Over the past two days, we’ve discussed various aspects of the Federal Trade Commission’s report on the debt buying industry. Today, we’ll explore the kinds of information debt buyers receive about consumers when they purchase debt portfolios, as well as how disputes are handled.
Knowing the kind of information debt buyers receive is important. All too often, when debt buyers call, they either call regarding debt that’s past the statute of limitations, they call the wrong person, or they don’t have the correct balance due. When a consumer disputes a debt, they often don’t seem to have the information to back up their claim that a debt is owed. So what’s up with that?
When the FTC examined five million accounts purchased by debt buyers, they found:
“(1) over 98% of debt accounts included the name, street address, and social security number of the debtor; (2) 70% set forth the debtor’s home telephone number, and 47% and 15% listed work and mobile telephone numbers, respectively; (3) 65% included the debtor’s birth date; and (4) less than 1% revealed the debtor’s credit score…. In addition, the debt buyers acquired the following information about the original creditor’s account: (1) 100% of accounts included the original creditor’s account number; (2) 10% stated the credit limit on the account; (3) 62% specified the type of debt; (4) 46% specified the name of the original creditor;148 and (5) 30% indicated the interest rate charged on the account. The debt buyers further obtained the following information about the amounts debtors owed: (1) 100% of accounts included the outstanding balance; (2) 72% listed the amount the debtor owed at chargeoff; (3) 11% stated the principal amount; and (4) 37% listed finance charges and fees.”
All by way of saying that debt buyers receive an incredible amount of information about each account – more than the Fair Debt Collection Practices Act (FDCPA) requires for a validation notice. The FTC rightly noted that if validation notices contained more of the specific information that debt buyers already have on file, it would be much easier for consumers to figure out whether or not the debt was theirs to pay, as well as whether or not the amount was correct.
The FTC points out that the glaring omissions in the data that debt buyers receive are a given debt’s history of collections and disputes. In other words, any information gathered in a previous attempt to collect a debt – from new contact information for the consumer to attempts to verify disputed debts. One could surmise that having this information would cut down on a variety of FDCPA violations, such revealing debt to third parties.
When it comes to disputes, the FTC extrapolated data to determine that each year consumers likely dispute at least 1 million debts owned by debt buyers. The agency is quick to point out that this number is likely a lowball estimate, since not every person receives a validation notice and not every person who thinks the debt is wrong actually disputes the debt in writing.
It’s also telling that debt buyers only verify about half of the debts that are disputed. The FTC notes, “(D)ebt buyers were significantly less likely to report
verification of disputed medical, telecommunications, and utility debt, as compared to verification of credit card debt. Debt buyers also were significantly less likely to verify debt that was more than six years old, as compared to debt less than three years old.”
What’s the takeaway? First, debt buyers likely have more information about a given debt than they provide in a validation notices. Second, only about half of all disputed debts are verified. In other words, if you’re unsure whether or not you owe a debt, it’s worth your while to file a dispute. If the debt buyer can’t or won’t verify the debt, he can no longer attempt to collect it. Remember, though, to put your dispute in writing and send it within 30 days of receiving the debt validation notice. Also, send it certified mail, return receipt requested, and keep a copy for your records.
Tomorrow, we’ll take a look at the FTC study’s findings on time-barred debt.