DIY Debt Verification

I was preparing the kiddies for bed a few nights back while listening to an interesting radio show on personal finances. Yes! Some of us still listen to the radio. A lady called to ask if there were any moral landmines associated with using a debt verification company to wiggle out of debt.

You probably have the same question…what is a moral landmine?

Okay, I just made that up and I’m sure your question was actually, what is a debt verification company?

It sounds like this person received a telemarketing-type call offering a service to reduce outstanding debt up to 75% (are your spidey senses tingling yet).

Through debt verification, this company claims to use a “loop hole” that allows consumers to duck debt if 3rd party debt collectors are unable to verify details of the debt owed. For instance, there must be a paper trail from the original creditor with the original amount owed. This company offered their services for a mere $6,000 (of course fees vary based on the amount of debt owed).

 

Debt Verfication

Two things.

  1. First – you can send your own verification request to any debt collector for the cost of an envelope and postage stamp.
  2. Second, a quick search of debt verification companies yielded nothing. Sounds like the latest iteration of companies preying on people in desperate financial situations.

Debt collectors must furnish the amount of debt owed and the original creditor within 5 days of the first contact. You are also advised that you have 30 days from that first contact to dispute the debt in question. After 30 days, it’s assumed you agree.

Debt validation confirms the identity of the creditor and the amount owed. This step may be useful because as debts are bought and passed between 3rd party collectors, details may be modified, additional fees distort the original amount owed, or the debt may be assigned to the wrong person all together.

Once you send a letter of verification, all progress with the debt collection must stop. The process can take days to weeks to months. However, if the debt is valid and months pass before the collection agency responds, the impact to your credit report will still reflect the time this debt was not paid. According to one debt collection expert, Jared Strauss, using this as a strategy to avoid paying debt can be more problematic than helpful. Given that 80% of debts are unresolved (according to the FTC), the verification strategy used on debts that are not in question may cause your account to receive more aggressive attention versus being one of the masses.

In short, send verification letters when there is a legitimate question about a debt’s validity. Your letter should:

  • State that you have a dispute with the debt.
  • Ask for documentation of the original debt.
  • Request the name and address of the original creditor. 

Don’t pay anybody thousands to do something that can be done for the cost of a stamp. Finally, avoid “get-over” strategies if you owe the debt. You might open a can of worms and you can always work with the creditor to negotiate a settlement.

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