Make Debt Collectors Prove You Owe

Have you been contacted by a debt collector and they claimed you owed a debt that you weren’t sure was yours?  Or, perhaps you weren’t sure that the amount you owed on the past due bill was correct? Under the FDCPA, or Fair Debt Collection Practices Act, you have the legal right to request that a debt collector sends you proof that you owe the debt claimed.

This process is called debt validation.

Debt Validation Timeframe

Within five days of first contacting you by phone or mail, the debt collection agency has the responsbility to send you a debt validation notice.  This is basically a summary of what the original creditor (OC) is, meaning the person you originally owed the debt to, how much the debt is, and how you can pay it.  It should also give you instructions on how to request debt validation.

You have thirty days from the date of contact to dispute a debt.  If you fail to do so in this time period, the debt collection agency can assume the debt is valid and continue to try and collect the debt from you.

Submitting a Debt Validation Request

This is the debt validation letter that has been previously posted.  You must send a similar letter to the address provided to the collection agency that is trying to collect a debt from you.  It is your personal choice to dispute part of the debt (if the amount is incorrect) or the entire debt entirely.

Once you send this dispute letter off, the debt collection agency cannot contact you again until it has responded to your debt validation letter.  Keep in mind, you always want to send any correspondance to a debt collection agency in writing and as a certified letter.  This means someone has to sign for the letter and you can keep a record of all correspondance — helpful if they start to deny they never received your letter.

The Debt Collection Agency’s Response

You sent your debt validation letter off to put the burden of proof onto the debt collection agency.  Now what?  Well, the collection agency should send you back proof that you owe $XX amount to X creditor.  They must send you a copy of the bill from the original creditor saying you owe that amount.  If they prove that you owe the debt, it’s your responsibility to make payment arranagements.

If the debt collection agency doesn’t verify the debt within 30 days or they can’t verify that you actually owe the debt they claim, they cannot continue collecting on the debt, nor can they list it on your credit reports.

Keep Your Credit Cards!

A sensible way to clean up your credit is to keep your credit cards.  Notice that I said keep, not use.

It’s smart to cut up a credit card or put it where it’s not easily accessible (like in a block of ice, seriously).  A person in debt may also think that’s it’s a wise decision to close the account — which is wrong! As far as your credit score is concerned, closing a credit card (balance or not) can be very detrimental.

You should not close down the following credit card accounts:

• If your credit card has a balance, your credit report will show your available credit as 0, but your balance will remain.  Unfortunately, the ratio of how much debt you have to your available credit reflects 30% of your credit score — so when your available credit for an account is $0 and you have $2,000 worth of debt on there, it looks like you’re beyond maxed out.

• If you close your only credit card, it may be the only revolving credit account type you have on your credit report.  Generally, a more diversified credit report with a variety of different types of accounts has a better credit score.

• Cards that are old.  The age (the length of time you’ve had accounts) is factored into your credit score.  Lenders also look at your credit history for the ability to pay a debt for the long-term, that’s why retirees are able to get loans easier than younger adults.  It’s not because the lending institution has a biased against young folks, it’s because the older you get, the older your accounts are.

Of course, there are perfectly logical times when you should close your credit cards.  If it’s a newer card or you have many more, that’s fine.  Also during situations of identity theft and fraud, you may be instructed to close your accounts to limit any damaged caused.

Dave Ramsey Bio

Dave (David) Ramsey is one of the most popular financial “gurus” in America.  While many know him from either his radio show and/or books like Financial Peace and The Total Money Makeover, he is also a television personality as he hosts The Dave Ramsey Show on the FOX Business Network nightly.

His flagship radio program, The Dave Ramsey Show, is syndicated throughout several hundred radio stations in the United States and Canada, including Sirius and XM satellite radio.  Three out of the 14 books that he has written on personal finances have been on The New York Times Best Seller list.  Whether over radio waves or through television, in writing or in person, Dave Ramsey dishes out his distain for credit cards, his recommendation on paying for cars in cash, and the importance of savings to millions every day.

Dave Ramsey also talks to the public in a variety of venues around the United States about issues pertaining to personal finances — some of these venues being churches.  Dave Ramsey is a Christian and his literature, in addition to his radio/television shows, have a Christian perspective to them.

A background on Dave Ramsey

Dave Ramsey received a BS degree with double majors from the University of Tennessee in 1982:  Finance and Real Estate.  By the age of 26, he and Ramsey Investments, Inc had a portfolio of more than $4 million — some if not most only obtainable by getting into debt.  Shortly afterward with the passing of the Tax Reform Act of 1986 and other circumstances, Dave Ramsey was forced to file for bankruptcy.

After going through bankruptcy, Dave Ramsey vowed to never borrow money again.  Once he recovered his financial footing and helped a few friends do the same, Ramsey began counseling couples on their personal finances at his local church.  In 1992, following the recommendations of some of the people that he had helped, he wrote his first book:  Financial Peace.