Debt validation for a series of debt collectors
A viewer recently asked about a debt that has not been validated being sold to a new company. If the debt has not been validated, is it now “bad debt”?
The concept: a debt collector calls you or writes to you within a so-called “validation period.”
This is normally 30 days after they send the first letter.
You dispute the debt and tell the company that you do not agree that you owe it.
Then the collector does nothing. They do not validate the debt.
Instead, the collector sells or transfers the debt to another company.
The new collector writes and calls you about this debt.
Once you have requested validation the first time without receiving a response, does this mean that the debt is now a bad debt that can’t be sold?
Under the law, when you request validation the debt collection company has two options:
- Validate the debt. If they validate properly, they are allowed to continue collections.
- Stop collecting and do nothing. This allows them to transfer the debt.
The second option is the reason we are not typically in favor of cease and desist letters. As soon as you send a cease and desist letter, the company may stop collecting and transfer the debt to a new company.
The cease and desist letter only applies to the first company and does not transfer with the debt. You would need to send a separate letter to the new company.
The same principle applies to the validation process. You may be able to prevent the initial debt collector from collecting because they choose not to validate the debt.
But when they transfer the debt to a new collector, you must start the validation request over again.
There is one exception — If the debt collector truly knows the debt is uncollectible, they have no right to collect.
Here’s an example:
We’ve been sued on a debt and we win.
Then the debt is sold.
Now the collector has sold bad debt.
Now we can sue both the seller and purchaser of the debt.
The seller, because they knew the debt was bad, and the purchaser, because they should also know the debt was bad.
The purchaser may claim that they were told the debt was valid.
However, the seller will face heavy consequences for their actions.
If you get a debt removed from your credit report and you send a validation request and the debt is then transferred, this alone does not violate the law, but it is something you should watch closely.
We hope this is helpful to you!
If you live in Alabama and you have any questions, feel free to get in touch with us.
We would be glad to help you in any way we can.
You can reach us by phone at 1-205-879-2447, or you can fill out a contact form and we will get in touch with you quickly.
Thanks for reading, and have a great day!
PS — If you are interested in Validation of Debts under the FDCPA (Fair Debt Collection Practices Act), you might want to watch these videos: