A debt validation letter is a formal document sent by a debt collector — a professional licensed to collect debt — presenting where your debt stands.
This letter is required to be sent under the Fair Debt Collection Practices Act (FDCPA) and serves as proof that the debt collector will assume the legal right to collect a debt and that the amount they are claiming is accurate.
Based on this validation letter, you have the right to dispute the debt if it is wrong or look for debt relief solutions. If the debt collector may try to collect the debt without sufficient proof, attempts to collect the debt can be disputed. If you don’t dispute it, the letter then becomes the starting point for you to assess your financial situation and find ways to deal with debt.
What Should Be Included in the Validation Letter
A proper debt validation notice contains key information regarding your debt, including:
- The letter must identify the original creditor and provide information about the new owner of the debt if it has been sold.
- It should include an itemization of the debt, including a breakdown of the principal balance, interest, fees, and other charges.
- The letter should also include the name and address of the current debt collector and information about your right to dispute the debt's validity.
If there is an account number associated with your debt, the letter should include it as well. Reviewing the Validation Letter
Once you receive a debt validation letter, you should check all the information provided:
- Look for any discrepancies in dates, amounts, or personal information.
- Verify that the debt collector has provided sufficient information to prove they own the debt and that their calculations are accurate.
- Compare against your payments, paperwork, and any proof you have to assess that the level of debt is right and that no payments are missing.
If you want to dispute a debt validation letter, you have 30 days to request that the debt be verified. You should use the information in the debt validation letter you received to dispute it. Disputing the debt must be based on provable facts and must be in writing.
Your Rights and Options
Following the days of receiving a debt validation letter, you have several options to consider. Let's look at how each can affect your ability to pay.
Pay the Debt in Full
If you have the means and you have verified that the debt is legitimate, you can pay the full amount you owe, and the matter will be resolved. Request written confirmation that the payment satisfies the debt entirely and ask how it will be reported to credit bureaus. Keep records of payment to prove you paid the debt.
Negotiate a Settlement
You can often settle the debt for less than the full amount of debt owed.
Start by offering a lower percentage (around 30-50% of the total debt) and negotiate. Always get settlement agreements in writing before sending any money. If you feel that negotiating with your debt collection agency is not part of your skillset, hire a debt settlement company like ClearOne to negotiate on your behalf and obtain a favorable deal.
Request that the settlement be reported as "paid as agreed" or "settled in full" rather than "settled for less than full amount."
Set Up a Payment Plan
If you can't pay off debt or negotiate a settlement, you can request a manageable payment plan.
Calculate how much you can afford every month to fit your budget. Get the terms in writing so that everything is clear for both sides.
Ask about interest rates and any additional fees that might apply during the repayment period because interest charges can increase the overall amount of debt you owe.
Dispute the Debt
If you find inaccuracies or don’t believe the debt is yours, you have the right to dispute it. Send a written dispute within 30 days, detailing why you believe the debt is incorrect. The debt collector must cease collection activities until they verify the debt with additional documentation. They will then inform you formally about their findings.
Request Debt Deletion
In some cases, you might negotiate a "pay-for-delete" agreement, where the collector removes the account from your credit reports in exchange for payment. While collectors are legally not obliged to agree to this, some may consider it.
File a Complaint
If you believe the debt collector has violated the FDCPA through harassment, misrepresentation, or failing to properly validate the debt, you can file a complaint with the Consumer Financial Protection Bureau (CFPB), your state's attorney general, or the Federal Trade Commission (FTC). You could also hire an attorney to file an action in court against the collector.
Consider Bankruptcy
If your debt isn’t sustainable or manageable, filing for bankruptcy might be an option. However, this should be considered a last resort and requires the assistance of a bankruptcy attorney, as filing for bankruptcy can hurt your credit for many years to come.
When to Look for Professional Help
If you are unsure about the validity of your credit card debt or your rights, you should consult a consumer protection attorney or credit counselor. They can review the validation letter, advise you on potential consumer rights violations, and help develop a strategy to improve your credit score and manage your debt. This is especially important if the amount is significant or you face multiple collection attempts.
If you are looking for debt settlement, you should hire a professional debt relief company like ClearOne, which has the skills and know-how to negotiate for you.
Taking Action
If you conclude that the debt is valid and you want to resolve it, contact the debt collector to discuss your options.
Get any agreements in writing before making payments. Once you have settled the debt, request a "paid as agreed" letter. This will mean you don’t owe the debt anymore.
Keep copies of all correspondence and proof of payments for your records. Mistakes are common, and you need to be able to prove that payments were made according to the agreement.
Ask the debt collector to report the resolution to credit bureaus to help repair your credit score. A good credit score is always helpful if you want to apply for credit in the future.
Protect Yourself Moving Forward
Once your debt has been resolved, keep track of your credit report to verify the account is properly updated.
Debt collectors must keep all information regarding resolved debts. However, keep all documentation related to the debt and its resolution. This way, you will have the documentation to prove it was resolved if you receive further communications about this debt from other collectors.
To avoid a similar debt situation in the future, set up a budget and an emergency fund. Try to stick to your budget, and whenever extra money comes your way, for example, from overtime work or a bonus, try to save some for your emergency fund.
Remember, ClearOne has specialized consultants that will provide you with options and the best solutions tailored to your debt.
