Strategies of Collection Letters

Creditors depend upon consumers paying their debts in order to maintain a profitable business model. When customers fail to make their payments as agreed or default on their debts entirely, creditors often turn to collection letters to convince debtors to pay what they owe. Collection letters range from respectful to threatening depending on the company sending them. Companies employ different collection letter strategies for different types of accounts.

Friendly Reminder

One form of collection strategy that numerous businesses utilize is to send the debtor a written reminder of his missed payment. This collection strategy involves noting that the debtor's payment is past due and respectfully requesting that he submit the payment as soon as possible. Friendly reminders sometimes, but not always, contain a warning regarding impending late fees the individual will incur if he does not bring the account current. Companies use friendly reminders when they have a vested interest in maintaining a financial relationship with the customer.

Demanding Tone

A demanding collection letter does not carry the same respectful tone as a friendly reminder. Companies often send demanding letters when a customer has missed more than one payment or is in danger of defaulting on the debt entirely. Demanding letters warn the individual of the consequences of nonpayment and frequently include vague threats such as noting the company's intent to take "further action" if payment is not received by a certain date. Creditors use demanding letters when obtaining payment is more important than maintaining rapport with the customer. Collection agencies also often use a demanding tone in their letters to debtors.

Intent to Sue

Collection letters noting a company's intent to sue are frequently used by collection agencies although original creditors also occasionally send these letters as well. A collection letter threatening consumers with a lawsuit serves as both a final warning of the consequences of nonpayment and a scare tactic. Debtors who would not submit payment otherwise will occasionally contact the creditor and work out a payment plan in order to avoid a lawsuit.

The Fair Debt Collection Practices Act notes that third-party collectors, such as collection agencies, can only legally send a collection letter threatening an individual with a lawsuit if the company actually has the right to sue the debtor and intends to exercise that right. This does not, however, stop some unethical debt collectors from using letters threatening to sue consumers merely to scare them into making payment arrangements.

Settlement Offer

A settlement offer often serves as a company's last resort when it either cannot sue or does not intend to sue. This particular strategy involves offering to accept a portion of the individual's outstanding debt as payment in full. While settlement offers are a common tactic collection agencies employ, original creditors sometimes send settlement offers as well. In general, the older the debt, the less a creditor will accept as a settlement.