Now, debt collectors must send consumers a “validation notice” within 5 days of first contacting them (FDCPA § 809). One reason for the notice is to help consumers figure out if the debt collector is going after the wrong person.
The validation notice has to contain the amount of the debt and the name of the current owner of the debt (FDCPA § 809(1)(2)). CFPB wonders whether consumers need more information to recognize the debt as one that they really owe. Here are possibilities:
- Name and address of debtor. (This info will be on the envelope if the validation notice is mailed, but it might not always come by mail. See below: Format of the notice.)
- Names and addresses of other people responsible for the debt.
- Debtor’s partial social security number (for privacy reasons).
- Original creditor’s account number (or part of the number, for privacy/security reasons).
- The name and contact information of the original creditor if that’s different from the current owner. (See Telling Consumers what’s happening with their debts—Notice that the debt has been sold.)
- The brand name the consumer would recognize as the company they originally dealt with, if that’s different from the original creditor’s legal name.
- Date and amount of the last payment the consumer made on the debt.
- Copy of the last billing or periodic statement sent to the consumer.
- The type of debt (student loan, auto loan, etc).
- For debts from testing labs or other medical services, the name of the doctor, medical group, or hospital (a name the consumer would associate with having gotten these services).
- Current practice: How much of this information do debt collectors and debt buyers have now?
- Costs: What expense or problems would debt collectors and buyers have with giving consumers this information?
- Benefits: Which of these will help consumers most, and why?
Comments45
Commenting is now closed.
TaxGuy
November 6, 2013 - 7:32pm
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.
When a consumer asks for proof, they should at the very least receive a fully itemized listing of what it is is being collecting upon. (e.g. a detailed statement of account, or the un-paid 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.
jeffreyjon
November 12, 2013 - 11:10am
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 taxguy does. 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.
stopwithspoofedcallerID
November 13, 2013 - 12:58am
I am sure many judges would disagree with you. Courtrooms are not a playground. And judges do not like it when plaintiffs waste their time by filling frivolous lawsuits that do not have proof.
Moderator
November 20, 2013 - 12:00pm
Welcome to RegulationRoom, jeffreyjon, and thanks for your comments. Some people are concerned that collectors don't do much more than doublecheck that the amount in the validation notice is what the creditor says the consumer owes. The FTC thinks the collector should have to do a “reasonable” investigation and CFPB is deciding whether this should be the new federal rule. Given your experience, we hope you will comment on the topic page, When consumers dispute a debt – How should collectors investigate and “verify” the debt.
Moderator
November 17, 2013 - 6:37pm
Thank you for your debt collection stories and comments TaxGuy. As CFPB moves to the next stage (coming up with specific proposals for new rules), it will be carefully considering what you and other commenters say here. We hope you will comment on the other topic pages including, When consumers dispute a debt.
Jane freese
November 7, 2013 - 11:13am
Most of the consumer debt I see if coming from debt buyers and the consumer doesn't recognize the name or the amount. Many of these are beyond the statute of limitations to file suit but suit is filed anyway. Many consumers don't know to file an answer is court and a default judgment is entered. The information you suggest would help a lot in letting consumers know what this debt is. I would include the trail of ownership of the debt as there could be intermediary owners between the original creditor and final collector. Debts are sold and resold. It would also help to have some documentation of the specific debt having been sold so the consumer can verify the current ownership of the debt. Currently, all they get in response to a validation request is "we checked and you owe it". Our firm asks for specific documents related to the claimed debt and the response we get is "the courts say we don't have to provide any documents...go fish".
Moderator
November 18, 2013 - 1:49pm
Thank you for your comments and suggestions Jane freese. CFPB doesn’t have legal authority over absolutely every aspect of debt collection and rules about collection litigation are a complicated mix of state law and federal law. But as CFPB moves to the next stage (coming up with specific proposals for new rules), it will be carefully considering what you and other commenters say here. We hope you will continue to engage in the discussion, it sounds like your experience can give CFPB some important insight.
Marlene
November 7, 2013 - 11:22am
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.
Moderator
November 10, 2013 - 11:52am
Thank you for your comment, Marlene, and welcome to RegulationRoom. You mention that you've had some experience with clients having collection disputes. What information that CFPB has suggested do you think would most help your clients and why? How do you think it would change the outcome or the process of the collection disputes? Do you think that requiring debt collectors to provide additional information to the consumer could add to the confusion?
mpick76
November 7, 2013 - 12:09pm
As a creditor, I can agree with this notification 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 them forget they owe the debt. All laws should not apply to all creditors.
Moderator
November 19, 2013 - 2:15pm
Thank you for your comment, mpick76. CFPB is interested in hearing ideas from debt collectors on how to make it easier to tell the “bad apples” from responsible collectors. Do you have specific suggestions for how CFPB could clearly differentiate between different types of creditors when writing rules for the validation notice? We hope you will join other discussions, including documentation on the topic, Making sure debt collectors & buyers have info about the debt.
mpick76
November 22, 2013 - 10:01am
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.
LarryS
November 7, 2013 - 2:20pm
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."
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 serves a positive consumer purpose as well as better serving the industry. Additionally, you will notice that I ignored the legal notification portion completely. 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.
MER
November 11, 2013 - 11:01am
From a creditor's standpoint, I generally agree with this comment. 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 unneccessary 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.
JClark53
November 20, 2013 - 3:53pm
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.
stopwithspoofedcallerID
November 7, 2013 - 9:03pm
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 the 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.
Bonita Kale
November 10, 2013 - 3:00pm
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."
RickJack
November 12, 2013 - 9:54pm
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.
Moderator
November 13, 2013 - 4:18pm
Thank you for your comment. Do you have any suggestions as to what the correct balance between privacy and disclosure may be in order to identify the debt to the debtor in a safe way?
paperbag
November 15, 2013 - 10:12am
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.
paperbag
November 15, 2013 - 10:53am
Every validation notice should include the collection agency's license status: license number, state of license, original license issue date, and current license expiration date.
RHN91362
December 5, 2013 - 6:28pm
This is not an appropriate requirement because not all states have licensing or registration for debt collectors.
JClark53
November 20, 2013 - 3:48pm
They need to include the name of the original creditor as well as the account number and the brand name the consumer would recognize. Date and amount of last payment, copy of the last billing statement (supposedly) sent to the consumer. However I also think they need to send 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.
RHN91362
December 5, 2013 - 6:29pm
But they also can't send you a signed paper for something you agreed to online, or over the phone. So few people actually put a pen to paper these days to sign a formal written agreement. So that's an unfair requirement when it doesn't always exist.
JClark53
December 5, 2013 - 7:26pm
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. Meanwhile, if you say they wouldn't lie about it, I would love to sell you my ocean front property in Nebraska.
paperbag
November 24, 2013 - 12:53pm
I think the requirement for a debt collector to send a validation notice 5 days after the initial contact is backwards. I believe communication between the debtor and debt collector would be improved if the debtor has the validation notice before the initial telephone contact. 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.
Tfleeman
December 2, 2013 - 3:07pm
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.
muscogulus
December 5, 2013 - 4:34pm
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.
muscogulus
December 5, 2013 - 4:27pm
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...."
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.
Moderator
December 9, 2013 - 12:35pm
Thank you for your comment muscogulus and welcome to RegulationRoom. When adopting new rules, CFPB is very interested in balancing costs and benefits. Do you think what you have proposed might burden debt collectors with significant costs that can pass down to consumers? Would an alternative, like providing the hospital name, or other information that makes it easier for collectors to produce, be acceptable?
muscogulus
December 22, 2013 - 6:41pm
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 a 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.
RHN91362
December 5, 2013 - 6:48pm
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 don't believe that any portion of the SSN should be included on this letter, because it's just too risky. However, I think 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.
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.
muscogulus
December 22, 2013 - 6:58pm
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.
Jmonighan
December 17, 2013 - 3:03pm
Validation should be obtained from the Creditor by the Collection Agency prior to any Collection attempt is made by the Collection Agency at the very least. 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.
The rules of Evidence Judicial Procedure should be horned during the validation process. With out meeting some measure of the burden of proof all functions of Debt Collection is simply a burden to the Tax Payer, any proceedings with out court worthy documentation would be frivolous.
If Custody of the debt is transfered form a Creditor to and Collection Agency the Contract must be available for the Consumer or Custody of the debt by the Collection Agency should be invalidated.
Privacy should be respected. When it come to mortgage debt; Upon the issuance of a mortgage form a bank the bottom line banks holding do not decrease. In essence The bank has written new currency (guaranteed by the future payment of the Property taxes, and other Taxes placed on the individual Citizens of the United States of America backed by there Social Security numbers and property deeds) in to existence. Essentially the Borrower is giving the full amount of the mortgage plus interest to the mortgage lender.
If the FDIC truly backs Lenders, The lender should maintain the documentation of the agreed debt and a Default should be handled by the FDIC. Outsourcing to a Collection Agency can compromises the custody of the debt and encourages harassment of the consumer by a 3rd party.
May Fraud be Minimal and Prosperity be Abundant.
Moderator
December 19, 2013 - 3:52pm
Welcome to RegulationRoom and thanks for your comment Jmonighan. You've raised several ways to further allow consumers to validate their debt. You may wish to join the discussion on the "validation notice" sent to consumers by clicking here.
CaliG
December 30, 2013 - 5:15pm
Items 1 through 10 should all be provided
on the validation notice. Number 10 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.
Moderator
December 31, 2013 - 5:17pm
Welcome to RegulationRoom CaliG, and thank you for your comments. Is there a way the validation notice can help clear up consumer confusion about the role of insurance companies?
It also sounds like you may have experience dealing with medical debts. If so, will you share more details with us? CFPB is looking for information on problems consumers and creditors are having in debt collection, and wants to know more about individual experiences.
crecente
January 8, 2014 - 4:56pm
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.
Moderator
January 8, 2014 - 7:34pm
Thank you for your comment crecente. Zombie debts can also be debts that are time barred – where the owner of a debt has waited too long to bring a lawsuit to collect it. To learn more and comment on this issue, see old debts.
JohnEllis
January 21, 2014 - 12:44am
I believe all of the possibilities listed 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.
Moderator
January 23, 2014 - 10:41pm
Thank you for your comments JohnEllis, and welcome to RegulationRoom. Because federal law requires CFPB to balance costs and benefits in any rule it might make, the agency wants to know what information would be most useful to consumers. If requiring all the information on the left were too costly, what kinds of information do you think would be most important, either for verifying a consumer’s identity or helping the consumer recognize the debt?
batchbattery
February 19, 2014 - 6:25pm
The debt collector must be required to submit the original application for credit with the consumer's original signature and the original letter of approval for the credit. The debt collection company should be required to submit full documentation that the debt actually exists. Too many debt collectors rely on falsified affidavits.
Moderator
February 19, 2014 - 8:09pm
Welcome to RegulationRoom batchbattery and thank you for commenting. Can you elaborate a little on what this "full documentation" would require? In what ways is the current validation notice requirement inadequate to protect consumers?
batchbattery
February 20, 2014 - 11:17am
Full documentation per my previous comment - that is the original application for credit with the consumer's original signature and the original letter of approval for the credit. Additionally, statements for the credit showing purchases made with retailer information, amounts and dates. Currently, when you submit a DV to a bill collector, you get a letter back that only says, "we have verified the debt" but they generally don't show any sort of documentation to back their claim.
mpick76
February 25, 2014 - 3:50pm
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.