[NOTE that comments reported in this section may have originally been made under another subtopic. Similarly, comments originally made on this subtopic may be reported in another, more relevant section. Information in parentheses comes from commenter response to interest survey; the “servicemember” designation may apply to the commenter or someone in their family. Numbers in parentheses for industry-perspective commenters refer to number of people involved in debt collection in the firm.]
The most striking aspect of the comments on this post and the next one (“When consumers dispute a debt”) is the great deal of confusion about what the validation notice is, what it is supposed to accomplish, and how it is different than and related to verification of the debt.Consumer commenters repeatedly interpret the requirement in line with the dictionary definition of “validate” – that is, to prove the validity or accuracy. Hence, the very language of the statute seems to be producing a great deal of consumer frustration, and sometimes anger, about the kinds of notices collectors actually send.
Moreover, this confusion is evident even among some collectors and some people (including attorneys) who work with consumers. In many instances, it was difficult to tell whether the commenter was addressing validation or verification; sometimes, the commenter used the terms interchangeably and talked about the two separate requirements as if they were a single operation. For example, here is a comment from someone who works for a credit counseling organization: “The majority of the collection disputes I help my clients with are never validated with documentation.The CRA simply sends a letter stating that the debt was verified although the dispute letter specifically asked for documentation.”
One commenter, an attorney who defends consumer collection suits, reported, “Most of the consumer debt I see [is] coming from debt buyers and the consumer doesn’t recognize the name or the amount. Many of these are beyond the statute of limitations... The information [CFPB] suggests[s] would help a lot in letting consumers know what this debt is.”
Commenters who identified themselves with the consumer perspective favored additional information in the validation notice:
(consumer who has worked on credit decisioning and identity authentication initiatives with the 3 CRAs) “I agree that expanding the scope of the validation notice would benefit consumers. Especially important is a means for the consumer to contact the original creditor and identify the account in question. When debts are sold multiple times it becomes impossible for consumers to: (1) determine if the account is theirs; (2) validate proper assignment; and (3) determine if the statute of limitations has expired. The current requirements facilitate ‘zombie debt’ accounts which - although already paid by the consumer - come back to life again and again. Absent a means for consumers to identify an account there is no way for them to verify that they have previously paid that debt.”
(consumer; subject of adverse action for another person’s debt) “I believe all of the possibilities listed [in CFPB’s ANPRM] are necessary. I never did business with Joe's Collection Agency and would never recognize any debt they allege is owed. Interest and other fees would make the amounts unrecognizable either even in the event I could miraculously determine that $757.24 is an old utility bill.”
(See also comments on medical debt, below). One consumer commenter urged that, in addition to the “name of the original creditor as well as the account number and the brand name the consumer would recognize, [d]ate and amount of last payment, [and] copy of the last billing statement (supposedly) sent to the consumer,” the notice should include “a copy of the original debt document with the consumer's signature. Someone can send me bills for something I don't owe, but they can't send me a signed paper I never signed.” Another consumer would require "the original application for credit with the consumer's original signature and the original latter of approval for the credit." An industry-side commenter (debt collection law firm; 20-50), objected on grounds that many debts are now incurred electronically, so that there is no “formal written agreement. So that’s an unfair requirement when it doesn’t always exist.” The original commenter responded, “I have never applied for credit in any way other by paper application, and everyone I have ever owed money to has tons of paperwork. I don't know how it works when you apply electronically, but what's to prevent someone from saying they are owed money? The burden of proof is going to have to be on the creditor, and if they aren't getting paper signatures, they'd better have some pretty good proof otherwise.” The second consumer complained, "Too many debt collectors rely on falsified affidavits." In response to moderator questions, this commenter replied, "Additionally, statements for the credit showing purchases made with retailer information, amounts and dates."
Another consumer commenter suggested that the notice should also include “the collection agency's license status: license number, state of license, original license issue date, and current license expiration date.” However, another commenter (debt collection law firm; 20-50) opposed this because “not all states have licensing or registration for debt collectors.”
Commenters who identified themselves as creditors or collectors had varied reactions to possible new requirements:
(creditor collecting own debts; <20): "If a bank or loan company makes the installment loan and does collections itself, and the debt is not sold or turned over to a collection agency, then there is no reason for a notice to the consumers to recognize the debt. They have been making payments to the debt collector for months and already know about the debt. Besides, the lender has already sent several past due statements and a certified letter about the debt."
(debt collector; <20): "It is important that a consumer receives notification that an account has arrived with a third party vendor. But a blanket notice covering every situation that may happen between now and the end of time should not be included in that notice. The initial notification should include the following facts:
1. The original creditor
2. The amount of the claim
3. The last date of charge to the account."
"It should also include the following information:
1. If you do not recognize this obligation, please call our customer service line for additional information. Please understand that you will be expected to identify yourself before customer service would be able to provide that information. Utilize this toll-free number to reach customer service. You will not be able to speak with a debt collector on this line.
2. If you do not believe that you owe this money, contact customer service for information regarding your right to dispute a bill. This request can also be made by mail or you can find this list at CFPB.com."
"Finally, of course, the recovery industry can include a request for full payment of the obligation or a call to discuss resolving the matter. The bottom of the notice should include ‘This notice has been generated by a debt collector."
(debt collection law firm; size unknown): "From a creditor's standpoint, I generally agree with this comment [one immediately above]. I think a good validation notice could answer a lot of the consumer's question. I think the author of the above note had some very well- reasoned thoughts. I wouldn't go so far as to add that an itemized statement must be provided, particularly if one might not be available (perhaps because of record retention rules or because one simply may not exist), but providing information as to the type of account, brand name of the original creditor issuing the account, the account number, the date of last pay, and the name of the party from whom the debt may have been purchased would help. Providing documentation at the get go seems rather unnecessary and costly, particularly if the wording of the letter allows the consumer to readily identify the account, and the disclosures allow the consumer to request documentation for validation."
One industry-side commenter (debt collection law firm; 20-50) argued that it would actually help collectors to have CFPB require more information in the validation notice:
"Speaking from a collection standpoint, I can tell you that most collectors would LOVE to give more information on the initial Validation Notice. The problem is, the murky case law related to ‘overshadowing’ makes it risky to include anything other than what is in the statute - no more, no less. Here's what I would like to include on the notice:
1. Name and address of the current creditor.
2. Our relationship to the current creditor.
3. Name of the original creditor, and the name of the subsequent owner of that original creditor's records, if that original creditor no longer exists (e.g. WaMu, Wachovia).
4. Any brand name or company name associated with the account.
5. The type of debt.
6. The original creditor's account number, and any other account numbers that this account may have been known under.
7. The amount of the debt (more on this in the appropriate thread).
8. The date the account was opened (for revolving credit) or the date the debt was incurred.
9. The date and amount of the last payment made by the consumer.
10. The date and amount of the last charge or debit on the account (for credit cards).
11. The name and address of any co-debtor that is also receiving this notice (helpful for co-signers)."
"… I do think it would be a bit of an expense on the part of creditors and debt buyers to provide this information to the agencies and law firms that they outsource collections to, but I believe that it would benefit those collectors as well as consumers to have this additional information. It would be necessary to mandate that this information be included whenever creditors sell portfolios of bad debt. But it would be worth it."
Engaging this comment, a consumer commenter was concerned about information overload:
“My only concern about this excellent comment is that consumers not be subjected to a flood of confusing or potentially intimidating information. The most useful information is the what, when, who, and why of the original transaction that incurred the unpaid debt. The original creditor should be identified by a name known to the consumer, e.g. DR. JOHN SMITH, RHEUMATOLOGIST not DYNAMIC HEALTHCARE OF GREATER ANYTOWN d/b/a ASSOCIATED SPECIALISTS P.C. You get the idea.”
One consumer commenter proposed the requirement of contact information for the current owner of the debt:
"Every validation notice should include not only the name, but the address and phone number of the current owner of the debt. It is not always the case that the consumer knows who the owner of the debt is, or how to contact them. This would not be a burden on collection agencies, because it would only require the collection agency to cut and paste the address and phone number of the debt owner onto the validation notice. The collection agency should already have this information in their company records, as the debt collector is forwarding consumer payments to said debt owner's address. This would allow the consumer to attempt to deal with the debt owner directly to try to resolve the dispute. For example, a case of mistaken identity can more easily be resolved by talking to a customer service representative of the debt owner, than by talking to a debt collector. The debt collector has no authority to correct the mistake, but a customer service representative of the debt owner does."
(See the related frustration expressed in “When consumers dispute a debt: What’s going on now?” about consumers getting shuttled back and forth between the creditor and the collection agency to get information and/or errors corrected.)
Note that one consumer commenter responded to the suggestion of the notice giving a customer service number for more information with the following: "I do not communicate with anyone I owe money to by phone. I want a written trail. It's too easy for them to say I agreed to something or to give me misleading information by phone. I want it IN THE MAIL."
Concerns about sensitive information/privacy. Several commenters opposed using the social security number, in any form. Even account number was a concern for some given the problem, frequently mentioned in other posts, of collectors contacting the wrong person (especially when a common last name was involved) or sending material to an outdated/wrong address:
(consumer who has had debt collectors call his/her number looking for someone s/he doesn’t know) "I don't think that the partial SSN should be included. That raises too many privacy concerns. And I'm sure that one day a debt collection company will have a "system malfunction" and will "accidentally" send the full SSN. Plus, what if it is sent [to] the wrong Ms. Jones. Too many consumers have similar names in the same city. Lastly, many different companies classify a partial SSN as the first 5 digits whereas other stick to the traditional last 4 digits. If a mail thief is lurking, then he might have access to a consumers full SSN.”
(debt collection law firm; >50) “It is unwise to require that the debt collector send sensitive personal information to the debtor (e.g., SSN, account number) as such a requirement would expose the debtor to the danger of ID theft.”
(debt collection law firm; <20) “Providing too much information in the first notice creates a risk of divulging sensitive personal information to the person who now lives where the actual debtor used to. I do think that providing the chain of ownership information (especially original creditor) should be provided for sold debts. When it comes to medical debts, HIPPA becomes another concern. Therefore, specific info on medical debts should only be provided AFTER the collector has verified that they are communicating with the proper party.”
On the specific point of account number, one commenter (debt collection law firm; 20-50) agreed that CFPB shouldn’t require “any portion of the SSN [to] be included on this letter, because it's just too risky” but argued that “the full account number can be included because in almost all circumstances, the account would already be closed and unable to be used by identity thieves.”
Medical debt. Here, as in other posts, medical debt got distinctive attention from consumers and industry-side commenters:
(consumer previously employed in pre-collection dep’t of medical billing office) “Item 1 through 10 [the list of CFPB proposed inclusions] should all be provided on the validation notice. Number 10 [name of doctor, medical group or hospital] specifically should include the Date-of-service or DOS for the medical debt. Many consumers do not realize that medical debt goes to collections just like any other consumer debt. They mistakenly believe that their insurance company will resolve the issue. Also with extensive medical bills (inpatient surgical stay) consumers have professional bills from each physician (radiology, pathology, etc) in addition to technical component bills for the facility. Many times the consumer never sees these medical providers and either mistakes the bill for another aspect of the service rendered or, again, just assumes the bill/debt will ‘be taken care of.’ Additionally the name of the consumer's insurance Co./plan on the validation notice would be quite helpful. This may seem to be a great deal of extra information but the originating physician and/or facility obtain this information at the time of or prior to service.”
(consumer; 62 or older) “My experience is only with medical bills. The debt collectors seem only to know (a) what hospital and (b) how much. When you've been doing the hokey-pokey from emergency room to nursing home and back again over a period of months, that information is not much help. What's really needed is an itemized bill that's a lot clearer than the ‘statement of benefits’ we get now. Something as clear as: ‘You were in X hospital on this date. You had this test and that test. They cost a gazillion dollars, but we bargained them down to $17.48. Please pay this amount.’"
Another consumer agreed that “This issue is related to the absurd complexities of medical billing, but those complexities should not be used to conceal the origin of a debt from a consumer.” S/he advocated:
“In the case of medical debt, the statement should inform the consumer of the date and location of the service provided, including the name of the doctor who was in charge of the case (rather than a consultant or firm that never contacted the consumer) or the commonly used name of the location (such as a hospital or clinic) where the service was performed. In my experience, cost-conscious consumers who are wary of scams have declined to pay legitimate medical debt because they did not recognize the debt and could not get an answer to the basic question, ‘Why do I owe this money?’ When the debt is unexplained, it is prudent to refuse to send money, yet when the debt is in fact legitimate, the consumer may suffer severe penalties for failure to pay."
“A validation notice for medical debt should not simply repeat numerical codes or obscure abbreviations. It should state, ‘You were billed on (DATE) when you went to (PLACE).’ If other debts related to the same visit have been paid, the letter should say so, e.g., ‘You already paid for other services during this visit, but you still owe...’ Or, ‘Your insurance paid for some of the costs of this visit, but you still owe...."
When the moderator pressed this commenter about balancing the costs of new requirements with the benefits, s/he responded:
“As medical records become more digitized, I see no significant cost increase to debt collectors in passing on substantive info to debtors, although debt collectors are bound to say otherwise. My concern is that the cost to consumers of inadequate information is routinely underestimated or dismissed as trivial. Here is an example: When I worked with a non-profit in Alabama, I took part in an informational meeting on a program of federal assistance (Farmers Home Admin, IIRC) in securing access to home loans on affordable terms for low-income workers. One woman who was at the meeting spoke of having been denied access to the program because of a single blot on her credit record, namely an unpaid medical bill. She said she had not paid it because she could not determine what the charges were for, was unaware of any medical treatment she had not paid for, and could not get a straight answer from the debt collector. She decided the debt might be illegitimate and refused to pay. As a result she was excluded from access to a home loan. This is an example of a consumer on a limited income who was consistently disciplined about her finances and who should have had access to credit. I find it significant that it was a medical bill that tripped her up, placing her in category in which even the FHA would not work with her. From this point, credit was only available to her at high cost if at all. I am confident that the rule I am suggesting would have led her to either pay the debt or dispute it formally on the basis of valid information. What it would not have done is to leave her to conclude that she was being scammed and refuse to pay at all. This anecdote (and I admit I only have anecdotal evidence) does suggest that legitimate credit agencies also stand to benefit by disclosing information that will persuade skeptical consumers that they do actually owe the debt.”
Even an industry-side commenter (creditor collection own debts; <20) who generally opposed new requirements agreed that more was needed for medical debt:
"As a creditor, I can agree with this notification [i.e., CFPB’s proposed list] on medical services since most people receive bills from companies they never heard of. When it comes to auto loans, and other monthly installment loans, I am sure the consumers are aware of the debt and who it is payable to, unless sold. This could be a huge regulatory burden on creditors that don't sell loans and follow current collection laws. After all, do very many people pay monthly payment to the same people for several months and the[n] forget they owe the debt[?] All laws should not apply to all creditors."
Note one commenter’s point (above) that HIPAA raises additional concerns in this context if the notice has gone to someone who is not the debtor. Another consumer commenter responded:
"Information about the source of the debt (such as the date of the service) can be provided without infringing on the patient's privacy. No one should be asked to pay a debt without first being told why they owe the money. This is esp. true of medical debts, which are notoriously complex and apparently redundant, with many charges occurring on the same occasion."
Timing of the notice. One consumer commenter argued that the statutory timing of the notice—5 days after the initial contact with the debtor—"is backwards:"
“The debt collector should be required to mail the debtor a validation notice 5 days before any phone contact, not 5 days after. Otherwise, the debtor is speaking with an unknown caller, who has surprised them with a demand for money. The debtor has not been provided with any time to prepare their thoughts, or to formulate important questions about the alleged debt. They may be caught ‘off guard’, increasing the fear and anxiety of the debtor, which would necessarily lead to impaired verbal communication. The debtor has no written factual statement to refer to during the phone call, while the debt collector has all of the factual details in from of them on their computer screen, and can cite facts and figures. This situation creates an imbalance of power not conducive to good communication. This proposal to require debt collectors to send a validation notice 5 days before the first telephone contact would impose no financial burden on the debt collector because validation notices are already required to be sent to the debtor. It is simply a change in the timing of an already existing requirement."
A commenter who self-identified as “a researcher” agreed, pointing out an additional benefit similar to the arguments some consumers made in favor of requiring notice that the debt was being sent to collection:
"It would be even better if the Collection Agency would give notice of validation at least 5 days before any attempt is made to collect. This notice would give the Consumer a narrow window to contact the Creditor directly to satisfy a debt that may be outstanding or to inquire about the details of the alleged debt before making a good faith payment to the Collection Agency.”
Another commenter (consumer; victim of ID theft; 62 or older) argued:
"Phone calls prior to the alleged debtor receiving a proper letter of demand together with the supporting documents must never be allowed, as it would enable crooks to harass the alleged debtor for money, even when such debt does not exist. After sending a proper letter of demand, phone-calls may be made to confirm receipt of said letter and to discuss further steps to resolve the debt if acknowledged or otherwise."
A commenter with experience "on both sides" wrote:
"As a banker in a small bank, I have been on both sides of the collection business. Bankers have to prove a debt and give consumers a chance of object to the validity. When I have had collection agencys contact us for medical collections, I found these people to be scum. They don't care if the debt is valid, correct, or anything else. They just know that they get 50% of everything they collect. You can request that they not contact you again, but they will. My suggestion is that collection agencies not be allowed to call at all and all correspondence be in writing. If anyone can tell me what I owe and why I owe it, I will pay it. They can't and they don't care."