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Author: Sergei Lemberg
What is a Chain of Title?
![Chain of Title]()
General Definition: A chain of title is documentation that shows the history of the assignment of a debt. A complete chain of title shows every assignment from the original creditor to the current debt owner.
It may come as a surprise to you when you receive a call one day from a company you never heard of to collect on a debt. The debt may sound vaguely familiar but you are not sure. If this is the case, you can ask the debt collector to provide proof that they own the debt and that you owe the amount in question. This is referred to as the chain of title.
Understanding who owns the debt is important as there are a lot of financial scams that you need to be aware of. Also, there are additional requirements for third-party debt collectors (e.g., debt buyers). Third-party debt collectors have responsibilities under the Fair Debt Collection Practices Act (FDCPA). This federal law provides specific restrictions on abusive debt collection practices.
This article will help you better understand what a chain of title is when it comes to debt collection. In addition, you will learn why it’s essential to confirm the chain of title with a debt collector.
Debt Buyers and the Chain of Title
When you take out a loan or incur a debt, the original party to the agreement is often referred to as the creditor. Sometimes the original creditor will manage a debt until the consumer pays it off in full. If the debt is past due they might hire a collection agency to manage the debt.
However, sometimes they will sell it to a debt buyer. A debt buyer will buy a past-due debt at a fraction of the cost and will then attempt to collect on it. The industry refers to the transfer of the debt from the creditor to a debt buyer as an assignment. When this happens the debt buyer will likely contact you to collect on the debt.
That being said, do not accept the debt buyer at their word. They must prove that they are the legitimate owner of the debt. They do this by showing the chain of title. This may be straightforward in cases where the debt buyer purchased the debt from the original creditor.
However, some debts go through multiple assignments. When this happens, the current debt buyer must show more than who they purchased the debt from. They must show every assignment of the debt from them all the way back to the original creditor. Each assignment from the current debt buyer to the creditor must clearly support the chain of title.
Why is the Chain of Title Important?
There are a few reasons why the chain of title is important. First, you want to ensure that the debt collector contacting you is legitimately collecting a debt. If you are dealing with a fraudulent company they may disappear. When this happens, it may be difficult to recoup any losses.
Second, even if legitimate, a debt collector cannot collect on a debt without appropriate proof of the chain of title. A debt collector must be able to show every assignment back to the original creditor. In addition, the information related to the amount owed and other information must be consistent with the original debt. Otherwise, they cannot collect on the debt.
The final reason this is important is because if you are no longer dealing with the original creditor you have additional rights. Primarily, you have protection under the FDCPA against third-party debt collectors. Under the FDCPA a third-party debt collector may not engage in the following:
- Deception. A debt collector cannot misrepresent who they are or information about your debt during the collection process.
- Harassment. A debt collector cannot harass you to coerce you into making a payment. This includes calls at odd hours and the use of abusive language.
- Publicizing Debt. A third-party debt collector must keep your debt private. They cannot reveal your debt to others. This includes in private conversations or by publicly posting your debt in some fashion.
Conclusion
If you are getting a call from an unrecognizable company, make sure they are legitimate. There are many scams that use public information to take advantage of consumers. If the debt buyer proves the chain of title, they are free to communicate with you and attempt to collect a debt.
However, these third-party debt collectors fall under the scope of the FDCPA. If they violate your rights under the FDCPA you can hire a consumer rights attorney to represent you.
About the author:
Sergei Lemberg is a consumer rights attorney, practicing since 2006, whose practice focuses on consumer law, class actions and personal injury litigation. He is known for a United States Supreme Court case (Facebook v. Duguid) defending consumers from autodialers under the Telephone Consumer Protection Act of 1991 to send unsolicited text messages. He is also the author of Defanging Debt Collectors, a book that teaches consumers how to battle debt collectors and win.
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