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Debt Validation: The ultimate weapon against the collection agencies
You could try to usedebt settlement methodswith a collection agency, but you might want to try debtvalidation first. Why? Because they may not even be legally entitled to collect the debt from you.Think of it in these terms: Even if you suspected you might owe
Joe
(original creditor) some money, and
Bob
(collection agency) came up to you and asked for Joe's money - would you just hand over the cash?No. No one would. These might be some of the thoughts you would have:1. How do you know that Bob is actually collecting for Joe? What legal documents does Bob have toprove that he is legally authorized to collect?2. How much is the actual debt? What payments have already been made on the account? Whereis the accounting of the debt, including all interest and fees? Are these fees and interest amountslegit?3. Do you really owe Joe the money? Or was it actually a third party, Sam? Where is the contractshowing that you made a deal with Joe and not Sam?If you keep all the legalese out of it when thinking of legal proof, you'll have an easier time figuring outwhat to ask a collection agency (Bob) for to validate a debt.(If you are wondering how a collection got on your credit report in the first place,read this).
Applicability of the FDCPA - It matters if the listing is from the originalcreditor or collection agency
 TheFDCPAdoes not cover collection tactics employed by original creditors (like credit card companieswho issue credit cards). It only governs the actions of a debt collector (collection agency). Let's look at thedefinition of these two groups as defined by the FDCPA.TITLE VIII - DEBT COLLECTION PRACTICES [Fair Debt Collection Practices Act]§ 803. Definitions [15 USC 1692a]As used in this title --(4) The term "creditor" means any person who offers or extends credit creating a debt orto whom a debt is owed, but such term does not include any person to the extent that hereceives an assignment or transfer of a debt in default solely for the purpose of facilitatingcollection of such debt for another.What does that mean? It means that, as far as the FDCPA is concerned,
a creditor is the original entity which loaned money to a consumer. It is 
not
a collection agency.
The definition of a debt collector is asfollows:TITLE VIII - DEBT COLLECTION PRACTICES [Fair Debt Collection Practices Act]§ 803. Definitions [15 USC 1692a]As used in this title --(6) The term "debt collector" means any person who uses any instrumentality of interstatecommerce or the mails in any business the principal purpose of which is the collection ofany debts, or who regularly collects or attempts to collect, directly or indirectly, debtsowed or due or asserted to be owed or due another.So when a collection agency is assigned, or has purchased, your debt, they are NOT the creditor. Theyare the debt collector and the actions they take are all governed by theFDCPA.
 
What if "Bob" is a lawyer?
 Under theFDCPA, even if Joe hires a lawyer or law firm to collect a debt from you, the lawyer or law firmis still considered a collector and must adhere to the FDCPA.
What does a debt collector need to provide as debt validation?
 
•
Proof that the collection company owns the debt/or has been assigned the debt.
(Bob is legally entitled to collect this particular debt from you.)
This is basic contract law. It is very difficult to geta 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, startingwith the original creditor.
(How the heck did Bob calculate this debt? What fees/interest Bob has tacked on to this debt and how he determined these fees?)
This requirement was established bythe caseFields v. Wilber Law Firm, Donald L. Wilber and Kenneth Wilber, USCA-02-C-0072, 7thCircuit Court, Sept 2004..
•
Copy of the original signed loan agreement or credit card application.
(Your contract with Joe establishing the debt between you.)
However, account statements from the original can fulfillthese requirements.
What Bob gets out of the deal
 It use to be that in most cases, creditors
assigned 
, not
sold 
, its debts to a collection agency. But not anymore.Creditors hire collection companies (like Bob) to collect debts for them, because they simply don't havethe time or resources to chase down all of their severely overdue accounts. Collection agencies havecheap labor and a streamlined system to pursue such accounts. When a creditor hires a collectionagency, the debt has been
assigned 
to the collection agency. If a collection agency is successful atcollecting the money on the account, they usually keep a percentage of what is collected as payment forservices.Original creditors sometimes sell debts in large portfolios to collection agencies. This is starting to be thenorm, and several of these companies, called Junk Debt Buyers (JDBs), are now being traded on WallStreet. The companies do not spend much money at all for these debts, sometimes paying less than 1cent on the dollar. Even if the debt is not a large debt, they often hire attorney to send out mass form-letters to debtors in the hopes of collecting. As you can see, even if they get a small percentage of thedebtor to pay, profits are enormous. For more on JDBs, you can read our articlehere.
Assigned or purchased debt (How do you know Bob is the right guy topay?)
 Why should you care if a debt is purchased or assigned? In an
assignment 
, the collection agency doesnot own the debt, and therefore you do not technically owe them any money. There is no way for acollection agency to prove that you owe them money because there is only an assignment of the debt andnot a contract between you and the creditor.One loophole: Some contracts have the wording "debtor agrees to be responsible for payment of this debtto creditor OR ITS ASSIGNS." This IS a contract between you and the debt collector as well as thecreditor and if they can provide you with a copy of a contract that states this (with your signature!), youare pretty much stuck and need tonegotiate.
 
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