Closed Rule

Consumer Debt Collection Practices (ANPRM)

Summary

The Consumer Financial Protection Bureau (CFPB) might propose new federal rules on how creditors and debt collectors can act to get consumers to pay overdue credit card, medical, student loan, auto or other loans. This decision matters to you if you

  • had an experience with debt collection (good or bad)
  • counsel consumers with overdue debts
  • have a business where you do your own account collection or
  • work in the debt collection industry

Here, you can learn what CFPB is thinking and what it needs to know. You can share information and experiences and discuss ideas with others. At the end of the discussion, CFPB will get a detailed summary and your input will help it decide what to do next. (This phase is for gathering information and brainstorming. The next phase would be where CFPB comes up with specific proposals and asks people to comment again before it decides whether to adopt those proposals as new regulations.)

Consumers and business both have a stake in effective, responsible debt collection practices. Don't be a bystander. Help CFPB make the right decisions about new consumer debt collection regulations. Share what you know and encourage family, friends and coworkers to do the same.

Final Discussion Summary When consumers dispute a debt

Select other topics

Subtopics

1|What’s going on now with consumer disputes?

Final Summary of Discussion

[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 Similarly, comments originally made on this subtopic may be reported in another, more relevant section.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 previous one (“The ‘validation notice’ sent to consumers”) is the amount of confusion about verifying the debt, what it is supposed to accomplish, and how it is different than and related to the validation notice. Consumer commenters repeatedly interpret the requirement in line with the dictionary definition of “verify” – that is, to demonstrate that something is true, accurate or justified. Hence, the very language of the statute seems to be producing a great deal of consumer frustration, and sometimes anger, about how collectors respond when the consumer disputes the debt.

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, one commenter from a debt collection law firm wrote: “There is a poor form letter that floats around the internet that many consumers find and use, in which the consumer requests verification not validation, whatever the difference in that may be…”

Several industry-perspective commenters recounted their experiences:

(debt collection law firm; 20) “As for medical collections, I very, very rarely see a legitimate dispute. Most often people are just trying to get the item removed from their credit or scare the collector with threats of FDCPA action. Many of the disputes we receive are copied directly from the internet and contain all kinds of demands for proof that are not required by any state or federal law OR even the rules of evidence during trial….” (see topic below)

(creditor collecting own debts;>50) “The most common consumer contact my firm receives as a dispute is the comment by the consumer on a call with the agency that ‘it’s not my debt.’”

(debt collection law firm; number of people unknown) “…Generally, the type of disputes we see center around when a debt buyer has purchased the debt and the consumer does not recognize the name of the debt buyer, they may generally state they don't owe the debt (with no further reasoning as to why not) or they don't owe as much as is being sought. Additionally, there may be claims of fraud or payment.”

(debt collector; <20) “…a disputed account is rare. Most people are aware of their obligations, but just cannot pay them now.”

Consumers also recounted experiences:

“I received a bill from an attorney’s office [acting as a debt collector] regarding a bill I did not think that was mine. I sent a certified return receipt request for validation but never received a response. So I sent a 2nd certified return receipt - request for validation and again never received a response. The attorney’s office filed a civil suit and took me to court. I explained this to the judge and gave proof. The proof I submitted into the court file were copies of request of validation, the USPS certified letter statement's and request verification receipt statement's. This was all ignored by the judge because I was pro se and did not know Washington state law. I had made the request prior to this case being filed. Later it was explained to me by an attorney that the local county civil courts do not enforce federal laws, only state laws and in state court a request for validation is not recognized.”

“Bank of America, my mortgage holder, does NOT even allow a formal dispute to move forward. The past 12 months have been a continuous headache with Bank of America. For example, our mortgage account has always been current, and never were we in Foreclosure status, nor even approaching default. However, every single month Bank of America reported to the three major credit bureaus that we were late. I've worked with their Military Liaison Officer on the resolution through phone calls, email messages, and formal letters but without success. Urgent Help/Assistance is needed for consumers to navigate and to resolve the problems that Bank of America is creating over simple and elementary issues of basic accounting procedures. Bank of America has the undue power of making reports to the credit bureaus which adversely affects the consumer. The Consumer lacks tools to challenge and fight back…” (servicemember)

“My in-laws had the same issue with BoA. They paid their mortgage EARLY every month and still were reported as late every month. This is tragic and ruined their credit. When these things happen it takes years for the credit to be repaired even though a collector reported the information falsely, inaccurately, and repeatedly….”

“When creditor or servicing company doesn't ‘credit’ a payment after receiving it and then getter further proof but still puts the victim in arrears or foreclosure, there should be fines regardless of whether it is a ‘mistake’ or ‘criminal act.’ A grace period can be allowed but after that slap on the fines. and keep them coming every week they don't correct their problem. Basically by not crediting payment they are stealing that payment….”

In this, as in other posts, consumers expressed frustration at being shuttled between the original creditor and the collector when trying to resolve a dispute:

“I had a particularly lousy experience with an abusive debt collector called Miracle Financial, working on behalf of Verizon Wireless to collect a debt I wasn't aware I had incurred and didn't believe I owed… Miracle said I had to speak to Verizon. Verizon said I had to speak to Miracle. Short of going to court over a $50 debt, I had no options for resolving the situation. Meanwhile, Miracle's demeanor on the phone was abusive, and they promised to call every day for years unless I paid up. So I did. It was an upsetting episode that left me feeling powerless--as if the whims (or mistakes) of corporate America dictated my financial liabilities, with no chance for appeal and potentially dire consequences for my credit rating. I'm very pleased to see the CFPB addressing these practices.”

“Yes, one of the biggest scams that consumers get put through is the collection agency saying discussions about the debt have to be made with the parent company, and the parent company saying they cannot talk about the debt because it has been assigned to a debt collection agency, Please FIX THIS. … When I disputed the two years of 30% interest rate charges that Citibank tacked onto a defaulted credit card account of mine, (raising the default debt by OVER 5,000 DOLLARS) the debt collector refused to contact Citibank and said they had no way to lower the amount owed back to what it was at the time of the default. If this is the law, it needs to be changed….”

“I also, think the original creditor should be required to help resolve disputes instead of debtors or third parties like me only being able to talk with the collection agency. Once companies have sold the debt to a collection agency they do not help resolve it in any way and the collection agency is only interested in getting money not whether the debt is real or there were some mitigating circumstances.” (commenter employed by a consumer protection organization who worked as a mediator for debtors)

An industry-perspective commenter (debt collector; >50) weighed in on the roles of collector and creditor when the debt is disputed: “I do agree with the fact that a debt collector must notify the creditor of disputes. As a matter of fact, legitimate debt collectors do this on a regular basis. As a debt collector typically does not own the debt, they're unable to control what a creditor does with that information, all they are currently able to do is implement internal controls that protect the consumer and the agency.”

Two consumer commenters reported experiencing retaliation for making a complaint with a federal agency:

“When I have a dispute thru FTC, credit bureau changes anything they can on my credit report.” (62 or older)

“I have a debt in dispute with the CFPB, and it has not yet been resolved, but during the government shutdown the Original Creditor turned it over to a collection agency. The collection agency has not contacted me in writing at all, but they did a hard pull on my credit report. I legitimately closed the account when it was paid in full, but they continued billing me after I had cancelled the service. Now the matter is simply snowballing. I am very upset about this. If a consumer is in the midst of a dispute with the CFPB, I would think there would be a ‘time out’ on collection actions and especially malicious hard pull of the credit report while the dispute is ongoing.“

2|What should count as a “dispute?”

Final Summary of Discussion

[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.]

Consumers and industry-perspective commenters tended to have sharply different views on what consumers ought to be required to provide in order to “dispute” a debt. In part, the differences were based on principle: Several consumers referred to “innocent until proven guilty” and the creditor or collector “having the burden of proof.” This is related to the debate in the next subtopic (“How should collectors investigate and verify the debt?”) about whether verifying the debt ought to involve evidence sufficient to support a judgment against the debtor. As emphasized by the set of comments there about credit reporting agencies, many consumers felt that they could be harmed in real ways by the claim of delinquency on little more than the say so of a creditor or collector.

Apart from concerns about principle, for some consumers, very practical considerations supported their insistence that federal law should not put a heavy burden on the (alleged) debtor to dispute the debt. Particularly vehement were commenters who had been put in the position of having to convince a collector (or CRA) of a negative proposition, for instance:

  • that they were not the person who incurred the debt
  • that they had never used a particular name as an alias
  • that they had never agreed to purchase the services or item
  • that they didn’t owe a debt they couldn’t identify from what was provided in the validation notice

Here are their comments:

(consumer; victim of ID theft) "[T]he burden of proof is always on the accuser; Not the accused! You accuse me -- fine -- YOU PROVE IT! No -- an Assertion that the debt is mine is NOT PROOF. But that is exactly what happens when I get phone calls from debt collectors who are seeking out somebody that happens to have my name. The collector cannot tell me anything about the debt that they assert is mine until I acknowledge that the debt is mine; which I will not do until they convince me that the debt is mine by supplying PROOF (not assertion). My particular cause for anger is that someone with my name that lived in a nearby town clearly left some bad debt around -- student loan debt and various credit card debts (some with companies that I have accounts with) -- so now what to the debt collectors do? They start contacting everyone with the same name and start accusing them that the debt is their debt. That's what they did to me -- probably 5-6 different debt collection agencies over the past year -- all looking for the same person -- NOT ME!! With the tidbits of info that I got from some of the collectors, I located the actual person's former address and some background info -- like his age range (per whitepages.com) -- again, close to my own. Not hard stuff to do, but why do I need to field these calls? And there can be several calls a day -- starting at 8AM on a Saturday! … The debt collectors don't do any proper research -- if they did then they would see that I have been at my address for the last 18 years!! But no -- they just call and call and call. What is my protection??? NONE! You just can't go around calling everybody with the same name as your debtor. You need something to [corroborate] the ID. [D]o not even think of asking for my info -- my previous addresses, my SS number, etc. JUST FORGET ABOUT THAT! NOT HAPPENING! I should have recourse to sue all of you for your false accusations and worse yet -- taking up my time."

(consumer; debt collectors calling to look for someone s/he doesn’t know) “Being in a court of law and talking to a debt collector on the phone [who] requires proof that the debt in question is not a valid debt, are two different things. If your intent is to sue, then sue. But requiring proof from anyone you call up and demand that they prove to you (and not a judge) that the debt is not theirs is extortion.”

(consumer; servicemember) “ I currently have an alias on my Credit report that I have NEVER gone by. I've disputed this several times and I can't get this alias and the related debt off my report….”

(consumer; victim of ID theft) “How do I prove that the dentist charged me for a procedure I did not request or receive? It is MUCH EASIER for the debt purchaser to supply the documentation that proves the debt is valid. If their collection is legitimate, their file will contain enough information to prove that the collection is for a specific amount and is unpaid by the consumer in question. They will have cancelled checks in the alleged debtor’s name, the debtor's signature on the original contract, a payment history from bank accounts in the name of the debtor. They will have x-rays that show Tooth Number XX had a root canal. They will have proof that an inquiry was made on the consumer's credit report on the day the account was open, and they will have an address that was used to send statements, credit cards, communications they initiated. What does the consumer have? Nothing. It is counterproductive and completely contradictory to suggest a consumer should have a file of information to send to a collection agency proving they didn't open an account or agree to a treatment, considering the consumer did not know the collection even existed until they start receiving phone calls. If a collection agency isn't able to provide the CONSUMER with enough information that proves the account belongs to them, then it is the collection agency's loss, not the consumer’s. . . The consumer shouldn't be required to do anything but demand a copy of the documentation to initiate the investigation. Nothing else.”

(consumer; victim of ID theft) “… You are presuming they are actually validating. This is the biggest mistake. They do none of that. . . I sent a letter to a company claiming I owed a debt and I was clear I was disputing the debt. A clear, declaratory sentence. I mailed it to the address listed. There was NO PERSON who signed this letter to me. I had to send it to To Whom It Concerned. But it was clear I was disputing the debt. I did so within two weeks, well within the 30 days. Yet they did nothing but wait 30 days and send me a letter saying ‘here is the info you requested.’ It contained nothing I recognized.”

(consumer) “The burden of proof should be on the creditor. If you make the debtor responsible for following up with a request, it gives the creditor an opportunity to say they never received anything from the debtor... If they had to send the documents to start with, there would not be any question.” Response from another commenter (debt collector; <20): “The burden of proof cannot be placed anywhere else. But a disputed account is rare. Most people are aware of their obligations, but just cannot pay them now. Starting the [collection] process should be simple and clear to each party, not talk about judgments or disputes where it is unlikely that either apply.”

(consumer; family member with debt in collection; adverse action taken for another person’s debt) “There needs to be rules around how disputes are handled for people with the same or similar names. There needs to be a process for disputing incorrect information on a credit report as well as for handling mistaken identity with the courts.”

A different kind of problem was a debt for the wrong amount based on some unknown-to-the-consumer error in how the creditor processed payments:

(consumer, victim of ID theft) “Here's my example to help define this. I knew I had made ‘x’ number of principal payments on my loan and my lender claimed I had made ‘y’ number of principal payments. I had emails and cancelled checks supporting the ‘x’ number of payments and the history from my issuing bank also supported my case and dates. My lender refused to investigate, saying they had done everything just as I asked and I had instructed them to apply ‘y’ number of payments to principal. They had no documentation to back up this assertion (their documentation was just a statement of how they processed my payments, not any of my direction). In order to get my situation fixed, I had to find the specific payment the lender misapplied from their own records, which were a mess due to the amount of errors they had made. This was not an easy task, as it was time consuming and the lenders records were not exactly layperson friendly reading. . . [H]ow much must be done to constitute ‘proof’? In my case, my bank's history, cancelled checks and emails were all sufficient proof to my mind and the extent of consumer responsibility. At that point, the institution needed to justify their claim beyond ‘we did what you told us to do’ and to provide proof of exactly that.”

Unsurprisingly, given such comments, consumers favor a very lenient definition of dispute. Many argued that simply making a clear, declarative statement to the collector ought to be enough. In addition, at least one commenter argued for making any of the following constitute a dispute:

  • complaint to CFPB or other consumer protection agency
  • “enlisting the help of an attorney or other intermediary” (e.g., financial advisor)

Several argued that the disparity in resources (including information) as between debtor and creditor made it unfair to place on the consumer the burden of substantiating a dispute. E.g., “Continuing to place the burden of proof on the consumer is onerous and prohibitive for many consumers. I personally had a problem with a mortgage company and the amount of my time it took to get the problem resolved was worth 20% of the original principal amount. If a consumer complaint is on file, the company should be burdened with disproving the consumer complaint before prosecuting. They have both the financial and personnel resources to do so, whereas a consumer usually does not. Otherwise, why wouldn't they continue to bully and defraud consumers to boost bottom line profits?” (consumer; identity theft).

Industry-perspective commenters responded with their own practical considerations in favor of requiring the debtor to produce specific information to “dispute” the debt. A common theme was frustration that debtors used form letters available on the Internet to request unreasonable (and unrequired) kinds of verification evidence (see next subtopic on this as well) and to make unsupportable disputes in order to delay collection. Note that the commenters who address the issue report that their firm takes a liberal approach to what constitutes a “dispute.”

(creditor collecting own debts; >50) “The most common consumer contact my firm receives as a dispute is the comment by the consumer on a call with the agency that ‘it's not my debt.’ While that may be a true statement in some cases, some proof from the consumer should be required as to why the debt isn't theirs. For our customers, proof of residence at a different address from where our service was provided is usually sufficient for us to remove that customer from the debt. The consumers must understand that they have to work with the creditor or agency to correct whatever info lead to an "incorrect link" (common name, bad SSN, fraud...). The 3 items listed in CFPB summary is usually adequate.”

(debt collector; >50) “The fact is, while a debt collector is required to maintain certain pieces of information and validate certain pieces of information, the consumer is not required to do anything further than say, ‘I don't owe this’ to make collections stop for a period of time. Just like for debt collectors, the few that do it wrong ruin if for the many that do it right, consumers in my opinion should be required to furnish some sort of support of dispute.”

(debt collection law firm; number of people unknown) “Our office throws a wide net around ‘disputes.’ This is largely a hard one to define because it can take very specific and individual forms. Generally, however, the type of disputes we see center around when a debt buyer has purchased the debt and the consumer does not recognize the name of the debt buyer, they may generally state they don't owe the debt (with no further reasoning as to why not) or they don't owe as much as is being sought. Additionally, there may be claims of fraud or payment. Our office conservatively accepts verbal disputes as well as written. I think the greater issue is not what is considered a dispute, but how does a collector validate the debt? Many consumers ask for incredibly specific items. There is a poor form letter that floats around the internet that many consumers find and use, in which the consumer requests verification not validation, whatever the difference in that may be, then demands specific information be provided. I say this because then I believe many consumers feel each of those requested items must then be provided, when in fact the FDCPA is silent to the issue as to what proper verification is.” [note example of confusion about validation and verification]

(debt collection law firm; <20) “We instruct our collectors to treat EVERY dispute the same--whether received in writing or over the phone and without regard to when it was received. Therefore, I agree that debtors should provide the information referenced in FCRA. The problem with FCRA disputes is the E-Oscar system that only affords the collector a couple options like ‘account information is accurate as of date reported’???? this doesn't even make sense as a response to the info provided by the debtor. If E-Oscar is going to be a valid ‘dispute’ under FDCPA, that website needs some serious updating including making sure that disputes actually contain the information listed in CFR 1022.43(d) and allowing collectors to transmit the actual contract/itemized statements/etc back to the debtor.” [See other discussion of e-Oscar below]

(debt collector; <20) “Debtors often respond with ‘I don't owe anything,’ which is vague and makes it harder to cater for their needs. If any rule making is needed, it is about the types of disputes a debtor may bring forth and the documentation needed for both the substantiation of that dispute (leaving the option for a dispute to be deemed frivolous) and what constitutes satisfaction of the dispute or proper proof. Otherwise, this is left for negotiation between individual collectors and debtors.”

(debt collector; >50) “In my opinion, a legitimate dispute should be defined as currently, a consumer solely mentioning the word dispute requires action on an account. I believe some sort of requirement should be imposed as to WHY an account is being disputed and some sort of evidence be provided to support the claim.”

(debt collection law firm; <20) “As for medical collections, I very, very rarely see a legitimate dispute. Most often people are just trying to get the item removed from their credit or scare the collector with threats of FDCPA action. Many of the disputes we receive are copied directly from the internet and contain all kinds of demands for proof that are not required by any state or federal law OR even the rules of evidence during trial. CFPB really needs to address this issue and set a clear standard for what is (or is not) a legitimate dispute and how the collector should respond.” In response to a consumer commenter who defended consumer advocacy websites that supply form letters and other materials to debtors, this commenter clarified: “The problem is not with a form letter of dispute. The problem is that these websites and unreasonable letters lead unsophisticated debtors to believe that a creditor has to provide extraordinary proof that simply is not required. [You are] correct that no legitimate dispute should be ignored, regardless of the form, but nor should debtors be allowed to abuse the system by repeatedly asking for proofs that are not required.”

In addition, several commenters, from both consumer and industry perspectives, discussed issues with e-oscar:

(creditor collecting own debts; <20) “The problem with disputes is the process is weakened by e-oscar. This process sees tons of paper work and faces road blocks. The solution is simply checks and balance and accesses to e-Oscars manual to see procedures for disputing errors on credit reporting. All the major bureaus do it and something must be done to empower the consumer not the credit reporting agency.”

(consumer; debts in collection as a result of debts of deceased person) “Consumers should be able to review all encoding and information in e-OSCAR and there should be a comprehensive means to submit corrections and evidence to a dispute.”

(first commenter) “To start e-oscar should take internet complaints the same [as] written letters. They do not do that. They take internet disputes differently than they do hand written letter. …”

(debt collector; >50) “E-Oscar was created by the credit reporting agencies due to a requirement that is outlined in the Fair Credit Reporting Act. This process is fully electronic save for the consumer's ability to upload paper correspondence or documents for the debt collector/creditor to review. Additionally, the CFPB has published clarification as to the requirements surrounding a ‘reasonable investigation’ when a dispute is issued, requiring debt collectors/creditors to go one step further. The underlying issue is this system is abused by many individuals who mass submit disputes repeatedly that have no validity. Agencies and creditors are forced to sift through all of those frivolous disputes in order to actually address legitimate disputes.”

(mortgage broker) “It seems to me that the system must provide a series of 'handshakes': When a dispute is initiated; when the dispute is resolved; or when a dispute is withdrawn. In each case the consumer must know with certainty that the collector acknowledges the consumer's position and that the CRA has been properly notified. The CRA must be party to the handshake, It is unacceptable that consumer's complaints can languish for months with the consumer having no way to determine whether the CRA has received updated information from the collector or whether the CRA is taking unduly long to process the update.”

Related idea: “Collection Calls and Dunning notices (via letter or email) should include a unique Collection ID. This would be listed in credit reports for the purposes of tracking and consumers would be able to enter into a online database provided by the CRPB with the type of violation or issue. This would also make it easier for the CRPB to look up disputes and determine if there's an actual issue." (consumer; family member debt in collection; adverse action taken for another’s debt)

Other requests. As in other posts, some consumers commenters went beyond the questions CFPB posed to request more extensive restructuring of the debtor/creditor relationship.

  1. Consolidate and further regulate CRAs. “I have disputed debts with the credit bureaus but they do not even try to resolve the issues. You get a standard response from them. It is in their interest not to resolve issues. Furthermore, you cannot get them on the phone and if you mail your disputes to them you never get a response. They are part of the rip-off system to prey on consumers. There should be only one credit bureau. They all contradict each other and it is a nightmare to get anything resolved. They should be highly regulated.” [See additional comments on CRAs in next subtopic, “How should collectors investigate and verify the debt?”

  2. Increase access to credit reports. “We keep paying these high interest rates [for delinquent debt] but yet we still have to pay for our credit scores and only receive one free report a year, If we are trying to stay on top of credit fraud and inaccurate information that is not of our doing but from reporting agencies , these agencies should be putting more funds in for these things.”

  3. Limit the amount of post-delinquency interest, fees, etc. “As it stands now, credit card companies can and usually do jump the interest rate up to as high as 29.9% and may even let the account stay in default as they rack up frequent default points on the debtor. When I gave up my regional Emmy award winning video business to become a caregiver for both of my parents, eventually savings ran out and I notified each of my credit card vendors ahead of any default. NONE could offer me anything other than, "pay your bill on time". If instead the credit card companies know that once the default occurs they cannot accrue any more penalties, fees or interest rate charges on the debt, they will bend over backwards to work with the alleged defaulter to get them to pay down the debt. Citibank rate jacked my never late payment 15 year old credit card account by 5,000 dollars. I dispute that amount of excess in lieu of why I had to default, but Citibank does not care, nor does the debt collector. If the amount of the debt reverted to what it was at the time of the default, you can bet Citibank would be working hard to work with me.” “We absolutely need a cap/limit on fees and interest on past debt!” (Financial literacy counselor for domestic violence shelter). “Sometimes the collection agencies will add extra fees to the debt which places an unfair burden [on the] person with the debt.” (employee of consumer protection organization who mediated for debtors)

  4. Tax treatment of chargeoffs. "Another issue that has come up regarding when an account has been charged off or in my case a repossession of a vehicle I had turn over due to not being released by my doctor to go back to work and my disability ran out , I had no other choice but to hand the vehicle over. then 6 years later I received a 1099 for over $6000.00. Why are consumers having to claim this as income when the company 1 wrote this off 2 retrieved the vehicle and sold it and the IRS is going off of what the company claims I have no record of what the sale of the vehicle went for."
3|How should collectors investigate and "verify" the debt?

Final Summary of Discussion

[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.]

In this and other posts, consumers expressed a lot of frustration that collectors (and credit reporting agencies) did not do the kind of investigation and documentation that consumers associated with the common dictionary meaning of “verifying” the debt (or “validation,” since the confusion between the two statutory steps was evident in discussion of this topic). Sometimes, the dearth of information provided in the validation notice made it difficult or impossible for the consumer to effectively dispute the debt in any detail. Industry-perspective commenters, for their part, expressed frustration that consumers provided only a very general statement of dispute and/or demanded documentation that they were not legally required to provide.

Both consumers and collectors recounted experiences and current practices – and each group made various suggestions for what should be done. As in other posts, some consumers seek changes that go considerably beyond the scope of the current ANPRM. A separate group of suggestions relates to CRAs and the handling of disputed or unverified debt. At a fundamental level, there is a conflict over how great a responsibility creditors/collectors/CRAs have to establish the existence and legal validity of the debt before taking action that harms consumers.

Comments describing consumer experiences:

"I have dealt with the issue of disputes and when you file a dispute and it has been closed it is placed in the comment section that you have filed a dispute. By doing this, this has kept me from refinancing my home just because the word dispute was there. The mortgage company said I had to have this removed, so I filed another form to ask for this to be removed it never was. I believe that once the dispute has been closed there should be no indication that there was a dispute filed. You again get penalized for trying to correct mistakes on your report."

"[Collectors] never do anything of substance to actually push back on the creditor's claims. I've had actual documentation that disputes creditor's claims, and all collectors do is rely on the information given them to by creditors."

"After offering documentation that I didn't owe a debt, the collection company ignored what I offered as proof and continued to try to collect the debt - even stated they didn't care that I didn't owe it." (62 or older)

"Debt collection companies abuse this, and make it a catch-22 for people who dispute the debt. I have written dispute letters four times in the past three years. They 1) deliberately use a post office box so you can't send it certified; 2) ignore the dispute letter and act like you never said a thing; 3) if you send it certified, nobody signs, or the signature is illegible. In about 99.9 percent of these cases these debt collection companies always fail to acknowledge the dispute. It is one of their main abuses. You can't even GET to the point of getting them to acknowledge you dispute it. Disputes are not investigated. That is a joke. Sending out a letter to whoever these debt collectors think is responsible for the debt is just rote -- it is not done in good faith or follow the letter of the law. ..The FTC says ‘reasonable’ investigation but these companies do none, and that is the standard practice. . . Abuses abound." (victim of ID theft)

"I had an instance where the bill was sent to wrong address. After 6 months I got a call re the debt. They mentioned only the amount and the service provider. When service provider was contacted they said already it is on collection and were not helpful. I asked them to send the Bill to pay it off. Only more calls from collector started. After almost 6/7 requests to the collector the bill detail was sent. On verification with my bank statement I found out that the amount had been paid. When confronted both the collector and service provider did not bother to apologize for the mistake. It is a case of nonverification."

"For over 3 years I have been contacted by debt collectors for an alleged debt. I diligently send proof of payment and am ignored, and several months later a new firm sends the same letter re the same debt. The collector never responds, investigates or verifies the dispute. They should be forced to do so." (62 or older)

"As I have had many accounts in collection due to an identity theft, I have several different experiences with the ‘validation’ process. My belief is that there is no rule defining exactly what documentation constitutes validation. As we know, if we dispute with the CRA and ask for a reinvestigation, all that will be done is the social security number will be matched and verified with the amount owed. It is a useless tool and a waste of the consumer's time. Asking for validation with a collection agency is almost as useless. This is because current laws suggest that the collection agency provide the consumer with information ‘such as’ the name and address of the original creditor, and the amount owed. This does not prove a debt is still owed, and to whom it is owed. . . The burden of proof MUST lie with the collection agency. As they are in the business of collecting debts, they are given all information regarding payment history, original contracts, methods of prior payment, and all personal information relating to the consumer. For far too long the consumer has been at the mercy of the collection agency. We are forced to send proof of our identity, current mailing address, phone number, etc. as well as all documentation we have regarding the account that would show an error has been made. But why? The collection agency has this information readily available." (victim of ID theft)

"I became involved in a dispute with a property management company as to whether a lease termination fee was due under the terms of the lease for an apartment that I had vacated prior to the expiration of the lease. The property management company and I disagree as to whether the express terms of the lease require the payment of a lease termination fee. After I refused to pay the property management company for any lease termination fee, the property management company contacted a debt collector and asserted that I owed a debt notwithstanding that I have repeatedly disputed by notice to both the alleged creditor and the debt collector the existence of the debt under the express terms of the lease. The debt collector has proceeded to report negative information to the CRAs which has negative impacted my credit standing even though there exists a legitimate ongoing dispute as to whether the debt even exists in the first place. Further, the debt collector's ‘verification’ of the debt was nothing more than an invoice from the property management company indicating the amount that the property management company asserts is owed."

"Some years ago, a debt collector was trying to collect a debt for an emergency room visit that included foot/leg xrays. The problem was that the only time I had ever been to the hospital in question was a worker's compensation covered workplace injury and it involved only my hand (sliced open, six stitches). I had contacted the collection agency and informed them that I did not owe anything and the circumstances of the visit. Although that did not work, once I contacted all three credit bureaus with the same information, the debt collector was unable to verify the debt and they removed it from my credit report - and stopped contacting me." (ID theft victim)

"From 1999 - 2004 I worked on a number of online identity authentication initiatives. At that time the only available solution was to ask ‘out of wallet’ questions based on the consumer's credit file. For example, the credit report might show that the consumer lived on Elm Street 20 years ago. Since an old address would not be easy to find (e.g. in a lost wallet) the idea is that if the consumer knows that they lived on Elm Street 20 years ago, there is greater confidence that this is indeed the person that they claim to be. The problem with this approach is that the information in credit reports has a reliability problem. Reports indicating low error rates are misleading: they only look to ‘material errors’ and they are often funded by credit industry groups. If it is commonly accepted that credit reports are filled with errors - then it is incumbent upon collectors to validate and verify the debt prior to pulling a credit report or contacting the consumer." (consumer who has worked on credit decisioning and ID authentication initiatives with the 3 CRAs)

"I have been contacted about a collection agency that stated that an old prescription charge was unpaid. The total was like $1500. When I asked for proof, I received a piece of paper that had three numbers on it that added up to $1500. Nothing more. Literally."

"Verification is a joke, it just means that they look at their computer again and say yes you owe the debt. They don't offer any proof that you owe the debt or that you are the actual person that incurred the debt. I had my identity stolen and I didn't even know it. They could not produce a signed credit card receipt to compare my signature." (victim of ID theft)

"The collection agency is not required to actually validate the debt and provide information to the consumer. Example, I disputed a debt as valid. The return validation consisted of a one line sentence: ‘The consumer owes the debt.’ This is not to me or to any reasonable person validation." (multiple types of debt in collection as result of debts of someone who died)

"The Industry is allowed to pursue individuals based on unvalidated information and are never required to demonstrate that a debt is legitimate. Collections Agencies are predominately seeking to collect debts previously deemed uncollectable that are consolidated and sold as a block. Each time the debt is sold, less information regarding the debt is passed to the receiving company. After a few cycles, it appears the receiving company only has a name, a purported value and contact information.• Even when Individuals challenge the debt as illegitimate by providing information in good faith, the collection company has no motivation or requirement to cancel or acknowledge the claim. Once a person is placed on a collection list, there appears to be no way to be removed without paying the purported debt even if it is not legitimate."

Comments in which collectors report current practices:

(debt collection law firm; number of people unknown) "Many disputes are difficult to investigate because it is unclear what the consumer's dispute actually is. If the consumer is specific enough so that there is a clear item to research, we will do so. However, [if] it’s a vague dispute such as ‘I dispute this debt’ or ‘I don't owe this debt’ (which is incredibly common), then we will provide statements or a contract to attempt to address it. The amount of the investigation is largely lead by the amount of detail the consumer relays, and most of it results in us relying on the documentation the creditor provides to resolve the dispute. Sometimes we may need to ask the creditor to research their records for indication of X, Y, or Z, but most the time the dispute isn't that specific. I find in my practice that we will often ask a consumer to provide information to support their dispute (such as proof of payment), but then the consumer does not provide it, and we are stuck in our efforts to investigate further… I do think one of the toughest hurdles for a collector (and one of the biggest complaints from persons against whom collection efforts are made) is when they get a person that states the debt is not theirs (but someone else's ) with the same name. We do our homework on our end to investigate (we'll attempt to compare the last 4 digits of the social, we may run a skip trace to see if party we contacted lived at the address on the statements, etc) and we will provide verification, but in a mobile world investigating that the John Smith you contacted is the same John Smith you are attempting to resolve a debt with can prove tricky. This is especially tricky if there is NEVER indication that we have reached the wrong person. We never wish to contact the wrong party regarding a debt, but it unfortunately happens because consumers don't always relay updated contacted information to creditors and a collector then has to rely upon the best information available to them. Unfortunately, I don't know what the fix is here. Despite the stories to the contrary, it simply is not the intent of any professional and responsible collection agency or firm to attempt collections from a party that does not owe the debt, but this is a hard one to address without good communication from the wrongly contacted party and the collector."

(debt collector; >50) "I agree with [the previous commenter]. I have experience as a debtor, pro-bono attorney and debt collector. You can't expect collectors to be judge or jury. The cease communication right is meant to force the collector to sue or go away."

What commenters think about possible new investigation/verification rules. In general, consumer commenters were angry that a collector could simply confirm that the creditor said the debt was owed; many called for greater penalties on the assumption that this behavior did not meet the existing legal standard of “verifying” the debt. E.g., "The law is vague, and this is the first problem. Spell it out what these companies MUST do to validate[sic] debt and put teeth into it. It won't work if it's just meaningless words on paper because there are a lot of rules too many debt collection companies ignore." (consumer; victim of ID theft)

Consumers asked for several new requirements:

  1. Genuine investigation. "[Collectors] should be required to investigate and respond in writing to a consumer's defense, so a follow up can be made, or complaint filed with a governmental agency." (62 or older)

  2. Accountability. "Every ‘notice of debt collection’ letter MUST be signed by a person who actually is an employee, one who is more than just a warm body who answers the phone, and they must use a physical address [not a P O box] and if they fail to acknowledge a disputed debt, face fines. Maybe they'll stop abusing this crucial first step [of acknowledging that the debt has been disputed]." (victim of ID theft)

  3. Documentation. If the collection agency cannot produce documentation from the original creditor including (1) a contract (2) payment history from original creditor if any (3) proper identification of the consumer (4) proof of purchase of the debt (5) proof they are legally able to collect on the debt in the consumer's state-then there should be laws in place that prevent the debt from being reported. In most cases, it is being reported from the original creditor already. And if it isn't, this should be a red flag to CRAs that the debt is not valid. Collection agencies must be able to show proof that a collection notice was sent, and they should be required to provide the same proof a consumer must provide to prove a dispute was sent (CMRR). If it is required of the consumer, it should be required of all. A debt should be considered validated only when all of these conditions have been met. (victim of ID theft)
    "
    The original debt owner or collection company that purchase the account, should produce the original copy of the signed contract, court documents, and any verifiable records relating to the dispute. Forward those documents to the disputing party within the set aside timeline. Any and all verification letters would have to state and indicate such findings."
    "Verification of debts should require the creditor to provide written proof of the initial debt instrument with the consumers' signature. There should be a notarized statement of authenticity along with it. This gives a consumer the documents to file a civil suit for fraud, if needed." (commenter works for local, state or tribal govt)
    "
    When a consumer asks for proof, they should at the very least receive a fully itemized listing of what it is being collecting upon. (e.g. a detailed statement of account, or the unpaid invoice(s).) Additionally, consumers should receive documentation as to why they are legally responsible. (E.g. an agreement that they signed.) I realize that for businesses that traffic in unpaid consumer debt this is going to be a huge burden as this information has long been lost. Too bad. At the very least, this should be the standard for any debts incurred after a certain date."
    "The collection agency should be required to at least furnish enough information to allow the consumer to recognize or dispute the debt. That information ideally would be a copy of the original application and a copy of the final billing statement." (multiple types of debt in collection of a person who died)
    (Several other consumer commenters requested some or all of the items listed above as required verification. See also Making sure debt collectors and buyers have information:Documentation).

  4. Model checklists. "[R]easonable will depend on the circumstance of the dispute and the type of debt. A formal checklist should be created for various scenarios and the analyst reviewing the dispute should be able to enter comments against the checklist which would be part of the eOscar transcript.” (See other comments on e-oscar in "What should count as a dispute.")

  5. Time frame. "I would like to see the time frame for validation change. I, as a consumer, have 30 days from the date of the letter to dispute the debt, however, the collection agency can take as long as they want, even years, to get back to the consumer. This practice is not only bad but some charge interest on the debt, even though they don't call it that (fee's???), all the time they are 'looking into it.’ If I have 30 day's they should have the same time frame to get back to me, period." Another agreed that "[t]he time line should be equal on the consumer, collection company, CRAs reporting, period.” An industry-perspective commenter (debt collection lawfirm; <20) took a different view: "As to a time frame on answering, I think the current system of stopping collection action until verification is provided is appropriate. Normally, sending the information to the debtor is not the hard part. Getting the info from the creditor and then circling back around to this particular account is what takes the time. I don't think disputes should be limited to the first 30 days, but should be prohibited once suit has been filed. The Court rules and discovery process provide the debtor all the access to this information they could ever need or want and the [rules and process] provide this access under pretty strict penalties from the Court if the creditor/plaintiff does not provide the info requested."

  6. Privacy. "There also should be special requirements for validating medical debt because of privacy rights. There seems to be no concern of violating people's privacy when it comes to medical debt collection activities." (victim of ID theft)

  7. Ombudsman."Require the collection agency to divulge to the individual all information related to the debt up front, including who originated the claim, what other companies have owned the debt and require them to ask if the individual acknowledges the debt as legitimate or not legitimate. If the individual claims to have evidence that the debt is not legitimate, the case must be referred to an ombudsman (not paid for by the Collections Agencies) for adjudication. If the Ombudsman determines the debt is not legitimate, the collection agency must remove the debt from its portfolio and either write off the debt or refer a claim back to the originator.")

  8. Easier dispute procedures; harsher sanctions. "When an account is in dispute, there should be some minimally invasive/expensive process that a debtor can use to try and remedy the situation. There should be an easy to use form that a debtor could use to dispute a debt. Once filed correctly, it should be against the law for any creditor/debt collector to attempt to collect on the debt. ... We need greater accountability for creditors and debt collectors. At a minimum, creditors and debt collectors need to be accountable for all actual damages and attorney’s fees. Better yet, creditors and debt collectors should be accountable for punitive damages (or some hefty, minimum penalty as well)."

  9. No adverse action until after judgment. "The CFPB should absolutely adopt rules concerning substantiation of purported debts… [A] ‘verified’ or ‘substantiated’ debt should not be deemed to exist until a final non-appealable judgment is obtained under circumstances where the consumer timely disputes the existence or amount of debt. Such a rule would ensure that creditors and debt collectors only pursue litigation for debts they believe actually exist and avoids adverse impacts to consumers prior to the time the debt is verified and substantiated by a final non-appealable order of a court of competent jurisdiction."

Some consumer commenters were concerned about the “frivolous and irrelevant” exception to the investigation requirement: "There should be clear guidelines on what constitutes ‘irrelevant and frivolous'." "Any rule that defines what qualifies as a ‘dispute’ would help. The clearer, the better. The vagueness now has led to abuses. Such as ‘frivolous and irrelevant’ disputes. That is a license to abuse consumers." An industry-perspective commenter disagreed: "Any … rule regarding verification should absolutely include an exception for frivolous and irrelevant disputes because there are way too many websites out there providing sample dispute letters and the advice to keep using them that the process is abused by enough debtors that we now have a standard letter to address this issue." (debt collection law firm; <20)

Industry-perspective commenters wanted relief from what one described as "a poor form letter that floats around the Internet that many consumers use" to demand "incredibly specific items." Here are their comments:

(debt collection law firm; number of people unknown) "Requiring only a ‘reasonable’ investigation without further definition sounds like a punt to the courts to decide the definition after a lot of litigation. I think at least a broad definition of obtaining documentation to support the position that consumer owes the debt/amount/and creditor is a good place to start. I would love to see consumers use a form letter prepared by the CFPB which spells out a variety of disputes and helps them articulate the dispute better."

(debt collector; 20-50 people) "Consumers who ask for validation should receive just that: a validation that the agency has verified the balance due has some basis as alleged. Too often consumers categorize this process as requiring ‘proof’ as [some consumer commenters do.]. This is not the function of the validation process. ‘Proof’ is something that will occur in court (or not). No document will be enough ‘proof’ for many consumers. That is why the court system exists. . . My concern about a ‘reasonable’ investigation is that it is so subjective. It opens the collector up to an entirely new avenue of prosecution. It is unlikely that a consumer and collector are ever going to agree on what is ‘reasonable.’ As it stands now courts have steadfastly maintained that collectors are allowed to rely on information given to them by their clients: ie: a debt for an amount stated against consumer so and so. Beyond that the consumer and the collector have the ability to ask a third party, a judge, to make a determination. By all appearances the FTC and the CFPB would place this burden directly on the collector, with predictable results: more needless litigation over the process and less resolution regarding the debt itself. One alternative might be for the rule to state a set formula for verification along with the proviso that if the collector follows it they are provided a safe harbor from litigation. However the myriad possibilities for reasonable investigation probably preclude anything so simple. In the end I think it is still a judges purvey to make the final determination."

(debt collection law firm; <20) "The CFPB should clarify whether ‘verify’ means verify that you are a legitimate collection agency (not a scam) OR does it mean to prove the legitimacy of the account relative to the debtor's objections. If is the former, some basic information relative to the account--contract, itemized statements, or any other identifying information that only the creditor would have access to would suffice. If CFPB wants ‘verify’ to answer every single objection a debtor can cook up, a collector could never move forward without spending hundreds of hours normally reserved for litigation."

(debt collector; <20) "The CFPB should determine what standard information needs to be made available for verification of a debt and the collection industry should be required to provide that information when requested. The list should be standard and available on websites of the CFPB and sent by every member of the industry upon request. i believe the list should be: 1. Original Creditor account number 2. Itemized statement of obligation including amount and date of last charge and payment 3. Type of debt 4. Signed contract if debt was the result of a contract 5. Location where services or sale was initiated 6. Any other brand name/business consumer might recognize associated with the obligation (if applies) Splitting these obligations of the recovery industry [by requiring this information at the point of verification rather than in the validation notice] serves a positive consumer purpose as well as better serving the industry…. Upon introduction is definitely the incorrect time to speak of legal action, the industry should be required to provide this notification only in cases that reach a minimum of a 50% chance that suit would be involved. This notification would have to be documented as sent no less than 45 days prior to taking any legal action."

(debt collector; <20) "I would suggest a review of the language already published in the Federal Rules of Bankruptcy BR 3001 (effective date 12/1/2012) relating to documentation. Based upon my participation with the Rule and numerous comments/hearings, I believe some time can be eliminated without re-inventing a different set of standards. Bankruptcy involves collection and involves consumers including attorneys on both sides as well."

Finally, as in many of the other topics, consumer commenters focused on the actions of credit reporting agencies, and on the impact on their credit standing, when they discussed problems with investigation and verification of the debt. The comments often reveal confusion and frustration about the roles and responsibilities of creditors, collectors, and the CRAs:

"As a consumer who has had Identity Fraud, Telecommunications Debt Error, Mortgage Reporting Errors, I know a lot about this subject, the time it takes to remove [the] lies the corporations tell to credit bureaus. Simply allowing the credit bureaus to accept ‘name, social security and address’ as the only ‘verification and validation’ is incorrect. With Identity Fraud, it is easy to have anyone's personal information. If a mortgage company is reporting a ‘foreclosure’ and cannot produce the Lawsuit, Case Number, and Sale of the property, they should not be allowed to report a foreclosure. A foreclosure is a legal process which begins with a lawsuit and ends with the sale of property or a voluntary dismissal. If a voluntary dismissal is signed by a Judge, the foreclosure should not be listed. Also, Loan Modification reporting should not include refinancing of loans which are only for the purposes of reducing an interest rate. Credit Bureaus should be forced to have the actual documents in their possession before they can report ANY information. Otherwise, they too should be responsible for misinformation and lies. This should be a monetary compensation of more than $10,000 per incident."

"If the consumer claims identity theft then the Debt collectors should be required to prove otherwise. The CRAs should be forbidden to report any debt that has been disputed as Identity theft unless they can provide court admissible proof that it is a valid debt. The CRAs should be held more accountable and heavily fined for reporting erroneous information. Their fines should be paid directly to the consumer for the countless hours they spend trying to fix their credit reports. The CRAs should be required to send a letter to the consumer's insurance companies, mortgage companies, and anyone else that charged the consumer a higher rate based on their erroneous credit score and find out how much their error costs the consumer. The sum of those added costs should be paid by the CRAs directly to the consumer in addition to the fines. The burden of proof should fall on the CRAs and the debt collectors, not the consumer." (victim of ID theft)

"[Federal law] should do something about this horrible thing that lets the credit reporting agencies off the hook for reporting inaccurate information. I had inaccurate listing on one, and it wasn't my debt and I proved it but when I first called, I got from all ‘we only report what they tell us.’ blah blah I was livid. That is putting the fox in charge of the hen house. I had to get the doctor's manager to write a letter to the collection agency (which he did and very quickly) that I was not the person. Then THAT had to be mailed to this obnoxious company that ignored my dispute and request they validate, they completely ignored everything. When they got that letter from the doctor's office, they grudgingly took it off, and instead of a letter of apology, they sent me a letter saying to the effect we are removing this but we will put it back on if anyone else complains. … I had no debt, they had the wrong person, they put it on my credit reports and that was their arrogant attitude. Then I had to send the letter to the credit reporting agencies who just removed it didn't apologize. This is no small thing. This can take up tremendous amount of time, you are not treated well even when it is abundantly clear they made If that company had done its job in the first place, they would have verified it was not my debt. But they added insult to injury. The ONLY way to get that attitude and actions changed it to put some muscle behind it with BOTH the debt collection companies AND the credit reporting agencies. I hope this comes to something, because what this has evolved into is a big money business … they just harass and expend no time verifying." (victim of ID theft)

"Currently, debt collectors are attempting to collect upon purported debts and reporting negative information to CRAs based solely on assertions by creditors that a debt is owed. Further, the ‘verification’ of a debt is usually nothing more than a piece of paper from the purported creditor stating the amount of the debt that the purported creditor asserts is owed. Even where the consumer has disputed the existence of the purported debt in light of, for example, legitimate legal defenses and counterclaims, the creditor or debt collector often times reports negative information to the CRAs thereby damaging the credit profile of the consumer. Although the FCRA requires that the CRA notate that the debt is disputed by the consumer, the damage to the consumer's credit standing is already complete as potential lenders and/or employers will see the negative information on the credit report and may take adverse action in connection with their lending or employment decisions based solely on the fact that negative information appears on the consumer's credit report. As a result, the threat of negative reporting by debt collectors to the CRAs can be highly coercive, unfair and deceptive in that a consumer may feel forced to pay a purported debt, even if the debt is legitimately and in good faith disputed, to avoid adverse information appearing on their credit report … Under circumstances where a consumer timely disputes the existence of a debt or the amount of the debt, creditors and debt collectors should be prohibited from reporting adverse information to CRAs and CRAs should be prohibited from including adverse information on a consumer's credit report about the purported debt until the creditor or debt collector obtains a final non-appealable judgment so as to avoid the highly coercive, unfair and deceptive consequences to consumers. … As an alternative to my initial proposal, a rule could be adopted that would impose significant statutory penalties, treble damages and recovery of attorney's fees against creditors, debt collectors and CRAs in the event the consumer can prove either the disputed debt doesn't exist or the amount of the debt is less than that claimed to be owed. This approach, however, places the burden of proof on the consumer and I feel strongly that the burden of proof should be on the creditors and debt collectors to affirmatively prove the existence and amount of any disputed debt before a consumer's credit report is adversely impacted."

"Credit bureaus are responsible for 95% of identity theft and inaccurate consumer credit files. It's because their revenue comes from businesses who pay for access to their databases including phony ones. I have a letter from a credit bureau that says the only thing they do to investigate/verify accuracy is ask the entity that initially reported the information if it's true. New rules have to put tighter restrictions and procedures on credit bureaus because they are the root of the actual problem. Secondly, because they are private companies who should not be able to collect or retain any financial information without consumers permission. Submission of proof of debt or other evidence/documents should be required. Retention of the identity of the actual [business] persons reporting the account information should be required." (commenter works for a state, local or tribal government)

"I have had several doctor/laboratory debts placed on my credit report. These are debts that I never rec'd a bill for or even a phone call from the hospital or facility. I have very good health insurance that paid over $14k when I had my baby...3 months go by and I start getting notified by my credit monitoring agency that my credit score is going down. Why? things such as a (pediatric audiology test $83) when my baby was 1 day old. Apparently the audiologist doesn’t bill through the hospital. [T]hey also don’t bill the patients. They outsource their billing to a 3rd party collection agency who immediately reports it to all 3 credit bureaus. Maybe I missed that forumn on this sight, but what about further regulating the credit reporting agencies that can destroy your credit without any proof. A company can send a $100 bill to Transunion and say I owe it, and BAM...my credit score takes a 10 point dive. Agencies should not be able to put something on your credit report without first having not only validated the debt and provided any and all documents that prove you owe the debt, but they must be required to have attempted to collect the debt. I have had businesses tell me that it’s cheaper to put the bill directly on your credit report than it is to hire a 3rd party to collect the debt. This is a horrible injustice to the people who pay their bills, maintain health insurance and who will pay their outstanding debts. The system is set up to force the consumer to prove their innocence (if you will) versus the creditor proving they are owed a debt." (service member)

"In my own experience, the CRAs consistently refused to delete trade lines not belonging to me even when I had provided documentation from the original creditor validating the debt was not mine. They falsely claimed they received additional information from the original creditor that superseded the documentation I had. When I circled back to the original creditor, I had learned the debt was sold to a junk debt buyer which leads to a separate issue. If the junk debt buyer is reporting to a credit reporting agency, why are they misrepresenting themselves as the original creditor. Junk Debt buying should be prohibited all together. The original creditors should know their vendors just as the law mandates they know their customers. If the vendor is violating the law on the original creditor's behalf the original creditor should hold responsibility to some extent." (victim of ID theft)

"My experience is the collection agency will not correct the debt on the credit report! we need a law requiring the collection company to report debt repayment or debt settlement to the credit bureau in a timely manner... Say 30 days after the debt has been settled, or payment arrangements have been made. It can be very hard to clean up your credit when working with collection companies... they want their money but they don't care if your credit report is accurate!" (financial literacy counselor for domestic violence shelter)

"If a debt collector reported accurately that the debt in question has not been paid, but now is, it is the responsibility of that debt collector to report the newly accurate information. As I too have noticed, some debt collectors will not accurately report updated information to the credit bureaus once they are paid." (consumer; being called by collectors looking for someone s/he doesn’t know)

"The collection agencies in my experience helping resolve debt disputes will often NOT notify the credit agencies that the debt was resolved." (employee of consumer protection organization who mediated for debtors)

"As someone who has dealt for over two years with a rogue collections company putting a debt I don't owe on my credit report, I think these debt buyers should be disallowed by law. Legitimate third parties can operate, but these fly by night businesses who buy for pennies on the dollar without a care as to whether the books are correct should be fined and put out of business. In other words, the regulations should be so tough that they can't afford to stay open. They only wreak havoc on people. I have dealt with an unscrupulous company for two years; my state Attorney General was involved in getting it removed from my credit report with 1 agency, only to have this company report the same to another agency. No collection should be allowed on the credit report until verified 100%. And if the debt is more than 2 years old, the creditor must notify the supposed debtor in writing and allow 30 days for a response--denial, request for proof, payment, etc.--before putting it on the credit report."

"Currently, CRA's deny responsibility for ‘reporting’ inaccurate information given to them. CRA's should be liable for both actual and punitive damages caused by ‘reporting’ inaccurate information." (62 or older)

"Having been recently included for free credit checking, after the Target identity theft issue, I checked my credit with Experian and found a $9,924 'collection' on my credit report, resulting in a 610 FICO score! I had never heard of Portfolio Recovery, a company located in Virginia. I immediately wrote to the Office of Consumer Affairs in Virginia, detailing what this erroneous addition to my credit report had done to my overall score and my ability to maintain good credit. ALL of my credit cards lowered my limits, but I thought that had been in response to the ongoing bank investigations and the banks way of getting back at consumers. It all made sense when I saw this entry. What shocked, alarmed and enraged me most is that Experian excepted this 'collection' entry without documentation. I can assure you that none exists. However, I have been a victim of lost wallets and identity theft within the last 20 years and may have seemed a legitimate target to Bottom-feeder agencies like Portfolio Recovery . . . Anytime a consumer writes to a credit reporting agency, the letter winds up in Mumbai, is laughed at and never acted upon. Experian, TransUnion and Equifax should undergo a Congressional investigation, during which their anti-consumer orientation and fraudulent reporting will be noted, as well as the impossibility of restoring a former 810 FICO, once scumbags like Portfolio Recovery have been allowed clear access to ruin the credit score and compromise the professional life and earning potential of millions of consumers." (consumer; victim of ID theft; 62 or older)

"Creditors should not simply be able to pull your credit report at their fancy. I had so many soft pulls (this was before I realized I needed to opt out of marketing) that my credit report from Equifax got 'split.' Basically, this means that my report got chopped in half and trade lines disappeared. Also, a legitimate creditor attempted to pull my credit and was told by Equifax that I didn't exist. Everything was gone. After numerous fruitless attempts at reaching someone at Equifax, I finally got a real person. I was informed of the split and told that the burden was on me to provide them with the correct information to 'put my report back together.' I had to fax them my driver's license, social security card, and a utility bill, all because their software cracked due to too many inquiries that I didn't even authorize. It's still not resolved, and I've filed a report with the CFPB."

One commenter (victim of ID theft; lawyer occasionally involved in debt collection) sketched what s/he saw as the bigger picture around substantiation, and echoed comments in several other posts about the need for new enforcement approaches:

"Current debt substantiation requirements all suffer from the same significant shortcoming in that they fail to address the often symbiotic relationship between first-line creditors, collectors, reporting agencies, consumer data clearinghouses, buyers of bad debt, and others industry players. Each has a vested profit motive in the ‘validation’ of debt. Without appropriate disincentive--i.e., enforcement of rules and stiff penalties for non-compliance--corners are cut and quid pro quo-type behaviors begin to surface. Consumers hold few cards and have to play against a stacked deck. The validation process should involve more than merely inquiring with the creditor about the validity of the debt or the identity of the debtor, and failure to observe all the necessary steps--in the sunshine, no less--should have severe consequences. The best deterrent would be putting the power back in the hands of the (truly-wronged) consumer through the inclusion of ‘private attorney general’ style enforcement mechanism. Awarding attorneys' fees and damages, with the ability to elect either actual or meaningful statutory damages (similar to the scheme introduced by Congress into the copyright statutes), would create serious disincentives for anyone involved in unscrupulous validation practices."

4|What should happen with unverified debts?

Final Summary of Discussion

[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.]

To the extent consumers had different views on this question, the difference was only in how far the law should go in restricting action by creditors, collectors and CRAs on unverified debts. (Note that the consumer perspective on what constitutes verification is much more robust than what current law may require of collectors. See previous subtopic.) The range of consequences consumer commenters proposed for failure to verify was:

  • Suspend further action to collect
  • Suspend any action to resell until proper verification
  • Prohibit resale
  • Prohibit inclusion in a CRA and require removal of any existing listing of the debt
  • Prohibit any kind of transfer (including to new collector)
  • Prohibit filing suit on the debt
  • “Cancel” or “delete” the debt.

Eg., "Currently, debt collection agencies can sell debt without proper validation. Or they can sell the debt if a consumer disputes the debt and the agency can't product the proper validation. These things should not be allowed and are very detrimental to the consumer. Consumers should be protected above collectors and other agencies as they, typically, have far less resources to fight inaccurate information. Additionally, the inaccurate information adversely affects consumers more than any other group in these situations." (consumer; service member)

Only one industry-perspective commenter commented on this question, but s/he concurred with consumers to the extent that an unverified debt, or one with an open dispute, should not be sold:

(debt collection law firm; <20) "If our client(s) can't provide any verification of the debt, we close the account and send the debtor a letter that we are doing so. Note: this has only happened once or twice in 20 years. An unresolved dispute account should NOT be sold. If so, seller should be liable."

One consumer urged that CRAs be required to delete all mention of a dispute once it has been settled:

"[W]hen you file a dispute and it has been closed it is placed in the comment section that you have filed a dispute. By doing this, this has kept me from refinancing my home just because the word dispute was there. The mortgage company said I had to have this removed, so I filed another form to ask for this to be removed it never was. I believe that once the dispute has been closed there should be no indication that there was a dispute filed. You again get penalized for trying to correct mistakes on your report."

Consumers supported a rule that prohibits collectors from reporting information to a CRA during the 30-day window for disputing a debt. (For descriptions of harm to consumers from having a disputed debt show up on a credit report, see the previous subtopic.) E.g., "There should be a federal rule prohibiting collectors from reporting information to a CRA during the 30-day window. There are automated processes in place with many collectors where they will generate 4 collection letters at one time, including the one where they tell you that they have reported you to a CRA. And then they will mail all those to letters (all dated on the same day) to you at the same time. And this is done without any debt verification whatsoever."

Only one industry-perspective commenter addressed this proposal; s/he perceived significant problems:

(debt collector; <20) "Suspend further action to collect or re-sell. Placing a rule that prohibits a collector from reporting information to a CRA during the 30 day window would be a nightmare from elm street and only cause more problems. First, a third party collecting on behalf of a lender isn't, nor should be, defined as a furnisher of information. While the FDCPA requires notice specific to the validity of the debt, the FCRA has requirements for users of consumer reports. Combining two statue requirements in the initial notice of a debt serves no purpose. Sending during the 30 day notice would create confusion in the event the consumer responds, for example, to the validity of the debt and does not include a request about a credit report accuracy. I believe the issue is whether a third party debt collector or debt buyer should report an account to a credit reporting agency which would overlap the original lender's last report on the consumer account. In my opinion they should not. I have seen confusion due to lack of rule clarity. For example, if a consumer files a bankruptcy petition who should report that event? If a third party opts to report then the third party would be required to report events that take place during or after the bankruptcy filing. To date, Title 11 offers no direction to reporting and neither does the FCRA other than a credit reporting agency removing after 10 years."

Others requested new requirements beyond the scope of unverified debts:

"Collectors should not be allowed to report a debt as 30 days late if the debt isn't 30 days late. The law should include stiff enforceable penalties to deter collectors from pre-dating debt. These rules should apply for any debt reported late at any time, not just the first 30 days." (consumer; service member)

"1st. Return all credit card debt back to the original banks and change the 6 month charge off rule existing today. (They most likely never attempted to worked it out anyway because of the 6 month charge off rule) 2nd. All the returned accounts should be examined for the multiple bad, abusive and deceptive practices the banks implemented the last 15 years and then recalculated. Believe it or not, a practice fairly common 10 years ago was to send consumers multiple 0% offers (free cost money) but if you were to pay 10 minutes late online the rate would go to 29.9% and there was no recourse. So if banks offered ‘free cost money until the balance was paid off’ and the debtor only paid late once or twice then the amount owed should be recalculated at the original 0%. Of course there would be limitations but more often than not the debtor simply paid late by a 1/2 day or day. Another example was when online payments were first introduced. Many times there were technical glitches yet the fault always fell on the consumer not the bank. 3rd. Once a new amount is recalculated then the banks should make a good faith attempt to work it out with the consumer. If after recalculation, it is determined there was an over payment from the consumer for more than or equal to a 25% return to the bank then a refund should be issued. What good does verification, objection to debt in a lawsuit or disputes do? This means nothing... For example, I have copies of letters sent, spreadsheets of interest rates going back to 2000 supported by statements and recorded phone calls. Calls consisting of attempts to work it out with a bank in 2009 -2010. The result? A junk debt buyer trying to squeeze out more money today above the 16% ROI the bank already made. I already liquidated my retirement account to contribute to this 16% return for the bank in 2010 . How much more do these banks and junk debt buyer's need over and above the principal and a generous interest?" (consumer)

All topics