Debt Free

One of the things taught about how to get out of debt is to carefully check your credit report for errors. What happens if you do find errors on your credit report, or worse yet, if credit report errors are brought to your attention by a collection agency claiming you owe money to a creditor. What do you do in such a situation? The answer is that you need to dispute the debt and dispute it without delay.

There are 2 possibilities; they could be trying to collect a debt that never existed, or one you’ve already paid. The second is much easier to dispute because you can show documentation that you paid the debt in full and their request is invalid. Trying to prove a negative on the other hand is much more difficult.

Rest assured, you wouldn’t be the first to be informed that you were in default on your debt for your Sears card that you owed $2,100 on. But, what if you didn’t actually owe the money? You either never made the purchase, or didn’t have an account with the firm in question. The first thing you do is jump on your trusty computer and fire off a letter to the collection agency and the merchant, disputing the debt. Want to do this as soon as possible. Use fake legal letterhead to make it appear even more impressive…..just kidding, definitely do not do that, however tempting it may be. Do, however provide every shred of documentation (copies only, please) supporting your position.

You will have to send the credit reporting agencies and the collection agency a letter disputing the debt. For reporting that you have a debt that you don’t actually owe, they can be in violation of section 623(a) of the Fair Credit Reporting Act (FCRA).

This provision of the FCRA states the following:

Duty of furnishers of information to provide accurate information.

(1) Prohibition.

(A) Reporting information with actual knowledge of errors. A person shall not furnish any information relating to a consumer to any consumer reporting agency if the person knows or has reasonable cause to believe that the information is inaccurate.

(B) Reporting information after notice and confirmation of errors. A person shall not furnish information relating to a consumer to any consumer reporting agency if

(i) the person has been notified by the consumer, at the address specified by the person for such notices, that specific information is inaccurate; and

(ii) the information is, in fact, inaccurate.

(C) No address requirement. A person who clearly and conspicuously specifies to the consumer an address for notices referred to in subparagraph (B) shall not be subject to subparagraph (A); however, nothing in subparagraph (B) shall require a person to specify such an address.

(D) DEFINITION- For purposes of subparagraph (A), the term `reasonable cause to believe that the information is inaccurate' means having specific knowledge, other than solely allegations by the consumer, that would cause a reasonable person to have substantial doubts about the accuracy of the information.

According to the same section, but in subsection (b), creditors, agencies and any other party who furnishes or reports information about your credit or transactions, have a duty to correct and update your information. They are also required to report that the entry(ies) are in dispute if you have disputed them.

First, check your credit report with the major credit reporting agencies (not the collection agencies, you owe them, and should give them nothing, or to quote motivational speaker Matt Foley, give them “Jack Squat”) to ensure they have all your updated information regarding address and phone number. In some cases these are problems of mistaken identity. If, for example you have a fairly common name, there could be another person with your name living on the same street in your city. If you work at a large company, they could even work there as well. If you’ve moved several times in the past, they may have an incorrect address and you could be mixed up with someone who actually has the debt. So, make sure the credit reporting agencies (CRAs) have deleted all your former addresses and updated your current one. When your information with the CRA is accurate, you can more easily get your dispute resolved, if the debt is really invalid.

 

One quick note; if someone from any agency calls you and requests personal information, such as your bank account number or SSN, DO NOT GIVE IT TO THEM. You could be at risk for identity theft, because you really have no idea if the person on the other end of the phone is in Moscow, Russia or Moscow, Idaho. If they are legit, they’ll already have your SSN, and if it’s incorrect, you’ll se as much in your report. You can call them at their customer service number if you feel the need.

 

Next, check to see that the collection agency in question is licensed and properly permitted to do business in your state. It’s kind of a long shot, but you can strike gold here. It gives you a lot of leverage you can use against them. Most likely they’ll just transfer the collection to another agency, but any leverage you have is good.

When you send out your letter of dispute, you usually want to send it Certified Mail Return Receipt Requested, understandably abbreviated as CMRRR. This will allow you to more easily document your efforts in the event that legal action is necessary in the future. You can also fax your letter of dispute to the collection agency; it’s easy, fast, and cheap. Now may not be the time to save $5.00 however. Some experts advise first sending your request handwritten on regular paper, and only proceeding to the use of a CMRRR in the event things are not rapidly resolved. The theory is that a handwritten letter gets more attention from the collection agency personnel.

Be sure you include copies of all your supporting documentation when you send in your debt dispute letter. Legally the agency has 30 days to respond to your dispute or the incorrect item must be removed, but that’s often not as easy as it should be. On the flip side, you have to respond to their allegation within 30 days as well. It’s very important that you do file your dispute in the allotted time frame so you maintain all your legal rights.

Knowledge is power here. Too many consumers don’t know their rights in this area and have never heard of the FCRA. You’re no longer one of them, so don’t take this lying down. Hit all parties concerned over the head with section 623(a) as hard as you can. Of course, in many cases, they’ll reply that according to their records, you really do owe the debt, and demand payment in full. Most of these companies are used to people trembling in fear or ignoring the situation entirely, so the mere act of firing back a response that sounds like you know of what you speak will take them a bit by surprise. Keep in mind that all parties trying to collect a debt are covered under the Fair Debt Collection Practices Act, which limits their actions. See my previous post on What Debt Collectors Can't Do under the act.

The CRA does have, according to the law, a “general duty to investigate a dispute when notified by a consumer.” So legally they just can’t shine you on. They have to make an attempt to resolve the issue, but all too often the attempt isn’t to resolve it in your favor.

They need to validate your debt, which if the debt isn’t truly yours, they will be unable to do. They may however send you an affidavit of the debt, which is not the same things as actually validating the debt, it merely states that they believe that you owe the debt. They need to provide something demonstrating that you actually owe what they claim, such as an invoice with your signature. If the debt is invalid, they will be unable to do so. It is imperative that you send them a CMRRR disputing their affidavit as soon as possible. Lack of response on your part can be taken as your approval of the debt according to the terms stated in the affidavit.

Unfortunately, you may have to threaten them with, and eventually pursue, legal action. First you’ll want to file a complaint with your state’s Attorney General, the BBB and the Federal Trade Commission.  It may cost you some money to get a competent lawyer with experience in resolving credit disputes. Sometimes that is what it will take to get the collection agency off your back.

One more thing; if you really do owe the debt, just pay it. Don’t pretend you don’t owe it and go through all the rigmarole of sending dispute letters. That’s the definition of insanity, not to mention fraudulent. If you really can’t afford to pay it, call your creditor before it goes to collection and make payment arrangements. In many cases they’ll be open to your attempts to resolve the situation. After all, what they really want is your money, and remember, a collection agency is going to take around 50% of your debt as a fee, so it behooves the creditor to work with you to resolve the whole thing.