What is a Collection Dispute Letter? How to Write & Needs

What is a Collection Dispute Letter?

A collection dispute letter is a formal communication sent by a business to gain clarification into the validity of details of a collection claim. It is received by a collection agency or the party responsible for collecting the debt. The collection dispute letter is a formal way of clarifying and confirming that the debt in question is legitimate (e.g., free of errors and calculated correctly) and accurately documented.

A debt collection dispute letter is slightly different from a collection dispute letter as it relates more to debts that are collected from consumers by debt collection companies.

6 Reasons a Business Needs a Collection Dispute Letter

Although the most common reason for a collection dispute letter is to examine a billing error, there are many other instances in which a collection needs to be clarified. Here are some scenarios in which a business might send a collection dispute letter to a creditor:

Incorrect debt amount. The amount claimed may have been calculated incorrectly, charged twice or include unauthorized fees. A business might dispute an invoice showing a higher balance than the agreed-upon terms.

Mistakes in identifying the debtor. A debt might be incorrectly attributed to the wrong business. A business may receive a collection notice for an account they never opened.

Expired debt (Statute of Limitations). Some debts become uncollectible after a specific period under the statute of limitations. A collection dispute letter can verify whether a debt has surpassed its legal timeframe for collection.

Errors in debt details. Discrepancies in account numbers, payment dates, or creditor names can lead to confusion. A debtor or business may send a dispute letter when the creditor’s name is unfamiliar or inaccurate.

Fraud or identity theft. Proactively reviewing invoices and ensuring their validity can help avoid fraudulent activity and unauthorized charges that are made in their name without consent.

Preventing impact from negative credit. Promptly identifying and resolving a collection dispute is a proactive step to prevent the debt from being reported, which could negatively impact the business’s credit score.

How to Write a Collection Dispute Letter

An effective collection dispute letter includes the important details that can help avoid disputes entirely, saving your business time and resources. It also demonstrates your commitment to maintain a strong relationship with your customers. Using a collection dispute letter template can help ensure the letter is clear, concise, and includes all information necessary to substantiate the claim.

Sender and recipient information. Clearly state your contact details and include the name and address of the recipient (creditor, collection agency, or service provider).

Personal and account information. Include your name, contact information, and account number associated with the debt so that your case is identified accurately.

Description of dispute. The reason for the dispute should be clearly stated (e.g., incorrect amount, unfamiliar account, expired debt). If you’re unsure how to write a collection dispute letter, refer to a detailed collection dispute letter template for guidance.

Request for supporting documentation. Demand documentation that proves the debt is valid and legally owed by you. This could be in the form of invoices, contracts, purchase orders, or delivery receipts.

Deadline for response. Specify a reasonable timeframe for the creditor to respond, typically between 30 to 60 days from the data of the letter.

How Gaviti Minimizes the Need for Collection Dispute Letters

Lack of documentation, missing information, the use of overly aggressive language, and inattention to detail are common pitfalls that can lead to collection disputes. Gaviti’s autonomous invoice-to-cash A/R management solution streamlines the entire accounts receivable process, bringing organization, visibility, predictability and efficiency to your A/R and finance team.

Its platform includes:

Automated and customizable dunning workflows that can automate payment reminders and escalations, with the right message at the right time. By relying on collection email templates, you’ll also be able to ensure the language is respectful so that your business and A/R team is seen as professional and the relationship is maintained for future potential business opportunities.

A streamlined and automated invoice process to ensure accuracy and consistency. Pull invoice data directly from any ERP to include the relevant purchase details and add personalized messages. Improve customer satisfaction while at the same time reduce the potential for disputes.

AI-powered remittance matching that automates the traditionally manual process of matching payments to invoices, reducing errors that lead to disputes while delivering an improved customer experience.

Proactive monitoring of credit risks with an AI copilot that gathers credit information, updates customer risk scores and suggests customer credit limits to avoid disputes.

Up-to-date A/R reporting and forecasting with data you can trust, enabling accurate invoicing and proactive monitoring of high-risk customers to avoid disputes and unpaid invoices.

Solve disputes quickly when they do arise by providing clear instructions for your customer to aid in resolution. Provide full credit and collection history available in one place to avoid miscommunication and errors that might escalate to disputes.

Want to learn more about how Gaviti’s autonomous invoice-to-cash A/R management platform streamlines the entire accounts receivable process to avoid disputes? Get a demo today!