Who is considered a debt collector?

When can a consumer dispute a debt or request validation?

What constitutes debt validation?

Consumer advocates have criticized the Chaudhry and Clark cases as setting too low a legal standard for validation and allowing debt collectors to justify providing little information in response to a dispute. In addition, some courts (such as the Court of Appeals of Indiana[6]) have taken a stricter stance on debt validation than the Chuadhry Court, though the precedential value of such cases is uncertain.

Thus, what exactly constitutes proper validation of a debt is not a settled issue and is likely to depend on the specific nature of the dispute. At a minimum, the debt collector is required to confirm with the creditor the amount being claimed is correct and that the person from whom they are attempting to collect the debt is the person who owes it.

What if the debt collector does not respond?

If a consumer makes a timely request for debt validation and a debt collector fails to provide proper validation or does not respond at all, the debt collector may not legally continue to pursue the debt. If collection activity continues, the consumer may file a law suit in state or federal court for violation of the FDCPA (see Fair Debt Collection Practices Act for discussion of FDCPA law suits).

Any dispute of the debt must also be reported by the creditor on the consumer's credit report pursuant to the Fair Credit Reporting Act (FCRA).

1. Notice of debt; contents

2.      Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
   1.      the amount of the debt;
   2.      the name of the creditor to whom the debt is owed;
   3.      a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
   4. a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
   5.      a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

3. Disputed debts
   If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section 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 a 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.

4. (c) Admission of liability

5. The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.

[2]  TITLE 15 > CHAPTER 41 > SUBCHAPTER V > § 1692a § 1692a. Definitions

1. The term “Commission” means the Federal Trade Commission.
2. The term “communication” means the conveying of information regarding a debt directly or indirectly to any person through any medium.
3. The term “consumer” means any natural person obligated or allegedly obligated to pay any debt.
4. The term “creditor” means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
5. The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment
6. The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts. For the purpose of section 1692f (6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. The term does not include—
   1. any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
   2. any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;
   3. any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties;
   4. any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;
   5. any nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors; and
   6. any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity
      1. is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement;
      2. concerns a debt which was originated by such person;
      3. concerns a debt which was not in default at the time it was obtained by such person; or
      4. concerns a debt obtained by such person as a secured party in a commercial credit transaction involving the creditor.
7. The term “location information” means a consumer’s place of abode and his telephone number at such place, or his place of employment.
8. The term “State” means any State, territory, or possession of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing.

[4]^ Clark v. Capital Credit & Collection Servs., 460 F.3d 1162 (9th Cir. 2006)

[5]^ Ninth and Fourth Circuit Decisions May Diminish Consumer Debt Dispute Rights. NCLC Reports. National Consumer Law Center (November/December 2006). Retrieved on 2007-02-26. [6]^ Spears v. Brennan, 745 N.E.2d 862 (Ind.App. 2001)

[7]  TITLE 15 > CHAPTER 41 > SUBCHAPTER V > § 1692k § 1692k. Civil liability

1. Amount of damages
   
2. Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person in an amount equal to the sum of—
3. Factors considered by court
   In determining the amount of liability in any action under subsection (a) of this section, the court shall consider, among other relevant factors—
   1. any actual damage sustained by such person as a result of such failure;
   2. • in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $1,000; or
      • in the case of a class action, (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and
4. in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.
5. Intent
   A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.
6. Jurisdiction
   An action to enforce any liability created by this subchapter may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.
7. Advisory opinions of Commission
   No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Commission, notwithstanding that after such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

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