Referral of Claim for Collection

When a creditor wants to inform the debtor or the person who borrowed money from him about the collection of the debt, a formal claim letter is sent to the debtor. This letter is known as the claim for collection. For example, a person borrowed money from a bank for business purposes and when the date of return of the debt comes near, the bank has legal obligation and responsibility of informing the debtor about the repayment of his debt and this is done by sending him the claim for collection.

Introduction to the Referral of Claim for Collection:

There are many situations in which even if a person or debtor agreed to pay back the debt on time or on demand from the creditor, he denies returning the debt or declares himself as bankrupt and informs the creditor that he can’t or won’t return the debt. In this situation, the creditor has three choices; meet with the debtor and ask him to agree on mutual terms to repay the debt and offer him some kind of compensation, file a law suit against him and let the court take care of this matter or hire a collection agency and ask the agency to collect the debt on behalf of the creditor. When creditor decide to go with the third option; hiring a collection agency, they provide all the necessary details to the agency and ask them to proceed with the process.

At this point, the collection agency has the legal obligation to send a formal request letter to the debtor and ask him to come forward and meet for some kind of settlement. In this process, the formal referral of claim for collection is sent to the debtor in order to inform him about the current situation; the situation that the creditor has hired the collection agency for the collection of debt from the debtor. Once the debtor receives this letter, he can easy understand that the collection agency is referring to the creditor and informing him that from this point on, the collection agency will deal with the debtor instead of the actual creditor.

Key elements to include in the Referral of Claim for Collection:

  • Name of the debtor with complete address
  • Name of the creditor with complete address
  • Date when the claim for collection is sent to the debtor
  • Details of the debt that the debtor owes to the creditor
  • Reference to the actual creditor, debt amount and the agreement signed by the debtor in order to return the debt on demand from the creditor
  • Duration in which the collection agency wants the debtor to come forward and settle the dispute
  • Details of compensation that the creditor or the collection agency is offering to the debtor for settlement
  • Legal actions that the creditor and the collection agency will take in case of no response from the debtor
  • Terms and conditions of the loan or debt agreement that allows the creditor to take legal action against the debtor
  • Signature of the person who is sending the referral letter

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Referral of Claim for Collection

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