Borrowing: A Tale of You, Joe, Bob and Money Borrowed
Borrowing can be a necessary evil.
Let’s say you borrowed money from your friend Joe. Joe would be the creditor of this debt, the original creditor. And, let’s say some time has gone by and you think you might still owe Joe money, though you’re not sure how much.
One day, a guy named Bob comes up to you and says he is collecting the money you owe Joe. Bob is acting just like a collection agency for a credit card company would. Think about it – having never met Bob before, would you just hand over the cash to him? No. Or at least I hope you wouldn’t. You should have these questions for Bob:
1. How do you know that Bob is actually collecting for Joe? What legal documents does Bob have to prove that he is legally authorized to collect?
2. How much is the actual debt? What payments have already been made on the account? Where is the accounting of the debt, including all interest and fees? Are these fees and interest amounts legit?
3. Do you still really owe Joe the money? You remember borrowing money from someone else, your friend Sam, at the same time. You also remember paying one of them back the next day. Is this debt the one you borrowed from Sam or Joe? Where is the contract showing the terms of the loan with Joe and the one from Sam? At the very minimum, you should call Joe or Sam on the phone to ask about the loan.
You should have the same thoughts about a collection agency who sends you a bill for a debt you may or may not owe.
Don’t Panic About Borrowing Issues
If you receive a phone call or a letter from a collection agency, your first reaction may be to panic. Calm down and analyze the situation. Keep all the fancy language and legal terms out of the attempts by a collection agency to collect. Think of what you would ask Bob in our example. If you do, you’ll know exactly what to ask a collection agency (Bob in our example) to validate a debt.
The Fair Debt Collection Practices Act
Debt Validation is a legal procedure which is spelled out by the Fair Debt Collection Practices Act, or FDCPA.
What if the person asking you for the money, ‘Bob’, is a lawyer?
Under the FDCPA, even if Joe hires a lawyer or law firm to collect a debt from you, the lawyer or law firm is still considered a collector and must adhere to the FDCPA.
Borrowing and debt collectors; validation questions
One of the following items is necessary for debt validation.
- Proof that the collection company owns the debt/or has been assigned the debt. (Bob is legally entitled to collect this particular debt from you.) This is basic contract law. It is very difficult to get a judgment without a direct contract between the collection agency and the original creditor.
- A copy of a statement from the original creditor. If you really want to get sticky, you can pin them down on the amount of the debt by requiring complete payment history, starting with the original creditor. (How the heck did Bob calculate this debt? What fees/interest Bob has tacked on to this debt and how he determined these fees?) This requirement was established by the case Fields v. Wilber Law Firm, Donald L. Wilber and Kenneth Wilber, USCA-02-C-0072, 7th Circuit Court, Sept 2004.
- Copy of the original signed loan agreement or credit card application. (Your contract with Joe establishing the debt between you.) However, account statements from the original can fulfill these requirements.
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A copy of a canceled check from you to the original creditor.
How Bob gets out of a borrowing deal
If the collection agents cannot provide the above information, then the debt cannot be legally collected upon, and therefore, the debt is invalidated. The Right to Validate Your Debt Under the FDCPA, you are allowed to validate this debt, and the creditor (in this case) must show provide you with one of the debt validation items listed above. The specific section of the FDCPA: If a creditor can’t validate a debt:
- They are not allowed to collect the debt,
- They are not allowed to contact you about the debt, and
- They are also not allowed to report it under the Fair Credit Reporting Act (FCRA). Doing so is a violation of the FCRA, and the FCRA states that you can sue for $1,000 in damages for any violation of the Act.
A collection agency CANNOT report a debt to the credit bureaus which has not been validated, and, you can sue in federal or state court if you have them on a violation. You could receive $1,000 for the incident plus damages. Small claims court, anyone? I hope you enjoyed this information. I look forward to hearing from you.
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