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Your phone rings. Someone on the other end is claiming to work for some sort of collection agency. He tells you that the purpose of this call is to collect the debt. A debt you either don’t remember or is so old you thought it was gone. How do you make sure it’s legitimately collectible?
The caller must identify who he or she is and for whom they work. A legitimate debt collector will provide a phone number, business name and mailing address. A scammer will fudge around this or claim that he does not have to provide this information.
Most collection agencies will send you a letter before calling you. Federal law requires that they send you a letter about the loan within five days of their first contact with you. Sending the letter first ensures that they are following the law and that you are not surprised when they call.
You have the right to verify the debt to the collection agency. You should do this in writing and I suggest you send the letter via certified mail with return receipt requested so you have proof they received the letter. A sample letter from the Consumer Financial Protection Bureau can be found at Consumerfinance.gov.
Although there is no federal definition of what constitutes debt verification, the assumption is that if they can prove to a judge that you owe the debt, then it is acceptable verification. Then you should get one or more of these items:
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A copy of the original, signed contract.
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A copy of the charge-off statement from the original creditor.
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A copy of at least one canceled check you paid to the original creditor.
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Information from the creditor that connects you to the debt (creditor name, an account number, amount charged, current balance and the last four digits of your Social Security number).
The collection agency has thirty days to provide this verification to you. During this time period, the collection agency cannot attempt to collect this debt in any way and they cannot report this debt to the credit bureaus (note that the original creditor may still report it). .
Here are a few things you should do during this thirty day period:
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Check your credit report to make sure the loan is indeed yours. The original creditor will report it as “charged off” if it is transferred or sold to a collection agency. You may also determine that the debt is too old under your state’s statute of limitations for the collector to sue you.
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Contact the original creditor to determine who they sold the debt to. Only they can tell this information. If the loan has been sold multiple times, you will need to follow the “chain of title” to find out who is the actual owner. And if it’s been sold multiple times, the likelihood that this collection agency will be able to verify the debt drops dramatically.
If verification cannot be provided to you within thirty days, the loan is non-cashable. But if they verify it, the debt is collectable and the collection agency will add it to your credit report.
According to Clearpoint Credit Counseling Solutions, only 51% of debts are verified by collection agencies ( FTC data on credit verification , So you have a 50-50 chance of this collection disappearing on its own!
If you have any questions about this debt not being yours, don’t spend time on the phone with a debt collector. You don’t want to give any indication of acknowledging that the debt is yours. Simply tell the collector you are sending a verification request, confirm the mailing address to send it to, and politely end the call. So send that letter as soon as possible!
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