If you have defaulted on a debt owed to the original creditor several things may occur. The original creditor (for example: Capital One, HSBC, GE Money, Mercy Hospital, etc.) may do one of the following:
- Close the account; charge off the debt and issue you a 1099-C tax form (forgiveness of debt). It ends there. You pay tax on the debt forgiven as income;
- Close the account and immediately send the debt to a “legitimate” law firm to file a collection lawsuit;
- Close the account; charge off the debt and sell the debt to a collection agency for collection;
- Assign the defaulted debt to a collection agency for collection. Although it is assigned as opposed to sold, the collection agency is a separate entity from the original creditor.
- You may also be facing a situation where the debt has been sold or assigned several times to several different collection agencies.
There is one major ground rule to remember here:
Each time a debt is assigned or sold to a new collection agency or law firm, that agency must advise you, very specifically, that you have a right to dispute the debt and request verification of the debt.
The key here is initial notice or initial communication. Normally a collection agency’s initial communication will either be by mail or by telephone. If the collection agency’s initial communication with you is by mail, the collection agency’s letter must include a notice telling the debtor that he/she has a right to dispute the debt and request verification of the debt.
If the collection agency’s initial communication is by telephone, the collection agency MUST, within 5 days of the INITIAL TELEPHONE COMMUNICATION, send you written correspondence advising that you have a right to dispute the debt and ask for verification of the debt. This is yet another reason why it is so critical that you keep accurate call notes (date of call, phone number, name of agency, description of call). Feel free to use our call log sheet to keep good records.
This notice is required pursuant to 15 U.S.C. § 1692g of the Federal Fair Debt Collection Practices Act (FDCPA). We like to refer to it as the “g notice.” The g notice requires the collector provide you with the following information:
- The amount of the debt;
- The name of the creditor to whom the debt is owed;
- A statement that unless the consumer disputes the debt within 30 days of receipt of the letter, the debt will be assumed valid;
- A statement that if the consumer disputes the debt within 30 days of receipt of the letter, the collector will obtain verification of the debt or a copy of a judgment against the consumer and these will be mailed to the consumer;
- A statement that if the consumer requests within 30 days of receipt of the letter the name and address of the original creditor, the collector shall provide it to the consumer.
The notice of right to dispute and request verification is usually in standard paragraph form. It should look very similar to this:
“Unless you notify us within 30 days after receiving this letter that you dispute the validity of the debt or any portion thereof, we will assume the debt is valid. If you notify us in writing within 30 days after receiving this notice that the debt, or any portion thereof, is disputed, we will obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such verification or judgment. Also, upon your written request within 30 days, we will provide you with the name and address of the original creditor if different from the current creditor.”
So what happens if you receive initial correspondence from a collection agency and the above disclosures do not appear?
First, you should be sure that it is in fact the initial communication from the collection agency. Usually the initial correspondence will be in the form of a notice to cure a recent default or the agency will notify you that they’ve just received the account. If you do not regularly open your mail or if you have recently changed your address, there could be problems verifying a violation or be sure the correspondence is in fact the initial correspondence.
What if the initial communication from the collection agency is by telephone?
Again, you should keep good records of all phone calls and keep an eye out for a letter from the collection agency within a week after the first call.
If you believe the collection agency has failed to provide the proper disclosures as described above or failed to provide the proper disclosures within five days of the initial telephone communication, it is likely the collection agency has violated the Federal Fair Debt Collection Practices Act (FDCPA), specifically 15 U.S.C. § 1692g. Along with violating the FDCPA, the debt collector will have violated the Iowa Debt Collection Practices Act (IDCPA). A violation of the FDCPA permits consumers to bring a private cause of action against a debt collector that breaks the law. If a debt collector is found to have violated the FDCPA, the consumer is entitled to statutory damages (up to $1,000), actual damages (possible emotional distress and out of pocket expenses), as well as attorney fees and costs of the action. A violation of the IDCPA allows for additional statutory damages ($100 to $1000).
Also keep in mind that in every single communication with the collection agency, whether oral or written or voice message, the collector must state that the communication is from a debt collector and any information obtained will be used for that purpose. If this has not been disclosed, you should be documenting it! This is considered a violation and you have a private cause of action to sue based on that violation!
What if you take the initiative to respond to the correspondence and dispute the debt and request verification of the debt?
It doesn’t matter if the letter is handwritten or typed, send it certified mail/ return receipt requested! If you don’t sent it certified mail/ return receipt requested, you will make it too easy for the debt collector to claim they never received your dispute and request for verification. Marks Law Firm has helped other consumers out with dispute/verification letters. Take a look at a sample letter our clients have used in the past. We have no problem if you want to use it for yourself. If the collection agency fails to forward you verification of the debt within 30 days of receipt of the dispute, they have violated the FDCPA and sued for damages as described above. Furthermore, if the collection agency is reporting on your credit report and you dispute the debt in writing, they have a duty to report to the credit bureaus that the debt is disputed. This can affect the way in which your credit score is calculated.
Contact Ashley Zubal to discuss your questions or concerns about possible debt collection harassment and potential FDCPA and IDCPA violations. I would be happy to meet with you over the phone or in person for a free consultation. You can also feel free to email me if that is easier.