Learn About Debt Validation And How It Can Help You

Picture for a instant, that you owe somebody named Joe some money, and somebody phones you or rings your doorbell, and when you answer a person by the name of Victor says that he's been authorized by Joe to collect the money that you owe him.

Even if you had the money, and knew that you owed it, would you pay this new person on the scene?

I'm pretty sure that you wouldn't even consider for a moment giving Victor any money, until you were 100% sure that he was really acting on Joe's behalf.

And that procedure is in essence exactly what Debt Validation is all about.

For your protection, and according to law, (The Fair Debt Collection Practices Act) you have the right to demand that Joe prove that he is empowered to collect the debt.

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

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.

N.B. The above only applies to third parties such as debt collectors and collection agencies, and does NOT apply to original creditors, i.e. credit card companies and the company that originally made the loan.

A computer generated printout of your debt is not sufficient, and you have to be provided with actual proof that the debt exists, and a search of the records is at the company's expense, and not yours.

And If A Creditor Or Debt Collection Agency Cannot Verify A Debt,

1) They are not allowed to collect the debt

2) They are not allowed to contact you about the debt

3) They are also not allowed to report it to a credit agency

4) If they violate any of the above you have the right to $1000 in damages which can be claimed via a small claims court.

How Does A Debt Collector Prove That He Owns A Debt?

1) By providing a copy of the original signed loan agreement or credit card application, or showing account statements from the original lender

2) Showing some kind of proof that the collection company owns the debt/or has been assigned the debt.

If you want to have some fun, and make life far more difficult for the debt collector, then you have the legal right to ask him to show,

a) How the debt was calculated

b) How much he added on

c) How he determined his fees.

Was Your Debt Assigned To The Collection Agency Or Did They Purchase It?

The reason that this is important, is that if the agency was simply assigned the debt then you don't technically owe them anything, unless you signed a contract with the original lender which included the wording, "debtor agrees to be responsible for payment of this debt to creditor OR ITS ASSIGNS".

The above is not very common but it does exist in some lenders' contracts.

And If The Debt Collection Agency Did Purchase The Debt?

Even if the debt collection agency purchased the debt, they are not the original lender and you are still protected by the FDCPA.

How And Why Collection Companies Buy Bad Debts

All kinds of creditors use collection companies, because they themselves generally have neither the time nor the resources to follow up on debtors that are deemed to have defaulted on their debt.

Nearly all of the big credit card companies and lenders now package their debts into large portfolios, and they're sold by auction on Wall Street.

JDBs (Junk Debt Buyers), very often buy bad debts for as little as two cents on the dollar, and more often than not the only things that they know about what they're buying is the amount of the debt, a name, and a last known phone number or address.

So it's easy to see then, how a company that focuses on debt collection, pays so little for the debts, and doesn't perhaps feel as ethically restricted as the original creditor, can make a great deal of money by tracking down debtors and getting them to pay as much as they're able.


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The author of this article was a film producer, and award winning film sound editor for many years. He has long been interested in finance and economics, and one of his websites -> Home Loan Help has a large number of very popular articles about the world's economy in general, and bad debt loans, debt settlement, debt consolidation, and bankruptcy in particular.