The collections letter has played a central role in the industry for generations and continues to be widely used. Given its importance and near-universal use, it is unsurprising that the makeup of a good collections letter is well understood. Most professionals use templates when constructing these letters, as a means of ensuring that each outreach has the greatest possible likelihood of prompting debtor engagement.
Over the past several years, innovative collections departments have begun to explore electronic communications channels like email, text messaging, and even social media direct messaging as another potentially powerful tool for debtor engagement. That trend has accelerated since the adoption of Regulation F provided long-awaited guidelines for the use of these media.
A standard collections letter template isn’t necessarily the best model for a collections text or other digital communications, but the underlying principles can be adapted to fit a given medium. Read on to learn how to do just that.
Letters and Phone Calls Remain Central (For Now)
In a 2023 survey of collections professionals by TransUnion, 98 percent of respondents reported using collections letters and 93 percent used the telephone to contact debtors. However, change is in the air. Forty percent reported using SMS text messages as part of their collections process, and another 31 percent expressed some degree of interest in adding text messages to their collections process within a two-year timeframe.
Email is already well entrenched, with 69 percent of respondents reporting that they use it in their collections efforts. Other forms of digital communication have not yet had the same level of uptake, though 29 percent of firms expressed intentions of adding chat boxes or digital assistants to their platforms. Direct messaging on social media presents another promising communication option for collections agents. First-party creditors have the option of using push notifications through their app or pop-ups on their site, app, or ATMs.
Each of these channels represents an opportunity, but also a set of specific constraints and unique characteristics. Adapting a collections letter template to any of these new media is not a linear process, but instead requires careful consideration of those details and how they affect communications.
Anatomy of a Collections Letter Template
A standard collections letter template follows a simple format. It begins by reminding the debtor of the specifics of the debt, followed by a carefully phrased reminder to the debtor about the advantages of settling promptly, and ends with a call to action.
The tone of the letter will vary with the degree of delinquency. In the case of a debt that’s only just past due, it remains friendly and low-key. The tone becomes more firm and direct as the debt continues to age without resolution.
While the structure of these letters is consistent and well-established, the actual wording of such letters is what differentiates them. A well-turned phrase can make a significant difference in how the letter is perceived by the debtor, and increase the chances of success. Most collections firms or departments have accrued a store of stock paragraphs and phrases that work, though these should be regularly reviewed and subjected to formal A/B testing against other variations. Consumer behaviors change over time, and what works with one generation may not be as effective with another.
Adapting Collections Letters to New Communication Channels
Templates for collections letters offer a number of advantages, including consistency of messaging and control over the specific wording used for key passages. Those advantages translate well to other communication channels, but the form and content of a given communication must be adapted to fit the demands of the chosen medium.
Three factors shape the content and style of any collections messages sent through channels like text messaging and email:
- The necessary information to describe the debt, encourage payment, and provide avenues for doing so.
- The constraints and limitations of the chosen medium.
- Any regulatory requirements specific to that medium, as laid out in Regulation F or state-level legislation.
Let’s take a brief look at several of these newer communications options, and how your current collections letter templates might be shaped in order to effectively exploit their potential. The marketing industry has been quicker to commit to these channels, and collections professionals can draw on their experience to craft effective messages without a tedious process of trial and error.
Collections Messages via Email
An existing collections letter template could simply be transferred verbatim to email, and this ease of adaptation (and email’s familiarity as the oldest and longest-serving form of digital communications) has undoubtedly helped fuel its wide acceptance. It’s also easy to incorporate live links to payment options, informational pages, or interactive chat on your website.
Still, there are specific changes that must be made. On the compliance front, Regulation F requires that debtors be given the ability to opt out of receiving future communications through this channel. You’re also forbidden to use email addresses on non-public servers, such as a debtor’s work email address.
On a pragmatic level, your subject line must be carefully crafted to encourage a debtor to open the email. It’s also important to recognize that fake collections emails are common, and that major email services like Outlook and Gmail aggressively filter those. Many online sources offer lists of words and phrases to avoid. If your firm uses a third-party service to manage your email campaigns, the service should be able to provide both whitelists and blacklists of words and phrases. Depending on the service and its subscription levels, the service may even craft customized templates for you drawn from the information in your current letters.
Collections Messages via Text
Text messaging’s allure for marketing and debt collection alike is easily understood. According to Pew Research, 97 percent of Americans owned a cell phone as of early 2024, and 90 percent owned a smartphone. That penetration, combined with high consumer acceptance and response rates, should place text messaging squarely in the plans of any forward-thinking collections team (we have discussed this in detail in an earlier blog post).
Brevity is key with text messages, so your collections letter template must be pared to the bone in this medium. Its first several words will be displayed as a snippet when the debtor receives your text, and should be thought of as equivalent to the subject line in an email. As with emails, debtors must be provided with a simple opt-out mechanism should they prefer not to use this medium.
Collections Messages via Social Media Messaging
Social media offers multiple means of driving engagement with debtors. In this context, we’ll limit our discussion to the use of private messaging as a medium for your debt collection communications.
Regulation F dictates that only private messaging can be used on social platforms in order to communicate with a debtor regarding a debt. Debt collectors are prohibited from posting public messages to a debtor’s timeline regarding the debt or publicly releasing any details of the debt on their own social media pages or platforms.
Private messages typically are not subject to limitations on length, even on platforms like X (formerly Twitter) where public posts do conform to such constraints. Your collections template could simply be utilized as-is, to take advantage of this freedom, but social media is by definition more of a “personal space” than other electronic media. In practice, you may find that a less formal, more empathetic, and customer-centric tone is more effective. For more tips, check out our deep dive into how to best use social media direct messaging to engage with debtors.
Collections Messages via Push Notifications and Pop-Ups
These avenues are typically available only to first-party creditors, though third-party collections enterprises may choose to offer an app of their own that debtors can use for communications and payments. The principle is simple enough: the debtor is a customer and already uses your mobile platform or ATMs, so a push notification on the mobile device or a pop-up on the ATM screen is both straightforward to implement and a highly efficient means of attracting their attention.
Because this medium utilizes an existing communications channel, regulatory barriers are minimal (an opt-out should still be provided). The message should be brief, as most of the information ordinarily contained in a collections letter is already established. These are best used as quick reminders or attention-getters.
A pop-up on an ATM can ask, “Do you want to make that payment now?” as an immediate option. The ATM’s screen can also display a URL, QR code, or phone number for the debtor’s convenience if they opt against an immediate payment. Push notifications through your app can also offer to accept an immediate payment, and provide live links or telephone numbers the debtor can click in order to access self-service options.
Modern Debt Collection Requires a Large Toolset
Diversifying into new avenues for debt collection is not something to embark on lightly, because it represents a significant departure from “business as usual.” Modern debt collection requires a large toolset because these new communication channels don’t exist in isolation.
If you plan to send debtors text messages, for example, then your software stack should also be capable of receiving and acting on replies. Your debtors will expect it, and failing to “bake in” those capabilities will sap your campaign’s effectiveness. More fundamentally, you’ll need a software tool like Spokeo for Business to unearth the data you need to target debtors through these new channels.
Spokeo’s powerful search tools enable your collections team to uncover previously unknown emails, phone numbers, and social media accounts associated with your debtors, making it possible to utilize the tools of your (and their) choice to establish a constructive dialog.
To learn more about how Spokeo for Business can empower your collections efforts, reach out to our team through the contact information on our Collections/Skip Tracing page. They’ll be happy to answer your questions, set up a demonstration of the product, or even arrange a no-cost trial of the product.
Disclaimer: This blog post is not intended as legal advice. Consult your legal and/or compliance department before making any changes to your written communications with debtors.
Sources
TransUnion: Seizing the Opportunity in Uncertain Times: The Collections Industry in 2023
University of Arkansas Sam M. Walton School of Business: Collection Letter
Consumer Financial Protection Bureau: Debt Collection Rule FAQs
US Federal Trade Commission: Fake and Abusive Debt Collectors
Pew Research: Mobile Fact Sheet