The Debt Validation Letter (DV Letter), Collection Companies, Junk Debt Buyers, And Your Credit

A debt validation letter (also known as a "DV letter") is simply a letter you can send to a presumed creditor (or debt collection company) requiring them to show proof that they either own the debt in question, or are otherwise legally authorized to collect on the debt.

If you owe a debt, under the Fair Debt Collection Practices Act (FDCPA), you have the right to require that collection companies validate that debt before you proceed to pay.

There are a few important reasons why you should formally validate a debt before you proceed to payment.

1. Establish The Ownership Of Debt

Before you pay any collection agency, you can use a debt validation letter to figure out whether your debt was purchased by the collection agent, rather than merely assigned. This is important because if the debt was assigned, and your original loan documents did not specifically grant rights to your creditor's "assigns", you do not technically owe the collector any money because they do not own the debt.

Even if a collection agency has purchased the debt outright, your correspondence to them can require them to show you proof of that purchase. One thing to remember is that as long as they are not the original owner of the debt, the collection agencies are subject to the Fair Debt Collection Practices Act regardless of their ownership status.

2. Establish the Accuracy of Reported Debt and Debt Records

Not only is it important for you to establish the ownership of the party you are dealing with, it would be to your advantage to make sure that the reported figures and records of your financial transaction are accurate.

3. Establish Proof Of Authority to Collect

Any representative of a creditor seeking to collect a debt from you should be able to provide legal documents to prove that they have the legal authority to collect on the debt. Such documents may include paperwork like account statements (from the original creditor), copies of original signed loan agreements, or copies of the original application.

4. Stop Debt Collection Activities

Under the FDPCA, collection of the debt must cease after you have notified creditors that you have a dispute, or when you request debt validating documents. These activities can only resume after the creditor or collection agency has mailed the relevant information to you.

5. Stop Debt Reporting Activities

If a creditor is unable to validate a debt, they are prohibited by the Fair Credit Reporting Act (FCRA) from reporting the debt to the credit reporting agencies.

Junk Debt Buyers and Debt Validation

A massive industry of junk debt buyers (JDBs) has developed over the last two decades or so. It consists of companies of varying size that purchase portfolios of charge-off debts with the hope of returning a lucrative profit by collecting on a small portion of them.

When you consider that many of these loans are purchased for as little as a penny on the dollar, you can see why the industry of bad debt buyers has ballooned in scale. As a result of these developments, consumers should be more vigilant than ever in holding collectors to their responsibilities.

Under the FDCPA, these JDBs (or "zombie debt buyers"), are considered "debt collectors" and are required to follow the due process required of all such companies.

One of the strategies experienced credit repair organizations use in dealing with creditors and credit reporting agencies is to establish that all legally required documentation and process are followed to the letter.

The changes in the debt collection landscape make it more likely than ever that you can resolve your loan challenges in a way that helps you meet your financial obligations and your credit goals easier and faster.