General Council on Central Commercial Economics

The federal Fair Debt Collection Practices Act outlines the procedures you are to follow when a debt collector demands that you pay a debt placed with him. Basically, the Fair Debt Collection Act gives you the right to dispute a debt. You accomplish two critical things when you dispute a debt. First, if you dispute the debt within the first 30 days after the debt collector contacts you, he must stop all collection activities until he verifies that you are responsible for the debt. Second, you force the debt collector to disclose your dispute to any credit reporting agency to which he reports. This is valuable because many credit scoring models ignore or disregard disputed debts.

Responding to Debt Collectors within the First 30 Days

The ideal time to dispute a debt is within the first 30 days after you receive the initial letter from the debt collector. The Fair Debt Collection Act refers to this 30 day time-frame as the verification period. During this period, you don’t need a valid challenge to dispute the debt. It’s allowable for you to simply ask the debt collector to affirm that you really owe the debt. The validation request is important request because it puts the burden of proof on the collector. In other words, the debt collector much produce verification to proof that you own the debt. If he can’t produce the verification, he can’t take any more action to collect from you.

Of course, if you have a bona fide challenge to the debt, make sure to assert it in your validation letter. Simply requesting verification doesn’t require the debt collector to describe the debt as disputed to a credit reporting agency. To raise the requirement that the debt collector describe the debt as disputed, you must submit a specific genuine challenge to the alleged debt.

Dealing with Debt Collectors after the First 30 Days

If you miss the first 30 day period, it’s still a good idea to dispute the debt. A valid dispute outside the 30 day time period still forces the debt collector to describe your debt as disputed. Don’t produce a flippant dispute because you may undermine any upcoming lawsuit you may file.

If you live in Texas, you have more rights that aren’t found under the federal Fair Debt Collection Practices Act. In Texas, you may dispute a debt at any time by giving the debt collector a letter stating your dispute. Upon receipt of the notice of dispute, the debt collector must cease all collection activities until he looks into your dispute to determine the true sum of money owed on the debt, if any.

No later than 30 days after the debt collector gets your dispute, he must reply in writing either denying your dispute, admitting the dispute, or requesting an extension of the time for his investigation. If he acknowledges your dispute, he must correct his records and send a notice of the inaccuracy along with a copy of the corrected information to each agency to whom he generated a report of the inaccurate record. If he requests additional time, he must correct his records to conform to your request and give notice of the correction to each agency to whom he reported the disputed information. The debt collector may resume collection efforts only after his investigation is complete and he has found the information to be correct.

Challenging Debts with Creditors

The federal Fair Debt Collection Act doesn’t apply to creditors. You don’t have the same rights when you dispute debts with your original creditors. You do, nevertheless, possess dispute rights by virtue of other federal and state laws with particular sorts of creditors.

For all creditors, Texas law prohibits the creditor from representing that you are willfully refusing payment of a debt when you are disputing the debt in writing. Texas law, however, doesn’t specifically make reference to credit reporting like the federal law does. As a practical matter, however, a creditor who states to a credit reporting agency that you have refused to settle a debt after you have challenged that debt is nearly always going to be in violation of Texas law. Texas law is actually broader than the federal law. It disallows making this representation to anyone, not just a credit reporting bureau. Accordingly, a creditor who sells a debt to a third party debt collector while wrongfully representing that you are refusing to pay is likely in violation of Texas law.

Regrettably, there are undecided legal questions involving the relationship of the federal Fair Credit Reporting Act and the Texas Debt Collection Act that make it difficult to hold a creditor responsible for breaking Texas law in its report to credit reporting agencies. But it’s still worth sending your dispute letter. The creditor may comply to head off the possibility that federal law will be construed to allow the enforcement of Texas state law requirements. The dispute letter may, therefore, keep the creditor from misrepresenting your debt to third parties other than credit reporting bureaus.