Do's and Don'ts in Debt Collection Letters

A debt recovery letter normally contains a demand for payment of overdue loans. This letter is the second missive that a debtor receives after a notice of default, which informs the individual or the business proprietor the amount overdue for the dates indicated. The contents of both debt collection letters are subject to scrutiny whether or not they followed the debt collection guidelines for creditors and licensed credit collectors. The following list briefly divulges the do's and don'ts of creating a letter of demand.

The Small Business Development Corporation of Western Australia suggests that, in general, a letter of demand should: 

* state clearly the impertinent details of the debt, such as the dates, agreements, amounts due, and days overdue.

* include copies of contracts, letters of agreement, applicable quotes, and invoices relevant to the debt.

* request explicitly that the payment be made by a specific date.

* propose an alternative settlement or payment arrangement as an option.

* warn the debtor of the type of debt recovery options that the creditor plans to pursue when payment has not been received by the indicated date.

On one hand, the Arts Law Centre of Australia recommends that the letter of demand should not:

* harass the debtor who has the right to complain about this to particular government agencies and the police. 

* look like a court document or pretend to come from a solicitor because this is illegal.

Furthermore, credit collectors for business or individual creditors are expected to behave responsibly and with respect towards the debtors. They shouldn't force, intimidate, or harass the debtor or people connected to him or her in any way. They shouldn't enter the debtor's property without permission or fail to leave the property when asked. Debt collectors shouldn't shout at or use obscene or racist language with debtors. All these will only put creditors or credit collectors in hot water. In addition, debtors have the right to receive an itemized computation of the real amounts they were indebted to creditors.

When sending debt collection letters to debtors, credit collection firms should observe the guidelines set by the Australian Securities and Investments Commission. The following is the July 2010 version of the guidelines:

* There should be no more than 3 letters sent to debtors each week or about ten letters in each month.

* These letters of demand to debtors should not be left in a shared post-box or left unattended in a place that other people can access.

* The letters should not make false statements about the amount or the status of the debt.

* The letters should not make false claims about the consequences of non-payment or false statements about what the creditor can do to the debtor.

Lastly, debt collectors are warned not to engage in abusive behavior that involves a minor (children under the age of 18 years), a person with a disability or illness, and a person disadvantaged because of illiteracy and an ignorance of the debt recovery process. All debtors have the right to being treated professionally and in a courteous manner by credit collectors.