Nowadays, it’s common for people to receive collection letters or to be served with a lawsuit by a creditor or collector that they’ve never heard of. This often happens because creditors assign debts to collection agencies or sell them to “debt buyers.”
Luckily, federal and state laws give you the right to demand information about the debt (called debt verification). And if the debt buyer or collector cannot produce documentation of the debt, you can raise this as a defense to a lawsuit.
The servicing, buying, and selling of debt has become so commonplace that often the original creditor does not have the account for very long. This is especially true if you have fallen behind on payments. Collectors and businesses you never heard of before may barrage you with telephone calls and letters.
Often, these calls and letters contain no information that will enable you to identify the debt, such as the name of the original creditor and account number. This makes it impossible to know if the amount sought is correct, or if you even owe the debt at all. In addition, it’s seldom clear who you are dealing with: is it a bill collector working for a creditor or an actual creditor? That distinction can be important under federal debt collection law.
So what can you do to dispute the debt when a creditor or debt collector has failed to provide you with supporting documentation verifying the debt? Both federal and state laws provide some options, depending on whether you have been sued or not.
If you are contacted by a debt collector, the Fair Debt Collection Practices Act (FDCPA), and many state debt collection statutes, provide you with an important tool: the verification letter. Under the FDCPA, if you send the bill collector a letter that disputes the debt and/or requests verification of the debt within 30 days of receiving the initial written notice of the debt (called a “dunning letter”), then that bill collector must:
The debt collector cannot continue its collection efforts against you until it verifies the debt. There is no time limit for the debt collector to respond. For instance, if six months have passed since you requested the verification, the collector cannot just resume calling or writing you to demand payment.
While some federal courts have held that this verification requirement does not mean that the creditor has to keep a file on that debt, at a minimum you are entitled to:
It’s important to understand the difference between a debt collector and a creditor. The federal verification obligation does not apply in instances where the creditor is the one trying to collect a debt from you.
On June 12, 2017, the Supreme Court decided Henson et al. v. Santander Consumer USA Inc., a case that sought an answer to the question of whether a debt buyer must abide by the collection rules outlined in the FDCPA. The Court concluded that the owner of a debt isn’t a debt collector under the Act. Although the Court’s holding seems straightforward, the Court didn’t explain whether this decision will apply to all debt buyers in every situation. (To learn more about this case, read Can a debt collector call me late at night?)
If a debt collector fails to verify the debt but continues go after you for payment, you have the right to sue that debt collector in federal or state court. You might be able to get $1,000 per lawsuit, plus actual damages, attorney’s fees, and court costs. Under some state fair debt collection acts, you can get more than $1,000 in statutory damages.
The debt collector might be able to shield itself from liability if it is able to prove that its acts and omissions were unintentional and in error. However, it will have to show that it had a procedure in place to prevent the situation from happening. (For more specifics on how to request debt verification, see Nolo’s article on Debt Validation.)
If a debt collector sues you, most state and local procedural rules put even heavier documentation requirements on both the debt collector and creditor. In many states, a creditor or debt collector that is suing for collection of an account must:
This is often referred to as the “attachment rule.”
If the creditor or debt collector doesn’t do this, you might be able to get the lawsuit dismissed. Or, you can ask the court to require the creditor or debt collector to provide the missing documentation and information. This is often called “requesting a more definite statement.” In either case, you’ll have to prepare and file a formal motion with the court.
But what must the creditor provide by way of documentation? At a minimum, it must produce:
If the creditor or collector suing you fails to produce proof of the assignment, then you can ask the court to dismiss the lawsuit. Again, you’ll have to prepare and file a formal motion with the court.
If the debt collector suing you previously did not verify the debt after you timely requested debt verification, you may file a counterclaim against that debt collector within the same lawsuit, requesting your own damages. Some states also allow you to countersue for damages against the creditor itself for failure to verify the debt. (To learn about other defenses in collection lawsuits, see Defenses to Credit Card Debt Lawsuits.)