--> What Is Validation?

Discussion in 'Credit Talk' started by Butch, Feb 3, 2003.

  1. Butch

    Butch Well-Known Member

    What Is Validation?!?!
    Mecro's Delimna.

    Mecro has an interesting situation which, as I proceeded to try and help with, grew in complexity until it became such that I think an individual thread is warranted.

    I chose to open this discussion by focusing on Mecro's case. His/Her case has many elements which I believe make for excellent discussion.

    First of all, Mecro's adversary is racking up violations fast. I do hope you're keeping extraordinary notes Mecro, as I'm sure you are. :)

    You do have two major factors working against you:

    • The debt is large - $7,700
    • It does appear to be legitimate

    You also have quite a number of factors working in your favor, which we can discuss after we catch up on your situation.

    Re-posted here is Mecro's delimna;


    Like it or not when one is faced with a sizable obligation which is legit., it may be advantageous to attempt to strike a deal. However, the good news is you may not even wish to consider so doing until they do meet with the requirements of proper validation. They certainly have not done so in this case, not even close.

    There's nothing wrong with making a new deal with one to whom I owe money to settle the issue for less than I originally agreed to. That's simply called "Free Enterprise", and the ability to contract, or in this case re-contract.

    Ever mindful of a certain mindset (The Litigious Mindset, eloquently detailed by Doc) let me tell you how I would approach your situation. The reason I would approach it this way is to DRIVE DOWN the potential amount the OC and/or collection atty. will be willing to settle for, not to escape it altogether. It is entirely possible though to drive that amount down to absolute zero.

    The more ammunition you can accumulate the more willing they will be to descend from their stated $3,000 settlement offer. Also, they probably dictated to you a certain time frame within which you "MUST" respond, and/or pay the debt. Forget that. Those dates are meaningless and arbitrarily set to begin with. In fact the longer they have to wait the less they will probably settle for.

    You said:

    Sometimes folks on CN suggest that one of the famous cases we talk about frequently, Spears v. Brennan, lays out what constitutes validation. It does not, unfortunately. But this IS a critically important case for it DOES enumerate some of the components that DO NOT constitute proper validation. It specifically talks about the statement of account. It also mentions that a copy of the contract creating the debt, although one of the components required in validation, does not, in and of itself, constitute proper validation;




    vs. No. 49A02-0003-CV-169


    Brennan maintains, however, that there was no violation of the FDCPA because he â??sent adequate verification of the debt [to Spears] in the October 30, 1996 notice of claim.â? Brief of Appellee at 13. Specifically, Brennan claims that a copy of the consumer credit contract between Spears and American General attached to the notice of claim provided sufficient verification of the debt within the meaning of 15 U.S.C. § 1692g(b). We cannot agree. The contract in no way provides sufficient verification of the debt.

    You are in fact entitled to see a copy of the original contract that creates the debt. But even if they do produce that, it still does not rise to the level of validation. In my opinion this is the starting point of their attempt to validate. I'll talk more about the original contract here in a minute, but for now let's stick with the statement of account.

    The Spears case goes on to discuss what qualifies as a proper statement of account. Generally, we have hammered this issue to death and the general consensus is that a proper statement of account must meet the following;

    • It must be complete. In other words it starts on the day the account began (or at least from the date the first transaction occurred) and runs until the last penny on the last day was added to the account. This statement is critical because therein lies the exact date when the account went delinquent, immediately preceding a negative action, important verbiage from the FCRA. It must include late charges, fees, collection fees, atty. fees, interest calculations and most especially every single penny you ever paid on the account from day one. (If not, this may also be an FCBA violation for "Open Ended Accounts")
    • The statement must contain the dates for all these calculations
    • The total amount on the statement MUST match EXACTLY the amount they are attempting to collect - TO THE PENNY, unless additional fees can be assessed as permitted by state law and may outside the dictates of your contract.
    • The statement also MUST come directly from the OC. It CANNOT be a mere reprint of what the CA or collection atty. already have in their system of records.
    • It must have come from the OC within the 30 day period within which the CA must investigate. In other words, it must be FRESH, not some old item that's been laying around in their office for the last 5 years.

    Again in Spears:

    A review of the document reveals that it identifies only the terms of Spearsâ?? loan, including a 17.99% annual interest rate and the original loan amount of $2,561.59. The loan agreement contains no accounting of any payments made by Spears, the dates on which those payments were made, the interest which had accrued, or any late fees which had been assessed once Spears stopped making the required payments. Indeed, the existing unpaid contract balance at the time Brennan sent the debt collection notice was at least $350.00 more than the original loan amount. Therefore, Brennan violated 15 U.S.C. § 1692g(b) when he failed to cease collection of the debt by obtaining a default judgment against Spears after Spears had notified Brennan in writing that he was disputing the debt but before Brennan had mailed verification of the debt to Spears. We reverse the trial courtâ??s entry of summary judgment in favor of Brennan on this issue.

    I respectfully suggest that your next item of homework is to print out this case and study Spears word for word, with multi-colored high lighters.

  2. Butch

    Butch Well-Known Member


    Now I think we are in a position to get back to the original contract that created the debt in the first place.

    One is perfectly entitled to see a copy of this contract. In fact, in my opinion, NOTHING needs to happen until they produce said contract. This is the beginning point of your demand for validation.

    [ Side Note: Also, as silly as it sounds I would request the contract, as opposed to a copy of such. I heard of one case where the obviously very young and inexperienced CSR actually sent the original contract, not a copy. Probably a one in a million shot, but hey, who knows. ]

    The FDCPA states:

    § 808. Unfair practices [15 USC 1692f]

    A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt ... the following conduct is a violation of this section:

    (1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law. PERIOD!!!

    No contract, no payment, no negotiations - end of story. Thus is my approach to a CA or collection atty.

    In Mecro's case I dare say the CA and collection atty. are hard pressed to come up with this information or they would not have been in such a rush to knock off $4,700 - so be it.

    Also, "PSP IN NM" stated that Midland is undergoing a BK proceeding. In these cases it's tough for them to find their respective butt's with both hands let alone a contract from years ago. But a contract they must produce nonetheless.

    After all, how does one know that;

    • The interest accrual is calculated according to the default provisions of said contract?
    • If the contract allows for collection fees to be included, how would you know if they are correct?
    • If the contract allows for atty. fees to be included, how would you know if they are correct?
    • How would you know if ANY of the items I listed as necessary components of a correct account statement are correct without seeing the contract?
    • How would you know that the contract allows for the OC to forward your personal financial information to a 3rd party for collection unless so stipulated - IN THE CONTRACT?
    • Etc., etc., etc.

    Furthermore, without it they lack proper standing in judicio, (proper standing in court, federally speaking).

    According to the Federal Rules of Civil Procedure (FRCP) you have a legal right to demand the original and they have 15 days to produce it or there is NO DEBT.

    FRCP - Rule 1002. Requirement of Original

    To prove the content of a writing, recording, or photograph, the original writing, record, or photograph, is required, except as otherwise provided in these rules or by Act of Congress.

    FRCP - Rule 1003. Admissibility of Duplicates

    A duplicate is admissible to the same extent as an original unless (1) a genuine question is raised as to the authenticity of the original or (2) in this circumstance it would be unfair to admit the duplicate in lieu of the original.

    And again, in the Uniform Commercial Code (UCC) Section 1-201 (3)

    (UCC) Section 1-201 (3)

    means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this Act (Sections 1-205 and 1-206 ). Whether an agreement has legal consequences is determined by the provisions of this Act, if applicable; otherwise by the law of contracts (Section 1-103 ). (Compare
    "Contract ".)

    So as you can see law is replete with insistence that your right to see an original contract is carved in stone.

    Although what does constitute validation is not clearly articulated in law or case law, and for very good reason, the burden of proof to which a collector or OC must rise, before discussions can even begin, is high.

    A 3rd component is the agreement between the OC and the CA that names the CA as an "associated entity" and empowers them to even send you a bill in the first place. This element is necessary though, ONLY to the extent that it becomes necessary to deal with the CA. A CA's assertion that you have no choice but to deal with them is nonsense without this agreement. You simply have no reason to deal with them until you get your copy of same. My argument on this point is simple with them and goes like this; "If you insist I have an obligation to deal with you show me this agreement or I will NOT deal with you, no if's and's or but's about it. I hereby unilaterally terminate your association with this account and will be dealing directly with the OC". - PERIOD!!!

    There are other factors involved as well. Is the CA licensed to practice in your state and in every other state within which collection activity was attempted, and is such license required in these states? In my state, Ohio, it is not, unfortunately.

    Is the Atty. licensed in your state, or his own state, for that matter?

    These factors, taken together with the fact that CA's are lazy, apathetic and generally not all that bright in the first place and you have the makings of a situation whereby you can prevail, if handled with the extreme care it deserves.

    Which brings me to the next point I'd like to mention. In the good old CN days we used to take one fine point in the law and hammer it for days. We moaned, groaned, argued, posted case law, FCRA, FDCPA, FCBA, FTC Staff Opinions and argued some more. Sometimes issues culminated in a general consensus and sometimes they didn't. These are things I don't see that much of lately.

    Kathycmh recently said; "I spent my entire Saturday digging through the law to find one thing". She continued; "I must be crazy".

    No she's not crazy, she's dedicated, and in my opinion a prime candidate to become a credit correction champion. I see the same dedication from others as well. So sorry for not mentioning you here. But many need to get back to basics. I only know what I know because I studied hard and foresook many weekends.

    Please take this comment in the true spirit in which it is intended. Just a gentle nudge to some to help stay on track, because I do know that if I can do it so can you.

    In conclusion (thank God :))

    I do wish I could just tell Mecro exactly what to do next, but I cannot. He/She has other things to worry about too. For example, just because they can't "seem" to come up with a contract or a statement doesn't mean this material doesn't exist and won't be forthcoming at the last minute. This is never a problem of course unless the debt is legit. I believe I can help Mecro best, and the rest of the board too, by outlining this general approach to validation. There's a heck of a lot more to this case than what is posted here so far but perhaps this is a good beginning.

    If Mecro sticks to his guns and insists upon proper validation, continues with letters up to a point and waits it out, I bet they'll settle for FAR less than $3,000. At that point we have a payment strategy which should allow you to come back around, after the debt is absolved, and sue with an offer to drop the suit in exchange for a deletion.

    I hope this helps.

  3. PsychDoc

    PsychDoc Well-Known Member

    Great work!

  4. Butch

    Butch Well-Known Member

    Thanks Doc.

  5. jlynn

    jlynn Well-Known Member

  6. psp in nm

    psp in nm Well-Known Member

    awesome, Butch, and very enlightening!!
  7. Touchdown

    Touchdown Well-Known Member

    Wow. This will be an all time CN Classic! Bookmarked already!
  8. pibb26

    pibb26 Well-Known Member

    Awesome post Butch...great to see you again.
  9. JohnB316

    JohnB316 Well-Known Member

    CNN Steve,

    How about pinning this thread to the top of the board, along with the other INTRO posts? This explanation of validation, IMHO, merits such a position.

    Butch, thanks very much for this clear, detailed explanation.

  10. lbrown59

    lbrown59 Well-Known Member

    My argument on this point is simple with them and goes like this; "If you insist I have an obligation to deal with you show me this agreement or I will NOT deal with you, no if's and's or but's about it. I hereby unilaterally terminate your association with this account and will be dealing directly with the OC". - PERIOD!!!
    POSTER Butch.
    Wouldn't this be grounds enough to have a CA listing removed from your report.
    I E no leagal obligation to deal with the CA!
  11. helpwanted

    helpwanted Well-Known Member

    I think the above statement is a little misleading. I think once you read it again, you will see that it could be understood another way.

    The verification must be obtained by the Debt Collector, from the OC, and then mailed to the person who is disputing the validity. Hardly something you could have accomplished in 30 days....IMO

    In the FTC opinion to Wollman, they write:

    The statute requires that the debt collector obtain verification of the debt and mail it to the consumer (emphasis mine). Because one of the principal purposes of this Section is to help consumers who have been misidentified by the debt collector or who dispute the amount of the debt, it is important that the verification of the identity of the consumer and the amount of the debt be obtained directly from the creditor. Mere itemization of what the debt collector already has does not accomplish this purpose. As stated above, the statute requires the debt collector, not the creditor, to mail the verification to the consumer.
  12. Mecro

    Mecro Well-Known Member


    I just found this post and I really appreciate it.

    I'm just going to keep fighting these bastards.
  13. Epitomee

    Epitomee Well-Known Member

    this is awesome. Well now we will see where my validation leads 30 days from now.
  14. Butch

    Butch Well-Known Member

    That's a great point Helpwanted. In my opinion you're right. To do all that needs to be done within 30 days is pushing it, but I for one am not complaining.

    And now Epitomee brings up a point. But I have to wonder about his/her dispute and whether or not it was sent through the CRA first. Hopefully this discussion will help clarify.

    Often, when we discuss a demand for validation we talk about a 30 day time frame within which the CA is required to produce a result of their investigation after receiving a dispute directly from a consumer. (NOT to be confused with the 30 day time frame within which the consumer must notify the CA of a dispute after the receipt of the first notice).


    The pertinent section:

    FDCPA § 809. Validation of debts [15 USC 1692g]

    (b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

    I see nothing here about any time frame whereby the CA must "get back" to the consumer with a result of an investigation initiated by the consumers dispute. I was baffled when I first saw this. Doesn't this mean that the CA can drag their feet indefinitely, or otherwise sit on the dispute from now until hell freezes over?

    The simplest answer to this question is YES - they can, IF YOU SEND YOUR DISPUTE DIRECTLY TO THE CA. (Remember that, we'll be getting back to it)

    [ Side Note: I now believe I know why they so rarely do respond to our notice of dispute, but that's another long story :) ]

    However, they MUST cease ALL collection activity until such time as they do provide proper validation, no matter when that takes place. So Helpwanted's point is technically correct, and an excellent point worthy of discussion.

    There are a lot of things you can sue a CA for pursuant to the FDCPA. But suing them for not responding to your demand for validation is NOT one of them, because it's not a violation. Continued collection activity in the face of an unresolved demand for val. IS a violation, but not responding to you ISN'T.

    It's very important to note that the FDCPA applies to CA's. It's been said many times that the FDCPA does not apply to OC's,. Since the FCRA DOES apply to both CA's and OC's. we must now make a major shift in our focus. In other words ...

    In order to discuss the 30 day time frame we must make a shift from the FDCPA to the FCRA. Herein lies the mysterious 30 day time frame.

    The terminology changes when we shift over to the FCRA. Your pertinent phrase now is Data Furnisher, (DF). Your argument here has nothing to do with the fact that it's a CA. Here your argument is with any DF. This could be the CA, an OC, or ANYONE that furnishes info. to the CRA. It just so happens in Mecro's case that the DF here is a CA, Midland.

    So now we can discuss this 30 day time frame. Let's bounce over to the Fair Credit Reporting Act:


    FCRA § 623. Responsibilities of furnishers of information to consumer reporting agencies [15 U.S.C. § 1681s-2]

    (b) Duties of furnishers of information upon notice of dispute.

    (1) In general. After receiving notice pursuant to section 611(a)(2) [§ 1681i] of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall

    (A) conduct an investigation with respect to the disputed information;

    (B) review all relevant information provided by the consumer reporting agency pursuant to section 611(a)(2) [§ 1681i];

    (C) report the results of the investigation to the consumer reporting agency; and

    (D) if the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis.

    (2) Deadline. A person shall complete all investigations, reviews, and reports required under paragraph (1) regarding information provided by the person to a consumer reporting agency, before the expiration of the period under section 611(a)(1) [§ 1681i] within which the consumer reporting agency is required to complete actions required by that section regarding that information.

    So now, we have to go back to section 611(a)(1) [§ 1681i] to see what THAT says (bear with me here);

    FCRA § 611. Procedure in case of disputed accuracy [15 U.S.C. § 1681i]

    (2) Prompt notice of dispute to furnisher of information.

    (A) In general. Before the expiration of the 5-business-day period beginning on the date on which a consumer reporting agency receives notice of a dispute from any consumer in accordance with paragraph (1), the agency shall provide notification of the dispute to any person who provided any item of information in dispute, at the address and in the manner established with the person. The notice shall include all relevant information regarding the dispute that the agency has received from the consumer.

    (B) Provision of other information from consumer. The consumer reporting agency shall promptly provide to the person who provided the information in dispute all relevant information regarding the dispute that is received by the agency from the consumer after the period referred to in subparagraph (A) and
    before the end of the period referred to in paragraph (1)(A).

    OH good grief!, that means now we have to bounce yet again, to go look at paragraph (1)(A). (Exhausting isn't it?) LOL

    (1) Reinvestigation required.

    (A) In general. If the completeness or accuracy of any item of information contained in a consumer's file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly of such dispute, the agency shall reinvestigate free of charge and record the current status of the disputed information, or delete the item from the file in accordance with paragraph (5),
    before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer.

    BINGO!!!! There's your 30 day deadline, and this is the ONLY way to get there, through the CRA, via the FCRA.

  15. Butch

    Butch Well-Known Member


    So lets see where we are at this point:

    • If your dispute is lodged directly to the DF, there is no law that requires them to respond within a certain time frame. You may sue a CA for a lot of things, but not responding to your Val. Demand is NOT one of them.
    • They MUST cease all collection activity until they do respond. Continued collection activity in the face of an unresolved demand for val. IS a violation.
    • The only way to apply a solid deadline to your dispute is to go directly through the CRA, via the FCRA.
    • If you ever intend to have a legal argument (a private right of action) over a time frame you must dispute directly through the CRA, via the FCRA first. Otherwise you have no case.

    What did launch me into this lengthy diatribe is two fold; 1) Is the fact that when a large number of new members join CN, one of the biggest areas of confusion is how to leverage this 30 day time frame, exactly how it is applied and the rationale behind it, and 2) Helpwanted's thought that gee, 30 days doesn't sound like very much time.

    I do hope that Congress NEVER changes this 30 day time frame. It works in our favor rather often actually. If it ever does get changed it would be changed to 90 days, in my opinion. A disaster to say the least.

    Helpwanted's reprint of that portion of the Wollman opinion only serves to uphold my point that validation information must come directly from the OC, through the CA and then on to the consumer, so therefore requires no further discussion. But as I've noted it must indeed happen within 30 days when done correctly.

    I wholeheartedly agree with his opinion that 30 days seems rather short for all these people to do all this stuff, especially when taken together with all the rigorous requirements of validation I've outlined to start this thread. The point is who cares what we think? In fact who cares what your CA, OC or CRA thinks? The fact of the matter is they have exactly 30 days to perform all their respective duties. If they fail, as they often do, they must delete. If they don't, sue their Butt's.

    Earlier I mentioned my befuddlement about the 30 days. The more you study the more it will became perfectly clear that if the process is followed properly, everything works perfectly smoothly in a congruous system of dispute and resolution, and is even on a very tight time frame.

    Before I close for now let's look at two more minor points.

    Are these people painfully aware of all that I've posted in this thread so far? You bet they are. There is no excuse for their noncompliance. Let's look at just one more item of information as found on the FTC's website. This is the required notice to all those who furnish information to a CRA.


    Appendix B to Part 601
    Prescribed Notice of Furnisher Responsibilities

    This appendix prescribes the content of the required notice.

    The federal Fair Credit Reporting Act (FCRA), as amended, imposes responsibilities on all persons who furnish information to consumer reporting agencies (CRAs). These responsibilities are found in Section 623 of the FCRA. State law may impose additional requirements. All furnishers of information to CRAs should become familiar with the law and may want to consult with their counsel to ensure that they are in compliance. The FCRA, 15 U.S.C. 1681-1681u, is set forth in full at the Federal Trade Commission's Internet web site (http://www.ftc.gov). Section 623 imposes the following duties:

    Duties After Notice of Dispute from Consumer Reporting Agency:

    Note that the dispute comes from the CRA!

    If a CRA notifies a furnisher that a consumer disputes the completeness or accuracy of information provided by the furnisher, the furnisher has a duty to follow certain procedures. The furnisher must:

    Conduct an investigation and review all relevant information provided by the CRA, including information given to the CRA by the consumer. Sections 623(b)(1)(A) and (b)(1)(B)

    Report the results to the CRA, and, if the investigation establishes that the information was, in fact, incomplete or inaccurate, report the results to all CRAs to which the furnisher provided the information that compile and maintain files on a nationwide basis. Sections 623(b)(1)(C) and (b)(1)(D)

    Complete the above within 30 days from the date the CRA receives the dispute (or 45 days, if the consumer later provides relevant additional information to the CRA). Section 623(b)(2)

    Says it all, at least as far as this consumer is concerned.

    Also, look at all the stuff these people have to do and the time frame involved. Congress has to try and strike a fine, very delicate balance between your rights and the ability of the Big Three to conduct their operations. This balance is very VERY difficult. When we contemplate all that has to be done and the 30 days within which to do it we can see how the situation is not so grimm.

    In fact, ya know maybe, I mean just maybe Congress is not quite so unfair after all.


  16. Butch

    Butch Well-Known Member


    When you get busy you can miss things. LOL

    Helpwanted's point is sound. The information must come directly from the OC, through the CA and on to the conusmer.

    I wasn't very clear.

    Thanks HW.

  17. psp in nm

    psp in nm Well-Known Member

    Re: --> What Is Validation?

    this just keeps getting better & better!!
  18. kemcos

    kemcos Well-Known Member

    Question Butch: Who does one deal with on these issues if a collection agency and OC are involved at the same time. e.g.: Pac Bell sends accounts to collections the same day that the account is closed. If you want validation, do you deal with PacBell or the CA ? What if you are already dealing with the OC when the CA gets involved? I guess the question is , what would the take be on Spears vs. brennan if brennan is an OC rather than CA ?
  19. Mecro

    Mecro Well-Known Member

    I think this should be a sticky.

    I know I will be referring to it.
  20. begntexs

    begntexs Well-Known Member

    <BUMP>for TEXANS

    re: 30 reply to validation in the State of Texas,

    It seems we have our own laws in ADDITION to Federal.. "BOY.... IS THIS YER BILL?"<boss hogg>
    crazy cooter "I'm gonna get dem duke boys"Rossco P Coaltrain!!!!!

    Finance Code Section 392.001 et seq. of the Texas Statutes governs debt collection practices in the State of Texas. These provisions generally mirror those prescribed under the Federal Fair Debt Collection Practices Act under 15 U.S.C. §§ 1692-1692(o). Specifically, the statutes require debt collectors to provide written response to disputes by consumers within 30 days of receipt of written notice, and make corrections to inaccuracies within 5 business days, prohibits conducts which constitute threats or coercion, harassment, unfair or unconscionable means, fraudulent, deceptive or misleading representations, deceptive use of credit bureau name, and use of independent collectors.

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