Uncertain2017

CONFUSED ABOUT DEBT VALIDATION

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Hello.   In August, I received a collection letter from Midland Funding for a store credit card I used to have.  I sent a letter requesting validation.    It was a letter I found on another website.    In November, Midland sent me another letter.  The only evidence in the letter was a copy of a credit card statement from Home Depot.  It had the same balance that Midland said I owe.

Here's the letter I sent.

I am sending this letter to you in response to a notice I received from you on (here, cite the date of the letter you received). Be advised that this is a notice sent pursuant to the Fair Debt Collection Practices Act, 15 USC 1692g Sec. 809 (b) that your claim is disputed and validation is requested.This is NOT a request for “validation” or proof of my mailing address, but a request for Validation made pursuant to the above named Title and Section. I am hereby requesting that your office provide me with competent evidence that I have any legal obligation to pay you. Please immediately provide me with the following:

*What the money you say I owe is for;

*Explain how you calculated what you say I owe:

*Provide me with copies of any papers that show I agreed to pay what you say I owe;

*Provide a verification or copy of any judgment if applicable;

*Identify the original creditor;

*Prove the Statute of Limitations has not expired on this account;

*Show me that you are licensed to collect in my State; and

*Provide me with your license numbers and Registered Agent.

If your offices have reported invalidated information to any of the three major Credit Bureaus (Equifax, Experian or TransUnion), said action may constitute fraud under both Federal and State laws. Due to this fact, if any negative mark is found on any of my credit reports by your company, or the company that your represent, I will pursue legal action against you for the following:

*Violation of the Fair Credit Reporting Act

*Violation of the Fair Debt Collection Practices Act

*Defamation of Character

If your offices are able to provide the proper documentation as requested, I will require at least 30 days to investigate this information, and during such time, all collection activity must cease and desist. Also, during this validation period, if any action is taken which could be considered detrimental to any of my credit reports, I will consult with my legal counsel. This includes any information to a credit reporting repository that could be inaccurate or invalidated, or verifying an account as accurate when, in fact, there is no provided proof that it is.

If your offices fail to respond to this validation request within 30 days from the date of your receipt, all references to this account must be deleted and completely removed from my credit file, and a copy of such deletion request shall be sent to me immediately.

The person on the other website said that Midland did not validate the debt.   He said they didn't even provide enough proof to file suit.  (They haven't sued me).   He asked where was the signed contract with my signature and their proof of right to subrogation of the debt.

I called a lawyer and he said the debt WAS validated.  Then I found this site and this information.

https://www.creditinfocenter.com/community/topic/328187-fdcpa-debt-validation-myths/

Now I am really confused.

 

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The other people has no clue what they are doing.  The letter you sent was mostly useless.  What Midland sent you was proper validation under the law (it is also enough to get a judgement in court, too).

Was this Home Depot card backed by Citi?  If so, then it has an arbitration clause that could make Midland drop this whole thing.  However, if they happen to sue first and use small claims court, then arbitration may not be an option due to the small claims exception in the agreement.  If this were me, I would get a copy of the card agreement and file a claim against Midland in AAA Arbitration before they have a chance to sue. It would cost Midland $5,000 to follow you into arbitration, which they will refuse to pay. 

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21 hours ago, Uncertain2017 said:

*Provide a verification or copy of any judgment if applicable;

*Identify the original creditor;

These are the only two things required under the FDCPA for debt validation.  PERIOD.

21 hours ago, Uncertain2017 said:

*What the money you say I owe is for;

*Explain how you calculated what you say I owe:

*Provide me with copies of any papers that show I agreed to pay what you say I owe;

*Prove the Statute of Limitations has not expired on this account;

*Show me that you are licensed to collect in my State; and

*Provide me with your license numbers and Registered Agent.

NONE of this is required under the FDCPA.

All sending that letter did was show Midland you don't know what your rights are and you can cut and paste from the internet.   Get ready because most likely they will sue you believing it will be an easy win after getting that letter.

21 hours ago, Uncertain2017 said:

The person on the other website said that Midland did not validate the debt. 

They are dead wrong.

22 hours ago, Uncertain2017 said:

He said they didn't even provide enough proof to file suit.  (They haven't sued me).   He asked where was the signed contract with my signature and their proof of right to subrogation of the debt.

They have more than enough to sue.  They don't have to prove anything to file and only have to prove it if it goes to trial AND the court demands evidence.  Often that statement and an affidavit attesting to their right to collect and the accuracy of the records is all that is needed.  Subrogation is not even part of it.  

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On 1/1/2018 at 12:28 PM, Uncertain2017 said:

The person on the other website said that Midland did not validate the debt.

The most frequently cited case for what constitutes validation is Graziano v. Harrison:

"The computer printouts provided to Graziano were sufficient to inform him of the amounts of his debts, the services provided, and the dates on which the debts were incurred."

You said Midland sent a credit card statement.  If that statement shows the amount of the debt, services provided (e.g. purchases) and dates of those purchases, the debt has been validated.  There is no caselaw whatsoever that requires a debt collector provide the things you asked for.  Because of this, asking for those things is a waste of time.

On 1/1/2018 at 12:28 PM, Uncertain2017 said:

He said they didn't even provide enough proof to file suit. 

This may or may not be true, depending on where you live.  Most jurisdictions, however, permit a lawsuit to be filed with no evidence whatsoever.

On 1/1/2018 at 12:28 PM, Uncertain2017 said:

He asked where was the signed contract with my signature and their proof of right to subrogation of the debt.

A signed contract is not necessary.  Using a credit card is evidence of an agreement.  Making payments toward the credit card is further (and I would argue even stronger) evidence of an agreement.  As far as "subrogation" is concerned, the credit card agreement contains a provision that the account may be sold to any party at any time.  By using the account, you agree to that provision.  It's true that a single credit card statement wouldn't hold up in a lawsuit against you as proof of assignment/sale, but, as I said before, it's not a requirement for validation.  The bar for permissible actions by a debt collector comes nowhere near the bar for finding you responsible in a court of law.  Until you are sued, you have no legal basis for demanding proof of assignement/sale.

Of course, you are not obligated to pay Midland a dime at this stage.  If you honestly believe they do not legally own a debt of yours, you can freely ignore them knowing that if they ever did sue you, you can simply prove them wrong.  On the other hand, if the credit card statement they sent is legit (and you know if it is), I would seriously consider options to settle or as @fisthardcheesepointed out, get educated on how to initiate arbitration, because the odds are very strongly in their favor that they will win a contested credit card debt collection case.  They're very good at it.

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Thank you everyone.  I’m looking into arbitration.  Well I’m trying to learn about it.   The attorney I talked to said the debt has only a few months left on the SOL  and that he doubts they’d sue.   But he also said to watch the court just in case.  

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@Uncertain2017

I don't know who advised you that the debt was not validated by a credit card statement that shows the name of the OC, account number, and balance, but that person is mistaken.  

You referenced a link on this website.

https://www.creditinfocenter.com/community/topic/328187-fdcpa-debt-validation-myths/

As you can see from from Myth #4, decisions from courts across this country show that a contract is not required to validate a debt.   Myths #5 and #6 shows that neither a license to collect or detailed files are needed in order to validate.  In fact, in Fassett v. Shermeta, Adams & Von Allmen, the plaintiff (Fassett) sent a validation request exactly like the one you posted.   Here's what the Michigan federal court ruled:

"One main issue before the court is whether defendants violated § 1692g(b) by failing to verify the disputed debt. Plaintiff contends that he is entitled to, among other things, ledger statements, contracts, and proof that defendants are licensed to collect debts in Michigan. Defendants contend that they are not required to keep and send "detailed files" of the alleged debt for verification or validation purposes. Contrary to plaintiff's contention, § 1692g(b) does not require defendants to produce exhaustive documentation in support of the creditor's claim."

"Here, defendants' October 3, 2011 letter in response to plaintiff's request for verification identified the creditor as Capital One, identified the credit card account, identified the current balance due as $12,522.89, stated that defendants represented Capital One, and referenced the enclosed documents which validated the debt pursuant to § 1692g."

"In summary, defendants October 3, 2011 letter confirmed in writing the identity of the creditor and the amount which plaintiff owed as of the date of the letter. Nothing more is required under § 1692g."

Due to the fact that not every state requires a license to collect debts, it cannot be a validation requirement.  If one's state requires a license to collect debts, the lack of a license might violate another section of the FDCPA, such as 1692e or f, but it has nothing to do with validating a debt.    The other site's letter requesting a license and a signed contract shows a lack of understanding of the purpose of validation.   That purpose has been ruled upon by numerous courts and I have not located a ruling made by a single court that states a signed contract or collection license is necessary to validate a debt.

The other site's reference to subrogation is puzzling due to the fact that there is no case law or statute that supports a subrogation claim in regard to a charged-off credit card account. 

 

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Thank you.

I guess by case law, you mean court decisions or court rulings?

Should I send another letter to the debt collector and ask about their proof to legal right of subrogation?

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2 hours ago, Uncertain2017 said:

Thank you.

I guess by case law, you mean court decisions or court rulings?

Should I send another letter to the debt collector and ask about their proof to legal right of subrogation?

Yes, I'm referring to court decisions/rulings.

Where did you get the advice regarding subrogation?

 

 

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I would not send anything else to them at all unless it is the filing paperwork for JAMS arbitration.  Just like in criminal law, anything you say to a debt collector can and will be used against you - so unless you know 100% what you are saying, dont say it.

If this were me, I would send that JAMS arbitration paperwork to them ASAP.  You don't want to give them the chance to file in court first because it would be more of an issue for you to get to arbitration after that.

https://www.jamsadr.com/files/Uploads/Documents/JAMS_Arbitration_Demand.pdf

This is the JAMS demand form.  The instructions for filing are on that form. You will need a copy of the citi Home Depot card agreement (google for the year you were last in good standing on the account it if you don't have one).  As the instructions state, you must send 2 copies of everything to JAMS and then send 1 copy of everything to Citi.  I would send it to the registered agent for Midand in your state (you can find it by looking up Midland on your secretary of state's website).  I would not yet send any money, but just send a cover letter stating that you are asking for Midland for forward the consumer portion of the filing fee per the included card agreement.

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@Uncertain2017

In regard to subrogation, perhaps a more accurate claim would be ownership of the debt and standing to sue.   There's plenty of case law (court rulings) regarding debt buyers and proof that they purchased the debt in question from either the original creditor or another debt buyer.  A simple google of any debt buyer's name (Midland Funding, Portfolio Recovery, CACH, etc.) "standing to sue",  and "credit card" will result in numerous rulings.  However, none of those rulings will reference subrogation.  It's not the correct term if one is simply referring to a proof that the debt buyer purchased the account from the original creditor or another debt buyer.

On the other hand, if the there are sites referring to insurance claims, I would assume it's being claimed that original creditors file claims on defaulted credit card debts and are compensated by insurance companies.  Therefore, the insurance companies would have the right of subrogation and debt buyers would then purchase debts from the insurance companies.   

If that's what is meant, there's nothing to support that claim.  I would think that if original creditors filed insurance claims for defaulted credit cards, there would be court rulings connecting subrogation with defaulted credit cards and debt buyers.   Do sites suggesting that claim offer court rulings to support it?

Debt buyers allege that they purchase accounts from the original creditor, not an insurance company.   They will provide a bill of sale from the original creditor which states that the original creditor (not an insurance company) sold accounts to the debt buyer.   An affidavit from the original creditor may also be provided that states the creditor sold the account directly to the debt buyer.    Again, there is no reference to an insurance company.

The Consumer Financial Protection Bureau (CFPB) filed suit against debt buyers Encore Receivables (Midland Funding), Portfolio Recovery Associates, and New Century Financial.    Those debt buyers agreed to "Consent Orders" without court rulings.    Subrogation was not raised in either the complaints or the consent orders.

Here are the links to the Consent Orders.

http://files.consumerfinance.gov/f/201509_cfpb_consent-order-encore-capital-group.pdf

http://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf

https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201604_cfpb_consent-order_new-century-financial-services-inc.pdf


Again, no mention is made of subrogation.  Where is the proof that credit card companies file insurance claims on defaulted credit card accounts giving insurance companies the rights of subrogation?

Here's a link to a December, 2015 report by the CFPB.  Start reading on page 237 (Credit Card Debt Collection).  Subrogation is not mentioned the article.

http://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf

Here are the links to 2 reports issued by the Federal Trade Commission (FTC).

Repairing a Broken System (Federal Trade Commission - July, 2010)

https://www.ftc.gov/sites/default/files/documents/reports/federal-trade-commission-bureau-consumer-protection-staff-report-repairing-broken-system-protecting/debtcollectionreport.pdf

The Structure and Practices of the Debt Buying  Industry  (Federal Trade Commission - January, 2013)

https://www.ftc.gov/sites/default/files/documents/reports/structure-and-practices-debt-buying-industry/debtbuyingreport.pdf


In the above 2 reports, just as in the Consent Orders and CFPB report, no mention is made of subrogation.   Neither the CFPB or FTC indicates that debt buyers purchase defaulted credit card accounts from any entity other than the original creditors or other debt buyers.

If you were sued, you could raise the issue of subrogation along with any other defense.  In fact, you could claim that you're not liable for the debt due to the fact that you lived on Mars at the time the account was allegedly opened.  A lazy attorney who's only out for a default judgment will dismiss.   However, that dismissal would have nothing to do with your defenses.     

Other attorneys will fight for their clients.   If you raised the issue of subrogation, due to the fact that the plaintiff did not claim it purchased the debt from any party other than the original creditor and provides a bill of sale from the original creditor along with an affidavit (especially an affidavit from the original creditor), it would be up to you to prove that the original creditor filed an insurance claim on your account and that the debt buyer then purchased it from the insurance company.   While the plaintiff must prove it purchased the account from the original creditor, you'd have to prove it was purchased from an insurance provider.

How would you do that?   Before a summary judgment is filed by the plaintiff, you'd have to depose witnesses from the debt buyer and original creditor.   That's because most states do not allow witnesses at summary judgment hearing.   

In the event the plaintiff files a motion for summary judgment before you've deposed witnesses, you have to get the judge to deny that motion so that the issue would go trial and you could subpoena witnesses.   Subrogation is not going to help you if you have nothing to show that an insurance company was involved.    The court is not going to accept a claim without something to support it.

If the summary judgment motion was denied and a trial was scheduled, you could subpeona witnesses.  What happens if you can't prove that insurance was involved?   If you were to lose, not only would you be liable for amount of the debt, but you could also be liable for legal costs that would include the expenses of the witness(es).

Again, and hopefully,  what is being claimed on other sites is simply a reference to ownership of the account in terms of "standing to sue" meaning proof that the debt buyer purchased the account from the original creditor or another debt buyer and which doesn't have anything to do with insurance and/or subrogation rights.   

On this site, we do not rely on members' opinions because courts don't care about those opinions.  Therefore, we do our best to support opinions with statutes and case law.  This site if full of applicable case law that supports both statutes and members' opinions.  

Note that opposing opinion and debate is allowed and encouraged on this site as long as opinions can be supported.   Debate enables the participants and readers to learn.   When opposing opinion and debate is not allowed, you have to stop and wonder why.

In addition, as has been suggested by @fisthardcheese, arbitration, especially when sued, is one of the best ways to get rid of a debt buyer.

 

 

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