Just about every serious collection process starts with a collection letter. This is the best way for a creditor to officially inform a debtor that their failure to make timely payments is not acceptable. It is also the beginning of the collection paper trail, which will be used as evidence if the collection should require legal action.
Despite the fact that every collection process utilizes collection letters and that they are an important piece of evidence that might be useful later in the process, many collection letters are missing some key components that would increase their odds of convincing a debtor to make payment. Many collection letters are also missing essential information that would make the letter more credible if it needs to be used in legal proceedings down the road.
In order to improve the overall success of your collection letters, make sure that you include each of these five essential components:
1. Formal Letterhead
Making sure that the collection letter is printed on your formal company letterhead sets the tone for every interaction that will follow with the debtor. Using a professional letterhead suggests that you are serious about collecting the debt. Without a formal letterhead, you run the risk of appearing to be too friendly towards the debtor, which might give them the impression that you are not as serious about collecting the debt in a timely manner.
2. State Your Case
The next essential component of a great collection letter is explaining all of the details surrounding the debt. You don’t want to make the mistake of assuming that you and the debtor agree on anything. You should detail the original purchase that created the debt, and provide and itemized list of any additional interest or fees that have been added over the life of the debt. Every detail you can provide regarding the debtor’s past due accounts will add to your case, should the letter need to be used in court.
3. List All Payments
Right after explaining the origin of the debt, you will want to detail any payments that the debtor has made thus far. It is helpful to list the date of each payment, as well as the amount and remaining balance after the payment. This will ensure that you have informed the debtor of the entire record of payments you have received, which will make it a great starting point for a legal case if the situation should escalate to that.
4. Explain the Next Steps
Following all of the payment information, you will want to provide the debtor with exact details on how they can go about settling the debt. You should spell out exactly how you would like the debtor to remit payment for every possible option they might be considering. This ensures that they know exactly how to go about arranging a payment with you, which will also be a good starting point for a legal case if necessary.
5. Require a Signature
The final essential component of a collection letter is that you absolutely must send the letter in a manner that requires the debtor to provide a signature acknowledging that they received the document. Should your collection end up in court, this eliminates the debtor’s ability to deny that they were properly notified of the situation.
As long as your collection letter includes each of these five components, you will already be on your way to improving its performance. You should also remember that nothing good will come from taking personal shots at the debtor in these letters. Even if you are furious with a debtor, write the letter in a way that makes you appear to be calm, cool, and collected. This is the most proven way to write a collection letter that actually produces results.