Important Notice: This does not constitute legal advice. Individuals are advised to seek the professional advice of an attorney. Use this advice at your own risk. I can only attest to the fact that it has worked for us.
1) You are protected by law, The Fair Debt Collection Practices Act.
2) Credit card debt is "unsecured debt". This means that no collateral was put up to guarantee your repayment of the loan, thus, your home or personal property cannot be taken and your wages cannot be garnished.
3) Most credit card issuers never keep a copy of the contract on file. Therefore, when they pass your debt on to a third party collection agency, there's no contract that can be enforced in a court of law!
4) If a collection agency attempts to a judgment against you, you must respond to the court within the time specified to challenge their claim, otherwise, the collection agency will be granted a "default judgment". You do not want this to happen! See this excellent article on how to avoid a default judgment.
5) The worse thing that could happen in the event a judgment is issued against you is that a lien for the amount of the debt could be placed against your home, but with the way the economy is now going, chances are that you will never sell it, therefore, the collection agency will never get a dime from you.
6) Collection Agencies know all of this but assume that YOU are ignorant and will not fight back. Most people are completely in the dark about all this and just assume they need to give in to the collection agencies.
7) Using this method, your credit score will be wrecked, but who cares!? The entire banking system is corrupt, credit scores are what manipulate the masses like sheep, and the whole system is going to come crashing down anyway. It's better to be free from the stress of collection agency harassment and tearing your hair out over the decision to pay a stupid credit card bill or put food on the table to feed your family! Your family comes FIRST and your priority should be food, shelter, utilities, and other immediate personal needs. Should the economy turn around (it won't), you can always pay the creditors back at a later date when you have more disposable income; but for now, you need to survive and that's what this post is all about.
Now, on to the Collection Agency Killer letter process...
Here's how the process typically works: When you stop paying your monthly credit card bill, the credit card issuer will hound you on the phone asking for payment. If you know that you just can't pay, ignore their calls (Caller ID works great for knowing when not to answer the phone!) -- don't talk to them on the phone to make excuses or promise to pay. After about 5 months of non-payment and ignoring their calls, you might want to pick up the phone because the the credit card issuer will offer you a sweet deal and this is the place you really should settle up with them if you can afford to. They will tell you that your account is about to be "charged off" but that they will settle now for a fraction of the amount owed (usually 25-50 cents on the dollar) -- this is because they know that if they don't get this amount from you now, chances are high that they will never see another dime from you. If you can afford to pay up the settlement at this time, it's a very good idea to do so -- your credit score will be dinged a bit and the amount of the balance that is forgiven will be considered as taxable income for tax purposes, but you won't have to hassle with any of the rest of the following process. If you cannot afford to settle with them for pennies on the dollar, tell them so and they will "charge off" your account (this is a bookkeeping procedure that all unsecured credit issues have to perform after 180 days on non-collectible accounts) and sell the balance of your debt to a third party collection agency (usually a law firm) for a fraction of the total balance. These collection agencies make their bread and butter off of tricking you into thinking that you owe them anything, but you know better now!
Once a collection has bought your debt from the original credit card issuer, they will send you a letter informing you of this and demanding a payment. Look closely at the letter because they will also tell you that you have 30 days to dispute their claim. Here's where the Collection Agency Killer letter comes into play. You will complete the letter (below) with your specific details (name, address, collection agency name & address, and your signature -- but not the signature that you normally use so that they cannot scan it and make up some some kind of phony contract with it -- just sign you name in a way/style that you normally do not). Print two copies of this letter, one for your records and one to send to them. Stick a copy of this letter in an envelope, address it to the collection agency, and then go to the post office to mail it with a Certified Mail receipt (about $4 with postage). Once mailed, keep the Certified Mail receipt and staple it to your copy of the letter and file it away for future reference. You now have proof that this letter was sent to the collection agency.
Give it a week and the phone calls from the collection agency will STOP. They have to, by law. Finally, you now have some piece of mind and you can go about your daily life without being hassled by some jerk in a cubicle who gets paid minimum wage by a law firm that spends their money down on a *risky gamble* that you'll be intimidated or fearful enough to send them a dime of your hard-earned money! This is the game they've been cashing in on for years, but now the public is waking up and fighting back!
Now, wait for 30 days to see if the collection agency sends you ALL of the documentation that you requested. They will not because the whole banking industry is built upon a shaky foundation of shoddy and often-times undocumented or un-trackable paperwork! Sure, signed receipts of some of your credit card purchases probably exists in a warehouse or hard drive somewhere, but the collections agencies who buy your debt certainly are not in the position to receive, handle, store, or wade through boxes and boxes of receipts or credit card applications for every debt they pay to take a gambe on! They would need massive of staff, warehouses and sever farms to keep up with all that -- so why bother with the expense of tracking everything properly when the public can be simply scared into compliance!? It's so much simpler... and profitable! This is actually how they think, and it's the kind of thinking that has led to the whole mortgage crisis that is tanking the global economy today. They cut corners to make big profits and in the end, they'll come to realize that they lost...big!
So, 30 days has passed and you still haven't received any proof that the collection agency has a claim. It's because they do not have a contract! They won't even send you a letter or call to tell you so. You just won't hear from them anymore -- no more statements and no more calls... but, they will eventually sell your debt to another law firm or collection agency, who, in turn, will notify you by mail they they now are handling your "account" and that they want you to pay up. Their letter will likewise state that you have 30 days to dispute their claim and so you will repeat the letter & certified mail process as described above, then wait another 30 days, get no response from them, and then about 90 days later you will repeat the process with the new sucker collection agency that has bought the debt. This is the point I've gotten to. One credit card debt has been passed on to three or four collection agencies and not one of them has ever shown me a scrap of evidence that I owe them a dime! I expect that eventually, this debt will get so "hot" that no agency will want to touch it with a ten foot pole -- I may even have to keep up this letter writing process for 4 years until the statute of limitations for credit card debt expires (time depends on the state you live in, see the link). Who knows? But for now, since I cannot afford to pay off an $8,000 debt, it is certainly buying me time and peace of mind.
UPDATE: FEB 9, 2015 -- THIS TECHNIQUE HAS WORKED ON ALL THREE CREDIT CARDS. NOT ONE COLLECTION AGENCY ATTEMPTED TO MAKE A CLAIM IN COURT. ALL CREDIT BALANCES DUE WERE WRITTEN OFF AND I HAD TO PAY INCOME TAX ON THE WRITTEN OFF AMOUNT OF EACH. BUT THAT'S BETTER THAN PAYING A CRIMINAL BANK 22% INTEREST FOR MONTHS ON END!
Now, on to the letter:
123 Your Street Address
Your City, State ZIP
Collection Agency Name
123 Their Street Address
Their City, State, ZIP
Re: Acct # XXXX-XXXX-XXXX-XXXX
To Whom It May Concern:
This letter is being sent to you in response to a debt collection notice dated *DATE HERE* . Be advised that this is not a refusal to pay, but a notice sent pursuant to the Fair Debt Collection Practices Act, 15 USC 1692g Sec. 809 (b) that your claim is disputed and validation of the claimed debt is requested.
This is NOT a request for “verification” or proof of my mailing address, but a request for VALIDATION made pursuant to the above named Title and Section. I respectfully request that your offices provide me with competent written evidence that I have any legal obligation to pay you.
Please provide me with ALL of the following, in writing, within 30 days:
1) What the money you say I owe is for;
2) Explain how you calculated what you say I owe;
3) Provide me with a copy of the contract bearing my signature showing that I agreed to take on the debt;
4) Identify the original creditor;
5) Show evidence that you are legally entitled to collect and settle debt issued by original creditor;
6) Show me that you are licensed to collect in my state;
7) Provide me with your license numbers and Registered Agent information
At this time I will also inform you that if your offices have reported invalidated information to any of the 3 major Credit Bureau’s (Equifax, Experian or TransUnion) this action might constitute fraud under both Federal and State Laws.
Once your offices are able to provide me with all of the above documentation I've requested, I will require at least 30 days to investigate this information and during such time all collection activity must cease and desist.
Should 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.
I am also hereby requesting, in writing, that no telephone contact be made by your offices to my home, cell phone or place of employment. If your offices attempt telephone communication with me, including but not limited to computer generated calls and calls or correspondence sent to or with any third parties, it will be considered harassment. All future communications with me MUST be done in writing and mailed to the address noted in this letter.
This is an attempt to validate your records of such claimed debt. Any information obtained shall be used for that purpose.
Without Prejudice, U.C.C. 1-308