Demanding Debt Payment

462210451Common scenario: a client comes to you for help in collecting a consumer debt. You should start off by demanding payment on your client’s behalf, and then evaluate any response you get.

As an initial step in the collection of a consumer debt, counsel should contact the debtor directly to request payment of the debt. In general, you should send a letter to the debtor by certified mail with a return receipt requested, stating (at least) the following information:

  • Who you represent;
  • The underlying basis for the claimed debt (e.g., a contract or unsecured promissory note);
  • The exact amount of the claim;
  • A date certain by which payment to you must be received or else formal litigation will be commenced; and
  • The form by which payment is to be made to you for the benefit of your client.

This demand letter should be accompanied by (1) a copy of a written statement signed by your client that authorizes you to act on your client’s behalf and (2) a copy of the contract or other document, if any, on which the debt claim is based.

When you make contact with a debtor, be sure to observe applicable provisions of California and federal law regulating debt collection efforts.

If the debtor responds at all to your demand letter, the type of response usually ranges from denying liability for the debt to requesting more time to make payment or asserting that the debt has already been fully paid.

Depending on the type of response, you may be able to avoid filing suit to collect the debt by entering into a payment plan with the debtor or other settlement of the debt. Carefully consider these options when assessing the case.

But if it’s clear from the debtor’s response that some form of settlement isn’t going to work and that the potential benefit to your client of litigating the matter justifies the cost of litigation, filing a civil complaint may be your best option.

For more on California and federal law regulating debt collection efforts and filing a civil complaint to collect a debt, turn to CEB’s Debt Collection Practice in California. Also check out CEB’s California Basic Practice Handbook, chapter 16 and CEB’s program Creditors’ Remedies and Debtors’ Rights, available On Demand.

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© The Regents of the University of California, 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

7 Responses

  1. Is there any particular reason to continue using certified mail for the demand letter? Priority mail now includes proof of delivery as part of the priority mail fee. With priority mail, the mail carrier certifies delivery by swiping the bar code, and you can print the results by the priority mail tracking number. In my experience, debtors will often fail to go to the post office to pick up their certified mail. That doesn’t prove the debtor moved; it just means they didn’t come to post office to get the letter.

    • I agree: I never use certified mail unless a contract requires it. In my experience, people often refuse to sign for certified mail unless they’re expecting it. As one client said to me, “nothing good ever comes in a certified letter requiring a signed receipt”. Better to just get a proof of mailing and rely on the presumption of delivery. Or use FedEx.

  2. With the Fair Debt Collections Practices Act, be careful about stating you will commence litigation in the initial letter. Better to send the required 30-day validation letter to see the debtor’s response to the debt.

  3. We do not use certified mail unless there is a very specific requirement for it. The courts accept a declaration that a letter addressed to a correct home address is presumed received if there is no mail return.

    No such presumption applies, unless there is a signature on certified mail or Fed-Express, because many debtors are not home during mail delivery hours and will not bother to go to pick up and sign for a letter, especially if they know “it is something bad.”

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