Do's and Don'ts of Collection Letters

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April 13, 2022
Author: Lorman Education


Creditors have every right to collect on debts owed to them. However there are guidelines laid out in the Fair Debt Collection Practices Act of 1977, amended in 2006 that define the limits of what is allowed and not allowed in collecting on consumer debts.

Within five days of the initial contact, a creditor must send a written list of details about the debt including the name of the original creditor, the date the debt was incurred, the total amount owed and a deadline for repayment of the debt. If requested the creditor must supply the consumer with documents verifying the nature of the debt.

There are important guidelines for writing to a customer about a debt. For example, the letter itself cannot be made to appear like a court document or a letter from a law firm. It also cannot represent itself being from a government agency. For example, the letter cannot use government logos or letterhead to appear more official. The envelope cannot indicate that the letter is coming from a collection agency and cannot be posted in a public place. Creditors cannot use postcards detailing information about the debt, thereby exposing the customer’s information to the public.

A creditor can demand payment but cannot threaten legal action unless steps are actually being taken to sue in court. The language used cannot be threatening or abusive. These actions are punishable by law. The letter cannot contain false threats of jail or repossession, and cannot use insulting or discriminatory language.

The attempt to collect the debt cannot invade the privacy of the individual. For example, even if the creditor has access to job information, collection letters cannot be sent to places of employment. The letter can contain no threats to contact employers, friends or family members about the debt.

Although businesses may be hard pressed to collect on overdue debts, coming across as too negative and aggressive may hurt your business image and may in fact have the opposite effect. Customers who feel offended may deliberately delay payment in response to a harsh letter. The language of the letter should start out as a friendly reminder, assuming the customer simply forgot or overlooked a payment. Following letters should intensify with more extreme actions taken each time, however, don’t issue empty threats. For example, don’t say “this is the last letter….” and then send another letter threatening action or demanding payment.

Don’t forget to acknowledge payment received with a thank you. Customers are hard to come by so good ones are definitely worth keeping.


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