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Collection Letters For Installment Accounts

( Originally Published 1918 )



Handling Instalment Accounts

There need be no hesitation in asking for money due on instalment accounts. In fact it should be asked for as pointedly as possible, and, speaking generally, payment should be insisted upon when payment is due. The small monthly payments are carried easily if collections are close, but if neglected they mount up rapidly and soon endanger the whole account.

Close collection for instalment accounts is not, how-ever, an invariable rule. Each case requires the exercise of judgment and discretion. Frequently it is most difficult, and at times impossible, for the instalment purchaser to pay on the due date, and, if he is pushed too hard, the last resort of the instalment house—the seizure of the goods—may be reached before it is really necessary.

In the consideration of instalment collections it must be remembered that there is much less danger of final loss on instalment purchases than is the case in ordinary collections. Such purchases are almost invariably made under contracts of conditional sale; and the security of the purchase itself is behind them. For this reason the collection manager of instalment accounts has much greater freedom of discretion than is usually the case.

He must, however, always remember that it is bad business to seize instalment goods if it can possibly be avoided. The house is supposedly in business to make money by selling goods, not by forfeiting payments; and, while there may be a profit to the house in seizures after material payments have been made, the effect of the practice on other customers, and its general unfairness, will inevitably react on and injure the instalment house. For this, if for no other reason, every effort should be made to secure payment, and goods once sold should not be taken back save as a last resort.

In the collection of instalment accounts, pressure of every kind is brought upon the delinquent to enforce payment—far more than in the case of ordinary collections. This is due to the fact that from the practical standpoint either the account must be collected, or, where the contract is forfeitable, the goods be taken back; and it is bad business to take the goods back. Appeal, argument, persuasion and anything else that may influence the purchaser are therefore resorted to before the collector allows himself to despair of success.

Conditions of Instalment Collections

In some cases the instalment purchaser tires of his purchase and finds the recurring burden of the payments too onerous to carry for something which he has ceased to value. At other times the articles purchased are lost, stolen or destroyed, and the instalment purchaser is quite willing for the concern to bear the loss if he can shift it. In other cases it is a financial impossibility for the purchaser to make the payments. To meet these varying conditions and the many others that arise in instalment work requires much ability and ingenuity on the part of the collection manager.

Where the purchaser has tired of the goods, they must really be sold afresh, and this requires a combination of persuasiveness and tactful bullying. Where the purchaser is unable to pay, the goods must either be taken back or the account be carried over until the party is again in funds. Where the goods have been lost, stolen or destroyed, insistence, persuasion, and a painting large of the possible results of failure to pay, must be relied upon to bring payments from the reluctant purchaser.

There is perhaps in instalment work more scope for the exercise of tact, strategy, a knowledge of human nature, skilful letter-writing, and general ability than in any other line of collection.

Instalment Notices

In the instalment business, notices of payments coming due take the place of the statement of account in ordinary lines. The notices which follow are sent out at such intervals as the policy of the particular house may determine. In the examples given they are sent at intervals of a little less than two weeks. The first notice goes out in advance of the due date of payment, and it and the succeeding notices of the series are numbered to give them a more formal appearance.

Notice No. 1.

CHICAGO, Ill., May 13, 1913.

Your payment of $7.50 on instalment contract falls due at this office May 15, 1913.

Respectfully,

CHICAGO FURNITURE HOUSE.
To JOHN WAGNER,
156 Chelsea Street, Springfield, Ill.

If payment is not made within the next ten days, a notice of delinquency is sent as follows:

Notice No. 2.

CHICAGO, Ill., May 24, 1913.

Your payment of $7.50 on instalment contract fell due at this office May 15, 1913. Please send in your payment at once.-

Respectfully,

CHICAGO FURNITURE HOUSE.
To JOHN WAGNER,
156 Chelsea Street,
Springfield, IlL

If this notice produces no effect, notice No. 3 goes out, as follows

Notice No. 3.

CHICAGO, Ill., June 4, 1913.

Two notices have been sent you in regard to the payment due on your instalment contract. These notices may not have reached you. We therefore send you this present formal notice that your payment of $7.50 fell due May 15, 1913, and is now unpaid. Please give this your prompt attention.

Respectfully,

CHICAGO FURNITURE HOUSE.
To JOHN WAGNER,
156 Chelsea Street,
Springfield, Ill.

If no attention is paid to these notices, it is time to place the matter—if a city collection—in the hands of a collector. If an outside collection, the matter must be followed up by means of letters.

Instalment Collection Letters

The following letters take up the preceding account at the point to which it was carried by the statements. The first letter is sent about the 15th of the month, when a second payment is coming due.

CHICAGO, Ill., June 15, 1913.
MR. JOHN WAGNER,
156 Chelsea Street,
Springfield, Ill.

Dear Sir:

In looking over the accounts on our books, I find that two payments of $7.50 each—$15 in all—are now due and payable on your account with us for furniture. In view of the very liberal terms of payment extended to you in this matter, I must insist upon your monthly payments being made regularly. When I tell you that we have nearly 10,000 such accounts on our books, you will readily appreciate the enormous amount tied up in this manner, and the importance of payments being made promptly.

Your monthly payments of $7.50 each are very small compared with the total of your account, and we are not unreasonable in insisting upon its payment in accordance with your agreement.

Within the next few days I shall expect to receive your remittance covering the balance of $15 due to date. I trust that hereafter your payments will be made as they become due.

Yours very truly,

HENRY ALSTON,

Manager Collection Dept.

If a remittance is not received, this letter is followed in due time by a second, as follows :

CHICAGO, Ill., June 25, 1913.
MR. JOHN WAGNER,
156 Chelsea Street,
Springfield, Ill.

Dear Sir:

Some ten days since I wrote you in regard to payments now due on your account, amounting to $15. I regret to find that you have completely ignored this letter, and I am writing now to find out why this is so, and also to remind you that we cannot carry your account on the books indefinitely.

We have been very lenient with you in this matter, and we now feel that the time has come to insist upon the settlement of all overdue payments. We shall expect you to arrange for this at once and shall look for your remittance by return mail.

The matter must receive your immediate attention.

Yours very truly,

HENRY ALSTON,

Manager Collection Dept.

If this letter does not bring a reply of some kind, the following letter may be more effective:

CHICAGO, Ill., July 5, 1913.
MR. JOHN WAGNER,
156 Chelsea Street,
Springfield, Ill.

Dear Sir:

I have written you twice in reference to the overdue payments on your account, amounting to $15. You have ignored my letters and you have not made any provision for your indebtedness. I must now insist on immediate settlement of the account to date.

Unless you forward your check by return mail for amount now due and payable, or otherwise write us fixing a definite date when you can remit, we shall draw upon you at sight for the amount due us.

Yours very truly,

HENRY ALSTON,

Manager Collection Dept.

If no response is received to this letter, a draft should be drawn. A letter may be sent at this time notifying the purchaser that this has been done. This letter is not, however, strictly necessary, and should only be used where it will help to secure payment of the draft.

If the draft is, returned unpaid and without explanation of why it is not paid, the following letter may be used:

CHICAGO, Ill., July 15, 1913.
MR. JOHN WAGNER,
156 Chelsea Street,
Springfield, Ill.

Dear Sir:

Please take notice that our draft, drawn upon you through the Hamilton National Bank for the amount of $15, has been returned to us dishonored.

This draft was drawn upon you for money due us on account of furniture—furniture which you have had and now have and are using daily. Is it courteous to ignore our draft and our letters, as you have done? Is it fair or honorable to keep from us money which is ours—money which is due—money for which you have had value received?

I do not like to proceed to extremes in the matter. I do not believe it would be necessary if you really appreciated the fact that you are keeping from us something that is ours. There is now due $22.50. Why not send us a check for the amount and clean the matter up?

Do not let the matter drag. Write me today and let me know exactly what you can do.

Yours very truly,

HENRY ALSTON,

Manager Collection Dept.

If the purchaser pays no attention to this letter, the matter is one for serious consideration. Shall the goods be recovered, or shall continued efforts be made for collection? If it is decided that the goods had better be recovered, the following "last chance" letter may be used:

CHICAGO, Ill., July 20, 1913.
MR. JOHN WAGNER,
156 Chelsea Street,
Springfield, Ill.

Dear Sir:

I have as yet received no reply to my letter of the 15th, and must therefore again call attention to the very unsatisfactory condition of your account.

Your monthly payments and the terms of your lease were made exceptionally easy. Notwithstanding this, we find you are at the present time $22.50 in arrears and you have paid no attention to our letters requesting payment.

In view of the foregoing facts, we are forced to notify you that unless you pay the amount now overdue on your contract on or before July 25, 1913, or otherwise call in before that date, we shall conclude that you are unable to pay for the furniture and shall send for the same.

It is important that you give the matter your immediate attention. Yours very truly,

HENRY ALSTON,

Manager Collection Dept.

If this letter produces no result, it is time for action. When the goods are in the same city, a driver should be sent round with an order for the goods, and instructions to secure them if possible. If the purchaser surrenders the goods, they are brought back and put into stock for resale, and the transaction is closed. If, however, the purchaser refuses to give them up, a collector should call and serve a written demand on the customer for the return of the goods, and get possession of them if he can. If the goods are outside of the city, this written demand for them may be sent by registered mail, or it may be placed in the hands of a local attorney, who will serve it, and secure possession of the goods.

The written demand is effective in many cases which are not responsive to any other appeal or argument, and either brings the customer to the store or secures the re-turn of the goods. A form of written demand is as follows:

To JOHN WAGNER,
156 Chelsea Street,
Springfield, Ill.

Formal demand is hereby made on you for the return to us of (description of furniture or other goods follows here) now in your possession and belonging to us, on account of the non-payment of the amount due on your contract for the purchase thereof, and because of your non-compliance with the terms and conditions of the contract concerning the same, and you are hereby requested and directed to deliver the said furniture to the bearer hereof for our account.

CHICAGO, Ill.,
CHICAGO FURNITURE HOUSE,
By Henry Alston, J
July 25, 1913
Manager Collection Dept.

The goods are, of course, taken back only where the account is uncollectible and it is considered better to have the goods than the outstanding account. Where it is believed that the account can be collected, or where for other reasons it is not desirable to take possession of the goods, the "demand for return of goods" and the preceding letter would be replaced by the following letter:

CHICAGO, Ill.,
July 25, 1913.
MR. JOHN WAGNER,
156 Chelsea Street,
Springfield, Ill.

Dear Sir:

I am surprised and disappointed that you have paid no attention to my draft or my letters. Payments aggregating $22.50 are now due, and I must insist on an IMMEDIATE SETTLEMENT of same. By promptly complying with this request—which you must admit is reasonable—you will be saved expense and embarrassment and obviate the disagreeable necessity on our part of adopting legal measures to secure payment.

Anticipating your prompt response, I remain

Yours very truly,

HENRY ALSTON,

Manager Collection Dept.

If for the sake of effect a more discursive letter is desired, the following form may be used:

CHICAGO, Ill., July 25, 1913.
MR. JOHN WAGNER,
156 Chelsea Street,
Springfield, Ill.

Dear Sir:

You have seen fit to ignore our draft and our letters. The draft, as I wrote you, was returned unpaid, and the costs of presentation have been added to your indebtedness.

We dislike to involve you in further costs and embarrassment, but your own neglect of the matter leaves us no alternative, and we are obliged to advise you that unless you remit at once the sum of $22.50 to cover the payments now overdue on your account, we shall bring suit against you to secure our claim.

Bear in mind that if this is done, the resulting costs, which must be paid by you, and the trouble and embarrassment which will be suffered by you, are entirely due to your failure to fulfill an agreement which was entered into in good faith.

Yours very truly,

HENRY ALSTON,

Manager Collection Dept.

If the letter suggesting legal procedure is ineffective, a follow-up letter, either fixing a date when legal proceedings will be begun, or elaborating more fully on the expenses and trouble incident to suit, may produce results. The following letters are of this nature. The proper one to be used is a matter of discretion.

Dear Sir:

Having received no reply to our recent letter, we are forced to believe that we must proceed to extreme measures for the collection of the money you owe us. Now, therefore, take notice that, unless we receive the sum of $22.50—the amount now due us—on or before the loth of the month, we shall place the account in the hands of our attorney in your city for collection.

If we are obliged to resort to legal measures to effect the settlement, you need expect no further consideration or leniency of any kind. We await your action.

Yours very truly,

Dear Sir:

Although you have ignored our recent letters and refused our draft, we wish to give you one more opportunity to settle your account before we proceed to extreme legal measures.

Do you appreciate how much discredit and dishonor falls upon anyone who must be forced to meet his legitimate business obligations by a court decision?

Do you know how much his standing and responsibility in his community is impaired?

Do you realize how injurious a judgment is, both from a business and a personal standpoint? Your credit will be impaired. You will find it difficult to get a position of responsibility, and impossible to get a bond from a bonding company if you do,

For these reasons we sincerely trust you will settle your account without this discrediting and disastrous publicity,

If, however, you continue to disregard the obligations of your contract, there can be no alternative, We will allow you ten days' time in which to make your choice and advise us of your decision, If we do not hear from you within that time, your claim must pass through the regular channels,

Yours very truly,

The next letter, making a final appeal to the debtor, is registered. This gives added weight to the letter, and also determines beyond doubt its receipt by the debtor.

Dear Sir:

We are forced to the conclusion that you will not voluntarily pay us the amount due on your contract. We therefore give you formal notice that, unless we hear from you within fifteen days from the date hereof, we will instruct our attorney in your city to bring suit for the balance of our claim, amounting to $

Yours very truly,

Non-Forfeitable Contracts

The preceding letters are for the most part equally applicable to forfeitable or non-forfeitable instalment contracts. If the contract is forfeitable, the next step would be either to declare the contract forfeited and take possession of the goods, or else, where the amount and the conditions justify, to place it in the hands of a col-lector for personal treatment. Under a non-forfeitable contract, or a contract in which the consideration received by the purchaser cannot be taken from him, or where the consideration is of such a nature that it is not advisable to take it from him, other methods must be adopted.

The following letters, which have proved very effective in practice, may be adapted to any non-forfeitable contract :

WARFIELD CORRESPONDENCE SCHOOLS,
185 Seneca Avenue.
DETROIT, Mich., June I, 1913.

MR. HENRY P. WILSON,
67 Front Street,
Milwaukee, Wis.

Dear Sir:

You have already received formal notice of suit which we are about to bring against you through our attorney at Milwaukee. This suit, calling for the amount due as per the enclosed statement, is based upon a definite contract entered into in good faith—a contract which has been fulfilled on our part to the letter, in issuing you a guaranteed, non-forfeitable scholarship, in supplying you with lessons and instructions for a considerable portion of the course, and in holding ourselves ready at any time to supply you with the unconsumed balance.

We regret that we have been compelled to take this action, and firmly believe that if you realized what it means to you—court costs, the loss of time, inconvenience, discredit and financial embarrassment—you would make some arrangement for a friendly settlement.

If necessary, we will agree to some adjustment of the payments that will make them easier for you, but we must insist upon something being done at once. If we hear from you by return mail with any reasonable suggestions as to payment, we will instruct our attorney to withhold suit until the matter can be adjusted, but, if otherwise, our instructions are to proceed at once.

Yours very truly,

JOHN H. MANSON,

Collection Manager.

If this letter produces no results, the following official letter may be tried before suit is begun:

WARFIELD CORRESPONDENCE SCHOOLS,
185 Seneca Avenue.
DETROIT, Mich., June 11, 1913.

MR. HENRY P. WILSON,
67 Front Street,
Milwaukee, Wis.

Dear Sir:

Mr. Manson, our collection manager, has just called my attention to your account showing a balance of $24 due us, and has also handed me copies of his recent letters.

I will frankly admit that Mr. Manson has been rather urgent in his appeals to you for payment, and I am therefore writing you personally before I allow our attorney to commence action.

Can we not arrange matters on a friendly basis—say a payment of $3 a month until the balance against you is liquidated? I realize that it might inconvenience you to pay the whole amount at once, but this small monthly payment could hardly embarrass you.

Please write me personally, stating what amount you will pay per month and upon what date, so that I can give proper instructions to our collection department.

I trust you will write me at once.

Sincerely yours,

HENRY WARFIELD,

President.

Where an instalment purchaser replies, no matter what the tenor of his response, there is always hope for the account. If the account has not been paid because of some fault on the part of the instalment concern, the trouble should be promptly adjusted. If something else is wrong, the method of attack must be determined by the conditions.

If an instalment purchaser pays no attention to correspondence, to drafts, to threats of legal procedure, there is but little more to be done unless the account can be placed in the hands of a collector for personal effort. If this is not feasible, a seizure of the property, or, in case of non-forfeitable contract, suit, is practically the only alternative.

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