When a creditor has a difficult time collecting a debt they may turn to a collection agency to help them out. A collection agency is a business that works at pursuing payments on delinquent debts from an individual or a business. Most collection agencies are working as an agent of the creditor and they receive a fee or a percentage of the amount collected.

Some collection agencies, however, are “debt buyers” and in that case they have purchased the debt from the creditors for a fraction of the value and in return they will try to collect the full balance.

Creditors typically refer or sell their bad debts to a collection agency so that they can remove them from their accounts receivable records. They can then write off anything that is not collected as a loss on their books.

In the past, debt collection agencies have often engaged in threatening behavior, harassment and coercion. However, there are laws that protect consumers from abusive behavior. In the United States, the Federal Trade Commission (FTC) enforces that Fair Debt Collection Practices Act or the FDCPA, which prohibits debt collectors from using unfair, abusive or deceptive practices in order to collect a debt from you. Most of the states have additional laws to protect consumers from abuse from a debt collector.

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A collection agency is a second party (rather than the original creditor) who has been authorized by the original creditor to try to collect the debt. There are various ways a collection agency may get the debt, however that goes off on a different tangent and should be in a different post.

But think about this……

If you owed Sam money and someone named George tried to collect the money, would you just automatically give George the money or would you make sure that he was authorized by Sam to collect? Would you make sure that you actually owed the money?

Exactly. You need to do the same thing with a collection agency. You never entered into any type of agreement with the collection agency. You only had an agreement with the original creditor.

And that is the purpose of debt validation. Make the collection company prove that you owe the debt and that they have the right to try to collect it. Here is a sample debt collection letter. 724Credit also has other credit repair letters here.

Your Name
Your Address
Your Phone #

Collector’s Name
Collector’s Address

Date

Dear Collection Manager,

Re: Account Number__________
This is to inform you that I’ve recently pulled my credit report and noticed that there’s a collection from your agency on my credit report. I have never been notified of this collection. However, this letter does not imply that I refuse to pay this debt. Rather, I would like to dispute your claim.

As per the FDCPA, I have the right to request a validation of this debt. I request you to prove that I am indeed the party who is by contract obligated to pay off this debt.
I hope you are aware of the fact that reporting any invalidated information to major credit bureaus may constitute defamation of character, as negative listing on credit report does not allow me to enjoy the benefits of good credit. In addition, you must also be aware that until you validate this debt, you can neither continue collection activities nor report this information on my credit report. I’m sure your legal staff will agree that non-compliance with this request is likely to put your company in serious legal trouble with the Federal Trade Commission (FTC) and other state/federal agencies.

Please attach copies of the following documents:

1. Agreement with your client that authorizes you to collect on this alleged debt.
2. Agreement that bears signature of the alleged debtor wherein he promises to pay the creditor.
3. Complete payment history on this account so as to prove that the debt amount you wish to collect is correct.

Thank You,
Your Signature
Your Name

For more sample letters for your credit repair arsenal see the other credit repair letters here at 724credit.

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It is estimated that as high as 75% of all credit reports contain errors, mistakes and inaccuracies.  The FCRA is the Fair Credit Reporting Act and it was enacted back in 1979 to allow consumers the opportunity to dispute problems on their credit report and to promote the fairness, accuracy and privacy of personal information on credit reports.  With so many potential errors on credit reports it is likely that at some point you may need to consider credit repair as an option to eliminate the inaccurate listings on your report.

The FCRA gave you the right to dispute the errors on your account.  After receiving the dispute the credit bureaus and lenders have a certain amount of time to verify the validity of the information or it must be removed from your account.  Credit repair can be accomplished on your own or you can engage the services of a professional credit repair company. 

Be aware however, that the Federal Trade Commission states clearly on their website that “No one can legally remove accurate and timely information from a credit report.  The law allows you to ask for an investigation of information in your file that you dispute as inaccurate or incomplete”.

This statement seems to be very clear and explicit and that is one reason why the critics of credit repair will try to dissuade you from any attempts to repair your credit by telling you that trying to repair your credit is futile.  The fact of the matter is that you can make a significant difference in your credit score and on your report when you repair your credit.  

Even thought the FTC statement seems quite straightforward, there is quite a bit of ambiguity in the quote when it comes to real credit reports and real situations.  Up to 75% of all credit reports are deemed to contain mistakes.  Since this is the case, credit repair companies actually offer a valuable service.  Of course, you can do it yourself and you may want to consider that but it does take time and energy and if you already have a busy life you may not want to tackle a major project like that on your own.

Since “accurate and timely” information should not be removed from a credit report, what are the criteria to define “accurate and timely”?  Many times miscommunications or mistakes happen between consumers and lenders and something that may be considered “accurate” may not be that at all.

Many credit reports have issues that are completely inaccurate.  Listings that belong to someone else, duplicate entries, listings that have been on your report for longer than 7 years, and anything that is the result of identity theft need to be removed from your account.  These issues frequently show up on credit reports.

As a consumer you also have the right to dispute any item that you think is misleading, ambiguous, unverifiable, biased or questionable.  Occasionally there may even be issues that the lender feels are accurate but you were never able to defend yourself with your side of the story.  One reason why it is so crucial that a consumer can dispute negative listings is because of the fact that there are always two sides to a story.  You can dispute anything showing on your report that is inaccurate, untimely, misleading, incomplete, ambiguous or questionable either on your own or by employing a professional credit repair service.

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The basis of most credit repair is the Fair Credit Reporting Act or the FCRA.  This law was enacted back in 1970 to protect consumers from inaccuracies and inconsistencies on credit reports.  This law enables consumers to dispute untruthful or inaccurate listings on their credit report.  It also permits a consumer to receive one free credit report each year from each of the three main credit bureaus.

Most people who know about credit and credit practices and repair are familiar with this law.  However, there are two additional laws that affect you as a consumer and can be beneficial to you for credit repair and it is wise to learn about these laws also.

While the FCRA or the Fair Credit Reporting Act is the foundation which makes all credit repair possible, the FCBA or the Fair Credit Billing Act and the FDCPA or the Fair Debt Collection Practices Act are also critical to a solid credit repair plan.

The FCBA or the Fair Credit Billing Act requires creditors to bill completely and correctly.  It prohibits charges that have the wrong date or wrong amount, unauthorized charges, charges for goods or services that you did not accept or were not delivered as agreed upon.  It prohibits a company from failing to post payments or other credit and failing to send billing notices to your current address, provided that any changes of address were received by them 20 days prior to the billing cycle.  This law also allows a consumer to request written proof of purchase or requests for clarification. 

The Fair Debt Collections Practices Act was enacted to protect ordinary consumers from unreasonable and unfair collection agency tactics.  Many collection agencies engaged in despicable practices in the past in order to collect a debt.

The FDCPA specifies reasonable collection practices.  For example, a collection agency cannot contact any third party who does not owe the debt.  They cannot issue false threats of reporting it on your credit or referring your account to an attorney in order to intimidate you to pay.  They are only allowed to call within reasonable hours, which are typically between 8:00 am and 9:00 pm unless they have your specific permission to call at another times.  They are not allowed to call you at inconvenient or unusual times or places if you let them know what is unacceptable.

This law, the FDCPA is very extensive and it has a long list of restrictions and acceptable behavior for collection agencies.  Just be aware that you must specifically and just to be safe, you should probably do it in writing tell them when and where it is unacceptable for them to call you.  If you have any questions about the law you can do an Internet search and read it in its entirety.

These three laws are critical to you as a credit consumer.  You can use any of them as a beneficial measure when you need to complete credit repair so it is wise to be aware of them and know where to find further information if necessary.

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The FCBA or the Fair Credit Billing Act requires creditors to bill entirely and properly. It prohibits charges that have the erroneous date or wrong amount, not permitted charges, charges for goods or services that you did not acknowledge or were not delivered as contracted upon.

It prohibits a company from failing to post payments or other credit and failing to send billing notices to your up to date address, provided that any changes of address were received by them 20 days prior to the billing cycle. This law also allows a consumer to request written proof of purchase or requests for explaining.

The Fair Debt Collections Practices Act was enacted to protect ordinary consumers from unreasonable and unfair collection agency tactics. Many collection agencies engaged in despicable practices in the past in order to collect a debt.

The FDCPA specifies reasonable collection practices. For example, a collection agency cannot phone any third party who does not owe the debt. They cannot give out fake terrorization of reporting it on your credit or referring your account to an attorney in order to bully you to pay.

They are only allowed to call within rational hours, which are as a rule between 8:00 am and 9:00 pm unless they have your definite say-so to call at another times. They are not allowed to call you at awkward or unusual times or places if you let them know what is improper.

The FDCPA is very broad and it goes on about what is limited and what is suitable actions from the collection agencies. Just be alert that they can call you within the hours and limitations unless you explicitly and if possible in writing request that they stop. If you have questions about the total boundary of this law you can do an Internet search and read it in its entirety.

These two laws are important to you as a credit consumer. You can use any of them as a advantageous measure when you need to finalize credit repair so it is sensible to be aware of them and know where to find additional information if needed.

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