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Verify the Debt: Collecting on Debts Getting Harder Than Ever

You know who owes you money. But can you prove they owe you?

Mortgage lenders have always faced debt validation challenges from both state and federal governments, but now this idea is spreading. It might be coming to an A/R department near you.

Recently, the state of Massachusetts became the first state to require validation of all types of consumer debt. Amazingly, these new rules impose such validation and verification requirements on creditors collecting their own debts – not just those who have hired a third-party to collect defaulted debt as required under the federal Fair Debt Collection Practices Act (FDCPA).

Under the new rules, if the debtor or the debtor’s attorney disputes the debt within the 30-day period, the creditor must cease collecting until they verify the debt AND provide the debtor or attorney with copies of all signed documents, account statements or ledger and information about the creditor.

According to the new Massachusetts rules, if the creditor does not possess, have custody of, or control these materials, the creditor must cease collection of the debt until the creditor has made reasonable efforts to obtain them and provide them to the debtor.

What This Means For You
We expect it won’t be long before other states follow Massachusetts’ example and pass similar regulations on first- and third-party collections. Whether you’re a hospital, a lender or a retailer, collecting debt is going to get more difficult. To collect on accounts, you’re going to have to maintain accurate and accessible records, whether those are managed in-house or by an agency.

Is it time to examine your invoicing and record keeping processes?