EVERYTHING YOU NEED TO KNOW ABOUT YOUR CREDIT
BUT WERE AFRAID TO ASK!
Under the Federal Debt
Collection Practices Act, you
are allowed to challenge the
validity of a debt that a
collection agency states you
owe to them. Use this letter
and the following form to
make the agency verify that
the debt is actually yours
and owed by you. Keep a
copy for your files and send
the letter registered mail.
Validation Letter
TITLE VIII - DEBT COLLECTION PRACTICES [Fair Debt Collection Practices Act]
§ 803. Definitions [15 USC 1692a]
As used in this title -(4) The term "creditor" means any person who offers or extends credit creating a debt or to whom a debt is owed, but
such term does not include any person to the extent that he receives an assignment or transfer of a debt in default
solely for the purpose of facilitating collection of such debt for another.
What does that mean? It means that, as far as the FDCPA is concerned, a creditor is the original entity
which loaned money to a consumer. It is not a collection agency. The definition of a debt collector is as
follows:
TITLE VIII - DEBT COLLECTION PRACTICES [Fair Debt Collection Practices Act]
§ 803. Definitions [15 USC 1692a]
As used in this title -(6) The term "debt collector" means any person who uses any instrumentality of interstate commerce or the mails in
any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to
collect, directly or indirectly, debts owed or due or asserted to be owed or due another.
So when a collection agency is assigned, or has purchased, your debt, they are NOT the creditor. They are
the debt collector and the actions they take are all governed by the FDCPA.
In an assignment, the collection agency does not own the debt, and therefore you do not
technically owe them any money. There is no way for a collection agency to prove that you owe
them money because there is only an assignment of the debt and not a contract between you and
the creditor.
If they do purchase the debt, this does not make them the original creditor. They are still a debt
collector and covered by the FDCPA.
Continue to treat any collection agency, junk debt buyer or law firm who says they own
the debt as a collection agency subject to the FDCPA. You can still request validation
and proof of the purchase, because if they can't validate it, the collection agency can't
prove you owe the debt. Often a JDB will tell a consumer that since they purchased the
debt, they are not subject the FDCPA - It's simply not true.
Mail All Letters Registered or Certified
This is important, as you must be able document when the letters
were sent and received. This gives you some leverage with the CRAs if
they don't respond in the time frame required by law. Here are
some certified mail tips. DON'T USE THE ONLINE DISPUTING SERVICE
PROVIDED BY THE CREDIT BUREAUS. You need to be documenting
everything, and you want to make sure that you have a complete
record of your disputes.
STATUTE OF LIMITATIONS
State
Virginia
Oral
3 years
Written
Promissory
Open-ended
Accounts
State Statute:
Open Accounts
5 years
6 years
3 years
8.01-246
A statute of limitations, or limitations of action statute, begins to run when a cause of
action accrues. In plain English, that means the statute begins to run when you have done
something contrary to the terms of your agreement for which you can be sued. Most of
the time, that "something" is failure to pay your bill. When you don’t make your payment
on time, you have violated the terms of your agreement and you have given the creditor
a cause of action.
It depends on the type of negative information. Here's the basic breakdown of how long different
types of negative information will remain on your credit report:
Late payments: 7 years
Bankruptcies: 7 years for completed Chapter 13 bankruptcies and 10 years for Chapter 7
bankruptcies.
Foreclosures: 7 years
Collections: Generally, about 7 years, depending on the age of the debt being collected.
Public Record: Generally 7 years, although unpaid tax liens can remain indefinitely.
Keep in mind:
For all of these negative items, the older they are the less impact they are going to have on your
FICO® score. For example, a collection that is 5 years old will hurt much less than a collection that
is 5 months old.
THE FAIR CREDIT REPORTING ACT (FCRA)
§ 623. (a)(8) ABILITY OF CONSUMER TO DISPUTE INFORMATION DIRECTLY WITH FURNISHER
(A) IN GENERAL The Federal banking agencies, the National Credit Union Administration, and the Commission shall jointly
prescribe regulations that shall identify the circumstances under which a furnisher shall be required to reinvestigate a dispute
concerning the accuracy of information contained in a consumer report on the consumer, based on a direct request of a
consumer.
THE FACT ACT (HR 2622)
Officially titled the Fair and Accurate Credit Transactions Act of 2003, the FACT Act incorporates and extends the Fair Credit
Reporting Act (FCRA), which had preemption provisions due to expire in December 2003. The new Act also aims to:
Prevent identity theft,
Improve the resolution of consumer disputes,
Improve the accuracy of consumer records, and
Make improvements in the use of, and consumer access to, credit information.
THE FAIR DEBT COLLECTION PRACTICES ACT (FDCPA)
As amended by Public Law 104-208, 110 Stat. 3009 (As of October 13, 2006)
To amend the Consumer Credit Protection Act to prohibit abusive practices by debt collectors.
»
Charge-Off - Action of transferring accounts deemed uncollectible to a category such as bad
debt or loss. Collectors will usually continue to solicit payments, but the accounts are no longer
considered part of a company’s receivable or profit picture.
»
Delinquent - Accounts classified into categories according to the time past due. Common
classifications are 30, 60, 90 and 120 days past due. Special classifications also include chargeoff, repossession, transferred, etc
»
Discharge - Granted by the court to release a debtor from most of his debts that were included
in a bankruptcy. Any debts not included in the bankruptcy – alimony, child support, liability for
willful and malicious conduct and certain student loans – cannot be discharged.
»
Public Record Data - Included as part of the credit report, this information is limited to tax liens,
lawsuits and judgments that relate to the consumer’s debt obligations.
»
Settle *Settlement) - Reach an agreement with a lender to repay only part of the original debt.
»
Third-Party Collectors - Collectors who are under contract to collect debts for a credit
department or credit company; collection agency.
»
Writ of Replevin - Legal document issued by a court authorizing repossession of security.
http://www.myfico.com/Downloads/Files/myFICO_YCS_Booklet.pdf
http://www.myfico.com/Downloads/Files/myFICO_Guide_CCFHA.
pdf
http://www.myfico.com/Downloads/Files/myFICO_UYFS_Booklet.
pdf
http://www.myfico.com/CreditEducation/Glossary.aspx
www.Experian.com
www.equifax.com
TransUnion.com
http://www.ftc.gov/bcp/edu/microsites/moneymatters/index.html