What is a collection letter and when should I send one?
What is a collection letter and when should you send one?
Short answer
A collection letter (also called a demand letter or collections notice) is a formal written communication demanding payment of an overdue invoice. It is more forceful than a payment reminder and is typically sent after informal follow-up attempts have failed.
**The three escalation levels:**
**Level 1: Payment reminder (Day 1–14 past due)** Tone: Friendly, assumes oversight. Purpose: Prompt the client to pay something they may have simply forgotten. Format: Email, brief, include invoice details and payment link.
**Level 2: Demand letter (Day 14–30 past due)** Tone: Formal and firm, not threatening. Purpose: Put the client on notice that you're escalating. Format: Email with certified mail backup. Include invoice details, total now due including any late fees, a specific payment deadline (7–10 business days), and a statement of next steps.
**Level 3: Collections notice (Day 30+ past due)** Tone: Matter-of-fact, legal in character. Purpose: Final formal step before collections referral, credit reporting, or legal action. Format: Written letter on letterhead, certified mail.
**What a collections notice must include:** - Your name and contact information - The debtor's name and last known address - Amount owed (principal + fees) - Date the debt originated - Statement that this is a final demand - Specific deadline for payment - Consequence of non-payment (collections referral, legal action, credit reporting)
**Important:** If you're the original creditor collecting your own invoice (first-party collection), the FDCPA generally does not apply to you. If you hire a third-party collector, they must comply with FDCPA requirements including the 30-day validation notice.