3 common final collection letter mistakes

Collecting money that's owed to you is never a joyous task, but when you've got a customer who hasn't responded to your initial collection letter, you may need to ramp it up by sending a second and in some cases, final demand letter.

Here are the three common mistakes made by small businesses when writing a second or final collection letter and how you can avoid them.

Mistake #1: Using aggressive and threatening language

Just because a customer has not responded to your initial letter doesn't warrant the use of abusive, aggressive or discriminatory language. According to the ACCC, it is not reasonable or acceptable to "frighten or intimidate the debtor, demoralise, tire out or exhaust the debtor; and embarrass the debtor in front of other people". Instead, use firm but formal/polite language - this will bring about a better outcome instead.

Mistake #2: Assuming the debtor knows about the debt

If a debtor hasn't responded, this may not be because he/she is ignoring your letter - he/she may never have gotten it in the first place. Perhaps it was sent to a wrong address or your debtor has relocated - in any case, list all the information about the debt upfront. It may also be a good idea to mention the number of attempts to contact him/her and ascertain why earlier attempts have not been responded to within a reasonable period, if relevant.

Mistake #3: Providing false information about consequences

A key feature of collection letters is to escalate the issue by listing the consequences of non-payment such as legal action. However, providing false or misleading information won't be tolerated by authorities. This includes statements threatening the debtor with a bankruptcy listing, overly harsh legal consequences, harassment of family/friends or making the debt publicly available. However, it is fine to mention that legal action may be taken if payment is not made within a certain period of time.

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