However, you may want to read this article so you may educate yourself for the future. I recently spent a little over 7 hours watching the videos produced by the FTC covering their recent debt collection workshop that took place on June 6th, The workshop participants included representatives of the FTC, CFPB, state regulators, consumer protection attorneys, junk debt buyers, and original creditors.
There was a lot of information that was shared in these videos. Information that can benefit our society when it comes to understanding the debt collection process and how it relates to us.
I have included some of the highlights short clips of these videos that pertain to debt validation in this article. I hope you find them to be informative and relevant.
I also share my opinions, when it comes to interpreting this information, from both a debt settlement and debt collection perspective. In an effort to help you better understand the risks of requesting validation on a valid debt. Debt Validation Letter — What happens when I send one? The common practice when an account is disputed is to validate it.
The probability of validation is generally dependent on your perceived ability to pay, the creditor, and the age of the debt. The full video can be viewed here: United States Federal Trade Commission, ftc. In addition, debt buyers reported that they were more likely to verify debts that they had obtained from the original creditor Regression analysis, presented in Table 15, indicates that debt buyers were significantly less likely to report verification of disputed medical, telecommunications, and utility debt, as compared to verification of credit card debt.
Debt buyers also were significantly less likely to verify debt that was more than six years old, as compared to debt less than three years old. The Structure and Practices of the Debt Buying Industry by the Federal Trade Commission in January — Page 40 Based on my experience , the lack of response is generally related to one of two things. One, if they feel that you are uncollectable, they may not find it personally beneficial to bother with validating the account.
And two, it is possible that they may not be able to validate it. As Heather Allen pointed out in the video, the older your debt is, and the more it has changed hands, the less likely that they will do so. If you are debating requesting validation on a credit card debt, make sure to note that the FTC report did state: The time for acquisition generally varies as well.
Based on my experience, its range can be from anywhere from a few days to possibly as long as 6 months, and sometimes longer. Which leads me to another consideration you should make: The collection agency or junk debt buyer can respond to a validation request years later. Why you should think twice before disputing a valid debt… I run into it all the time and you may too.
Almost every website out there recommends sending a debt validation letter on a valid debt. I believe these people are trying to help you. But, I also believe that they may not be aware of the potential reactions that may be created when sending a debt validation letter on a valid debt. Unless they come from the debt collection industry, they would have no way of knowing how debt collectors think and react to these letters.
Generally, the advice on sending a debt validation letter on a valid debt is premised on making sure that the collection entity who is attempting to collect from you is legitimate. There are ways to accomplish this without exposing yourself to the risks that are associated with formally requesting validation on a valid debt. I explain them in detail at the end of this article. First, it singles you out… Most collection agencies and junk debt buyers service tens of thousands to hundreds of thousands of accounts at any given time.
In the above clip, Heather Allen explains that consumers dispute 3. This next piece of information is going to shock you. Most people assume that junk debt buyers and collection agencies collect a high percentage of the accounts that they service. You read that right, 4 out of 5 accounts go unresolved.
The reality is that junk debt buyers and collection agencies collect a very low percentage of the accounts that they service. Which means, on a monthly basis, debt collectors only collect between less than one percent to a few percent of the debt that they are servicing. When you consider these dynamics, I personally believe your best protection is to mingle with the tens of thousands to hundreds of thousands of accounts that the collection agency or junk debt buyer is servicing, and to maintain a defensive rather than offensive position.
Phone calls and letters are standard operating procedure. In the above clip, Brandon Black, former CEO of Encore Capital aka Midland Credit Management one of the largest debt buyers in the country , explains that 8 out of 10 charge-offs that go into collections never pay. This figure is consistent with the entire debt collection industry. Read it for yourself from the Consumer Financial Protection Bureau.
On the bottom of page 42 it states: Meaning that approximately 6 out of 10 consumers who are in collections never answer their phone. In a lot of circumstances requests for validation are intertwined with major purchases. The consumer requesting the validation may be trying to buy a home or clean up their credit report. Sending a debt validation letter demonstrates that the sender desires to have the item resolved on their credit report.
If your goal is to settle the debt — this is the worst possible negotiation position to put yourself in. They roll over and negotiate WAY more easily. Almost to the point of desperation in a lot of situations. They think they stand in the way of something you want.
They feel they have leverage. You read that right: You can reference this number in the first paragraph on the second page in the link.
In 12 years time, I have never, not once, recommended to my clients to send a debt validation letter on a valid debt.
My job is to help my clients avoid adversarial situations that may make their situation worse or more expensive to resolve. Sending debt validation letters on valid debts presents that risk. And they also eliminate the psychological advantage that you had previous to formally making your intentions and desires known. Sending a debt validation letter on a valid debt also potentially arms the debt collector with the means to escalate their collection efforts against you.
When debt buyers or collection agencies are assigned debt, it is generally done by way of an Excel spreadsheet. There is no contract. There are no statements. The information generally provided to the collection agency or debt buyer is as follows - Personal Information.