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Debt Consolidation Facts

1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair Isaac).

2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% - 30%!

3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.

Legal Debt Validation Letter

debt collectionThere are several reasons you may choose to write a legal debt validation letter:

  • You found a mistake on your credit card statement – a double charge or something you didn’t buy.
  • You made a purchase, received defective merchandise, and the retailer refused to allow a return.
  • Your account went into collections and you’re not sure if the new collector is legitimate
  • Someone is trying to collect on a debt you remember already paying.

Can My Creditor Really Settle My Dispute?

It may sound unbelievable that you can buy something and then refuse to pay on the grounds that the item was illegally charged or defective in some way.  However, by law, your creditor must help you resolve a merchant dispute if you’re dissatisfied. The Fair Credit Billing Act says that creditors must help you if: there are unauthorized charges, charges with the wrong dates or amounts, charges on goods that weren’t delivered as requested, math errors, failure to record payments, failure to send bills to your current address or charges which you asked for written documentation of that were not provided to you.

Before you can enlist the help of your credit card company, you must first try to contact the merchant yourself. Within 60 days of the error, send a letter to the merchant disputing the charge, including any backing documentation if you have it (sales slips, payment records, etc). While your bill is being disputed, you must pay any of the charges that are not relevant to the dispute. 

Video: Today Show - Disputing Credit Card Charges

What Results Can Be Expected?

If it turns out the charges were legitimate, then you will receive a written explanation from the merchant, along with supporting evidence that verifies the debt. At this time, you will owe the disputed amount, along with any finance charges or penalties that occurred during the dispute period.

If you still disagree with the resolution, then you may contact your creditor within 10 days of receiving the alleged “verification of debt.” The creditor may investigate further, begin collection procedures or report your refusal to pay to the credit bureaus (although it must also state that you feel you have been charged erroneously).

If it turns out the charges were incorrect, then congratulations! You’ll receive an explanation letter and the creditor will need to credit your account for the disputed debt, as well as any finance charges or penalties that incurred.

In some cases, creditors have tried to avoid the issue, claiming that a quality dispute does not fall under “billing errors.” Furious consumers took action and sued FCBA violating creditors, often winning anywhere from $100 to $1,000. 

Video: Disputing Your Credit

Insights from an Experienced Attorney

According to Chi Chi Wu, a staff attorney at the National Consumer Law Center, consumers are legally entitled to an investigation of a dispute, but they’re not entitled to a particular outcome. She added that consumers don’t always receive prompt responses from credit bureaus and that many people feel frustrated when the disputes aren’t settled quickly, stalling them from buying a new home or getting a car loan. She recommends disputing credit errors directly with merchants and creditors, rather than trying to use the credit bureau’s automated dispute system which is, what she calls in one of her reports, “a travesty of justice.”  Yet, at the very least, a credit card debt validation letter forces the creditor to investigate for you and pay attention to your dispute, as required by law under the Federal Fair Credit Billing Act.