30 Nov A Guide To Sending And Receiving Debt Collection Letter
Letter of demands this is formally known as a debt collection letter. It is a letter that demands the debtor for the settlement of outstanding dues. A debt collection letter informs the debtor about the dues as well as the remaining total amount. Usually, it is the debt collecting agency that issues the letter in the name of the debtor, informing him about dues, total outstanding amount, and the legal actions that can be taken in case of default.
A debt collection letter is always sent after the overdue payment. It can be in two stages
● Reminder letter (soft letter template)
● Final demand letter ( harsh debt letter template)
● Debt collection letter
The general reminder letter is the first reminder letter sent to the debtor. It depends upon the debt collecting agency for the number of times it has to send this general reminder. It is an initial reminder, including the information of payment due and the full amount. It is primarily a general reminder letter to get the follow-up, and it does not involve legal action statements and a specific date for settlement.
However, a final demand letter is a fully informed letter. This letter is usually sent before taking any harsh legal actions. Hence it is also known as a letter before action. It mainly focuses on the repayment of the debt at the earliest. This letter contains all the data about an outstanding debt, full amount, interest charges, and settlement’s last date (deadlines). Moreover, this letter also briefly mentions the legal actions that can be being taken in case of default.
The final stage is the debt collection letter, and these letters come under a court judgment. A debt collection letter informs about the beginning of legal actions as the final demand letter is not taken seriously.
Debt collection letter mainly has three purposes:
● It is formally informing the debtor about the payment dues.
● o construct a rational negotiation among the creditor and the debtor to organize a suitable repayment plan.
● If the above two fails, then the last step is to begin the legal action. After the debtor is receiving the debt collection letter, then only the legal proceedings can start. Here, the intention is to provoke the debtor to repay the outstanding amount before initiating harsh actions.
Since the debt collection letter works as a mediate to debt recovery and formal association with clients. Thus, there are some prescribed tips that you can follow while drafting a debt collection letter. Such that the intended goal is being met without compromising the relationship with the client.
You can follow these tips to draft the debt collection letter.
1. Understanding the legal rules and regulations
“Federal Trade Commission” (FTC) has amended the “Fair debt collection practices act,” which aims to shield the debtors from barbaric debt collecting practices. Concerning this, all the debt collection letters must abide by the “fair debt collection practices act “(FDCPA). The creditor’s legal responsibility is to mention all the relevant details about the amount due, last date, interest charges, and the legal actions that can be being taken in case of default in the letter that is being sent to the debtor.
It is an exact requirement under the fair debt collection practice act.
Hence, it is always advised to understand the legal regulations concerning crediting behavior practices briefly.
2. Consultations from a professional.
It is always advised to consult a professional debt recovery advisor as the regulations under the fair debt collection practice act are very wide. Even if you get complete information regarding the rules and regulations, it is still not expert advice. There is always some add one in practice than in theory.
Therefore, it is fair to consult a professional advisor who can help you through the drafting of a debt collection letter.
3. Elements that need to be being included:
A debt collection letter should include these essential elements
● Name of the subject (Creditor)
● Amount due
● Total amount
● Deadline to repay
● Debt reference
● Legal actions and consequences
Always mention the above details in your debt recovery letters. Make sure that your letter complies with the fair debt collection practice act.
4. Title should be catchy
A debt collection letter is being sent to the debtor to ensure he repays the due. Moreover, it is prescribed that your mail title or heading should be catchy enough such that it grabs the debtor’s attention. However, it should also reflect the urgency required in action.
5. Personalize your letter.
Your letter should be brief enough to describe all the regulations and legal actions yet, as the intention is also to set up a negotiated rational plan. Hence keeping it personalized will help you achieve your goal.
A sample is being attached below for your reference.
There might be times where instead of sending the debt collection letter, you will be receiving one.
It is just another side of the same coin.
The debt recovery letter concept remains the same, only the steps that need to be taken change.
Now receiving a debt collection letter is never a willing situation. Hence one should be preparing for situations well in advance.
Here are some steps that you can take to overcome the situation.
- Acquiring a debt validation letter
A debt validation letter is a written statement you owe the creditor a certain sum of money. This letter should contain all the necessary details. Such as total debt amount, information about the creditor, repayment plan, and POC.
A debt validation letter should always be obtained in a written format than on call or SMS. The document will help the fair debt collection practice act protect you from illegal payment recovery.
- Enhance your knowledge about the rights you possess
As soon as you receive the debt collection letter, make sure you obtain the debt validation letter that provides proof. A debtor will be protected under the fair debt collection practice act only if he possesses a valid debt validation letter. It is also the creditor’s responsibility to research and understand the rights he possesses to protect himself from inhuman and illegal debt recovery.
- Negotiate for a rational payment plan.
If your situation is financially stable, then it is advised to repay the complete amount at once and escape from the stress. Since the creditor possesses the right to threaten you and even sue you, it is wise to negotiate a suitable repayment plan that settles according to your condition.
- Maintain a report file.
Maintain a proper file of debt collection letter, receipt of payment, and debt validation letter for future reference.
Since you would never want to end up in a situation to receive a debt collection letter, you should always be ready to arm yourself from the situation.
Debt collection is a complicated task. You have to keep a balance between good client relations and enough cash flow to run your business. Therefore, now you can use the above tips to draft your debt collection letter and prepare yourself for the situation to receive one.