The Frugal Creditnista

If I Know I Owe The Original Creditor, Why Ask The Collection Agency For Validation?

The beginning of the year marks a fresh start for new beginnings. Financial goals are often made of improving our credit and improving our financial health. So… we embark on an action plan to get our credit together!

The funny thing is; we're not the only ones making strides to increase our bottom line; our creditors are too. The beginning of the year is the time we'll start to receive all types of phone calls, and dunning letters demanding payment, offering 50% or more off settlements, and requests to call in to discuss payment arrangements.

Most of these communications will come from collection agencies, and with tax time coming up; being able to just pay them off and be done with them seems sooooo appealing, right?  You call, pay them, and feel so accomplished! Good credit in no time!WRONG!

This way of thinking is so common and so wrong! But if you feel this way, this is not an attempt to poke fun because; I felt the same way too! Gosh, I can't imagine the amount of money I've lost paying creditors – collection agencies – when I didn't have to!

I say it all the time; Financial Illiteracy is EX-PEN-SIVE! So, let's take a moment to break this down and educate ourselves.

When you receive any communication for a debt the first thing you should do is check your state's statute of limitations. Each state has a specific amount of time a creditor has to enforce a debt through the court system. This basically means suing you for a judgment. They can still attempt to collect but if someone can't MAKE you pay; why pay them? That money can be applied towards more current debts.

The next thing you want to do is look up the company that sent the letter. I do this for 2 reasons:

A.  I want to see who I'm dealing with. Are they legit, are they local, are they ‘sue happy'; are they known to give steep reductions on debt;

B.  To see if there have been any cases brought against them for violations of the Fair Debt Collection Practices Act already, this lets me know what to look out for in case I can sue them as well. If your debt is NOT outside of your state's statute of limitations it's good to know how ‘wolf-like' the company you're dealing with is.

Then, you write a Debt Validation Letter. This is where I get the most hesitation. I know I owe the debt; I know the amount is right, why do I need to validate; can't I just get it over with and pay already?! No, you can't (I say this with love).

Asking a collection agency to validate (prove) the debt is your legal right.  Look right here on the FTC's website for the Fair Debt Collection Practices Act and click on 809: Validation of debts. It's all there!  Exercise your right.

The number one reason you want to ask for validation is to see if the collection agency is legit.  Go ahead and Google Fake, Phony, Scam, AND Collection Agency. You will see a ton of cases pop up of consumers who've been duped, companies that have been fined, and individuals who have been prosecuted.

You cannot take the phone call or letter at face value. You may wonder “Well if they were a phony collector how would they know my name, my debts, and the exact amount I owe?”

Well, considering the number of private companies, financial institutions, and government entities that have been hacked in the past 5 years it's really not that difficult. To generate a fraudulent letter using a legit company's name and logo, directing you to another ‘customer service' center, using data they either illegally purchased from a hacked database, or that they have personally hacked themselves is pretty easy.  Validation Protects You.

Another reason you want to validate is to see if the collection agency truly represents the original creditor.  Just because some random stranger calls you up claiming to represent a company and now wants you to pay them, doesn't mean they're telling the truth.  This is not to say that collection agencies lie (although a lot of them do), but that debt can transfer to many hands, especially a bad debt, you want to ensure the collection agency has legally been assigned your debt. How do you do this?

Ask for proof. Request a copy of an agreement or a statement from an officer from the original company, notarized and on company letter heard; again, protect yourself.  If the debt has been purchased you want proof of that too.

Another item you want to validate is the amount due.  Just because the amount ‘looks' right does not mean it is right. Ask how they got to that amount, even if it matches the final bill issued by the original creditor; heck how did they get to that amount?

Remember validation doesn't just ask for proof of who owns the debt but also how much is truly owed.  This is because fees and interest have been added and it's good to know how much.  Think about it, if you are going to offer a settlement; wouldn't you want to know how much of that amount due is principal, interest, and fees? I negotiate off of principal all day long. Your added fees are irrelevant to me.

Also, if the debt was purchased, they bought it for significantly lower than what they're asking you for; YES this includes the settlement offer as well. If they are offering you 50% off how much do you think they purchased it for?  Further, I can't tell you how many times my clients have gone to the original creditor on assigned debts and have gotten a better deal once the collection agency's fee, creditor's added fees/interest were deducted. So, ask for a full accounting of how your account arrived at the balance that is showing.

Hopefully, these reasons are enough for you to request a debt validation rather than just paying a debt.  I go so much deeper than this in my Fire Your Collections course, which I created for my  Credit On Fire Academy members because collection agencies are so crafty these days!

For example,

  • Attorneys will try to sue you when they receive a validation letter, knowing they are legally required to validate the debt prior to seeking any further collection activity.
  • They will sell the invalidated debt to another collection agency to avoid providing you with information that they more than likely do not have.
  • They will give you partial documents such as original statements from the original creditor without giving you proof that they were assigned or own the debt and you are required to pay them.

Here's something I do per the FCDPA.  I say I am DISPUTING the debt and require validation rather than just saying I want to validate the debt.  Why?

Because if I am disputing the validity of the debt they have to provide me with documents proving otherwise.  I have so many of my spiritual clients that feel badly about this, but you are NOT lying.  Did you enter into an agreement with the original creditor right?  Did you make an agreement with ABYZ Collection Company?  NO.  So, ask that they prove they have the legal right to collect from you.

Now, I'll be lying if I stated that many professionals in my industry send these letters to send collection agencies scrambling away with their tails between their legs.  This is because when debt transfers hands documentation gets lost and they are often not able to validate.  That works to your advantage.  Per the FDCPA (remember, I asked you to read it?) it states all collection activity must STOP until they are able to validate.  So, you just got away from paying this invalidated debt and can put that money towards other efforts that will help you meet your goals this year :).

Many representatives in the debt collection industry HATE validation letters and state they are stupid, they are a trick to avoid your responsibilities, or they single you out for more aggressive collection activity.  That's bull.

Consumers are the protected class, not the debt collection agency, so it is their responsibility to ensure they have all the legal documentation that proves we should be paying them.  As far as more aggressive collection activities, if you don't respond, that's far worse than asking for validation; either way, you can get sued. So what would they recommend?  That you just pay any ole body?  That's even more stupid. There's already case law that has found that a collector cannot sue without providing the basic information I described above.

So, if they are not able to validate and you still want to pay, can you?  Absolutely, it's your personal choice. If it is within your state's statute of limitations, yes; if it's past NO!  If they are offering a real deal and agree to remove it from your credit report, YES.

Hope this helps!

If you’d like to learn how to apply everything I’ve detailed here, check out my Credit on Fire Academy! My members are doing more than increasing their credit scores; they are TRANSFORMING their lives!

If you’d like 1-on-1 assistance, visit www.SoarMyScores.com!

Bonus:  Sample Validation Dispute Letter
(For additional dispute letter templates, visit my free online community, CreditMakesSense.me!)


Your Name
Your Address

Collection Agency
Collection Agency Address


To Whom It May Concern,

I am sending this letter to you in response to a notice I received from you on (date of letter), (adjust if you found out about them by reviewing your credit report). Be advised this is not a refusal to pay, but a notice that your claim is disputed and validation is requested.

Under the Fair Debt Collection Practices Act (FDCPA), I have the right to request validation of the debt you say I owe you. I am requesting proof that I am indeed the party you are asking to pay this debt, and there is some contractual obligation that is binding on me to pay this debt.

This is NOT a request for “verification” or proof of my mailing address, but a request for VALIDATION made pursuant to 15 USC 1692g Sec. 809 (b) of the FDCPA. I respectfully request that your offices provide me with competent evidence that I have any legal obligation to pay you.

At this time I will also inform you that if your offices have or continue to report invalidated information to any of the three major credit bureaus (Equifax, Experian, TransUnion), this action might constitute fraud under both federal and state laws. Due to this fact, if any negative mark is found or continues to report on any of my credit reports by your company or the company you represent, I will not hesitate in bringing legal action against you and your client for the following:

Violation of the Fair Debt Collection Practices Act
Defamation of Character

I am sure your legal staff will agree that non-compliance with this request could put your company in serious legal trouble with the FTC and other state or federal agencies.

If your offices are able to provide the proper documentation as requested in the following declaration, I will require 30 days to investigate this information and during such time all collection activity must cease and desist. Also, during this validation period, if any action is taken which could be considered detrimental to any of my credit reports, I will consult with legal counsel for suit. This includes any listing of any information to a credit reporting repository that could be inaccurate or invalidated. If your offices fail to respond to this validation request within 30 days from the date of your receipt, all references to this account must be deleted and completely removed from my credit file and a copy of such deletion request shall be sent to me immediately.

It would be advisable that you and your client assure that your records are in order before I am forced to take legal action.

Please provide the following:

• Agreement with your client that grants you the authority to collect on this alleged debt.
• Agreement that bears the signature of the alleged debtor wherein he/she agreed to pay the creditor.
• Any insurance claims been made by any creditor regarding this account.
• Any Judgments obtained by any creditor regarding this account.
• Name and address of alleged creditor.
• Name on file of alleged debtor.
• Alleged account number.
• Address on file for alleged debtor.
• Amount of alleged debt.
• Date this alleged debt became payable.
• Date of original charge-off or delinquency.
• Verification that this debt was assigned or sold to collector.
• Complete accounting of alleged debt.
• Commission for debt collector if collection efforts are successful.

Please provide the name and address of the bonding agent for «COLLECTION AGENCY» in case legal action becomes necessary.

Your claim cannot and WILL NOT be considered if any portion of the above is not completed and returned with copies of all requested documents. This is a request for validation made pursuant to the Fair Debt Collection Practices Act. Please allow 30 days for processing after receiving this information back.

Best Regards

[Your Signature]

cc Federal Trade Commission

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