Thank you for you inquiry. The activities of collection agencies are regulated under the Fair Debt Collection Practices Act: http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm. The full text of this act can be found by going to the link provided above.
Basically, it is important to make a clear distinction between how an “original creditor” may act and how a “collection agency” may proceed regarding validating a debt, pursuing a debt, and reporting a debt to the credit bureaus. Remember, the above law does not govern the activities or original creditors, such as credit card companies, only third parties, or collection agencies. Even lawyers, hired by third party collection agencies, must adhere to the provisions of the FDPCA.
Under the FDCPA, you are allowed to validate this debt, and the creditor (in this case, the collection agency) must show you proof that the debt is valid and that you owe the debt to the collection agency (not to the original creditor.)
Here is the actual section of the FDPA which deals with the question you have asked:
FDCPA Section 809. Validation of debts [15 USC 1692g]
(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection
(a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.
So, if a creditor can’t validate or verify a debt: They are not allowed to collect it; They are not allowed to contact you about it. and They are also not allowed to report it to the credit bureaus under the Fair Credit Reporting Act (FCRA). If they do this, they are in violation of the FCRA, and the FCRA states that you can sue for $1,000 in damages for any violation of the Act.
Here is an opinion letter from the FTC which communicates that a collection agency may not report a debt to the credit bureaus which has not been validated:
It is important to point out that the same FTC document above indicates that a collection agency may continue to report to the credit bureau during the 30 day validation period. (see I.)
I. “Is it permissible under the FDCPA for a debt collector to report charged-off debts to a consumer reporting agency during the term of the 30-day validation period detailed in Section 1692g?” Yes. As stated in the Commission’s Staff Commentary on the FDCPA (copy enclosed), a debt collector may accurately report a debt to a consumer reporting agency within the thirty day validation period (p. 50103). We do not regard the action of reporting a debt to a consumer reporting agency as inconsistent with the consumer’s dispute or verification rights under § 1692g.
Helena, we hope this information has been helpful to you. This is not legal advice but information that we hope will be helpful to you. The bottom line the FDCPA provides consumers with certain protections against collection agencies. How those laws are interpreted, applied, and amended from time to time may change, so it is also recommended that you get legal advice that will help you correctly apply the provisions of FDCPA to your particular situation.
We wish you the best,
CLC Help Center
Thu Dec 21, 2006 04:16:47 PM