When a debt languishes, it’s important to remind the client and request payment. This often involves sending a collection letter, but what should be in it? Here are three primary tips:
How do you inspire your customer to pay promptly?
First, communicate that the debt is a serious matter. This requires some care (see “Staying Legal” below), but it’s necessary to convey that payment is expected. If further action will be taken, such as late fees or third-party involvement, this should also be communicated. (In the event a collection company is involved, the letter can have “This has been sent to you by a Professional Debt Collection Agency” to add more weight.)
Second, paying should be easy. Are the directions easy to follow? Can the client pay in a variety of ways? Who do they contact if they need to discuss it?
Debt collection efforts are heavily regulated.
Harassing or threatening language, coercion, and deception are unacceptable. This includes implying that a third party is involved when they aren’t, trying to make your letter look as if it comes from the state or a federal agency, and bluffing (suggesting, for example, that a lawsuit is pending when it isn’t). See the FTC’s Fair Debt Collection Practices Act (FDCPA) for best collection agency practices.
Different states have different regulations, so be sure to stay within the boundaries of the state in which the client currently resides and of your own state.
KEEPING THE RELATIONSHIP
Most importantly, recognize that a demand letter bears a psychological impact. If handled unprofessionally, repeat business becomes unlikely. Handle the matter with some finesse, however, and you can actually improve the relationship.
Keep the letter non-critical – assume the client intends to pay. They should be encouraged to contact you directly if they need to discuss it, even if a third party is already involved. (The customer is more likely to contact you than a third party because they won’t feel as threatened.)
How about sending (or having your collection agency send) a “Thank you” afterward? This improves the relationship because the client feels good about your appreciation and they don’t have to chase down proof of the debt being paid. It also invites them to continue the relationship.
We hope these tips for honing your debt collection letter help you get paid, stay legal, and keep the relationship with your clients, as we strive for with our first- and third-party collection letter services.