How to Dispute Collections and Debt Collectors
Anyone intending to challenge a debt that has gone into collections — even someone with a case as rock solid as Gibraltar — needs to know what they’re up against.
Debt collection in the United States is so large, only an absurd description can do it justice. Simply put, it’s humongous: 7,000 collection agencies, boasting a market value of $18.8 billion, reap roughly $13.4 billion annually.
The collections seas are frothy: Consumer Financial Protection Bureau (CFPB) received 70,348 complaints regarding debt collectors in 2021. The number has steadily increased each year over the past decade, and is far and away the top industry for complaints the bureau gets about bill collection.
These figures will not shock anyone who has fallen badly in arrears in his/her accounts. Knowing debt collectors can be both ever-present and relentless, they might be tempted to ask: What else is new?
Glad you asked.
A recent rule change adopted by the CFPB provides guidelines for debt collectors attempting to contact you via email, text message, and — ready? — social media. Yes, that request to connect on Facebook, Twitter, or Instagram may be from someone intent on collecting a debt.
Upside: Debt collectors cannot, by law, post how much you owe, or to whom.
What to do in the face of all this pressure? First, don’t hide, especially if you have a legitimate beef. Credit-tracing agencies are far from flawless. More than half the complaints filed to the CFPB in 2021 and 2020 came from consumers who claimed they were contacted about debts they did not owe — a 25% hike over the previous two years.
To stop the collection calls, answer the phone and follow the steps outlined by Washington-based attorney Ira Rheingold, a 20-plus-year veteran of the debt-collection war as executive director of the National Association of Consumer Advocates (NACA).
“Pick it up and say to the person on the other end of the line: Stop calling me!” Rheingold says. “But before you hang up, get their name and address, then sit down and write a letter telling them not to call you. Send it by certified mail, return-receipt requested, so you have a record of this if it keeps going.
“Knowing the debt collection industry, it probably will.”
This is ducks-in-a-row time: “Most … complaints are from consumers who are being harassed for debt they don’t owe,” says Rheingold, who made a one-hour appearance on CSPAN to discuss problems with debt collectors. “In a lot of cases, the wrong person is being harassed or even sued for the wrong amount of debt and the collection agencies are using very limited information to bring those cases.”
Sound like you? Here’s how to fight back.
How to Dispute a Debt
Debt collectors rely on an array of information sources in their attempts to collect. To successfully dispute their claim(s), the consumer must be methodical and thorough.
“The first step,” says Michael Cummins, finance director for InsuranceGeek, “is to gather all of your information and evidence related to the debt. This includes any letters or documentation you’ve received from the creditor, as well as proof that the debt is not yours. If you have any witnesses who can testify to the fact that you don’t owe the debt, you should also gather their testimony.”
Luckily, seeing to the details is not rocket science. Here’s what you do:
- Do not discuss the debt with anyone who calls, texts, emails or otherwise contacts you. Saying the wrong thing can work against you.
- Get the collector’s info, meaning name, address and phone number. Collectors who won’t provide information are oftentimes scammers.
- During the first phone call or within five days, you are legally entitled to the details of the alleged debt: amount, current owner of the debt, and information necessary to contact the original creditor. Make a note of that if it doesn’t come in five days.
- Immediately request a copy of your credit report from the three major reporting agencies (Experian, Equifax, TransUnion). Credit agencies are obligated, under the Fair Credit Reporting Act (FCRA), to provide you with information regarding your file and credit score.
- Comb through each report to identify errors.
- Complete a credit bureau dispute form.
- Print your credit report, highlighting errors.
- Submit your dispute to the credit agency, by uploading or sending it via certified mail (return receipt requested).
Taking these steps will begin the process of eliminating the erroneous claim against you. But there’s more to do.
Debt Dispute Letter
If you doubt that you owe a debt, or that the amount owed is not accurate, your best recourse is to send a debt dispute letter to the collection agency asking that the debt be validated.
“An effective debt-dispute letter must be clear and concise,” says Daniel Chan, Chief Technology Officer for Marketplace Fairness. “It should include all of the relevant information about the debt.”
A debt dispute letter demands that the collection agency demonstrate that you do indeed owe the debt and can provide detailed information and documents to prove the amount owed.
Federal law says that after receiving written notice of a debt, consumers have a 30-day window to respond with a debt dispute letter. The 2021 Consumer Finance Protection Bureau Debt Collection Rule has made this easier for you, by requiring all debt collectors to provide a tear-off form that you can use to dispute the debt, rather than writing a letter.
That form will be part of a validation notice debt collectors are required to send you that also includes:
- Debt collector’s name and mail address
- Original creditor’s name
- Account number (if any) associated with the debt
- Itemization of current amount of the debt (including interest, fees, payments, credits)
- Current amount of the debt as of when the validation notice is sent
- Information about your rights, including how to dispute the debt
If you don’t dispute the debt within 30 days, the debt collector considers the debt valid. If you dispute it, the collector must stop contacting you until it provides you with verification of the debt.
If you write a letter, instead of using the tear-off form, the debt dispute letter should include your personal identifying information; verification of the amount of debt owed; the name of the creditor for the debt; and a request the debt not be reported to credit reporting agencies until the matter is resolved or have it removed from the report, if it already has been reported.
A second dispute letter should be sent to the credit reporting agencies with the same information, so they, too, are aware the debt is in dispute.
Often, however, the matter is not resolved until the information already has appeared on your credit report and thus becomes a negative factor on your credit score. If it does make it onto your credit report, yet another form of dispute letter should be sent to the credit-reporting agency, disputing the accuracy of the information and asking that it be removed or corrected. All three credit-reporting bureaus have online dispute mechanisms available when you get copies of your credit report.
Sample Letters to Dispute Debt
Should I Pay Debt Collectors or the Original Creditor?
If the debt is legitimately yours, knowing whom to pay can be confusing. Debt collection agency? Original creditor? Debt that has slipped into arrears often changes hands, sometimes more than once.
There are, essentially, three scenarios for paying collections and the consumer could be confused about who is being dealt with and who is getting paid.
A creditor may have an in-house collection division. In this case, you are still in debt to the original creditor and that is who gets paid.
Sometimes the creditor will hire a collection agency to chase the money for them. Ask the debt collector if they own the debt. If not, you still might be able to negotiate with the original creditor.
Often the last straw, the original creditor might sell the debt to a collection agency. In this case, the debt collector owns the debt, so any payment is made to the collection agency. (This amount, too, may be negotiable.)
Know Your Rights under FDCPA
Problems between consumers and debt collection agencies have been around for quite a while. In 1977, Congress passed the FDCPA in an attempt to protect consumers from abusive collection practices.
“Credit bureaus are required by [FDCPA] to repair or delete any information that cannot be confirmed, is erroneous, or is incomplete within 30 days,” says Edward Mellett, London-based founder of WikiJob. “Otherwise, they have broken the law, and you have the right to sue and file a complaint with the Consumer Financial Protection Bureau.
“Make sure to build a case that is so compelling that the creditor will either have to agree with you or give real evidence to the contrary.”
The FDCPA outlines debt collection guidelines:
- Collection agencies must restrict phone calls to between 8 a.m. and 9 p.m. local time.
- Debt collectors may not call you at work if you tell them that you are not allowed to receive calls.
- You can stop calls from collection agencies by sending a certified letter asking them to stop calling.
- Debt collectors must send you a written validation notice that states how much money you owe, the name of the creditor and how to proceed if you want to dispute the debt.
- Debt collectors may not make threats of violence, use obscene language, make false claims to be attorneys or government representatives, misrepresent the amount of money owed, or claim that you are going to be arrested.
- Debt collection agencies are allowed to talk about your debt only with you and your attorney. They can reach out to your friends and family in search of your contact information, but they can’t speak about your debt (with the exception of a spouse in some cases).
Even with all those restrictions and protections, the CFPB and state attorneys general receive thousands of complaints from consumers every month about debt-collection practices. Be aware, consumer complaints often arise because collection agencies fail to accurately track details of the original contract from start to finish.
Debt collectors often target senior citizens, so many of these regulations are aimed at protecting the elderly. Learn more about debt collection laws for the elderly.
Statute of Limitations on Debt Collectors
Sometimes, it is important to restate the obvious: Job No. 1 is to verify the debt exists. In addition to the validation notice debt collectors must send, there is a statute of limitations on most debts. The statute of limitations varies from state to state, from as little as three years to as many as 15. Most states fall in the range of 4-6 years.
If the statute of limitations on your debt has passed, it means the collection agency can’t get a court judgment against you. It does not mean they can’t still try to collect, though if you refuse to pay, they have no legal recourse. However, the unpaid debt remains on your credit report for seven years from the last time you made a payment on it.
Many of the problems start with the fact that debt collection agencies often buy debts from several sources and either collect the money or sell the debt a second, third, maybe even fourth time. Along the way, the original contract gets lost and specifics of how much was originally borrowed, at what interest rate, what late payment penalties are involved and how much is still owed, are lost with it.
Consumers must keep accurate records of all transactions involved with their debt, especially the original contract, record of payments, and any receipts. That information is used when filing a dispute letter with the collection agency.
What Not to Do When You’re in Debt
- Don’t ignore debt collectors. Whether it is your debt or not, don’t ignore the calls or letters. Take the recommended steps to dispute the claim.
- Don’t talk over the phone. It’s better to communicate through writing in order to keep a paper trail. If you do need to talk over the phone, record the conversation. You might need permission to record, depending on what state you live in. Simply inform them of your intention to record. If they continue the conversation, that counts as permission.
- Don’t try to hide money or assets. It’s not a good idea to hide money in a friend or family member’s account. In fact, it’s against the law and called fraudulent conveyance.
- Don’t take their word for it. Debt collectors are notorious for trying to get their money by any means necessary, and that could include deception. If you need more time, you can always ask for a debt validation. That should have everything spelled out for you and give you some extra time to double check that the debt is correct.
It is unclear yet whether the validation process is working, so there still could be problems with the information on your credit reports. Each time your debt is sold, if the buyer fails to collect, he could send the information under his company’s name to a reporting agency. Thus, the same debt could be listed under several company names at all three reporting agencies.
“That is why you should check your credit report from each agency every year,” Rheingold says. “If you find an error, send the reporting agency a dispute letter right away.”
Still, you don’t get to be an $18.6 billion industry by surrendering easily. Consumers can be sued by a debt collector. When, as often happens, they fail to appear for their court date, they lose by default, having a judgment go against them. (Some consumers try to represent themselves … with predictable results.)
If the debt collectors do win a court judgment, they can attempt to recoup their money, depending on what state the judgment was entered. If you try to appeal the case, it is wise to find a consumer advocate attorney to represent you. If you can’t afford it, go to the local Legal Aid Society to seek legal representation.
“Ignoring the court date is the worst possible thing you can do,” Rheingold says. “The standard of proof is minimal in most cases so you can bet your life that whether you owed the debt or not, (debt collectors) will get a judgment against you if you don’t show up.”
Losing can result in your wages being garnished by a creditor.
Ways to Remove Collections from Credit Report
There is a chance you could get the collection removed. A collection stays on your credit report for seven years from the time of your last payment, and there are three ways to get it taken off.
Dispute the claim – This is option No. 1. It works only if you don’t owe the debt, or the collection agency fails to verify the debt within 30 days. Sometimes the collection agency keeps a debt on your credit report past seven years. In this case, you can write them with proof of when delinquency started to have it removed.
Pay for a removal – Even if you pay the collection agency and settle the debt, the collection stays on your credit report for seven years. You can try to negotiate with the collection agency to have the collection removed. You would pay a fee to the collection agency and they would stop reporting your collection; just make sure you have the agreement in writing.
Goodwill deletion – If the debt was acquired under unfortunate circumstances and the debt has been paid, the last option is to ask the collection agency or creditor to take the collection off your credit report out of goodwill. Maybe you had a medical emergency or a situation out of your control. If you have good credit (other than the collection) and were reliable with payments before and after the delinquency, there is a chance they will delete the collection from your credit report. The chances are much higher with the original creditor, but extremely low with a collection agency.
Unfortunately, this is when the situation can become deeply complicated.
The problems consumers have had disputing information on credit reports have been the subject of several lawsuits and investigative journalism pieces, including one by “60 Minutes,” the CBS news magazine. The situation got so hot that the three major credit reporting bureaus reached an agreement in 2015 with the New York State attorney general to reform the process for correcting errors.
The reforms are supposed to promote fairness in the process for resolving credit reporting errors, including notifying the other credit bureaus when a dispute has been settled in favor of the consumer.
An examination by the CFPB in 2022, however, found that credit reporting agencies “commonly fail to conduct these investigations in a timely manner, and they also fail to review and consider all the relevant evidence submitted by consumers.” It found that, In 2021, the national credit reporting agencies reported relief in less than 2% of complaints, down from nearly 25% in 2019.
Can a Debt Collector Contact You If You Dispute Debt?
When you dispute a debt in writing, debt collectors can’t call or contact you until they provide verification of the debt in writing to you.
This essentially puts everything on hold until you receive verification, but you have only 30 days from when you first receive required information from a debt collector to dispute that debt. Valuable rights can be lost if you fail to file your dispute, in writing, within that 30 days.
Check Credit Reports Regularly
As Attorney Rheingold notes above, most disputes with debt collection agencies are the result of debts consumers don’t even owe. Collection agencies often rely on second or even third-hand information that is unreliable and unverified.
By checking your credit report regularly, you may detect a problem early and get it corrected before that debt even reaches a collection agency.
“If a judgment goes against you, find a lawyer,” Rheingold adds. “If you do so within 30 days and your lawyer files a motion to reconsider, you have a chance to get it overturned. The crucial thing is to make sure the debt collector has the information necessary to bring the case to court. A lot of times, he is working off a line of data that says the amount owed, but with no real proof that you are the one who owes the debt.”
If you can’t find a way to stop the phone from ringing (or your text alert from pinging), stop trying to go it alone. Instead, contact a nonprofit credit counseling agency, such as InCharge Debt Solutions.
As illustrated above, disputing a debt against collectors whose only goal is to squeeze money from each consumer on its list can be a painstaking, time-consuming, and downright exasperating endeavor. Having InCharge Debt Solutions’ expert, certified counselors on your side can help deal with collectors and credit problems, steering you — today — toward solutions you hadn’t imagined.
About The Author
Tom Jackson focuses on writing about debt solutions for consumers struggling to make ends meet. His background includes time as a columnist for newspapers in Washington D.C., Tampa and Sacramento, Calif., where he reported and commented on everything from city and state budgets to the marketing of local businesses and how the business of professional sports impacts a city. Along the way, he has racked up state and national awards for writing, editing and design. Tom’s blogging on the 2016 election won a pair of top honors from the Florida Press Club. A University of Florida alumnus, St. Louis Cardinals fan and eager-if-haphazard golfer, Tom splits time between Tampa and Cashiers, N.C., with his wife of 40 years, college-age son, and Spencer, a yappy Shetland sheepdog.
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