Why the Old Debt Collection Letter Doesn’t Work Anymore

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Decades ago all a debt collector had to do was send along a letter to their prospect, letting that prospect know what they owed and when they owed it by, and that letter would generally do the trick. These days, the debt collection letter just doesn’t work anymore. Not only are you unlikely to receive any money back from any debt collection letter you send out, but there’s a low chance your prospect will ever even read your message. There are a couple of big reasons for this change.

First, you are less likely to have an accurate address where your prospect can be reached. People move around a whole lot more these days than ever before, and as a result it’s likely your prospect no longer lives at the address you would send your letter to in the first place. 

Second, even if your letter is received by your prospect there’s a good chance they will just ignore it, or even shred it. It’s easy to blame this on apathy or discourtesy, but it’s more likely due to the fact people just receive so many messages every day they’ve grown used to simply ignoring what doesn’t interest them. Tack on the fact most people don’t want to respond to a collection letter and you have a recipe for never being read, no matter how many letters you send.

Finally, people just don’t take collection letters very seriously these days. They know that a letter is just a letter, and they are accustomed to receiving more serious forms of pressure from debt collectors, such as phone calls, emails and other more forceful forms of communication. In the big picture, a collection letter is inconsequential to today’s prospect.  

The Proven Formula for Locating Debtors

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Lenders are constantly faced with the unfortunate reality that plenty of their debtors will attempt to go off the grid to avoid the responsibility of paying back their loan. While many lenders have procedures in place for collecting from debtors who are easy to find and contact, most lenders find themselves powerless to track down and elicit payments from debtors who have skipped town. Yet just because a case is difficult for a lending agency doesn’t mean it’s impossible for a professional collections agency.

Debt collection agencies and debt buyers develop proven formulas for finding skipped debtors. This process is referred to as “skip tracing” and it employs many of the same methodologies as private investigators and other professionals use to locate any missing person.

One of the most important skip tracing actions involves contacting and putting an acceptable amount of pressure on the debtor’s contacts. Speaking with all listed employers, all institutions and organizations the debtor is associated with, and contacting any references the debtor listed on their loan application often bears fruit. Even if these connections fail to offer assistance they will often offer up the name and contact information of other leads who may provide access to the missing debtor. The key to receiving useful information from a debtor’s connections and their leads lies in communicating with them in the right manner. E-mail and phone calls are easy to dismiss and to ignore, but in person meetings and attempts at making contact are more likely to result in open and honest communication.

The skip tracing formula will vary from debtor to debtor, but ultimately there are a few key principles which never vary.

The Amazing New Secret of the Debt Buying Industry

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Like all high-stakes industries, the debt buying industry is constantly evolving. Debt buying and collections agencies consistently update their strategies and tactics to further increase the chances of receiving money from debtors. For example, modern debt buyers have learned how to use social networking websites like Facebook and Twitter to remain in contact with debtors, to learn about a debtor’s lifestyle, and to develop relationships with debtors which lead to payment.

Not only are debt buyers using social media websites to perform their work better, they are also using these websites to determine whether a prospect is likely to pay off their debts in the first place.

One of the secrets to effective debt collection lies in being able to distinguish between debtors who are likely to pay off their debts, and debtors who are unlikely to honor their loan’s repayment terms and conditions. Determining whether a debtor is likely to pay back their account balance or not depends on a number of criteria every good collection agency will consider before taking on a case.

For example, an individual who has more than $75,000 in debt, an individual who is in jail, or an individual with no cash-flow and no prospect for building cash-flow is unlikely to pay back their debt, no matter what. On the other hand an individual who lives large, who clearly spends a lot of money on a daily basis, who has a relatively small level of debt, and who has plenty of personal assets and connections with other people who have personal assets, is a prime candidate for effective collections. Social networking and social media sites offer an exceptional way to evaluate these criteria.