How to Dispute a Debt Collection and Win

Introduction

Is your business dealing with a disputed debt amount or faulty goods that led to an unjust collection request? Disputing collections can help resolve these issues.

Collection disputes occur when customers—creditors and debtors—disagree on debt claims. They are typically resolved by sending a dispute letter to the collection agency or creditor.

If your accounting team believes that you don’t owe the debt or that it’s inaccurate, keep reading. This blog will explain how to dispute a debt collection. But let’s first cover the basics.

What Does Disputing Collection Mean?

Disputing a collection refers to the process in which the debtor challenges the debt claim made by the creditor or the collection agency. Simply put, when someone disputes a collection, they assert that they do not owe the amount, indicating an error or discrepancy in the claim.

There can be several reasons why a business might dispute a collection. One common scenario is billing errors, where invoices or statements inaccurately reflect the amount owed due to mistakes in calculations, unauthorized charges, or charges for goods or services not received.

Another reason could be contractual disputes. In such cases, the company asserts that the debt is not owed according to the agreed-upon terms, such as by disputing extra fees or penalties not stipulated in the original agreement.

Irrespective of the reason, resolving incorrect debt is crucial for businesses to maintain their financial credibility. This is because a company’s debt collection history affects its credit score, which plays an important role in determining its potential to handle credit.

How to Dispute a Collection?

Businesses can dispute a collection that they find incorrect by sending a collection dispute letter to the debt collector or the collection agency. They must send this letter within 30 days of receiving the collection notice, requesting proof or justification of the claimed debt.

Here are some steps that you can take to dispute a collection:

• Gather debt information

  Start by collecting all the relevant information, records, and documents related to the debt claimed. Ensure you have a clear understanding of the debt and the basis for the dispute.

• Verify the debt claimed

  To verify the accuracy of the debt claimed, compare the amount and terms stated in the creditor’s communication with your records and agreements. This will help you identify the discrepancies and their causes.

• Sending a collection dispute letter

  Draft a formal dispute letter to the debt collector or debt collection agency. The letter should include the reason why you want to dispute the debt or ask for the relevant proof or validation document behind the claimed debt. Send the letter to the respective creditor or collection agency. 

• Await response

  Upon receiving your dispute letter, the creditor or collection agency is required to investigate your claim. They must cease collection efforts until they provide validation of the debt. The investigation typically takes about 30 days, but this may vary depending on local laws and regulations.

• Consider next steps

  Depending on the outcome of the disputing collections, take the following steps:

  1. If the debt is validated and your concerns are satisfactorily addressed, you may proceed with resolving the debt according to the agreed terms.
  2. If the validation is insufficient or you still dispute the debt, you can escalate the matter. This may involve seeking legal advice, filing a complaint with regulatory authorities, or exploring mediation or arbitration if stipulated in your contracts.

Last but not least, maintain detailed records of all communications throughout the dispute process, including copies of letters, emails, and supporting documents exchanged with the creditor or collection agency. These records are crucial for documenting your efforts and supporting further actions to resolve the dispute.

Debt Dispute Letter

A debt dispute letter, or a collection dispute letter, is a formal written communication sent by a debtor to a debt collection agency or creditor regarding a debt that is being pursued for payment. The purpose of the letter is to dispute the validity or accuracy of the debt being claimed.

Writing a collection dispute letter is one of the best ways to dispute a collection. Here are some essential elements that you must include in your collection dispute letter:

• Business information

  A collection dispute letter must include your essential business details, such as name, address, email, and any account number linked with the debt.

• Date

  Specify the date of writing on the letter before you send it to the creditor or the collection agency.;

• Receiver’s information

  Provide the name and address of the creditor or collection agency to whom you are addressing the letter.

• Description of the dispute

  Clearly and concisely explain why your business disputes the debt. Include specific details such as incorrect invoicing, discrepancies in goods or services, contractual disputes, etc.

• Request for supporting documents

  Ask the creditor to provide proof documents that validate or support the debt claimed, such as invoices, contracts, purchase orders, delivery receipts, or any other records.

• Contact information

  Businesses must provide a contact person’s name, position, phone number, and email address so the creditor or collection agency can reach out to discuss the matter further.

Not sure how to craft an effective collection dispute letter? Check out this sample collection dispute letter.

How To Dispute a Collection on a Credit Report?

If your business encounters a collection appearing on the credit report that you believe is inaccurate, you can dispute the collection by writing a collection dispute letter to the credit agency. The letter must include the reason for disputing the debt and the relevant supporting documents.

Here are some tips for businesses on how to dispute a collection account in credit reports:

1. Obtain and review a copy of your business credit report from agencies like Equifax and Experian.
2. Verify each and every collection detail to ensure there are no discrepancies.
3. In case a discrepancy is found, gather evidence (receipts, letters) proving the debt has been paid.
4. Draft a collection dispute letter to the agency and provide relevant details, such as the reason for the dispute, why it is inaccurate, etc.
5. Attach relevant supporting documents that will validate your dispute.
6. Send the letter to the respective credit agencies, and keep a record of all the documents.
7. Wait for the agencies’ response; follow up if needed. Generally, the investigation is completed within 30 days, so expect a response accordingly.

Needless to say, business credit reports are like report cards for businesses, indicating how credible and responsible the company is in handling credit terms. Inaccurate collections accounts can negatively impact your credit score and financial reputation, so addressing any errors is essential for maintaining your credit health.

Things To Keep in Mind While Dealing With Debt Collectors

When dealing with debt collectors as a business, it’s essential to approach the situation with caution and professionalism. Here are some things that businesses must keep in mind on how to dispute a debt and win:

1. Carefully verify the debt’s accuracy

   Before you decide to dispute a collection, ensure you have correctly verified the debt details. Check all the agreements and related documents. If the claimed debt is inaccurate, gather supporting evidence and proceed with the collection dispute.

2. Maintain professionalism in communications

   Alwayscommunicate clearly and professionally with the debt collector, avoiding emotional responses. Professionalism helps uphold your business’s reputation and facilitates the effective resolution of debt-related issues.

3. Know your rights

   Understand the laws and regulations that govern debt collection in your jurisdiction. While the Fair Debt Collection Practices Act (FDCPA) primarily applies to consumer debts, there may be state laws or other regulations that impact businesses’ debt dispute processes.

4. Keep records of communications

   Businesses must document phone calls, emails, and letters to help track agreements, disputes, and any promises made. These records serve as evidence in cases of disputes or legal proceedings, ensuring transparency and accountability.

5. Negotiate if needed

   If you find the debt valid, negotiate payment plans wisely with debt collectors. Consider your financial capabilities and propose realistic payment plans or settlements. Be clear in your communication to avoid future misunderstandings.

Conclusion

Manage your financial obligations efficiently by proactively overseeing and reviewing your financial responsibilities. In B2B transactions, collection disputes are common and can be frustrating. To mitigate these issues, businesses can streamline their accounts payable processes. This involves maintaining meticulous records of transactions, contracts, and agreements and ensuring accurate invoicing with clear payment terms.

FAQs

1. How to dispute a debt collection?

   To dispute a debt collection, gather all relevant information about the debt, verify it against your records, & draft a formal dispute letter to the collection agency or creditor. Request proof of the debt’s validity and await their response. Lastly, maintain detailed records throughout the process.

2. What is the best reason to put when disputing a collection?

   The reason for disputing a collection may vary depending on the circumstances. However, some of the valid reasons for disputing a collection include billing errors, service discrepancies, contractual disputes, etc. By providing relevant supporting documents, you can dispute a collection easily. 

3. How do I dispute a collection and win?

   To dispute and win a collection, send a formal collection dispute letter to the creditor or collection agency within 30 days of receiving the claim. Gather comprehensive documentation, verify the debt’s accuracy against contracts and records, and articulate discrepancies clearly in the letter.