[Biz Talk] Collections - Bad Debt, etc

So, I offered this awhile back, and am just now getting around to
writing it up.

Firstly, let me say this: I am not an attorney, and do not work for
an attorney. NONE of what I say/type should be considered legal
advice. Please, please, PLEASE consult your personal/staff/retained
attorney for legal counsel.

That being said, I do work for a national third party debt
collection agency (day job! believe me, I’d love to be at the bench
all day instead). I believe the issue on the other post (entitled Bad
Customer, What To Do?) was that a customer ordered a customized piece
and did not pay up. Hence, my internal monologue: “Self, you could
help! Write up a quick pre-collection notice!” Then I pressed 'send’
on my reply, thinking I was being all helpful, and then… had all
these thoughts come up about the legalities (hence the disclaimer
above) and I think there’s more to it than just putting a generic
form letter out there for you guys. Delinquency is not common in the
trade to my knowledge, (client-related) as it’s generally a “This is
$1,000,000.00. No sir, we do not do lay-away”. But, for vendors, the
rare bad situation (like from the other post) and consignment
contracts, a nudge is sometimes needed for people to pay up.

First, a quick overview of Delinquency. There are 4 causes:

  1. Emotional
  2. Circumstantial
  3. Intellectual
  4. Intentional

The only causes I think would apply are Circumstantial and
Intentional. Lets go with Circumstantial first: Simply put, you/your
vendor/client ran out of money. It happens. Come to an agreement,
move on to next month. This can slip into Intentional, though - they
never intended to pay, or let’s say, with a vendor, they
intentionally put you off till ‘next month’. Well, ‘next month’ never
comes. The invoice from January is not paid until June, etc. With a
client, intentional delinquency is straight-out stealing, to put it
bluntly. They get a service, and never pay. They ask for custom work,
and never pay. They pay for half, but not the rest. They straight-up
steal your merchandise. Lather, rinse, repeat.

Anyway, onward…

There are 3 appeals for recovering delinquent accounts (well, 3 that
are taught at my agency):

  1. Pride
  2. Honesty
  3. Anxiety

Pride is a tricky one - it is based on reputation, and, in my humble
opinion, works most effectively on vendors. They know that if they
don’t keep you happy, your word-of-mouth, or word-of-internet, now,
may cause a loss of potential/current clients for them.

Honesty is the most commonly used - “Mr. Hessonite, you’re an honest
person. You know this bill is due, and needs to be paid. How would
you like to take care of it today?” See what I did there? Combined
Honesty with Anxiety. Using the word today implies that this needs to
be taken care of immediately. (With Anxiety you’re making the person
anxious to take care of the bill/invoice (or at least that’s the
theory…) This works especially well with services that were to be
paid on delivery/completion.

Now, on to that form letter I promised. Well… after much
consideration, I won’t put one up. Why? Too much variety in the
situations we’re are dealing with. However, searching for ‘debt
letter’ in Google will provide you with a myriad of examples. I am
more than willing to review any letter someone wants to use, but it
is up to you to know the laws on first party collections in your

If you want to contract with a debt collection agency, vet them
first. Are they a member of ACA International? What’s on their BBB
record? Etc…

I hope this helps…