Debt Collection Companies Up The Ante

It seems that more and more collection companies are taking their battle to court.  Up to now it was a matter of contacting you and using whatever means necessary to persuade, cajole even demand you pay the debt collector!

The newest tactic is to take you to “small claims” court.  If you don’t show up the court will award the collection company a judgment against you giving them the power to garnishee your wages.

But here is a strategy to slow them way down, even stop them!  It is called “Debt Validation”

When you are served a summons to appear in small claims court you have 30 days to request that the collection company “validate” the debt they are trying to collect.  This STOPS the court action until the debt has been fully verified!

What does the debt collector need to provide as debt validation?

• Proof that the collection company owns the debt/or has been legally assigned the debt. This is basic contract law. It is very difficult to get a judgment without a direct contract between collection agency and the original creditor.
• At a minimum, some account statements from the original creditor. If you really want to get sticky, you can pin them down on the amount of the debt by requiring complete payment history, starting with the original creditor. (How the heck did they calculate this debt? What fees/interest have tacked on to this debt and how were these fees determined?) This requirement was established by the case Fields v. Wilber Law Firm, Donald L. Wilber and Kenneth Wilber, USCA-02-C-0072, 7th Circuit Court, Sept 2004..
• Copy of the original signed loan agreement or credit card application. (Your contract with the original creditor establishing the debt between you.) However, account statements from the original can fulfill these requirements.
• Proof that this debt collection company has the right to collect the debt in your state (is licensed).

As is “too” often the case, the collection company may not be able to fulfill all of these requirements.  If they can’t they are prohibited from both collecting the debt and reporting the debt to the credit bureaus.

Here is a link to a set of “debt collection” letters you can use.  Sample Debt Collection Letters

The key to being “pro-active” about your credit is to know what your rights are and how to apply them.  For further information visit the “library” on our Safe Haven Credit website.

Tell us your debt collection story in the comment section.