for collection. This second letter informs you of your right to validate and dispute the debt. Generally, you have a month -- 30 days -- to respond and dispute the total. If you don't respond, the collection agency will assume you agree that they have the right to collect.

What to Get

Under debt validation, any collection agency should send you three items. The first is the proof that the creditor sold or assigned the debt to the collection agency. A collection agency cannot attempt to collect a debt it doesn't own or to which it hasn't been assigned, so this shows you the collection agency has a right to pursue your balance.

The collection agency also should give you a copy of your payment history with the creditor. The third piece of documentation is a copy of your original contract. Normally, the contract and payment history are enough to show you that the debt is correct or where a mistake has happened. If a collection agency can't produce the original contract, copies of account statements, along with the payment history, may give sufficient evidence.

Steps

Debt validation is a multi-step process. It starts with you checking the statute of limitations for your state -- if the statute has expired, the collection agency is pursuing phantom debt you aren't legally obligated to pay even if the total is accurate.

Once you've checked the statute of limitations, check that the collection agency is licensed, as only licensed collection agencies have the right to collect debts. Then request validation in writing via certified mail. If they don't respond, send them a copy of your original letter and a copy of your return receipt; tell them they have violated the Fair Debt Collection Practices Act. Send a second letter asking them to remove the negative listing from your credit history if they still don't respond. Sue if they don't comply.

Contact the credit bureaus in writing and let them know the collection agency didn't respond to your validation request and violated FDCPA. Ask that they verify how they got their information from the collection agency. If they can't do this, you can assume the bureau didn't perform a reasonable investigation. If they don't remove the negative listing, indicate your intent to sue and, if necessary, do so.