By Dean Kaplan+
When the in-house debt collection process comes up empty, it may be time for the credit department to consider turning the account over to a commercial collection agency or a debt collections attorney. This is the final article in a six part series of articles about the principles of in-house debt collections. This article will discuss additional collection techniques and when it is time to go outside for collection help.
When a debt collector is getting no where with a debtor, it is important to maintain a business-like demeanor and avoid making any written or oral threats involving the reputation of the debtor. These kinds of threats can lead the debtor to filing suit against the creditor and possibly winning. The debt collector should never threaten legal action against the debtor until the company is prepared to move forward in this direction.
Good internal communication is critical when a collection effort is in process, particularly when the customer’s credit has been tightened. It is important to communicate the status of the debt collection with the sales and distribution personnel so that everyone is working in unison. Sometimes the sales person may be able to help in the collection process. This can be delicate, so only do this after careful consideration.
Letter writing is another method which can be employed for debt collections.
Every agreement between the creditor and the debtor must always be confirmed in writing. Additionally, a mass mailing approach can be utilized if automation is possible for the collection process. Below are some things to consider if pursuing debtors through letters:
a. Address the letter to a specific person who has been identified as a valid payment decision maker. Never send a letter to a title only.
b. Keep the letter concise and direct.
c. Keep the tone of the letter firm and business-like. Ask specifically for the action that is desired.
When it is clear that the debtor is not going to pay, the next step is the final demand letter. This letter informs the debtor that litigation is the next step. Whenever possible, send this letter by overnight carrier with a signature required. This lets the customer know that the matter is important and has a sense of urgency. Sending the letter via USPS is another option, but if the customer suspects it is a collection letter, it may be refused.
Sending collection letters by fax is another option, but one problem with this method is that the recipient can be anyone who happens to check the fax machine. If confidentiality is important, then faxing is probably not the best option. If fax is the only workable option, put a cover sheet on the document with the desired recipient’s name visible. Call the recipient before you fax it to alert them to its pending arrival. If supporting documents are needed quickly by the debtor, faxing is a good option as well as scans sent via e-mail.
The exact right time to pursue litigation is unique to each debt collection. Typically, if a customer has not ordered, remitted a payment, or responded to a letter or phone call for a minimum of three weeks, it may be time to think about the next step. If possible, telephone some other suppliers that do business with the customer to see if any additional information is available. If you hear similar stories from these suppliers, it is probably time to consider turning over the account to a commercial collection agency or collection attorney. Remember, if the customer ever files for bankruptcy protection, all efforts to collect from the debtor must immediately cease.
If you missed the previous articles in this six part series, check them out below:
In-House Debt Collection Considerations
- Things to Consider Before Starting Debt Collection
- Four Steps to Collection Success
- When to Start The Collection Process
- Making Contact
- Following Up On Collections
- Additional Collection Techniques
The Kaplan Group is a boutique collection agency specializing in large (over $10,000) debt collections due from businesses. Founded in 1991, the company has a stellar reputation (A+ rating with the Better Business Bureau) and is recognized as one of the leading collection agencies for results on large and complex matters.