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Over the last decade, the collections letter seems to have gotten lost in the automated shuffle of such fancy new technologies as speed dialing. Indeed, few collections experts regard dunning letters with much enthusiasm any more. "The telephone is still the most powerful instrument in contacting the customer," says Peter Williamson, president of Credit Partners Inc., Larchmont, N.Y. "Letters have taken on a secondary role as telephone technology developed."
A new understanding of the power of the written word, however, is changing that. Dunning letters are gaining new influence as credit card issuers incorporate them into their telephone collections strategies.
Of course, letters are still used in different instances depending on where the delinquency falls in the collections cycle. For example, letters are of use in the 15-, 30-, and 60-day past-due category as a gentle reminder that payment has not been received, says Lyle F. Herrmann, a vice president at Integratec Inc., a collections agency in Atlanta.
QUIET REVOLUTION
Most consultants agree that sending a letter after an account is 90 days past due is ridiculous. "Chances are the person has received your initial letters and has ignored them and will ignore any subsequent letters," says David B. Lawrence, president of D.B. Lawrence and Co. Inc., a consulting firm based in New York. Telephoning takes over at this point, and letter-writing is abandoned--but only for a time. Letters have the most impact when they are used at 180 days past-due, when the issuer is taking legal action.
But a quiet revolution in attitudes toward the dunning letter is going on. Ten to 15 years ago, most issuers sent a letter if an account was 10-to-30-days delinquent, and followed up with a call if necessary. Now, most issuers lead with a call, and generate a letter if they cannot reach customers by phone, or wish to reiterate what was discussed during the telephone conversation.
RULE OF THUMB
Even at 29 cents, a first-class letter is still cheaper than a phone call. But it's a rapidly growing expense. So issuers are starting to manage dunning more judiciously so as to substitute letters for calls where possible while...