This article previously appeared on Ontario System's blog and is republished here with permission.

When it comes to the FDCPA’s 30-day validation period, many third-party ARM agencies struggle with the concept of “overshadowing.” It’s a term found in  Section 809 of the Fair Debt Collection Practices Act (FDCPA), which provides:

“…any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.”

Let’s take a minute to review this important clause and shine some light on the most difficult compliance issues.

It’s true: Third-party ARM agencies may communicate with consumers during the validation notice period, as long as the communication does not overshadow or confuse the consumer about their right to dispute the debt and request verification of the debt. However, most know if the consumer exercises those rights and disputes the debt, or requests verification of the debt in writing during the 30 days after they are first notified, the agent must cease collection efforts until they obtain verification of the debt or a copy of the judgment, and mail it to the consumer. Once this is accomplished, the agent may resume collection activities during the validation notice period and beyond.

This feels cut-and-dry – So what makes this such a challenging compliance issue for even the e average ARM agency? It’s the fact the validation notice is contradicted when other language in a letter or other communications made during the validation notice period is logically inconsistent with the validation notice. Many are so skittish they may confuse the consumer about their rights during this period that they refuse to place calls to the consumer until it has expired. But that is an overreaction.

Mitigating the risk is really just a matter of following a few additional guidelines:

  1. Communicate Intentionally: Recognize all communications, both direct and indirect, can potentially overshadow the validation notice. Calls, letters, your website, calls to an employer and email can all obscure or contradict the consumer’s right to dispute the debt or request verification.
  2. Take Your Time: Avoid words that create a sense of urgency and make sure any demands for payment during this period do not require the debt to be paid prior to the period’s expiration. You may ask the consumer to pay the debt or set up a payment arrangement, but you cannot demand it in a time frame shorter than the 30-day period. Avoid telling a consumer to pay “today,” “immediately,” or “at once.” These terms may be problematic if given to a consumer within the 30-day validation time frame.
  3. Discounts can be Dangerous: Settlement offers are great, but avoid discounts that require the consumer to act during the validation period to obtain the discount, or “today only” offers of settlement.
  4. Watch Your Ties: If you tie accounts, make sure the validation notice has expired on all the accounts in the route before offering a settlement discount.
  5. Watch Your Reports: Nothing prohibits a debt collector from reporting a debt to a consumer reporting agency within the 30-day validation period, provided the debt collector has not received a request for verification or a dispute notice from the consumer. The FTC Staff’s opinion holds that under § 809(b), a collector may not report or continue to report a debt after a written dispute is received within the validation period until verification of the debt is sent to the consumer. Once verification has been sent to the consumer, the item may again be reported to a consumer reporting agency. As a practical matter, it’s best to not credit report on an account for at least 65 days after placement, and of course longer if it is a medical debt.
  6. Wait on the Lawsuit: Courts have held a collection letter that included the validation notice, and also threatened legal action within ten days unless the consumer paid the debt within the same time frame constituted overshadowing in violation of the FDCPA. Do not threaten legal action during the 30-day validation period in a way that contradicts the consumer’s right to request verification or dispute the debt.
  7. Count to 30+: Calculate the validation notice period accurately. The FDCPA makes clear the validation notice expires 30 days after the consumer receives the notice. It does not say 30 days after mailing, or 30 days after postmark. Keep track of the details: Make sure you accurately calculate the time it takes for your letters to reach your consumers, then add this number of days to 30 and start the clock when your letter service confirms it mailed the notice. In general, most debt collectors assume the validation notice is received 35 days after their letter service mails the notice using first class mail delivery.
  8. Seed Your Letters: Remember to include a member of your senior staff on the list of recipients for your letter campaigns. You need not inundate the poor soul with a copy of every collection notice you send but you should include the person as a recipient on each new letter and periodically throughout the year to ensure your calculation of the validation notice is accurate.

Nothing is failsafe when it comes to FDCPA compliance, but these eight tips should help you establish a bona fide error defense if you are sued, and help you prevent law suits challenging your validation notice practices altogether.


Disclaimer: Ontario Systems is a technology company and provides this blog article solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts. Because everyone’s situation is different, you must consult your own attorneys, accountants, and/or other advisors to obtain specific advice on your company’s compliance, legal, tax, regulatory and/or other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies.

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