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Collection agencies tend to be assigned accounts after the 90 day deliquent mark. You may have received phone calls or letters from these collection agencies bombarding you with dollar figures that you owe them. Generally we take them in by their word that they are collecting X amount of money for Company Y. But if I walked up to you on the street and said “Hey, I’m representing Company Y and you owe them $200. Please pay up.” Would you start writing a check? Of course not.

In the United States, we are protected by a law called the “Fair Debt Collection Practices Act.” (FDCPA)

The FDCPA defines the creditor as:

The term “creditor” means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.

That defined piece very specifically excludes collection agencies.

A debt collector is:

6) The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 808(6), such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include —

(A) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;

(B) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;

(C) any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties;

(D) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;

(E) any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and

(F) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.

So these are the people that are responsible for collecting your debt. Notice how they aren’t the same thing? That means that you need to make sure that the debt collection agency actually represents the creditor. And they are responsible for proving it.

Based on the FDCPA, a collection agency has to provide you the amount of debt, the name of the creditor, a statement that says that if you don’t dispute the notice within 30 days then it will be assumed valid, a statement that says that if you notify them that the debt is dispute that they will obtain verification of the debt and mail it to you. And finally that they will send you within 30 days the name and address of the original creditor if different than the current creditor. These statements must be made within 5 days of initial communication with you, if it’s not included on the original notice. That’s why generally you will get a letter from a collection agency before they start calling you.

What does this mean to you?

If you receive a phone call from a collection agency before receiving anything in the mail, ask them for their name, agency name, address, and who they are collecting for. Tell them you request all further notification be sent by mail. If you haven’t received, the information above within 5 days, then you should send them a letter stating that they are in violation of the FDCPA and any further attempt at collecting the debt will be met with legal action. Pursuant to the FDCPA, any collection agency that is in violation of the Act can result with a fine of up to $1000.

If you get the statements within 5 days, then you should always follow up immediately by mail with a letter stating that you are disputing the information in the letter and request:

1) Proof that the collection agency owns the debt or has been assigned the debt. They have to show that they can collect money from you.

2) The complete payment history, starting with the creditor. There is a requirement established in Fields v Wilber Law Firm (see the full court opinion at FindLaw

3) Copy of the original signed agreement or application.

The FTC has written an opinion stating that an agency cannot report a debt to the credit bureaus that have not been validated. See here

If they do not provide you with that information, they are in violation of the FDCPA and are subject to a civil lawsuit.

There is much much more that the FDCPA and the FCRA (Fair Credit Reporting Act) that we will be bringing to you in the future.