Debt Collection Defense: Requiring That the Collector Document the Debt

If the collector or debt buyer can't prove it owns the debt, you might have a defense to a collection lawsuit.

By , Attorney · Case Western Reserve University School of Law
Updated by Amy Loftsgordon, Attorney · University of Denver Sturm College of Law

It's common for people to receive collection letters or be served with a lawsuit by a creditor or collector they've never heard of. Often, this happens because creditors assign debts to collection agencies or sell them to "debt buyers."

Federal and state laws give you the right to demand information about the debt, called "debt verification." And if the debt buyer or collector doesn't verify the debt or can't produce documentation of the debt, you can probably raise this failure as a defense against a lawsuit.

Why Is It Important to Get Documentation of the Debt?

The servicing, buying, and selling of debt has become so commonplace that often the original creditor doesn't have the account for very long. This is especially true if you've fallen behind on payments. Collectors and businesses you've never heard of before might barrage you with 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 lack of information 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're 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 fails to provide you with supporting documentation verifying the debt? Both federal and state laws provide some options, depending on whether you've been sued.

Before You Are Sued: Requesting Verification of the Debt

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:

  • immediately stop its collection activity, and
  • send you information verifying the debt, such as an account statement.

The debt collector can't 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 can't just resume calling or writing you to demand payment.

What Constitutes Debt Verification?

While some federal courts have held that this verification requirement doesn't mean that the creditor has to keep a file on that debt, at a minimum, you're entitled to:

  • a description of the amount owed, and
  • the name and address of the original creditor.

Debt Verification Applies to Debt Collectors

It's important to understand the difference between a debt collector, debt buyer, and a creditor. The federal verification obligation doesn't apply when the creditor is trying to collect a debt from you. It applies to debt collectors and sometimes debt buyers.

Debt Buyers Sometimes Have to Comply With the FDCPA

On June 12, 2017, the Supreme Court decided Henson et al. v. Santander Consumer USA Inc., a case that sought an answer to 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. While the Court's holding seems straightforward, the Court didn't explain whether this decision will apply to all debt buyers in every situation.

Following the Henson decision, the United States Court of Appeals for the Third Circuit held in Tepper v. Amos Financial, LLC, 898 F.3d 364 (3d Cir. 2018) that an entity whose principal purpose of business is the collection of any debts is a debt collector for purposes of the FDCPA.

So, this court said that if a business's principal purpose is debt collection, it must comply with the requirements of the FDCPA, even if the entity owns the debts it collects. (In Henson, Santander also convincingly argued its principal purpose was loan origination, which is different from debt buyers that primarily or exclusively buy and collect defaulted debts.)

In addition, the Consumer Financial Protection Bureau (CFPB) issued a final rule amending Regulation F (12 C.F.R. § 1006 and following), which implements the FDCPA. The official interpretation to 12 C.F.R. § 1006.2(i) of Regulation F says that a debt buyer is not considered a "debt collector" for the purposes of the FDCPA if (1) it doesn't collect debts owed or due to another and (2) doesn't have a business with the principal purpose of collecting debts.

What Happens If the Collector Doesn't Verify the Debt?

If a debt collector fails to verify the debt but continues to go after you for payment, you can sue that debt collector in federal or state court. You might be able to get $1,000 per lawsuit, plus actual damages, attorneys' 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 can prove that its acts and omissions were unintentional and in error. But it will have to show that it had a procedure in place to prevent the situation from happening.

When You Are Sued: Getting Documentation of the Debt

If a debt collector sues you, most state and local procedural rules put even heavier documentation requirements on both the debt collector and the creditor. In many states, a creditor or debt collector that is suing for collection of an account must:

  • attach to the complaint a copy of the account or written contract or agreement, or
  • state in the complaint why the account or document is not attached.

This requirement is often referred to as the "attachment rule."

If the creditor or debt collector doesn't comply with this rule, 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.

What Documentation Must the Creditor Provide?

But what must the creditor provide by way of documentation? At a minimum, it must produce:

  • A copy of the original written agreement between the parties, such as the loan note or credit card agreement, preferably signed by you.
  • If the account has been sold to another creditor, that creditor must prove that it has the right to sue to collect the debt. This usually means producing proof that the debt was assigned to it. Often such proof will be a bill of sale, an "assignment," or a receipt between the last creditor holding the debt and the entity suing you.

What If the Collector Can't Produce the Assignment?

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.

Counterclaims if the Collector Did Not Previously Verify the Debt

If the debt collector suing you previously didn't 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.

Talk to an Attorney

If you need help responding to a lawsuit for nonpayment of a debt, consider hiring a lawyer. But keep this in mind: If hiring a lawyer costs more than the creditor seeks in the lawsuit, it might not make sense to seek attorney assistance.

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