With both creditors and debtors being there in the market, there are not always very pleasant business moments. Some debtors pay their dues in the form of installments on a very regular basis. But there are some fishes that mess up the ocean. There are some debtors who do not pay up on time and avoid their creditors for the fear of being punished. The law for non-payment of dues is there but is not followed very strictly so the creditors have to end up writing off the amount from their accounts. However before doing so they try hard to recover their dues.
A Debt Collection Letter is a weapon that is used by the creditors to make an effort to recover what in finance jargon called “bad debt”. This is a payment which if not recovered is usually written off. But this ends up with a huge loss for the creditor. So the creditors make their best efforts to recover this money that for many reasons is not coming back to them as promised. The creditors write a Debt Collection Letter to their debtors reminding them about the pending payments. Usually these letters do not serve their purpose till they are written with reminders.
DOS AND DON’T’S OF DEBT COLLECTION LETTER
- A Debt Collection Letter should be written only when the payment that has been due has not come in and the last date has gone by
- It should always give the loan number or any other reference number in the subject line of the letter to make it easy for the reader to know the context of the letter
- If it is a first time reminder for an overdue payment, it should be done very politely
- Even though this letter is written by a creditor to the debtor, the tone of the letter should not sound bossy or authoritative or dictatorial
- The tone of the letter should first be empathetic because there could be a very genuine reason why the payment has not come, a death may be one such reason
- A Debt Collection Letter should be short and brief
- It must always have a date on the top left corner of the letter indicating its origin
- The letter should also give details of any deadlines if any
- A Debt Collection Letter should be firm but not threatening
- Any repercussions of not abiding by the deadlines given in the Debt Collection Letter should also be clearly mentioned in the letter
- Check for any grammatical or punctuation errors
- The Debt Collection Letter should not sound as a closed letter. Another payment option should be offered to the debtor to make it easy for her/him to pay
- The Creditor must leaver her/his phone number just in case s/he needs to be contacted
- To ensure that the letter has reached the debtor, it should always be either sent by courier or speed post so that the creditor gets a proof of delivery against it
SAMPLE DEBT COLLECTION LETTER
_______________ (Name and address of debtor)
Subject: Payment overdue against loan installment
Dear Sir or Madam
This is with reference to your loan account number __________ against which you have taken a house loan for 20 years. The payment is due to us on the 1st of every month that is already lying with us in the form of post-dated cheques.
We would like to inform you that your bank has returned the cheque that we presented in the bank towards payment for this month unpaid. We would therefore request you to please clear your debt for this month via a demand draft for Rs.____________ payable to ____________ (name of the company). Please have this cleared latest by ____________ (deadline date).
We hope not to be forced to take any legal course of action in case of non-payment.
We look forward to a long business relationship with you.
(Name of signing authority)