Have You Read Your Letters Lately?

When is the last time you actually read your collection letters? I tell clients all the time, “Letters are easy – easy to get sued over, yet easy to get right at the outset before you send them out.” This is one area of the collection business in which an ounce of prevention is truly worth a pound of cure. Letter claims are on the rise and they often appear in the form of class actions when a collector sends the same defective letter thousands of times.  The consequences of sending defective letters can be high, 1% of your net worth, plus the consumer’s reasonable attorney fees and costs (not to mention your own fees and costs).  Periodic review of collection letters should be an important element of any collector’s compliance program.  This article shares some of the things I look for when reviewing collection letters for compliance.  The problem areas I see most often are as follows:

  • Don’t Equivocate:  I don’t like equivocation in collection letters.  I routinely strike words and phrases such as “may,” “might,” “sometimes,” “possibly,” “could,” “can,” “could possibly,” and “may well,” when these words are used to describe a particular action a collector might take (credit reporting) or a particular consequence the consumer might suffer (entry of judgment or garnishment).  Instead, I replace them with clear, unambiguous, and definite words which describe exactly what the collector has done or plans to do, “We will report this account to a consumer reporting agency in . . .,” or “We have filed a civil action to collect this debt.”  If you don’t know how you or your client plans to handle an account at the time a letter is sent, don’t fudge the language with equivocation
  • Avoid False Inference.  Just because a statement in your letter is true doesn’t make it lawful.  Even true statements can mislead.  Take the following statement, “The law allows our client to garnish the wages of a consumer against whom it has a judgment.”  This statement may very well be true, but the inference is that the client actually files civil actions to collect its balances.  If a collector makes this statement to a consumer on behalf of a creditor that never files civil actions and has no intention of suing the consumer, the letter could run afoul of the law by causing the consumer to believe something that isn’t true even though the statement itself is true.  Don’t threatened unintended action, directly or by inference.
  • Make Proper Disclosures.  Repeat after me [yes, say it out loud as you read this article], “Don’t monkey with the validation notice.”  In case you didn’t hear yourself, let me repeat it for you, “Don’t monkey with the validation notice!”  Collectors should enforce a zero-tolerance policy for this proposition.  It’s time tested, court approved, collection industry gospel – there is only one validation notice.  Don’t change it.  Review ACA Fastfax documents 1148 and 1121 for validation notice language.  For state disclosures see 2008 and 3048.
  • Don’t Overshadow.  Communications with consumers during the validation period deserve special attention.  Overshadowing occurs when a collector tells a consumer something that confuses the consumer about his verification rights, contradicts those rights, or makes those rights more difficult to understand.  Collectors should avoid language in letters sent inside the validation period such as, “pay now,” “immediately,” “urgent,” “prompt payment,” “today” or anything that suggests the consumer should or must do anything other than exercise their rights inside the validation period.   Web sites referenced in a collection letter should also be reviewed to ensure their content does not overshadow.
  • Forbidden Words and Phrases.  Some words and phrases, no matter how lawfully they may be used, are “complaint magnets.” They draw complaints just because they evoke strong emotion.    Examples of words I routinely strike from collection letters include: “proceed with further action [against you],” referring to the debt as a “claim” or “claim against you” or “case” or “case number,”  “garnish[ment],” “judgment,”  “the law …” (resist reciting the law unless required), “lien,” “firm,” “legal department,” “partner,” “seize,” “[bench] warrant,” “sheriff,” “arrest,” “[county] clerk,” and “damage to credit.”  It may be possible to use these words in a lawful manner, but experience tells me these words generate complaints.
  • See My Backside.  Sounds routine, but it’s not:  A collector who includes writing on the backside of a letter should include a conspicuous instruction to the reader on the front side of the letter to read the reverse side.
  • Settlement Offers.  Case law on the permissible content of a settlement offer has matured in recent years.  Collectors should still avoid “last chance” and “one time only” settlement letters as these phrases are also complaint magnets. Wise collectors include the following language in their settlement letters, “We are not obligated to renew this offer.”  Settlement letters should do just that, offer a settlement, and not pontificate about a possible offer that can only be discovered by jumping through hoops and calling the collector.  If the letter doesn’t actually offer settlement terms, then it’s not a settlement letter and don’t call it one.  A settlement offer should not be conditioned on accepting it prior to the expiration of the verification period.

All collectors are familiar with the standard by which their letters will be judged – the least sophisticated (or unsophisticated) consumer standard.  If the least sophisticated consumer would be confused about what a collector is telling them, the letter might not comply with law.  I have a standard of my own that I like to use.  I call it “the grandma test.”  If grandma doesn’t understand your letter, change it.  If grandma believes she will suffer some undesirable, unlawful, and unlikely consequence after reading your letter, change it faster!  Changing a collection letter is serious business.  Make sure your compliance program includes robust and thorough policies and procedures for controlling how your letters can be changed.