Congress has long known about the abusive, unfair, and deceptive debt collection practices employed by many debt collectors in the US. It believes that such tactics damage the fabric of society, leading to job loss, invasion of individual privacy, and even marital breakdown.
Historically, laws were non-existent or inadequate on the subject of debt collection. While there were some measures in place to protect consumers, they did not meet the minimum standards necessary to make a meaningful impact.
The first specific and still most relied on method of protection was implemented in 1977. The “Fair Debt Collection Practices Act” (FDCPA) brings a raft of targeted measures to reduce the damage done and control unethical and illegal tactics employed by unsavory collection companies. One such measure implemented by the FDCPA is the requirement to provide a Validation Notice.
Debt Validation Notices: A Definition
The Consumer Financial Protection Bureau (CFPB) – a U.S. government agency dedicated to ensuring banks, lenders and other financial institutions treat their customers fairly.
The FDCPA requires lenders to provide consumers with certain information when they make a debt repayment request (or within five days). This notification is called a “validation notice” and allows alleged debtors to confirm that the debt is theirs, or engage in a dispute with the lender if it is not. As of Nov 20, 2021, this is further enforced by the Debt Collection Rule of The Consumer Financial Protection Bureau (CFPB) – a U.S. government agency dedicated to ensuring banks, lenders and other financial institutions treat their customers fairly.
What Information Must A Debt Validation Notice Contain?
Validation notices must contain sufficient information for recipients to determine whether the debt is theirs or belongs to someone else. If they do not, they are in violation of the FDCPA. At a minimum, they must include:
- Notice that the communication is from a debt collector
- The name of the creditor to whom the debt is owed
- The name of the debt collection agency, and their mailing information and that of the consumer
- A clear itemization of the debt that reflects interest, fees, payments and credits since a particular date, the “itemization date”
- The current amount of the debt as of the date of issuance of the validation notice
- The account number associated with the debt, if applicable
- Information about the debtor’s rights which must include:
- If you do dispute the debt within 30 days the debt collector must stop collection until it provide you verification of the debt
- If you don’t dispute the debt, in writing, within 30 days the debt collector is free to assume the debt is valid
- If the name and address of the original creditor is requested-if different than the current creditor- and the request is made within 30 days, the debt collector must provide you with the information
- Information on how to dispute the debt
- A “tear-off” form must be included that allows the debtor to send information back to the debt collector to dispute information or take alternative action
Other information may appear on a debt validation notice and varies from one debt collector to another. However, the aforementioned must be present. Absence of any one of the listed items is a violation of the FDCPA. If a violation occurs under the FDCPA, individuals may take action against the debt collector and receive statutory damages of up to $1,000 and actual damages. Additionally, the FDCPA has a ‘fee-shifting’ provision which places the burden of attorney’s fees on the debt collector if the action results in a favorable outcome.
What Must a Debt Collector Supply if You Respond to the Validation Notice?
The FDCPA forces debt collectors to supply debtors with critical information pertaining to their rights, especially when responding to a validation notice.
Debtors have thirty days to respond to a debt validation notice. If they do not respond within that time window, the debt collection agency will assume that the debt is valid and proceed with debt collection activity. This could be in the form of direct communication such as phone calls, letters or even text messages. Additionally, debt collectors could also exercise their rights to the legal system and bring a legal action to force remedying the debt.
However, courts cannot construe the failure of a consumer to dispute the validity of the debt as an admission of liability. Creditors must still demonstrate that debtors own the debts they ascribe to them. You do not lose or waive any argument you might have by failing to respond to a validation notice. But, you do lose an opportunity to force the debt collector to stop activity while you force them to investigate the validity of the debt. If a debt collector chooses to bring legal action to collect the debt, they cannot use the fact that you didn’t respond to the validation notice as evidence against you.
If debtors do respond within 30 days with a written request to validate the debt, debt collectors must provide debtors with documentation verifying the debt before they can resume the debt collection process. Debt collectors must cease all collection activity until the debt is verified and sufficient proof given to the debtor.
Debt collectors must also provide the name and address of the original creditor within 30 days of your request, even if it is different from the current creditor.
Lastly, if a consumer repays a portion of a debt, debt collectors can only repay the debt that the consumer intends to repay. They cannot divert funds to repay a disputed debt before it is resolved. This is often a concern where a debtor does not dispute owing a debt but may dispute the amount owed.
Can Creditors Use Model Validation Notices?
The list of FDCPA requirements for validation notices is extensive. That said, there are numerous resources debt collectors can use to ensure they are keeping their notices within the parameters setup by the FDCPA. There are no excuses concerning complexity that would be a defense against an FDCPA claim should a debt collector violate it. A lack of excuses is exceptionally true considering both English and Spanish translations of model validations notices are available on the CFPB’s website.
Model validation notices contain five required categories of validation information:
- Disclosures relating to debt collection communication
- Information related to the debt owed
- Itemization of debt-related information
- Information that affords consumer response
- Information about the protections the consumer enjoys under the FDCPA
The CFPB says that debt collectors that use its model validation notices will receive safe harbor for validation information content and format requirements. Furthermore, agencies can add addendums providing consumers with additional, optional information when required.
However, even when using model validation notices, debt collectors must still complete information (such as the amount owed and the name of the consumer) correctly. Failing to do so violates the prohibition against providing consumers with “false and misleading representations,” as stipulated by the FDCPA.
Debt collectors can, with some limitations, make changes to the content and format of the model validation notice, and still receive safe harbor. However, any changes they make must be “substantially similar” to the original. Debt collectors who write their own notices can still be compliant, but they must include FDCPA-required content.
Rules For Residential Mortgage Debt
If creditors believe that a consumer has failed to make a mortgage repayment, debt collectors must issue a validation notice. However, the rules are slightly different for residential mortgage debt under § 1006.34(c)(5) (Special Rule). Instead of having to provide full itemization, debt collectors can simply provide the most recent periodic statement as a substitute under Regulation Z.
To qualify, the statement must:
- Have been required by Regulation Z at the time of issuance
- Be included in the same communication as the validation notice
Under the Special Rule, debt collectors can omit the itemization of the current debt amount, the amount of debt as of the itemization date, and the itemization date from the notice. However, under CFPB rules, they cannot omit the actual debt amount owed.
The FDCPA provides considerable protections for consumers. To remain compliant, debt collectors must provide honest, clear, and accurate information when serving validation notices.
With model validation notices and the Special Rule for residential mortgage debt, noncompliance is inexcusable. Additionally, failure to include correct or accurate information on a model validation notice is also inexcusable.
If you have further questions about, received a validation notice or believe a debt collection agency has violated the requirements of a validation notice, give Starks Law a call. We will review the notice, free of charge, and recommend a strategy from there. This may include an offer to file an FDCPA claim on your behalf.