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Scarlet Letters: How to Handle Robo-Disputes

More and more collection agencies are receiving large envelopes that have dozens of credit reporting dispute letters in them, all dealing with different creditors and all purportedly signed by the consumer. When looking at the signatures at the bottom of the dispute letters, while the names are different, the writing style appears to be very similar from one letter to the next.

Whether or not the letters actually originated from a consumer is a huge deal for collection agencies. Under the Fair Credit Reporting Act, furnishers of data — collection agencies, in this case — need to investigate every dispute initiated by a consumer. However, if the dispute is originating from a credit repair organization, then the furnisher is not under an obligation to perform a reasonable investigation of that dispute..

Collection agencies need to do their homework and put on their Sherlock Holmes’ hat when batches of letters arrive in the mail, said John Bedard of The Bedard Law Group.

“The FCRA does not require furnishers to respond to disputes from credit reporting organizations,” Bedard said. “Congress saw fit to treat disputes from credit repair organizations differently, and furnishers need not perform the type of investigation required if the dispute had been made by a consumer.”

But that doesn’t mean that the letters can just be thrown away, Bedard cautioned. Collection agencies need to retain the letters and document the process through which they determined that the letters originated from someone other than the consumer, in case they are questioned about it later or if a consumer files a lawsuit against the agency for not investigating the dispute.

Bedard recommends that clients simply call the consumer and ask if he or she disputed the debt in writing. In the overwhelming majority of cases that Bedard has heard about, when contacted by a collection agency about these letters, consumers will always admit they the letter did not come from them. But does that mean that agencies should contact every consumer every time they receive one of these letters? No, Bedard said.

The agency should contact a “meaningful” sample of consumers, Bedard said. What that actually represents is up to each agency.

Companies “need to make a legitimate effort to see if the dispute came from a consumer, and they should document that effort,” Bedard said.

Agencies can also look at the return addresses on the envelopes, Bedard said.

It is most important that agencies develop a set of policies and procedures, or a workflow, for how it handles these types of letters. Every step in the process should be documented, Bedard said.

“It is critical to document exactly what was received and how,” he said. “And then to document the process that was used to conclude these disputes are not from consumers.”


Debra Ciskey, the chief compliance officer for Wakefield & Associates, said that the postage being used on the letters that are mailed to collection agencies can provide a huge clue in determining whether a consumer or a credit repair organization actually sent it.

If the postage is a first-class pre-sort stamp on the letter instead of a regular stamp, that is a likely indicator that a credit repair organization sent the letter instead of an individual. In order to be eligible for pre-sorted postage, which is offered at a reduced rate from regular first-class mail, letters must be sent in bulk quantities. It’s unlikely that a bunch of individuals got together with the intention of sending their dispute letters simultaneously so they could receive a reduced rate on their postage.

“They don’t understand they are doing us a huge favor,” Ciskey said. “Their money-saving efforts are saving us a lot of money, too. We can make the assumption because no individual consumer would use a pre-sort. We can make the assumption and have reasonable belief the letters are from a credit repair organization.”

Even though the letters appear to be from a credit repair organization instead of an individual consumer, collection agencies should still open the letter, Ciskey said, because a small percentage of them include requests from individuals to cease communication. And complying with those requests, which originate with a credit repair organization, is an ethically ambiguous area. Credit repair organizations are not on the list of entities that can request communications be ceased between a collector and an individual under the Fair Debt Collection Practices Act.

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