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How to make a Debt recovery letter

A debt recovery letter or late payment letter is a letter to remind your client or customer that they owe you or your organisation. It sets out the details of the debt such as the date the debt owed should have been paid, whether interest is payable in the debt and a reminder that if the payment is not settled a legal action may follow. 

Make sure you follow the right first step in order to recover a debt that is owed to you or your organisation with this debt recovery letter template. By using a payment reminder letter you can feel assured that you have formally reminded your client or customer to make payment. 

Use this debt recovery letter:

  • when you want to recover a debt that is owing to you or your organisation
  • when you want to follow up after an invoice has been sent and the payment terms have expired or after 28 days have passed and the debt remains outstanding
  • when you want to commence a more formal procedure for collection of the debt

For more information, read Recovering debt

This late payment letter covers:

  • the date the debt owing should have been paid
  • whether interest is payable on the debt
  • automatic calculation of the amount of interest to be paid in total
  • automatic calculation of the continuing daily amount of interest charged as long as the debt remains unpaid
  • a threat of further action which may be taken if the debt is not paid

You need this letter when your client or customer is late with a payment and you want to commence a formal procedure for the collection of debt. This letter will remind your customer to pay the debt and ensure that your debtor knows the consequences of not settling the payment. These include late payment interest charges (if it is a business transaction) and/or a threat of legal action.

You can use this letter to start a debt recovery process for both individuals and organisations whether in course of business or not. Where there is no contractual interest, you can only charge interest on late payments if it's a business to business transaction and statutory interest applies. Statutory interest is 8% plus the Bank of England base rate and may be subject to changes. You cannot claim statutory interest if your customer is a consumer and not acting in the course of business. In such scenarios, you can only claim interest if the contract sets a contractual rate (ie late payment rate specified in the contract).

You should request your debtor to arrange the payment as soon as possible or on the same date. You can offer in this letter the debtor the option of making an alternative payment arrangement. An Alternative payment arrangement is a repayment agreement with your debtor in regular fixed instalments.

Ask a lawyer for advice:

  • on debt recovery procedures
  • on debt recovery outside England, Wales or Scotland
  • as to whether an insolvency procedure is appropriate

Other names for Debt recovery letter

Late payment letter, Payment reminder letter, First debt recovery letter, Overdue payment letter.