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The Law and Your Collection Letters

“What can I legally say in my collection letters?” is without a doubt the question we’re asked most often, so I want to take a moment to answer it.  The FDCPA or Fair Debt Collection Practices Act was written for 3rd party debt collectors, not for you as a small business owner or credit manager.  Quite frankly as a 1st party collector, or the person that owns the debt, you can say pretty much whatever you want.   (Some states are considering laws to regulate what in-house collectors can say, leave it to California) but for now as an in-house collector your calls and letters are not regulated by the FDCPA.  Nevertheless, you need to ask yourself if “What can I say?” is the right question.  In my opinion it is not.  The 2nd most commonly asked question is much more important.  The right question, in my not so humble opinion is “what works?”

There is no simple set of words that will make someone pay that doesn’t want to, or thinks he can’t.  The answer to the question “what works?” as usual is, it depends.  Is your late paying customer generally a prompt pay?  If he is there may be a problem with either your service, your product or your billing.  Before sending out a dunning letter you probably want to give your customer a call to make certain all is well.

If on the other hand your customer is a chronic late payer you have an entirely different set of circustances requiring a different solution.   A chronic late payer isn’t likely to be motivated by a standard dunning or collection letter.  We’ll be talking more about chronic late payers and how to deal with them in future posts.

Small invoices tend to be skipped over for a number of reasons, the customer who chronically pays late may use the small size of the invoice as an excuse not to pay, as in “it’s so small it doesn’t really matter”.  But, for you small invoices add up and it’s a poor precedent for future collections of larger invoices.  Let your customer know every invoice matters to you by sending a simple but friendly reminder notice by snail mail or fax.  Be certain to include all the  pertinent information, include a copy of the invoice and don’t forget to ask them to pay it.

Summing up, don’t worry about the legality of your letter, focus instead on it’s appropriateness to the situation.

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