End Debt Collection Stress—Our Attorneys Have You Covered
It's common for people to receive collection letters or be served with a lawsuit by a creditor or collector they've never heard of. Often, this happens because creditors assign debts to collection agencies or sell them to "debt buyers."
Federal and state laws give you the right to demand information about the debt, called "debt verification" or "debt validation." And if the debt buyer or collector doesn't verify the debt or can't produce documentation of the debt, you can probably raise this failure as a defense against a lawsuit.
The servicing, buying, and selling of debt has become so commonplace that often, the original creditor doesn't have the account for very long. This is especially true if you've fallen behind on payments. Collectors and businesses you've never heard of before might barrage you with calls and letters.
Often, these calls and letters contain no information that will enable you to identify the debt, such as the name of the original creditor and account number. This lack of information makes it impossible to know if the amount sought is correct or if you even owe the debt at all.
On June 12, 2017, the Supreme Court decided Henson et al. v. Santander Consumer USA Inc., a case that sought an answer to whether a debt buyer must abide by the collection rules outlined in the FDCPA. The Court concluded that the owner of the debt isn't a debt collector under the Act. While the Court's holding seems straightforward, the Court didn't explain whether this decision will apply to all debt buyers in every situation.
Following the Henson decision, the United States Court of Appeals for the Third Circuit held in Tepper v. Amos Financial, LLC, 898 F.3d 364 (3d Cir. 2018) that an entity whose principal purpose of business is the collection of any debts is a debt collector for purposes of the FDCPA.
So, this court said that if a business's principal purpose is debt collection, it must comply with the requirements of the FDCPA, even if the entity owns the debts it collects. (In Henson, Santander also convincingly argued its principal purpose was loan origination, which is different from debt buyers that primarily or exclusively buy and collect defaulted debts.)
In addition, the Consumer Financial Protection Bureau(CFPB) issued a final rule amending Regulation F (12 C.F.R. § 1006 and following), which implements the FDCPA. The official interpretation to 12 C.F.R. § 1006.2(i) of Regulation F says that a debt buyer is not considered a "debt collector" for the purposes of the FDCPA if:
- it doesn't collect debts owed or due to another, and
- doesn't have a business with the principal purpose of collecting debts.
What Happens If the Collector Doesn't Validate the Debt?
If a debt collector fails to validate the debt but continues to go after you for payment, you can sue that debt collector in federal or state court. You might be able to get $1,000 per lawsuit plus actual damages, attorneys' fees, and court costs. (15 U.S.C. § 1692k (2024).) Under some state fair debt collection acts, you can get more than $1,000 in statutory damages.
The debt collector might be able to shield itself from liability if it can prove that its acts and omissions were unintentional and in error. But it will have to show that it had a procedure in place to prevent the situation from happening.
Whether you’ve been sued by a creditor, a collection agency, or a third-party debt buyer, we’re here to help you navigate the complex legal process, challenge improper claims, and avoid unjust financial burdens.