Validation and Verification Vignettes: More Results from an Empirical Study of Consumer Understanding of Debt Collection Validation Notices

Abstract

The federal Fair Debt Collection Practices Act obliges debt collectors to provide certain notices to consumers from whom they are attempting to collect debts. This article is our second to report findings from the first academic study of consumer understanding of one of those notices, commonly called the validation notice or “g notice.” We showed consumers different versions of collection letters and then asked questions to measure their understanding of the notices. Our findings raise serious questions about the efficacy of a commonly-used form of validation notice, especially when read in conjunction with the findings in our first article.

In this article, we report that a fifth of the respondents who said they would write a letter if told they needed to do so to dispute a debt they did not owe failed to realize that the letter they saw said that the collector would have to verify the debt if they wrote 25 days after receipt of the collector’s demand for payment—even though the demand letter had been approved by the Seventh Circuit. Most respondents did not find the validation notice salient enough to mention when asked an open-ended question about the contents of the two-page collection letter they saw. We also found a gulf between what many consumers expect when requesting verification of a debt and what some courts say collectors must provide.

Some consumers also seemed to run out of patience to dispute debts. Significantly fewer consumers said they would dispute a debt with a second collector when they had already disputed it once, though most said they would dispute the debt a second time. Because some collectors sell disputed debts to other collectors, that finding suggests that consumers will surrender some rights simply because they grow tired of asserting them. On the positive side, we found that seeing a validation notice made a difference on some questions, though not on others. After discussing these and other findings, the article offers some recommendations to lawmakers for addressing the problems revealed in our study.

Keywords: debt collection; debt purchasing; debt buyers; consumer credit; fair debt collection; FDCPA; consumer law, disclosure; consumer understanding; Bankruptcy; Reorganization & Creditors eJournal; LSN: Administrative Enforcement (Sub-Topic); LSN