Warybuyer Guide to Disputing a Debt

You can achieve two important things by disputing a debt with a debt collector. First, if you dispute the debt within the first 30 days after the debt collector contacts you, you can stop the debt collector from continuing to try to collect the debt until he can verify that you actually owe the money. Second, you can force the debt collector to disclose to any credit reporting agency he reports to that your debt is disputed. This is valuable because many credit scoring models disregard or discount disputed debts.

Debt Collectors: The First 30 Days

The best time to dispute a debt is during the first 30 days after you receive first letter from the debt collector. This period is known as the verification period. During this period, you do not have to have a valid dispute to challenge the debt. It is permissible for you to merely ask the debt collector to verify that you actually owe the debt. This can be a powerful request, because it essentially puts the burden of proof on the debt collector. Until the debt collector can produce verification of the debt, he can take no further action to collect from you.

Of course, if you have a bona fide dispute over the debt, be sure to assert it in your verification request. Merely requesting verification does not require the debt collector to report the debt as disputed to a credit reporting agency. My sample Letter Requesting Verification of Debt shows you how to make the verification request, both with and without a dispute.

Debt Collectors: Any Time

Even if you miss the first 30 day period, it still is a good idea to dispute a debt if you can. You can still force the debt collector to report your debt as disputed. Do not make up a frivolous dispute, because you will undermine any future lawsuit you may file if you do. My sample Letter to Debt Collector Disputing a Debt shows how to dispute a debt with a debt collector.

If you are a Texas resident, you have additional dispute rights that are not available under the Federal Act. You may dispute a debt at any time by giving the debt collector written notice of your dispute. Upon receipt of the notice, the debt collector must stop all collection efforts until it investigates to determine the actual amount of the debt, if any.

No later than 30 days after the debt collector receives your dispute, it must respond in writing either denying the inaccuracy, admitting the inaccuracy, or requesting more time for the investigation. If it admits the inaccuracy, it must update its records and send a notice of inaccuracy and a copy of the corrected information to each person to whom it gave a report of the inaccurate information. If it requests more time, it must correct its records in accordance with your request and give notice of the correction to each person to whom it reported the disputed information. The debt collector may resume collection efforts only after its investigation is completed and it has determined the information to be accurate.

Note: Although the Texas law allows you to stop collection efforts with a dispute at any time, it does require you to actually dispute the debt. You cannot simply request verification of the debt as you can under federal law. Be careful to make only good faith disputes, otherwise you will lose credibility and have a very difficult time enforcing your rights in court if you have to later.

Disputing Debts with Creditors

Federal debt collection law doesn’t apply to creditors, so you don’t have the same rights when you dispute debts with them. However, you do have dispute rights under other federal and state laws with certain kinds of creditors.

For credit card companies, see my Warybuyer Guide to Credit Card Errors and Chargebacks for more information about disputing billing errors and other improper charges.

For all creditors, Texas law prohibits representing that a person is willfully refusing to pay a debt when the person has disputed the debt in writing. While the Texas law does not specifically address credit reporting the way the federal law does, as a practical matter, a creditor who reports to a credit reporting agency that you have failed to pay a debt after you have disputed the debt is almost always going to be in violation of this law. The Texas law is also broader than the federal law. It prohibits making this representation to anyone, not just a credit reporting agency. Accordingly, a creditor who sells a debt to a third party while wrongfully representing that you are refusing to pay may violate this law.

Unfortunately, there are unresolved legal issues involving the relationship of the federal Fair Credit Reporting Act and the Texas Debt Collection Act that make it hard to hold a creditor responsible for violating this law in its reports to credit reporting agencies, but it is still worth sending the dispute letter, as a creditor may comply to avoid the possibility that federal law will be interpreted to permit the enforcement of this state law requirement, and the letter will prevent the creditor from misrepresenting your debt to third parties other than credit reporting agencies.