Under the Fair Credit Reporting Act, furnishers of information — collection agencies, in this case — are required to conduct a reasonable investigation when a consumer disputes a debt. But what a collection agency needs to when a third-party, such as a credit repair organization, disputes a debt is entirely different, and makes the process more confusing.
Collection agencies receive these other types of disputes by the bin. They are made to look like they are coming directly from a consumer, but there are a lot of similarities. They all use the same font for the “signature.” They all have the same formatting. They all came from the same postmark on the same day. The paper is exactly the same for each of them. There are many telltale signs that the letters likely did not come directly from a consumer. So what should a collection agency do then?
This is where things can get kind of tricky. The best thing to do is to call the consumer and ask if he or she sent the letter, said John Bedard of the Bedard Law Group, during a webinar earlier this week that was sponsored by WebRecon. But even that can be daunting. It’s not out of the question for a collection agency to get 75 or 100 of these letters at a time. So Bedard recommends taking a “meaningful sample” and calling those individuals to see if they sent the letters. In the “overwhelming” majority of cases, the consumer will have no idea what the agency is talking about, Bedard said.
A copy of the webinar recording is available here.
Whatever an agency does to conduct an investigation or to determine whether a dispute letter originated from a consumer or not, the most important thing a collection agency can do is document the process it uses, said Monica Littman, a lawyer with the law firm of Fineman Krekstein & Harris.
Where things get confusing is when the Fair Debt Collection Practices Act comes into play, said Rozanne Andersen, a vice president and chief compliance officer at Ontario Systems. Depending on the language used in the dispute letter, regardless of who sent it, requirements under the FDCPA could be triggered, Andersen said.
For example, section 807 of the FDCPA deals with using false, deceptive or misleading information in the collection of a debt. Not reporting a dispute could fall under that section, depending on the language in the dispute letter.
Andersen also mentioned a couple of legal precedents that might be helpful for collection agencies when determining how to handle dispute letters. One case, Hinkle v. Midland Credit, details how a “reasonable investigation” may be conducted.