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What Should an eCommerce Business Do if it Receives a Debt Collection Letter?

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As an eCommerce brand, you must make payments for your business’ purchases on time. However, cash flow can be difficult to manage, which results in your business not paying its invoices or paying bills late. Alternatively, you may innocently forget to make a payment. Where any of these occur, you could end up receiving a debt collection letter as part of a debt recovery process. This article will explain what to do if your eCommerce business receives a debt collection letter.  

What is a Debt Collection Letter?

When your internet brand makes a business-to-business purchase for goods or services, you will agree to business terms with the company. One of these will cover their payment terms, which you must honour. Alternatively, you may have a contract with the company, which is a legally binding agreement, and your internet brand should adhere to this. 

A debt collection letter is a letter that your eCommerce business receives for money that you owe another business. If your internet brand receives a debt collection letter, it means you have not adhered to the payment terms, and payment is overdue. Therefore, you have not paid an invoice on time that you owe the business. 

If the letter is the first letter about the debt or payment missed, it will generally come from the creditor your eCommerce business owes money to. However, when your business receives a letter from a debt collection agency, it means the creditor has passed the debt to another business.

What Should an eCommerce Business Do if it Receives a Debt Collection Letter?

If your eCommerce business receives a debt collection letter, it is essential to know what to do and to act on it. As a business owner who has built up your eCommerce business, you do not want to ruin its reputation by not paying the debts that it owes. Additionally, paying creditors late means they may have the legal right to charge your eCommerce business interest, debt recovery costs and compensation. To avoid this, you should consider the following steps. 

1. Pay if Possible

If the debt collection letter is the first letter your eCommerce business receives about the payment you owe, it is crucial to respond as soon as you can to avoid the matter escalating. Naturally, if your internet business can pay the invoice or payment you owe, you should do so to resolve the issue. Where the debt collection letter is not the first letter, you have likely either missed other letters or not responded to them. Also, by this stage, a debt collection agency may have taken the debt. 

2. Respond

You must respond to a debt collection letter for your internet business. Ignoring them will mean the company may take further legal action, such as court action. This could cost your eCommerce business more money than the debt. It will also cost you time and your business reputation. 

When you receive a debt collection letter, you should respond within two weeks. If you disagree that you owe the debt or the amount in question, your response should state this. If you cannot pay the total amount, your internet business should try to arrange a payment plan that you can afford. Accordingly, your creditor may agree to an affordable payment plan. If they do not, they may take you to court, making a country court claim.  

If your creditor takes your internet business to court, and you do not contest the payment or do and lose, you will receive a county court judgment as a result. This means you will have to pay your debt. This will affect the credit rating of your eCommerce business. Ultimately, not paying any business debts can result in:

  • statutory demands;
  • bankruptcy petitions; and 
  • winding-up petitions. 

Debt Collector

It is important to note what a debt collector can and cannot do. A debt collection agency has no particular or special legal powers over your internet business. While they can take court action if you do not pay the money you owe, they cannot:

  • lie about the powers they have; or
  • pester your e-commerce business with too many phone calls.
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Key Takeaways

If you receive a debt collection letter, you should respond accordingly. If possible, you should try to pay the amount in full unless you dispute the sum you owe. Alternatively, where you cannot pay, you can try to make a payment arrangement with the business. Ultimately, the creditor can decide not to accept this and take you to court. It is essential that where the debt collection letter comes from, a debt collector, rather than your creditor, knows what they can and cannot do. 

For more information, LegalVision’s experienced eCommerce lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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