An Excellent Review of ‘Validation of Debt’

 

Technorati Tags: Collection agency,Debt validation,Fair Debt Collection Practices Act,FDCPA,Federal Rules of Evidence,Validation of debt

There is A LOT of misinformation in print and on the internet regarding how debt validation works. The following review does a great job of demystifying the whole process and provides some good legal references as well. It is a lengthy article and does reference the Federal Rules of Evidence and other legal concepts, so you’d better put on your legal thinking cap before you delve into this one! I don’t normally recommend an article unless I have thoroughly researched the author and their credentials. This one gets my full approval as it is well written, well researched and very accurate.

DEBT VALIDATION

MYTH, MYSTERY OR MIND TRAP

A presentation of Senior Outreach Ministries

2006© All Rights Reserved

http://www.senior2senior.org

Disclaimer: The material in this e-book is for information and educational purposes only. It is not intended to replace professional legal, medical or accounting advice.

Any reliance on this material by the reader is done so at his/her own discretion.

Although this material was researched from presumably reliable sources such as the US government, the reader remains responsible to perform their own due diligence.

The estimates of the amount of debt carried by Americans ranges from about $2000 per adult to $8000 per adult and this is just on their credit cards. When you add in house, car, boat, motorcycle and RV payments on top of everyday household expenses like groceries, insurance, vacations, appliance and environmental home system repairs along with a myriad of other obligations, you can see why debt is more than a 4 letter word.

This e-book does not purport to be a get out of debt plan, a credit repair plan, tell your creditor to shove it plan or any other scheme in those channels. Rather, it is an e-book that covers only one topic: Debt Validation and it covers it the way I see debt validation as it exists today. In other words, since I believe I’ve done my homework, I’m sharing my opinion of what I think I learned.

Debt Validation comes into existence only at the time a person receives a letter from a debt collector stating something to the effect they are attempting to collect a debt for XYZ, Co. in the amount of $BBBBB.CC. They tell you in the letter unless you dispute this thing they are saying is a debt within 30 days; it will be presumed you owe it.

There are two ways to react to this letter. One, answer it. Two, ignore it. Number two is not a good idea for a myriad of reasons the least of which is you actually may not owe the debt. You see, debt collectors have been criminally prosecuted for telling someone they owe a debt when in fact the person did not owe the debt. You can Google a ton of stories about such happenings so I won’t say anymore here.

You also may not owe as much as they claim. Another debt collector trick which has cost them quite a few dollars after the court suit was settled in the alleged debtor’s favor. When you Google for the above information, I feel certain you’ll read about this faux-paus as well.

To understand the composition of the letter from the collector you should understand the law behind it. The law that sets the parameters is the Fair Debt Collection Practices Act (FDCPA). It states, for example, the collector must tell the alleged debtor that they are attempting to collect a debt.

Sidebar: I once had a debt collector state in their letter they were just writing a letter for a friend who happened to be a client and they didn’t include the required wording about attempting to collect a debt. I never heard from them again after I wrote and highlighted the violations of the FDCPA they had committed. Oh that all such collectors could be disposed of so easily.

Please become familiar with the FDCPA as it could become your newest best friend. Section 1692g of the FDCPA is the paragraph addressing debt validation. It is titled: Validation of Debt. This is important because validation and verification are not the same thing in the eyes of the law. The law is codified in Title 15 of the United States Codes beginning in section 1692. Use any search engine to find this Title.

Verification, although used in the Code, is not as requiring as validation. If you care to research this point, start with a good law dictionary then move into the court cases. Unless you want to fall asleep, I’d wait until I was contacted by an over aggressive debt collector.

Here is the applicable section as printed in the Codes:

Sec. 1692g. Validation of debts

(a) Notice of debt; contents

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.

(b) 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.

(c) Admission of liability

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.

Notice the thirty-day requirement in the Code? They must give you 30 days to request a validation. Also, look at subsection (c) right above this paragraph. Should you fail to dispute the validity of a debt, no court is allowed to construe your failure as an admission of liability. This is a very powerful subsection because you no longer are liable simply because you did not dispute the validity of the debt at the onset. You may not have done so for any number of reasons. You, in fact, may have wanted your day in court without the encumbrance of a stack of paperwork or you may wanted to short-circuit the time the dispute would normally take if you entered into a letter writing campaign. All of that is now moot per the law. That’s a good thing. Now the question is reduced to what is this animal called validation you want from the debt collector? No part of this section clearly defines validation yet it lays the requirement for such an action squarely on the shoulders of the debt collector.

Debt collectors will take the verification route and use computer print outs or copies of paper work you allegedly signed years ago or copies of microfiche documents or a letter supposedly from somebody in the credit department of the original creditor. If the debt has been reassigned or sold several times, the new debt collector uses the collection letter the former collector sent you.

As you can imagine, most consumers do not accept this slight of hand as validation. They want their original contract or the other document(s) alleging a debt be brought forward that has their signature on it. On this point, unfortunately, the courts seem to be ruling that a computer print out from the creditor alleging a debt is sufficient as validation. And, unfortunately one more time, the Federal Rules of Evidence (FRE), sections 1002, 1003 and 1004 are allowing the courts to rule this way.

Here are the rules, along with their Notes, as they appear in the FRE.

Rule 1002. Requirement of Original to prove the content of a writing, recording, or photograph, the original writing, recording, or photograph is required, except as otherwise provided in these rules or by Act of Congress. Notes on Rule 1002: Notes of Advisory Committee on Rules. The rule is the familiar one requiring production of the original of a document to prove its contents, expanded to include writings, recordings, and photographs, as defined in Rule 1001(1) and (2), supra.

Application of the rule requires a resolution of the question whether contents are sought to be proved. Thus an event may be proved by nondocumentary evidence, even though a written record of it was made. If, however, the event is sought to be proved by the written record, the rule applies. For example, payment may be proved without producing the written receipt which was given. Earnings may be proved without producing books of account in which they are entered. McCormick § 198; 4 Wigmore § 1245. Nor does the rule apply to testimony that books or records have been examined and found not to contain any reference to a designated matter.

The assumption should not be made that the rule will come into operation on every occasion when use is made of a photograph in evidence. On the contrary, the rule will seldom apply to ordinary photographs. In most instances a party wishes to introduce the item and the question raised is the propriety of receiving it in evidence. Cases in which an offer is made of the testimony of a witness as to what he saw in a photograph or motion picture, without producing the same, are most unusual. The usual course is for a witness on the stand to identify the photograph or motion picture as a correct representation of events which he saw or of a scene with which he is familiar. In fact he adopts the picture as his testimony, or, in common parlance, uses the picture to illustrate his testimony. Under these circumstances, no effort is made to 6 prove the contents of the picture, and the rule is inapplicable. Paradis, The Celluloid Witness, 37 U.Colo.L. Rev. 235, 249-251 (1965).

On occasion, however, situations arise in which contents are sought to be proved. Copyright, defamation, and invasion of privacy by photograph or motion picture falls in this category. Similarly as to situations in which the picture is offered as having independent probative value, e.g. automatic photograph of bank robber. See People v. Doggett, 83 Cal.App.2d 405, 188 P.2d 792 (1948) photograph of defendants engaged in indecent act; Mouser and Philbin, Photographic Evidence-Is There a Recognized Basis for Admissibility? 8 Hastings L.J. 310 (1957). The most commonly encountered of this latter group is of course, the X-ray, with substantial authority calling for production of the original. Daniels v. Iowa City, 191 Iowa 811, 183 N.W. 415 (1921); Cellamare v. Third Acc. Transit Corp., 273 App.Div. 260, 77 N.Y.S.2d 91 (1948); Patrick & Tilman v. Matkin, 154 Okl. 232, 7 P.2d 414 (1932); Mendoza v. Rivera, 78 P.R.R. 569 (1955).

It should be noted, however, that Rule 703, supra, allows an expert to give an opinion based on matters not in evidence, and the present rule must be read as being limited accordingly in its application. Hospital records which may be admitted as business records under Rule 803(6) commonly contain reports interpreting X-rays by the staff radiologist, who qualifies as an expert, and these reports need not be excluded from the records by the instant rule.

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 the circumstances it would be unfair to admit the duplicate in lieu of the original. Notes on Rule 1003: Notes of Advisory Committee on Rules. When the only concern is with getting the words or other contents before the court with accuracy and precision, then a counterpart serves equally as well as the original, if the counterpart is the product of a method which insures accuracy and genuineness. By definition in Rule 1001(4), supra, a “duplicate” possesses this character.

Therefore, if no genuine issue exists as to authenticity and no other reason exists for requiring the original, a duplicate is admissible under the rule. This position finds support in the decisions, Myrick v. United States, 332 F.2d 279 (5th Cir. 1964), no error in admitting photostatic copies of checks instead of original microfilm in absence of suggestion to trial judge that photostats were incorrect; Johns v. United States, 323 F.2d 421 (5th Cir. 1963), not error to admit concededly accurate tape recording made from original wire recording; Sauget v. Johnston, 315 F.2d 816 (9^th Cir. 1963), not error to admit copy of agreement when opponent had original and did not on appeal claim any discrepancy. Other reasons for requiring the original may be 7 present when only a part of the original is reproduced and the remainder is needed for cross-examination or may disclose matters qualifying the part offered or otherwise useful to the opposing party. United States v. Alexander, 326 F.2d 736 (4th Cir. 1964). And see Toho Bussan Kaisha, Ltd. v. American President Lines, Ltd., 265 F.2d 418, 76 .L.R.2d 1344 (2d Cir. 1959). Notes of Committee on the Judiciary, House Report No. 93-650. The Committee approved this Rule in the form submitted by the Court, with the expectation that the courts would be liberal in deciding that a “genuine question is raised as to the authenticity of the original.” Rule 1004. Admissibility of Other Evidence of Contents The original is not required, and other evidence of the contents of a writing, recording, or photograph is admissible if—

(1) Originals lost or destroyed. All originals are lost or have been destroyed,

unless the proponent lost or destroyed them in bad faith; or

(2) Original not obtainable. No original can be obtained by any available judicial

process or procedure; or

(3) Original in possession of opponent. At a time when an original was under the

control of the party against whom offered, that party was put on notice, by the

pleadings or otherwise, that the contents would be a subject of proof at the hearing, and that party does not produce the original at the hearing; or

(4) Collateral matters. The writing, recording, or photograph is not closely related to a controlling issue.

Notes on Rule 1004: Notes of Advisory Committee on Rules.

Basically the rule requiring the production of the original as proof of contents has developed as a rule of preference: if failure to produce the original is satisfactory explained, secondary evidence is admissible. The instant rule specifies the circumstances under which production of the original is excused.

The rule recognizes no “degrees” of secondary evidence. While strict logic might call for extending the principle of preference beyond simply preferring the original, the formulation of a hierarchy of preferences and a procedure for making it effective is believed to involve unwarranted complexities. Most, if not all, that would be accomplished by an extended scheme of preferences will, in any event, be achieved through the normal motivation of a party to present the most convincing evidence 8 possible and the arguments and procedures available to his opponent if he does not.

Compare McCormick § 207. Paragraph (1). Loss or destruction of the original unless due to bad faith of the proponent, is a satisfactory explanation of nonproduction. McCormick § 201. Paragraph (2). When the original is in the possession of a third person, inability to procure it from him by resort to process or other judicial procedure is sufficient explanation of non-production. Judicial procedure includes subpoena duces tecum as an incident to the taking of a deposition in another jurisdiction. No further showing is required. See McCormick § 202. Paragraph (3). A party who has an original in his control has no need for the protection of the rule if put on notice that proof of contents will be made. He can ward off secondary evidence by offering the original. The notice procedure here provided is not to be confused with orders to produce or other discovery procedures, as the purpose of the procedure under this rule is to afford the opposite party an opportunity to produce the original, not to compel him to do so. McCormick § 203. Paragraph (4). While difficult to define with precision, situations arise in which no good purpose is served by production of the original. Examples are the newspaper in an action for the price of publishing defendant’s advertisement, Foster-Holcomb Investment Co. v. Little Rock Publishing Co., 151 Ark. 449, 236 S.W. 597 (1922), and the streetcar transfer of plaintiff claiming status as a passenger, Chicago City Ry. Co. v. Carroll, 206 Ill. 318, 68 N.E. 1087 (1903). Numerous cases are collected in McCormick § 200, p. 412, n. 1.

Notes of Committee on the Judiciary, House Report No. 93-650. The Committee approved Rule 1004(1) in the form submitted to Congress. However, the Committee intends that loss or destruction of an original by another person at the instigation of the proponent should be considered as tantamount to loss or destruction in bad faith by the proponent himself. Notes of Advisory Committee on 1987 amendments to Rules.

The amendments are technical. No substantive change is intended. You can find this information simply by going to your nearest law library and opening a

copy of the Federal Rules of Evidence to Rule 1002. By the way, some people say the above rules are located in the Federal Rules of Civil Procedure. This is simply not so as the FRCP are numbered 1 through 86 and never even touch numbering into 100 and above let alone 1000 and above. Regardless, now that you know where to find the applicable rules and have their accompanying notes, you are better armed to phrase your argument. The notes are extremely important because they add clarification to the rule itself. Always look for notes or annotations to any statute or code section you are researching. They not only clarify but lay out, in some cases, the thought processes of the law makers.

You have a right to demand the original as you can plainly read. However, for one reason or another, the debt collector can weasel out of producing the original. I believe the weasel clauses were allowed in the rules because of income taxes.

The IRS puts all kinds of entries into your Master File but never produces the original document authorizing them to make any of the entries. Having been down that road with this bunch of brigands, I can state flatly the court is never on the taxpayer’s side. It always allows the IRS to use a dummied up, at least in my case, computer printout as validation/verification of taxes owed.

This e-book is also not about the IRS but I reserve the right to inject my opinion about the genesis of why the original doesn’t have to be produced. I have researched many college treatises as well as having read many books in this area and I can only come to the conclusion that the leeway allowed the IRS has spilled over into the credit arena. For me, this is a truly sad day.

Others have adeptly written about certain cases decided in the validation argument and have said the courts either didn’t address the issue of the original or agreed with the debt collector that verification/validation is completed with the presentation of a computer print out or a copy of a supposed contract.

It is immaterial what the courts said or didn’t say because the governing doctrine is laid out in the already quoted sections of the Federal Rules of Evidence. Believe me, all states have adopted the FRE in one manner or another.

Why? Because it is a well laid out schematic easily adaptable to local rules and customs. Its ease of construction is hard to argue with.

Therefore, at least in my opinion, you stand a better chance of beating the debt collector by scrutinizing their legal responsibility to follow the procedures. For example, lawyers can be debt collectors and you would think they’d be the first to follow the procedures to a T, right? Wrong!

Not only do they have to follow federal procedures, they must comply with state procedures. If you live in Nevada like I do and a debt collecting lawyer sends you one of those “I am attempting to collect a debt letter” and she is not licensed to practice law in the State of Nevada, she may have to be licensed as a collection agency. Also, the form letter she mailed you must have been approved by the State. If neither of these requirements are met, you win on procedures. That’s a good thing. A debt collector may not have reported you to any credit bureau prior to resolution of your dispute. This is a common occurrence causing untold grief for alleged debtors. OK, at the beginning of this e-book I did say this book’s focus is strictly validation and I’ve gone astray. Not much, but enough to have to stop myself.

I have a Request For Validation letter I send to all debt collectors in which I ask certain questions. These questions set the stage for a law suit should the process go that far. I do not give this letter away as it has material I haven’t seen anywhere else. I am not saying it is bullet proof simply because I don’t know how a judge will rule in any presented set of circumstances. But, I do know, this letter does a beautiful job of protecting my interests and intertwining the FRE and local statutes into the matter. It also allows me to sue in the easiest and least expensive court in any state – Small Claims Court. The highest amount I could sue for in Nevada is $5000.00. However, if I believe I have more than $5000.00 in damages, I will file suit in Federal District Court.

I think my letter pinpoints the sections in both the Federal and State Statutes the debt collector will have violated. Therefore, I believe I will win on the procedures, that is violations thereof. Procedures they, and not me, must follow since the law specifically lays the procedural requirement smack on their door step.

There you have it. My take on Debt Validation and an alternative way to at least counter sue the debt collector.

I can be reached at tom@senior2senior.org with questions, comments or critiques.

FACTA and guidelines for an effective FRCA 623 attack based upon inaccurate information in your credit report

Technorati Tags: Facta,FCRA 623,investigation,credit repair

Disputed information in your credit file must be Validated by original creditor. There have been many articles written about the FCRA and how it can be used to help consumers repair their damaged credit files. One Google search will turn up literally hundreds of articles on the subject. Much of the information is either too difficult to understand, or is woefully incomplete. Many of the authors of such articles have an ulterior motive; give the reader a tid-bit of information designed to gently lead them to their website where they then offer to give the reader the “whole story” for a price, or solicit other costly credit repair services.
 While I don’t necessarily blame them for trying to make a buck, I,like other consumers of credit repair information would like to simply get the whole story without all the underhanded marketing tactics that are so abundant on the Internet. I promise all of my readers that the information in my posts is “pure” and without strings attached!! Just knowledge, no fat, no bad information, and no marketing! While I do own and run a credit repair agency, the information I post is for CONSUMPTION, not to market my credit repair services.
By its very name, the Fair and Accurate Credit Transactions Act places new emphasis on accuracy of information in consumer reports. Two FACTA sections aim to improve the accuracy and integrity of information as well as give consumers a new right to dispute data included in reports directly with the company that furnished it. These sections are:

Accuracy guidelines for financial institutions and creditors that furnish information to credit bureaus. (FACTA §312(a), FCRA §623(e)(1)). Ability of consumers to dispute information with companies that report to credit bureaus. (FACTA §312(c), FCRA §623(a)(8)).

Like other FACTA sections, the accuracy and dispute sections call for rules to be adopted by the federal banking agency and the FTC. On March 22, 2006, the agencies jointly issued an Advanced Notice of Proposed Rulemaking (ANPR), a means of gathering information prior to a rule proposal. The ANPR can be viewed at www.ftc.gov/os/fedreg/2006/march/060322accuratecredittrans.pdf Public comments received in response to the ANPR can be viewed at www.ftc.gov/os/comments/FACTA-furnishers/index.shtm

While case law has established for the past few years that the Original Creditor (O.C.) can be held liable for reporting inaccurate information (Richardson vs. Fleet, Nelson vs. Chase Manhattan ), the FACTA legislation passed recently allows the consumer to go directly to the original creditor and dispute information which the original creditor (called the information furnisher in the FCRA), has supplied to the credit bureaus. However, before disputing with the original creditor, the CONSUMER MUST HAVE DISPUTED WITH THE CREDIT BUREAUS first. Following this step is crucial.

Again, when you write the Original creditor, you are asking for an INVESTIGATION, not verification. Under the laws, the OC’s are not required to verify an account, only to conduct an investigation. If you want to get results, you must invoke the right laws. O.C.’s are NOT required by law to “verify” anything. Basically, you can dispute information placed on your credit report by an O.C. in the same way as you would with a credit bureau. An original creditor must:

1. Conduct an investigation of the dispute
2. Review all information provided by the consumer relating to the dispute
3. Respond within 30 days to the investigation
4. If the information is inaccurate, they must notify the credit bureaus of the mistake and tell the credit bureau to correct it.

Some of you might remember the very popular slogan used by one of the major parcel delivery services: “We move at the speed of Business” Well, that slogan was not only true, but it was also prophetic. Large companies in the US are constantly buying each other out, merging with larger companies, and selling parts of their departments to vendor companies. This means that information can and does get lost in “translation.” As anyone who has ever taken an economics course knows, US companies are more concerned with profits than complaints.
It has been my experience as a credit repair professional that most companies (original creditors) do not adequately staff their dispute resolution departments until they are facing a class-action type lawsuit. That’s when the lawyers are brought in to clean things up and resolve whatever dispute occurred through litigation. One consumer complaint is rarely given the attention it deserves because of the simple, yet profound fact that the man-hours to resolve every complaint cannot be justified in a profit-driven environment. Bottom line: they don’t keep their records very well. In fact, most credit card companies only keep records for 13-18 months! Fortunately for consumers, the FACT-ACT now requires any issuer of credit to validate all information it reports to the three major credit bureaus. Section 623 (a) (8) D) of FACTA which is titled: SUBMITTING A NOTICE OF DISPUTE states:

• A consumer who seeks to dispute the accuracy of information shall provide a dispute notice (letter) directly to such person at the address specified by the person for such notices that:
• identifies the specific information that is being disputed
• explains the basis of the dispute, and
• includes all supporting documentation required by the furnisher (original creditor) to substantiate the basis of the dispute.

(E) DUTY OF PERSON AFTER RECEIVING NOTICE OF DISPUTE- After receiving a notice of dispute from a consumer pursuant to subparagraph (D),the person that provided the information in dispute to a consumer reporting agency shall–
(i) conduct an investigation with respect to the disputed information;
(ii) review all relevant information provided by the consumer with the notice;
(iii) complete such person’s investigation of the dispute and report the results of the investigation to the consumer before the expiration of the period under section 611(a)(1) within which a consumer reporting agency would be required to complete its action if the consumer had elected to dispute the information under that section; and
(iv) if the investigation finds that the information reported was inaccurate, promptly notify each consumer reporting agency to which the person furnished the inaccurate information of that determination and provide to the agency any correction to that information that is necessary to make the information provided by the person accurate.
§ 623. (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;
(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; and
(E) if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation under paragraph (1),
for purposes of reporting to a consumer reporting agency only, as appropriate, based on the results of the reinvestigation promptly –
(i) modify that item of information;
(ii) delete that item of information; or
(iii) permanently block the reporting of that item of information.


I won’t provide an interpretation here because that is as straight-forward as it gets. You can call up (or write) your credit card company, or any “furnisher” of credit and demand that they investigate your account for inaccuracies and by law they must comply or be found liable in a court of law. Remember what I wrote above, that the consumer must first dispute with the credit bureaus BEFORE they dispute with the original creditor. Why? Because when you dispute the debt with credit bureaus first, they will almost always verify the debt as legit and accurate (they are supposed to do this by contacting the above mentioned original creditor, but in most cases they don’t). When the debt is verified by the bureaus you then have standing to dispute with the original creditor who then will be liable for verifying a debt with the credit bureaus, but did not (could not) verify it with you - proving no investigation ever occurred!! When you write your dispute letter threatening to sue for damages they will immediately stop reporting the debt to the credit bureaus, who then in turn must delete it from your credit file.

Self-help credit repair 101 Lesson 2



Credit Repair 101

As I considered writing this second credit repair lesson I must admit I had some problems getting started.  I didn’t want to write the same old information that is already all over the Internet because much of it is false and not very well researched.  And while the principles of credit repair are much easier talked about than they are to put into practice, it is still quite challenging to write a generic article about credit repair when the process depends so much on knowing a client’s particular circumstances.   Therefore, this lesson is not going to include any strategic information on how to restore your credit.  It will include information about how the credit industry works, when you should consider consulting a consumer rights attorney, and how to organize yourself before you begin the dispute process.  It makes no sense to me to include any information on particular FCRA or FDCPA laws when you will not need to use them at this stage of the dispute process.  That information will become more useful when and if you decide to file a lawsuit.  However, if your situation is complicated, the above stated laws and others are required reading if you want to be as effective as possible in dealing with the credit bureaus and collection agencies.

Many of the theories you hear or read about simply do not work all the time in the real world of credit repair.  Original creditors are difficult to contact by phone, and they rarely call you back.  Collection agencies lie to you and mis-quote the law.  Credit reporting agencies pretend to care about customer service, but really don’t care about their customers at all.  Most business, (generally referred to as original creditors or issuers of credit by the FCRA) and everyone in the credit reporting business is out to make as much money as they can off of your unfortunate circumstances.  Collection agencies, credit card companies, and all other original creditors make it difficult for anyone trying to restore their credit as they have a vested interest in keeping consumers’ FICO scores as low as possible.  If everyone had an 800 FICO score and always paid their bills on time, collection agencies would have no business, original creditors could not charge exorbitant interest rates on late pays, and everyone would be eligible for a near zero APR on everything they bought on credit.  There would be no sub-prime loan companies because there would be no sub-prime credit.  Take a look at these statistics from a report by the non-profit, National People’s Action:

The nation’s largest payday loan companies have earned a record $1.5 Billion in combined annual revenues from high-cost payday loans.

• The nation’s major banks including Bank of America, JPMorgan Chase, and Wells Fargo finance approximately 42% of the entire payday loan industry nationwide.

• State regulators report that payday loans cost borrowers a minimum of $3.4 Billion in fees annually.

• Every year an estimated $3.1 Billion in wealth is “stripped” from the pockets of needy borrowers directly into the coffers of the nation’s payday lenders.

• The segment of the payday loan industry funded by the big banks results in a minimum of $1.5 Billion annually in wealth-stripping from excessive fees paid by payday loan borrowers nationwide

My point is that when you decide to actually start doing something about your bad credit, or investigate errors you might find on your credit report, you are up against an army of vile, unscrupulous vultures not unlike the creatures from the movie, "Lord of the Rings."  The good news is that you have the law on your side.  The biggest challenge for the layman trying to restore their credit rating is understanding their legal rights, and effectively communicating it to the bureaus and collection agencies.  The ideal solution is to hire a consumer protection attorney, but not everyone can afford to do that.

Not everyone will need an attorney.  Thousands of laymen deal with the bureaus and collection agencies effectively all the time and get their credit file fixed or raise their FICO scores.  However, be warned that if your credit situation is complicated, it is likely you will need assistance from a legal professional who specializes in consumer rights law, because it also likely you will have to sue to get your credit report restored and corrected.

Credit repair, at its core, is the ability to recognize errors on your credit report, communicate those errors to the powers that be in such a way that clearly demonstrate that you have a VERIFIABLE LEGAL CLAIM.  Therefore, you must be ready and willing to take your case to the courts of law if necessary.  I say this because that is really the only thing that will get their attention and compel them to act.  All of the credit reporting bureaus, collection agencies, credit card companies and other original creditors know their business practices can usually be characterized under what the Federal Trade Commission calls “unfair and deceptive practices” but they count on the average person being too intimidated or too poor to do anything substantial about being treated that way.  Most people can scarcely handle keeping food on the table, and making the house payment.  And because of the current economic recession, thousands are not able to that anymore.

In lesson three I am going to first cover the legal claims that can be made by a consumer in a civil lawsuit as opposed to the legal claims that must be initiated by federal regulatory agencies such as the Federal Trade Commission, the Consumer Financial Protection Bureau, or the Office of Comptroller of the Currency.  Because the laws that regulate the credit industry are federal laws, when the FTC initiates a law suit against a company like Experian, the legal caption says: The United States v. Experian, and the case is litigated by the US Justice Department in federal district court.  And the Justice Department usually wins because of the egregious business practices of the many businesses that control our credit information and issue credit in this country.
It has only been since the very recent creation of the Consumer Financial Protection Bureau that companies that are investigated by the CFPB for unfair and deceptive business practices have been required to pay extreme penalties and fines (similar to Punitive damages in civil lawsuits) for their actions as well having to pay back the money they received from consumers.  For example, in July of this year, the Consumer Financial Protection Bureau tacked on a $35 million restitution penalty in addition to the $150 million settlement with credit card company Capitol One for violating section 5 of the Federal Trade Commission Act for unfair and deceptive business practices.
Now, let's discuss the consumer dispute process and how to write an effective dispute letter to the credit reporting bureaus, collection agencies, (CA) and original creditors (OC).

Before you Begin
The entire re-investigation process is initiated by the consumer disputing the accuracy of information in their credit report, but before you even think about writing a letter or making a phone call to anyone, you MUST get organized.  Below is a brief list of the items you will need to prepare for the dispute process:

1. A notebook (s) to write down all conversations with creditors, credit bureaus or whomever you call about your credit report
2. A computer with word processing software like Microsoft Word so you can transfer what you write in your notebooks to an electronic or digital format
3. A monthly calendar to make appointments, record dates of phone conversations, and keep up with time deadlines
4. A postage budget to send everything via certified mail
5. Full copies of the FCRA, FDCPA, CROA, and the FACTA

Sending your first dispute letter
Opinions vary on what constitutes an effective dispute letter.  Some believe a consumer should send a letter that indicates their knowledge of their rights under the FCRA.  Others believe a consumer should adhere to the “kiss”(keep it simple, stupid) rule.  The truth is, both are equally effective if done correctly.  Personally, I believe if a consumer is writing the dispute letter a simple letter works best. Credit bureaus do not like, nor do they care if you know the law.  They only care if you are going to utilize it.  Complicated dispute letters that quote the FCRA don’t compel anyone to do anything.  Remember, you are not going to intimidate anyone with a letter that has all kinds of quotes from the FCRA.  The minimum wage worker at a credit bureau who receives your fancy letter is not going to care about you quoting the law.  It certainly will not further your cause at that point in the dispute process.  Moreover, they have lawyers who deal with lawsuits all the time.  Believe me, it doesn't impress or intimidate anyone.  Reserve that language for when you actually intend to sue.  That is what the, “intent to sue letter” is for.
Your first letter to the credit bureaus should be simple.  Below is a list of information that you should include in your letter:

1. Full legal name
2. Current address (include a utility bill for proof)
3. Social security number (include a photo-copy of your ss#)
4. A photo-copy of your legal picture ID
5. Phone number
6. List of accounts (include account #’s) you want to dispute.  Highlight those same items on the copy of your credit report you send with the letter
7. Brief explanation why you think the accounts are inaccurate (with supporting documentation if possible)

Remember to send everything by US Postal Service with Return Receipt so you have documented proof they received it. Document what you did in your notebook or on your computer.  As for the number of items you can dispute, some say don’t dispute too many at once.  I believe a consumer should dispute everything that is inaccurate on their report.  That includes identity information like a wrong letter in their name, a wrong number in their address, a wrong past address – anything and everything that is inaccurate!
A few points to remember
Always be professional when dealing with creditors, credit reporting agencies and collection agencies.  Be nice, but don’t be naïve! They are often dishonest and won’t think twice about lying to you.  That’s why they get sued so much.

• Don’t ever initiate a dispute by filling out a form over the Internet at the the credit bureaus’ website.  You might loose important rights by doing this, and it legally extends their time to re-investigate the dispute.
• Don’t write an overly aggressive letter.  It doesn't help your cause to be nasty to anyone.
• Don’t make threats to sue if you don’t intend to follow through.  If you intend to sue, send a “intent to sue” letter and be prepared to file you claim with the courts.

I have included a link to a sample dispute letter from the Federal Trade Commission website that you can use as a guide along with all of the information in this lesson.  There is other information on the FTC website that you might find useful, including the link to annualcreditreport.com where you can get a free credit report from all three credit bureaus.  You will find information on how they think a consumer should start and manage the dispute process.  They also have contact information for all three credit bureaus.