Cornell university Library Installment sales and collections, INSTALLMENT SALES AND COLLECTIONS. YOURSELF: Pull down the flap and seal yourself in. Then, when your correspondent opens the envelope, you step out; your eye looks squarely into his; your voice speaks a message in a way that demands his attention. INSTALLMENT SALES AND COLLECTIONS By BRYANT W. GRIFFIN MANAGER NEW BUSINESS DEPARTMENT GOTHAM NATIONAL BANK OF NEW YORK Formerly Collection Manager: Guaranty Banking Corporation, Chicago; Continental Guaranty Corporation, New York New YorK PRENTICE-HALL, INC. 1922 Copyright, 1922, by PRENTICE-HALL, Inc. All rights reserved (773 7r° Printed in the United States of America DEDICATION This book is affectionately dedicated to my DARLING LITTLE BOY, an assiduous collector of marbles, pieces of zinc pipe, dolls and teddy bears; but not money. When he grows up he is “going to work in the office like his ‘Daddy’,” and I believe he may be a collection man, but of the old school, for he told me this morning what he would do to me if I didn’t hurry up and tie his shoe. B. W. G. FLusHING, Lonc IsLAND PREFACE Extent of installment business——“Only during the past ten years has the installment business assumed proportions sufficient to make the collection of such accounts a work equal to, if not surpassing in importance, the collection of orthodox open accounts. ‘Your credit is good with us,’ is boldly advertised in all lines. There is not a town in the United States where furniture cannot be purchased by the newly-wed with a comparatively small cash payment. A dollar will bring a talking machine into the apartment. Pianos, talking machines, diamonds, furs, clothes, auto- mobiles, electrical household goods, all types of machinery and equipment, stocks and bonds houses and cooperative apartments—and even charities, can be arranged on the in- stallment plan.” * This plan has simply created business. The automobile salesman has an easy answer for the man who has only two hundred dollars, but hopes to have a car some day. A demonstration ride and the car is sold. The larger part of the articles sold on the installment plan would not be sold, and other uses for the money would likely be found if one had to wait to accumulate $800 for a piano, or $15,000 for a house before he could buy. How much of the stringency of these times is due to in- stallment business would be hard to say, for no one knows how far the merchant has gone in tying up his capital for months in installment sales to purchasers of articles for which he (the merchant) had to pay within thirty days; and no one can know the hardship worked on the millions of installment purchasers who overbought and mortgaged the future, and are now struggling to finish the monthly pay- ments on articles bought during the flush war period at the then prevailing prices. The extent and, on the other hand, the blessings of the installment plan are realized as one sees the procession of 1B. M. Skinner, “Credits and Collections.” vii vill PREFACE cars leaving the city; three out of four being bought on the time-payment plan. The small towns, as it becomes twilight, are entertained by radiophone and victrolas, ‘“dollar-down, balance monthly.” Fortunate and myriad are the men who are buying their houses, “balance like rent.” And strange to say, in the tremendous field of install- ment collections, not a single book has been printed in English. Scope of the work.—In any installment business, the credit and collection is the big department. Sales are made easy on the deferred payment plan. But credit and: especi- ally collection work is multiplied through breaking the bill up into a dozen payments or installments. Then there is the danger of a change in the buyer’s financial status during the months the collection has to run, and the possibility of deteri- oration in the collateral. Just as collections are necessarily emphasized in the install- ment concern, so we have emphasized them in this book. A practical book.—This book was written, not by theor- ists, but by ‘successful installment credit and collection managers. For the two chapters bearing directly on credits: “Installment Sales and the Dealer of Moderate Capital,” and ‘“‘Factors In Passing Credit,” we are obligated to Mr. E. O. Rockwood, Credit Manager of the Columbia Grapho- phone Co., and to Mr. F. M. Zimmerman, Credit Manager of the Auto Brokerage Co. For the contribution on “Testing Form Letters” we are indebted to the late Mr. A. S. Wolf, formerly Collection Manager for the System Magazine and A. W. Shaw Publi- cations, later Credit and Office Manager, and then Vice- President and General Manager of the Pittsburgh Mortgage and the Colonial Finance Trust. Mr. H. C. Greene, who has charge of installment collections at Bloomingdale’s Depart- ment Store, has kindly contributed two chapters: ‘Selling on the Installment Plan,” and “Furniture and Musical Instru- ments.” Mr. G. F. Muse, the Collection man of the Com- mercial Investment Trust, wrote the chapter on ‘“Prophy- lactic Collections.” Some of the best letters quoted are his. Out of ‘his abundant experience hath spoken my good friend Mr. Frank J. Rooney, Chief Adjuster of the Con- tinental Guaranty Corporation, and Manager of the San PREFACE 1x Francisco branch. He has contributed to the chapter on “Adjusters.” To each of these prominent and busy New York, Chicago and San Francisco business men, I want to express my sin- cere thanks. I am also grateful to Mr. William C. McCabe for sug- gestions. He was formerly with the wholesale department of Marshall Field, and of Carson, Pirie & Scott. Walter Knapp Tompkins, Esq., is a prominent New York attorney, a specialist on chattel mortgage forms and install- ment sales forms, and attorney for one of the leading associa- tions of manufacturers and dealers whose line is sold heavily on the installment plan. He is also the manager of the Uni- form Sales Service. He has revised the laws in the Appen- dix up to date, and has made a valuable legal contribution to the book in furnishing, in compact, readable, up-to-date form, all the law that it is necessary to know to decide how to act in the various States. I acknowledge my indebtedness to the A. W. Shaw Co., publishers of System, and to the Postage Magazine, for their kind permission to use material of mine that has come out in their publications; also P. F. Collier & Son, and Samuel B. Crowthers, for their permission to use ideas from my article in ‘““The Book of Business.” I have the Eastern Manufacturing Co., to thank for the drawings from which the illustrations were taken. CONTENTS CHAPTER PAGE I—INTRODUCTORY CHAPTER . . . 2. 4, 1 The letter; The answer; The secret of collections. II—IMPORTANCE OF COLLECTIONS. . . . . . 3 Promptness a primary consideration; Prompt collections save losses; Turnover affected by slow collections; Slow collections cut down sales; Importance of good collection men. IJI—SELLING ON THE INSTALLMENT PLAN . . . 5 Increase in installment sales; Competition the cause; Terms; Form of sale; Dangers of installment selling; Advantages of in- stallment selling; Ethics of installment collections. IV—INSTALLMENT SALES WITH MODERATE CAPITAL . 11 Credit and cash business compared; Financial balance endangered by over-installment selling; Economic laws must be observed; Proper proportion of capital to business required; Reasonable allowance for furniture and fixtures; Ratio of liabilities and assets ; ‘When to apply the brakes; Basis for successful installment opera- tions; Correct forms; Sound credits; Efficient follow-up system; Common sense applied to collections; Terms satisfactory to both parties; Repossession. V—Facrors IN PassING CREDIT . . . . . 19 Factors; Willingness to pay; Stability and habits; Character and reputation; Credit to a corporation; Problems as to bank- rupts; Ability to pay; Bank references important; Life insurance evidence of thrift; Getting credit information; Applicants must give facts; Value of confidential information; Checking credit of a typical case; Quick work is essential; Co-operation the means to success; System will ease manager’s burden; Records for reference; Rating books and black lists; Mortgage forms; Filing of liens. VI—CoLLEcCTION PsycHoLoGy . . . .. . . 3l Why men pay; How waste-baskets are filled; Past experience useful; Human nature the same; Classes of debtors; Tact in collec- tions; Resale of goods; Collector part salesman; Reawakening interest; Driving the debtor; Selling honesty; Honesty basic motive for paying debts; Definite and personal; A real personal letter; Friendly letter collects where threats fail; Sympathy in collections; Force ineffectual; Examples of appeal to pride; A man of your standing; Appeal to credit standing; Another credit appeal; Determination essential; “Adjusting” a $5,000 debt. xi xil CONTENTS CHAPTER PAGE VII—Propuytactic COLLECTIONS . . . . . . 45 Collection is salesmanship; Principles of advertising applied to collections; Selling the collection idea; Assistance from the credit department; Training the debtor; Foundation for collection on notes; Results; Illustrations; Two educative letters. VilI—Avutomatic Fottow-up MetTuops. . . . 54 The course of collections; Skeleton outline; The statement; Forms of maturity notices; Form letters; Testing form letters; How a test is made; Working out the results; Form letters individually typed; Proof that individual letters pay; Examples of sets of letters; Records easily kept; Advantages of form letters; Making forms personal; Professional appeal; Timely appeal; A holiday dun; A pay-day reminder. IX—DicTaTep LETTERS: FoRM AND PERSONAL . . 66 Writing to one man; The advantages of forms; An indexed card stand; Specimen sheet; Dictation made easy; Successful dictated letters; Terseness and strength; Make it short; Personal element again; Grape fruit, oranges, promotion; Courtesy; Threats; Straightforward appeals best; Letter censoring. X—EXAMPLES OF SUCCESSFUL COLLECTION LETTERS . 72 All tested letters; Printed form first; Friendly reminders; Appeal to reason; Collection of interest; A publisher’s letter; Effective but irritating; Harking back to the note; One of the “best pullers”; A shock to the debtor; Too weak for installments; Credit appeal; Use of credit stationery; To the dealer as an endorser; Reaching the truckman; The appeal of timeliness; Suggesting dual loss; Future effect good also; Caused some debtors to whine; Repesses- sions; An Al puller; Threats to repossess; Demands for collateral; Full amount due and payable; Threat of additional cost; Driving the facts home; Cutting down on threats; Send through the local bank; Bank may clear situation; Threats in tabloid form; Threats on note and contract; A phrase that grips; A solar plexus dun; Legal threats; Brief and pointed; A publisher’s final effort; The lawyer steps in; The house attorney; A typical set of “friendly” letters; Impersonal in tone; The customer who “pays short”; Customer may be right; Urgent but polite; Veiled threat justified ; A final “bluff”; New busimess solicited. XI—Tue Make-up AND MAILING . . . . . 94 To attract attention; Blue at non-payment; Illustrating collection letters; Timing the follow-up; The mailing schedule; The en- velope; Deliberate mixing of envelopes. XIJ—PHONES AND WIRES IN COLLECTING. . . . 97 Advantages of the telephone; Gets debtor’s immediate attention; Use of wires; Telegraphic money-getters; Last resort uses for wires; Registered letter. CONTENTS xill CHAPTER PAGE XIJJ—Last-Resort Metuwops .... ... 101 Some of these methods may serve you; Review credit informa- tion; Inspection of the collateral; Concerns which check collateral ; Printed letter, supposedly from agency; Value; Renew note with additional security; Character and ability count; Discount debtor’s note at his own bank; Aiding the debtor directly; Seek cause for criminal action; The element of fraud; Easy when you have the goods; Beating political influence; Adjuster the best recourse. XIV—TueE ADJUSTER AND HIS MeTHops. . . . 108 Qualifications for success; Adjuster must get full information; Bank comes to the rescue; Discretion a virtue; Adjuster must clean up the claim; Department store adjustments; Method of keeping in touch with adjusters; Mixed up accounts; To avoid misunder- standings; Value of personal contact. XV—ATTORNEYS AND COLLECTION AGENCIES. ... 113 Care in selecting an attorney; The house attorney; Successful attorney letters; Difficult to get action; Review losses for future guidance. XVI—DIGEstT oF Laws OF THE VARIOUS STATES ON CONTRACTS OF CONDITIONAL SALE AND CHATTEL MortTGaGes . ... . . . . . . «. 116 Conditional Sale; Exemption; Election of remedies; Foreclosure; Uniform conditional sales act; Penalty. Each state is covered in alphabetical order as to—Conditional Sale—Filing or record- ing; Exemption; Rights and remedies of seller and buyer; Pen- alty—Chattel Mortgage—Filing or recording; Exemption; Rights and remedies of parties; Penalty. XVII—Fo.Litow-up Systems ANALYZED . . ... 177 Objections to many systems; Follow-up date on the correspondence file; Extra carbon filed ahead for follow-up purposes; Ledger card attached to outside of folder, with a place for follow-up; A per- sonal tickler file on small cards; Master sheet or control book; Personal inspection of all ledger cards; Duplicate system of cards with collection cards filed by maturities; Two groups of cards made; The regular file; How the regular file works; The special or delinquent file; On correspondence; Geographical divisions; Stencils. XVIII—Gettinc Your MEN STARTED RIGHT .. . 182 Case of too much pep; Letter to unsuccessful applicants; The reply; The successful applicant; Personal contact. xiv CONTENTS CHAPTER PAGE XIX—FurRwITURE AND Musical INSTRUMENTS . . 185 Fixing terms; Credit a salable accommodation; Depreciation de- termines deposits; Form of sale; Credits and the moral risk; Character as a credit factor; Collections; Differences between open and installment accounts; Reselling the instrument; Organiza- tion of the department; Legal department. XX—HONEsTY AND COLLECTIONS. . . . . . 190 Personal experience confirms impression of .basic honesty; Ex- amples of dishonest practices; A crooked photographer’s trick; Temptations of the collection man; Is deception justified; Beating a thief with a lie; Unfavorable reactions on collection men; Getting a broader view. APPENDIX: A RESUME ON COLLECTIONS ARRANGED ALPHABETICALLY . . . .. . . . . . 195 The mechanical workings of the collection department briefly set forth for convenient reference. BIBLIOGRAPHY oe. eh Oat Freight and War Tax on Passenger Car or Truck-________$- In tons Trpe of Body. ADDITIONAL EQUIFMENT O caces cae eked tte he eae tee pmenes ke ak a Lekeg Deve —— ee Allowed on Trade In——$.___________ Give full meme of cock Front Bumper — > other wance——___$_-__—____ item and indicate whether Asy allo some forms pert of Rear Bumper Sos Balance by Note regular fectery rquipment. If eddsticnal equipment is Fire Extinguisher —____$___—___. purchesed, show cost of each item where tf con Monthly Installments = se Of $s Each 5 stitutes part-of cash sell- img price. a Gc iccaeareetnae me Total Cash Price _—————_____$________ Total Time Selling Price $. 9. IN WITNESS WHEREOF, the buyer and seller have hereunto set their hands and seals-————-_—¥__—. —_________1 (Fil im date bere) Witness to bayer’s signature———_——_________________———- BUYER; ——_____{. ______...__.....___ (i. §) Address of witness______________-__—- -___-___-—- BY Residence Address of BUYER State of New York No Town or Cty t+ county of —__—. Business Address of SELLER: State of New York No Town or City of SOLD UNDER PLAN NO. (Have buyer of car sign bere) ee ee Street oR as SF (Have seller sign bere) ee BY eee en Comey of Fdi im exect nu=ber cf gion DEALER'S ASSIGNMENT AND GUARANTY OF CLEAR TITLE For value received, and simultaneously with the purchase of the note referred to therein, the undersigned hereby sells, assigns and transfers, the within Security Agreement to the AUTO BROKERAGE COMPANY, Inc., a New York Corporation, and hereby represents and certifies that nothing has been done which in any way impairs, modifies, limits, o: in any other way affects the validity or enforcibility of the aforesaid note and Security, Agreement, and further certifies that the said note arose from the sale of the car described in the any part of the said amount so specified as having been paid in cash, and certifies that such car has been de- livered to the buyer and that the statements cont ained in said Security Agreement are in all respects true and correct, and the undersigned further represents that the automobile so described was sold and delivered by the seller to the buyer and that the seller had authority to sell and deliver the same, and that said automobile was not consigned to the seller, nor were there any conditions which prevented the absolute title from vesting in the buyer, subject, however, to this Security Agreement, and said automobile is free and clear of any and every claim of any kind whatsoever, and these Statements and representations are made knowing and intending that AUTO ee COMPANY, Inc., shall rely upon the same in the purchase of the said “note and Security Agreement. Notary Public will fill in proper acknowledgment. NEW YORK NO......ccccsecccesesesee Individual or Partnership Acknowledg- ment of Assignment STATE OF NEW YORK 88: COUNTY OF ssscicamisiiccinccssacionrarcan eseeseosses On this. wey” OF sececevssessssscuiecese ic LOZ cecesais . before me CAME... .cssorseancersonsersenecarsecsenssecosscseansrssssarsusesessesesssosesssosersonsessen one of the Name of dealer here tf individual to me known to be the individual described ‘in and who exe- cuted the foregoing assignment, and acknowledged that he executed the same. Notary Public....ssccsssssssssssssscscsssseessseesssscsesgcsnesensenveectsnnysesecsuessad County Name of county Buyer Seller to SEO R eee ee meee ewwres cecenwec ccc coe mss cteceetecereeseutseseeesoseceoes. OF0 0000 00 Ov ee Tore ec ree ter enrrercurenes Temes cece eeesene ee coteEnesosce AUTO BROKERAGE COMPANY, Inc Assigned DY............ccccccccccccsccescecceessecssesseesece Security Agreement Partnerships must sign firm name by partner Signing. Corporations must sign corporate name by officer signing and must affix its corporate seal. Corporate Acknowledgment of Assignment STATE OF NEW YORK, 88: COUNTY OF o.nessecsssscssssees aesesscaveagece vosereanesreszoeen 0 On this... sssssssees AY OF crsrcssoreerersseees reserve OZ. before me Personally CaMe........ssserssecsserescseseseceeneeeseecssceseser soseeseeseee eeseesenrsececeseceneceren Name of officer signing assignment to me known, who, being by me duly sworn, did depose and Bay that he resides it....scsscsssessecscecscssccesssees esseeceseveeraesersees co sseeenevensseesen that he is the.. Name of desler if a corporation te ee gare the corporation described in and which executed the foregoing assignment; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said cor- poration and that he signed his name thereto by like order. sted tereeeneceereneeressreeseecsoeeysenrensseeressonscseereoesees: eeeneerescseaers Notary ‘signs here Notatiy: (Pa blicsscscscssesssetestevsiusssievinv sectctea copteseat an stioceatesteass os sseeseeseesCOMNTY Name of county i and Assignment PMO. iss cei ciata ccececesih deca ssadicaiseseetebeccasscaessease Date Delivered................soccsscsresessscecsesersee COREY 35522 coosscecs icc cassssiscecssececsctosssscicsecciveccd Daten icsisicssict sas csssieons sn sesivtossanieenieats PLACE SEAL CORPORATIONS HERE 2 crf fo saquines $9043 US ffey peneenmeMON NV TE YAAINO GOS jo AYANO) yo AY) 30 GMO} PAINS ON MJOX MON JO NUNS IUMMITEAS 39 SSUppy Ssoursng : ‘ xa J yous , (2194 UBS Saas aaez) awsodsoa ty xyjo | CS “D woOrT1as esis guaussasO0 S442 Buubss woryps0gs09 yova pwn 4any¥fo yo AyTMOZ jo 4K) Jo amoy, Parssoyinn fq ausow ayosogaoa wu OF WINS ON YIOX MON JO 3301S MOAN JO Ssasppy souUSpreoy iain ee AL Ju 30 ssosppy a’ nas ial ene Pc tks (a13q «UZIs sed yo radnq avy) ns “aduuaanestg Cs “1D two AAG snzeusis ssa4nq 0% sHoInI A, (2294 a3ep Ut Ifa) 61 g[eas pue gpury 1194} 498 OUNasOg savy Ja]]as pue Ja{nq 04} ‘WOAUAHM SSANLIM NI . FYaH Tvas SLI AOVId NOILVUOdaOD Vv sr oe ae eee ane See undgegnsnemessrseeensen ge ag Zayas aur, TRoL, 3 oer $38 syusuN[eysuy A[WIWOWL 330N Aq aouejeg seanaenerarersevensacenesens eGansneangee IIB MOLLE 49430 fuy Ascbacaceandsesenboetedrocee @sceresss (gy: oper, uo peaory sesneonseanesensecanscnnonsnaQesnsneszaccensonsoensee gy pred qEeD . “kpog jo adh t fe svovonaecacenseraes aces: suo} uy emdensecnenerscannveesnesnscceanagesansonevipacsnnenn..080seunes Ayroede «Nn 40 FIX samsup srveeavennsanecansonecnscanegpesssensransenueanonasenoneeggty y YSE [OL oO tanad bus jas ysvr fo.qang sagngas $ “02 js asaym ways YyIDa fo 3s02 moys ‘pasnyrang $ ADYSINIAHXT I11T St guatudinba youossppp {7 ‘yuaudinbs £40390f 40jnbas $ dung seay JO j4og = Sussofe amos ee 4ayjJaYyar azDI1pur pun ways $ aaduing 3003.7 yona fo awn jinf aasy $ ao1Aaq =BuIyD07T ‘$ saqny, pue soy INSNAINOA TWNOILLIGGV "YONI, JO ivy ssBuasseq uo xey sep, pue yqB13q7 “s0jVT "GT ‘O “Wf 3JeQ saBsuasseg jo 211g Ist] ALOPICET “YT “‘O “Q sisseyo Jo ag ysl] D uo pasm 2q OL ~ Cpog pun sisspya 40 Kjuo sissoyo fs aynys ‘yong fs pun ‘soya. 40 Aayspoos ‘6u14n0. t DANO Titesseeevsereasncosnavanscescnrsqeansesanseounas sy £4 DEALER'S ASSIGNMENT AND GUARANTY OF CLEAR TITLE For value received, and simultaneously with the purchase of the note referred to therein, the undersigned hereby sells, assigns and transfers, the within Security Agreement to the AUTO BROKERAGE COMPANY, Inc., a New York Corporation, and hereby represents and certifies that nothing has been done which in any way impairs, modifies, limits, o: in any other way affects the validity or enforcibility of the aforesaid note and Security Agreement, and further certifies that the said note arose from the sale of the car described in the within Security Agreement, and further certifies that the amount of cash specified as having been paid in by the buyer was actually paid by the buyer to the seller and that no part of said cash was furnished by the seller or the seller’s agent and that the seller does ‘not hold the buyer or the buyer’s agent’s deferred obligation for any part of the said amount so specified as having been paid in cash, and certifies that such car has been de- livered to the buyer and that the statements contained in said Security Agreement are in all respects true and correct, and the undersigned further represents that the automobile so described was sold and delivered by tha seller to the buyer and that the seller had authority to sell and deliver the same, and that said automobile was not consigned to the seller, nor were there any conditions which prevented the absolute title from vesting in the buyer, subject, however, to this Security Agreement, and said automobile is free and clear of any and every claim of any kind whatsoever, and these statements and representations are made knowing and intending that AUTO oe COMPANY, Inc., shall rely upon the same in the purchase of the said note and Security Agreement. Dated 192 a se (L. S$.) Dealer signs his name here at 6 Name of City ay Parinerships must sign firm name by partner signing. Corporations must sign corporate name by officer signing and must affix tts corporate seal. Individual or Partnership Acknowledg- Corporate Acknowledgment PLACE SEAL CORPORATIONS HERE CHAPTER VI COLLECTION PSYCHOLOGY Why men pay.—What makes you pay? You do not have to, at least not the small bills. You probably will agree on the following reasons: 1. Honesty. 2. Pride, or sense of shame. 3. Desire for good credit. Keep these motives in the back of your mind while we pro- ceed with the discussion. If these are the reasons you pay, they will be the reasons that others pay. You see, we are go- ing to discuss this subject subjectively, reasoning from our- selves as typical in emotions of all men, rather than to work objectively, giving rules for collections, as though such rules could be formulated in a cut and dried manner. In thinking of what kind of letters would collect money, let us consider what kind of letters appeal to us. This seems elementary, but, as one reads the collection letters he receives, he realizes how many collection men overlook the fundamen- tals. What do you do with the collection letters which you receive? Most of them go to the waste-basket, do they not? How waste-baskets are filled—They go there for two rea- sons, as a rule? One is because they are too much alike to get your interest. They are like the jeweller’s clocks that always point to twenty minutes past eight. And the second reason is that a person is a little sensitive about past due obli- gations. The majority of collection letters, with their con- tinued helpless threats, rasp on your feelings. What place have good sense and good will in the collection procedure, one is compelled to wonder. Photograph that mood of yours after you receive some inane collection letter, and place that photograph under the glass top on your desk, and I venture that the letters you write will at least have individuality. Your letters must not be something that will do for “them,” but something that would have been politic enough, persuasive enough, yet strong enough to have drawn a check from you, 31 32 INSTALLMENT COLLECTIONS instead of being consigned to the waste-basket, and creating nothing else except a raw edge for the day’s work. Past experience useful.—We are safe in advancing another step and saying that successful collection efforts will be those that have been successful in the past. ‘The shrewd collection man, when he receives a wire that money is being mailed, or some other evidence of desire to pay, will look to see what produced that result, so that he may use the same means again. In the chapter on ‘Letters’ we will discuss the subject of testing letters in detail, with charts to illustrate, so be it enough at the start to recognize that the principle of scientific testing has advanced out of the reach of machine production into more intangible spheres of work. For instance, Profes- sor Thorndike, of Columbia University, made use of this prin- ciple in testing methods of teaching spelling. Human nature the same.—When you test letters, as you should if you have not already, you will see how strikingly human nature reacts in the same way to the same appeals. - I know of one case in which a thousand or so accounts had been charged off to bad debts and forgotten. These collec- tions were taken out after a year or so, and listed, and a sin- gle well-tested letter mailed them, with the result that in a number of cases a large part of the outstanding accounts was paid in cash by return mail. That letter was written twelve or fifteen years ago, and is today being sent out in identically the same circumstances by the same house, and with the same result, after every other collection method has failed. The minds of most people react in very much the same way. It is amusing when you read different books on economics, to see how frequently they begin discussion of money by describ- ing it as originally barter, and how the system of shells was evolved as an elementary money. Classes of debtors.—The few books that have been writ- ten on collections are inclined to divide humanity into three general classes, as follows: 1. Those who can and intend to pay. 2. Those who can and won't pay. 3. Those who absolutely can’t pay. The president of one of New York’s banking institutions was also president of a national credit insurance company. He is a most successful collection man. He wrote a let COLLECTION PSYCHOLOGY i ter to his collection manager which divides delinquent human- ity into three classes, under far-seeing classifications of (1) crooks, (2) the morally obtuse, (3) the improvident; and in this letter he discusses how these three classes may be ap- pealed to. A copy of this letter fell into my hands, and as I have collected other things besides money, I retained it, and you mav now have the benefit of its philosophy: It is not my position at all that we ought to throw away the advantage of asserting that we have a right to the money, or of demanding payment under that right, and my thcught is not at all that you ought merely to harp on the one string that a man has forgotten to send you the money. My thought is, on the other hand, that every debtor should be appealed to from every side of his mental make-up that we can possibly reach; but that even in the case of asserting a right, there are two ways of doing it. If a man is sitting on my front door-step against my wishes, I do not need to choose between telling him the advantages of going home, and pointing out how nice it would be to sit in his own living room on the one hand; and throwing him bodily off the front step, on the other. In other words, I do not have either to coax him off, or throw him off. I can explain to him that it is my front step, and that for good and sufficient reasons, I like to keep my front step to myself; that he has no place there with- out my consent and that, therefore, he ought and must get up and move. The same thing is true of collecting money. I do not need to coax a man to pay, although I should be perfectly willing to do that too, if that were the quickest way to get the money. But it may be that at a certain stage of the collection effort, the emphasis should be laid entirely on our right to the money, and the demand that this right be respected may become more and more in- sistent with every letter we write him, and still not culminate for a long time in actually taking the money away from him by process of law. In my thought of collections, I always approach the problem by 2 process of elimination, and that means that I approach it backwards. I say to myself that there are few men in the world, relative to the whole number of men, who would go into my house or my office and actually take money out of my desk if it belonged to me and keep it, even though they were quite sure they would not be detected in doing so. As to those few who would do this, who are just out and out crooks, no collection effort will suffice, save one of two things, either force, or threat of force, but they are the last and worst class to handle, and happily very few in number. Next to them is a much larger class—a class of men who do not think straight, who do not recognize the rights and wrongs of respecting or abusing terms of payment, who do not feel that they are stealing interest from me when they keep my money five minutes after it is due, who would not blush to tell me that they knew an item was due yesterday, and offer payment today without offering me the interest that they have stolen from me. These men are not bad men. They are merely obtuse morally; but if my right to money due me at the time that it is due can be made plain to these men, so that they cannot becloud the issue before their own consciences, a great majority of such men will pay if they can. The next troublesome class, and a still larger one, is the improvident class which consists of men who have committed themselves to paying certain amounts of money at times when it is difficult, or perhaps impossible for them to live up to their obligations. 34 INSTALLMENT COLLECTIONS , The word “impossible” of course is a relative term; I mean impossible from the viewpoint of the debtor. If it is only inconvenient, as the debtor himself would size it up, then all that is necessary to make him pay is to make him realize the unfairness, the dishonour, the iniquity, the danger of keeping me from my rights ; emphasizing this to the point where it will outweigh in his thought the inconvenience of going to work and getting the money, or bor- rowing or selling something to realize it, or standing off some other less im- portunate creditor. If, on the other hand, he really feels that it is impossible, then all this urging will not avail. He must either be threatened or forced into doing it. Often- times a man who is sure that something was impossible five minutes ago, sees a great light now, because he has been confronted with an alternative which is very much less to his liking. Certainly, in dealing with any of these classes, we ought to be far better artists in our chosen profession of separating people from their money than the lawyer, who has no knowledge of the art of this, ninety-nine times out of a hundred, and merely knows out of books certain forms that he goes through to get what he calls a judgment, and realizes upon it—maybe. I might go on indefinitely with descriptions of other classes of debtors, but I trust I have made my point plain; that I have not at all in mind the idea of wheedling a debtor into paying his debts, or certainly not that alone, or in any important degree. I have in mind the utilization of that same psychological advantage which th: policeman enjoys when one policeman bosses a whole crowd of. people who d> not want to do what he wants them to do, merely by asserting his right to tell them to get off the side-walk, or move on. He does not hit them on the head, he does not drive them back. He merely insists that they go back, and they go, because he has a right to demand it; and it is because we have a right to demand money when it is due that we ask for it, and if we know how to play upon the mind of the debtor, we can get that money in the great majority of cases without the necessity of any resort to force, as has been excellently demonstrated in the experience of the ————- on its collections. Tact in collections.—In thinking in general of how to in- duce men to pay, remember how sensitive you are over an ob- ligation, and how, when you really intended to pay, and probably would have if you had been left alone, you post- poned payment on account of having received a tactless. col- lection letter. Tact comes from a Latin word “‘tango” which means to “touch.” A tactful man is a man who gets in touch with his correspondent. When the collection.man gets “touchy” him- self he cannot maintain the proper touch with the debtor. Re-sale of goods.—Sales managers like to lecture their sales- men about what they call ‘‘sales-resistance.” This is a very real thing, as every salesman knows, and he will lie awake nights planning out methods to overcome it. We might equally well speak of “collection resistance,” which is just about as difficult to overcome. If the salesman can once get his prospect to the point of COLLECTION PSYCHOLOGY 35 wanting an article more than he wants the money it costs, the battle is won. But part of the burden is passed along to the collection man if the salesman has used easy terms of pay- ment to overcome the “‘sales-resistance.” After the contract is signed, the customer may regret his decision, or at any rate, become very much less enthusiastic about his purchase. Collector part salesman.—A good collection man there- fore, must be one-half salesman, since he must keep his cus- tomers sold continuously, bringing them back to the state of mind in which they decided to buy. It is fair to assume that if the customer wanted his piano or automobile enough to agree on the purchase price, he is still of the same mind, or may be brought back to it. This is called the principle of re- sale, and it is a very important principle of collection. By emphasizing this principle, we can keep in the background the disagreeable fact that the customer will be held to his con- tract, if necessary. In the earlier stages of collections, only this argument should be used, together with the familiar sug- gestion that payment has been overlooked, forgotten, etc. If collection‘has not been made, and the item is still out- standing, the transaction can be freshened by a resale of the goods or service. Reawakening interest.—Below is a sample of a letter used in automobile collections which illustrates this fact. If the purchaser of the automobile can be made as enthusiastic as at the first drive-away, he will pay. It is in your car that you and your friends hie away from the crowded city streets, away and away along’ the stately Palisades, the Fells of Wisconsin, or you follow the meandering of some green river or the shore line of Silver Lake, until the peace of the scene sinks into your heart. Disturbing successes and undeserved failures, if they flash across your mind at the wheel, read like the affairs of someone else. You come back into the traffic with the cobwebs blown from your brain—eager for the fray. But, incidentally, you must have oil on the way, and gas; and they ask pay for it. Must we remind you that if you have not already mailed remittance, the car itself must be paid for and the request of a banking institution for the liquida- tion of a note must not be misunderstood, no matter in what language it is put? Did faacata disievausracazense Salsas Please. Very truly yours, Thank you. Here is an exceptional example of a good resale letter sent to the writer. It was so good that the writer, who was in- tending to accept the full set of collection letters, paid up, and lost the benefit of better letters that might follow. 36 INSTALLMENT COLLECTIONS THE ANTI-SALOON LEAGUE OF NEW YORK William H. Anderson, State Superintendent 16th Floor, 906 Broapway at 20th Street New York City Telephone Stuyvesant 8490 May 11, 1921. Dear Friend: We do not believe that pity for destitute mothers and suffering children has gone from the hearts of the men and women of New York. We do not believe that in failing to keep your pledge to help support our work, you considered just what that unkept pledge meant to the drink-cursed homes in this State. There are many reasons for combatting this illicit traffic—but perhaps no reason is so great as that of the human suffering, the blindness, the disease, the poverty, the hardship caused by booze. It is quite possible that in making your pledge you were inspired by the thought of such results of law violation. We are confident that your mind and heart will again respond and that you will keep faith as you promised. It is not only the Anti-Saloon League which appeals thus to your spirit of kindness. It is the mute supplication of the unhappy mothers and children of this State whom, in our efforts to secure 100 per cent. law enforcement, we are indirectly trying to help. We and they are counting on you. Will you send whatever amount possible? Very sincerely, William H. Anderson. State Superintendent. Driving the debtor.—The elephant is driven by the mahout, who sits astride his neck and drives a short iron-pointed stick into one sore spot in the neck, until it is blackened with blood, and the flies collect around it; but an elephant is about the only thing that can be driven that way. How many un. successful collection men try to operate collections in just that manner! A debtor is but a person who owes, and we all owe money; and we continue to owe money, when we receive let- ters that rub us the wrong way. When acting as an attorney for a corporation I had many opportunities of collecting thousands of dollars with a single letter; I might more properly say, with a single signature, viz.: one different from that of the corporation. For time and again, the delinquent would write in that he cared to have no dealings, not even to the extent of answering cor- respondence, with my client, but would call to settle up with me. Selling honesty.—Collection is nothing else but salesman- ship, and salesmanship of the highest type. The article we sell is an intangible one. It is good credit. Business is original and constructive. The teacher teaches what was taught him; COLLECTION PSYCHOLOGY 37 the preacher expounds from a book two thousand years old, full of the truths of life, and hoary with the age of twenty centuries; lawyers follow precedent; the business man has the . world before him. The collection man has a far more dif- ficult task than the average salesman, for he sells nothing tangible in return for money. But he sells the finest thing in the world—Honesty. Honesty basic motive for paying debts—How many writ- ers of business letters fail to realize this, and grind out a grist of letters true to type—the sales letters introducing themselves as though a salesman should come in and turn a somersault to get attention, and the collection letters, as though the collector should come in and hit you in the face. Let the collection man forget he is writing a dun. If he will but read the contract and the correspondence and listen to his man from out of the folder, he will know how he, in turn, should speak. To write a good collection letter, something more is required than that the correspondent simply express himself. A letter is written for some definite object. One should never write to express himself alone; the diary is the only place for that. Definite and personal.—To obtain that definite object, the letter must get next to the reader. The touch must be personal. : A Cleveland collection manager has arranged with his sales- men to write a personal report on each individual customer. These are put into a file, and when it is necessary to send a dun, a real personal letter can be written. He can get better results than if he did not know the customer’s likes and dislikes. A real personal letter —The collection man can see how much more effective a real personal letter is than the usual business type, when he notices which letters among those he re- ceives give him the strongest tendency to be lenient for a few days. Here is an example: For the following reasons I am unable to send you the check asked for: I have been held up, held down, sand-bagged, walked on, sat on, flattened out and squeezed. First, by the United States Government for Federal war tax, the excess profits tax, the Liberty Bond loans, thrift stamps, capital stock, merchant’s license and auto tax; and by every society and organization that the inventive mind of man can invent to extract what I may or may not have in my possession. From the Society of St. John the Baptist, the G. A. R. the Women’s Relief, the Navy League, the Red Cross, the Black Cross, the Purple Cross, the Double 38 INSTALLMENT COLLECTIONS Cross, the Children’s Home, the Dorcas Society, the Y. M. C. A,, the Y. W. C. A,, the Salvation Army, the Boy Scouts, the Jewish Relief, the Belgian Relief, and every hospital in town. The Government has so governed my business that I don’t know who owns it. I am inspected, suspected, examined: and re-examined, informed, required and commanded, so that I don’t know who I am, where I am, or why I am here. All 1 know is that I am supposed to be an inexhaustible supply of money for every known need, desire or hope of the human race; and because IJ will not sell all I have and go out and beg, borrow or steal money to give away, I am cussed, discussed, boycotted, talked to, talked about, lied to, lied about; - held up, hung up, robbed and nearly ruined; and the only reason I am clinging to life is to see what in hell is coming next. Sympathy in collections——The Master of psychology said: “Rejoice with those that do rejoice, and weep with those that weep.” While I have no use for crocodile tears, real sym- pathy with the unfortunate man is found to be the most effec- tive method of collection, looking at it from a purely cold- blooded standpoint. The collection man cannot afford to be- come case-hardened, for the business world has no use for the aged and embittered collector. When an honest failure to pay arouses no responsive chord, it is a sign of warning to the collection man that he had better get out of the business. In reading outgoing correspondence, I read a letter instruct- ing a man to turn a truck over to the dealer. Could you im- agine collections so poisoning a man that he would give in- structions of that kind in reply to a letter in which a man who had purchased a truck with his life savings told how he was so unfortunate as to run over his little boy in backing up at his home? Our friend explained that the funeral expenses had taken up what he would otherwise have paid as an installment, and that he had no heart for the minute to drive the black mon- ster. Of course, in a case like that there is nothing to do but allow a little time. Friendly, kindly reminders, with threats used only when all else fails—and carried out—improved collections 41 per cent. in one month in one discount house. The legal expenses also touched a new low. Friendly letter collects where threats fail—Here is an example of a letter of this kind that followed a string of threatening letters. This letter was mailed back, with the check pinned on the margin: When I got your letter of December 30, I felt very badly to think that I had troubled your wife while she was in the hospital. I hope she is quite well COLLECTION PSYCHOLOGY 39 now so that she will be able to join you shortly. Virginia must be a better place to get well after an illness than this town. It is quite cold here right now. I was much interested in what you told me about the cotton crop down your way. Let me tell you that cotton goods are pretty high around here, and if the producers do not get their share of the money, it is a shame. You ought to have a pretty good market for your peanuts. There is a good demand for them here. Probably you sell them locally, but if they could be sold direct to New York food brokers, I am sure you would make a nice profit on them. I often pay 10 cents for a bag of peanuts. Now about that bill. Don’t let it worry you, because the balance is only $48 now; but we should like to have it paid by the end of this month. We have troubles of our own, and when I have to carry an account several months old, I am likely to get into trouble with the management. It was a real pleasure to get such a friendly letter from you, so I had to stop in the busy routine of the office to tell you how much I enjoyed it. Please let me know if Mrs. is well now; and try to settle that bill soon, so that I can send you a receipt in full, which you can give your wife, just like the piano, bought and paid for. Force ineffectual—Force is the very last recourse, follow- ing the old adage: ‘‘You can catch more flies with molasses than with vinegar.” And the thought that a man owes money does not necessarily stamp him as a social outcast, or some one always to be shunned. Indeed, he may be a very high type of man and possibly more honest and upright than the collectors who berate him and abuse him. The fact that he owes money gives the col- lector no license to talk to him like a traffic cop to a bewildered farmer in a Ford. The collector must not cry: “off with his head,” like the Queen in ‘‘Alice in Wonderland,” to all who incur his dis- pleasure by failing to pay up. Besides, it does not “get the money.” ‘The old, tactless collection line makes us all decid- edly like Brother Bogus. “Does yo’ still refuse to pay me dem two dollars I done loaned yo’ de lawd on’y knows when?” “Nussah!” dignifiedly replied Brother Bogus. “I doesn’t refuse; I dess refrains,”—Kansas City Star. We become like Bill Pack in the story below: A merchant in a Wisconsin town who had a Swedish clerk sent him out to do some collecting. When he returned from an unsuccessful trip he reported: “Yim Yonson say he vil pay ven he sell his hogs, Yim Olson he vil pay ven he sell his wheat, and Bill Pack say he vil pay in Yanuary.” “Well,” said the Boss, “that’s the first time Bill ever set a date to pay. Did he really say he would pay in January?” “Vell, aye tank so,” said the clerk. ‘He said it bane a dam cold day ven you get that money. Aye tank that bane in Yanuary.”—Forbes Magazine. 40 INSTALLMENT COLLECTIONS Examples of appeals to pride—yYou will remember that the second of the three motives we decided were basic as a reason for paying bills, was a sense of shame and pride. A rather amusing illustration of taking advantage of this appeal was found in a case of one of the wealthiest families in New York. The debtor, who owed for two installments on a large automobile, had just been married, with one of the biggest church and society weddings on Fifth Avenue during the season. Among the hundreds of letters of congratulations which he received was one in just as large an envelope as any, and on just as fine linen paper as any. It congratulated him on the wedding the same as the rest, and spoke of the automobile payment which he would “no doubt wish to get squared zight away.” Whether his bride read it, or he, it at least got by the secretary, and brought back the desired result. The ef- fectiveness of telegrams is due to the same appeal; for no one will stand up against the publicity of three or four telegrams without trying to arrive at some satisfactory arrangement. A man of your standing.—A weak attempt to appeal to pride appears in the stereotyped phrase—“‘A man of your standing.” It contains the germ of the right idea, but the recipient of a letter passes over it in much the same way that he does “‘yours truly.” A delinquent in Florida received a letter in which his pride was appealed to. He was so pleased that he not only paid up to date, but shipped a box of oranges and grapefruit to the collector. Following are a few phrases from the letter which achieved that result: “I note that you have been a director of a small bank of which you were the Vice-President, and that your ‘little bank’ carried only $200,000 deposits,” and “On November 2nd, I returned your check for $132.22 dated October 20, with which you meant to pay your September installment, explaining that it was against the policy of the corporation to accept a check when a previous one had gone to protest. I have not the slightest doubt but that the check which was returtred was perfectly good, but a large corporation cannot make exceptions to a general policy. It does not know the peculiar conditions, but it does know that it is more or less a common stall to send in a check which goes to protest and allows extra time. I know that a policy like that sometimes works hardship to a perfectly good and reliable customer like you, and I appreciate, etc.” Appeal to credit standing.—The last of the three reasons why we pay, is the desire for good credit. This appeal is COLLECTION PSYCHOLOGY 41 universally made use of. Here is an effective letter based on that appeal: As you know, the current installment on your note has not been paid. You will probably remember that you did not buy the motor vehicle on open account, but you signed a note and a contract. The paper was offered to us for discount, and accepted after a satisfactory investigation of your credit. In this way, your note has been drawn into banking channels and in fact, given to a bank with affiliations in New York, London and Toronto, the largest institution of its kind. In this way, also, you have been afforded an excellent opportunity to establish a good credit record. If the installment due is paid immediately, and subse- quent installments are retired in a prompt and businesslike manner, your record will justify our saying all that you are entitled to, and all that we wish to be able to say, should your name appear among the thousands of references we are filling out—sometimes known to the purchasers—sometimes not. Your papers will be returned when the note is paid, but your record is here to stay. Make one of the units in that record, the mid-summer installment on your note, the best possible by sending your check today $——. Another credit appeal——I have in my possession a set of collection letters of a well-known business house in which a great many of the appeals were credit appeals. What do you think of this? You are doing yourself a great injury. You made a purchase from us some months ago, and you have not fulfilled the obligation. This hurts you more than it does us. In selling we naturally make an allowance to cover bad debts. You are apparently bad credit. We shall, therefore, unless you send your check in reply to this letter, add your name to the list which is kept by a number of houses, and which is consulted by them all whenever a new order comes in. Thus, by failing to pay your account you are destroying your credit. If you care about your credit, you will doubtlessly reply. If not, the loss is more yours than ours; and in you will go into that list of indiscriminate persons whose promises are mere “‘scraps of paper.” Would that letter make you pay, or would it make you feel like telling them to go ahead and put your name on the list? You have all probably received letters such as this: ‘‘Hon- est men pay their debts; dishonest men do not. You owe me $10. Which are you? If you’ve gat as much as $2.50, send it along.” In contrast to these ideas, read the following poem in prose by Walt Mason, which came out in a syndicate of newspapers, and, with the permission of the George Matthew Adams Service Co., was printed on an artistic card and sent out with maturity notices, with the result of two per cent. better returns. Many customers wrote in and asked if they might have copies for their business. 42 INSTALLMENT COLLECTIONS “T F you've kept your credit spotless, ills may trail you in a bunch, but bad luck is rendered swatless, evil fate has lost its ° punch. For the helpful merchant princes will not answer you ‘Nay, Nay! when you call to buy some quinces or a luscious bale of hay. You can buy all things you are needing from a cook-stove to a cheese, without argu- ing or pleading, without falling on your knees; for the watchful merchant princes have your record, writ in black; and each one of them evinces confidence that you'll come back. You can buy a flaxseed poultice, and when ready you can pay. If you wish to buy an anchor or a house to call your own, you can go and ask the banker for a little timely loan; and the banker will embrace you and caress you o’er and o’er, and around a block he’ll chase you, asking you to borrow more. But if you are slow and heedless in the paying of your bills, you will find your chil- dren feedless when arrives the day of ills. And your wife, who proudly minces in her new and modish gown, will approach the merchant princes, and they'll snarl and turn her down.” —WaLT Mason. COLLECTION PSYCHOLOGY 43 Determination essential—When one thinks of a collection man, he thinks of him as being determined. Determination is the last and greatest quality for the work. The man should personally have ambition. He should determine that by such a time he will hold such a position, and earn such a salary. It is the ambitious man who is the most useful to the business, ‘and certainly determination is essential for collection work, and for the organization itself. The debtor must see that this man is to be reckoned with. Nothing suits a debtor like time. The collector is the only aggressive factor. After all is said and done, there are cases and times where sympathy and tact are wasted, and where a collector must compel his man to pay. This compulsion may be purely mental and logical. For example, in a conversation when the delinquent leads away from the matter of his debt, he should be brought back to it. A man will pay if he is made to see that there is no other course possible. “Adjusting” a $5,000 debt.—Determination alone won for a young adjuster with a certain dealer in Detroit where two collection men had returned unsuccessful. This adjuster sat in the office in the morning with three cigars and seven news- papers, and told the debtor that he was going to sit in that office until he received a check for $5,000. Every time a customer came into the office to talk business, the collector started to speak in a very businesslike way about the obligation. Late in the afternoon, when several sales had been spoiled by the insistent demands of the collector for money, Mr. F. turned to his cashier and said: ‘Give him a check for $5,000.” ‘And you get out of here.” In a word, have no idea but that the debtor will pay. Do not pave the way for excuses in your wording. Use no phrases such as, ‘Shall appreciate your remittance,” “Can you not?” May I touch on threats, in this preliminary general discus- sion, just enough to point out that threats have no connection with determination? Determination is something to have. and not to make a show of. ‘“‘A barking dog never bites.” Guy F. Muse. The contributor of the next chapter has been in collection work all his business life. His treatment of the subject shows what an advanced conception he has of the psychology of collections. The proof of the correctness of his theories is to be found in the remarkable collection figures that the Commer- cial Investment Trust has attained. The Commercial Investment Trust is a plaything, and a very successful one, of a set of bankers. They buy accounts and collect them, discount automobile notes, etc. 44 CHAPTER VII PROPHYLACTIC COLLECTIONS Collection is salesmanship.—The psychology of selling and collecting money is, for the most part, the same, and the sooner collection men get out of the old rut, the sooner they will find that it is just as easy to cause a debtor to pay as it is for the advertising men to make people buy Ivory soap be- cause “it floats.” The best collection results cannot be ob- tained by starting at the top, that is, waiting until the bill is considerably past due before starting the collection machinery. But in the interest of good business and mutual profits, the possibilities of collection troubles should be minimized by starting at the very bottom, and. working up to the point where the decks are cleared for action with that small percentage of dead beats and others who are always with us. A few will get by any system, including the ‘‘Cash Only.” Principles of advertising applied to collections.—In sell- ing, after having the goods, the next important thing is to attract favourable attention and create interest through care- fully thought out advertising campaigns. In working up these campaigns, the prospect’s mind is analyzed, so to speak, and an attempt is made to influence his action in favour of the advertised article. Without a doubt, he apparently buys of his own free will; he will tell you his action is voluntary; but he has forgotten that “It Floats” has been before his eyes any way he might turn. , The collection man who makes use of the same psychologi- cal principles is the man who is going to accomplish the most, not only in collecting the money for the goods, but in influenc- ing the good will of the trade. People like to be made to do a thing “voluntarily,” and in order to cause them to act, the collection man accordingly must do his best work before the bill is due; formulate and put into effect his collection adver- tisement campaign. Let a bill ride along until it matures, and then some, and the debtor may have made no preparations to meet the obligation. But if as much study is given collection as is ‘given the preparation of the advertising campaign, the 45 46 INSTALLMENT COLLECTIONS debtor’s interest will be kept alive, and he will be wide awake to his duty when the bill matures. Selling the collection idea——A salesman has only to be a salesman, but a collection man must be a credit man and also a salesman; he sells the collection idea in advance, and if at the end only a few are not fully sold, his problem is so much the easier. Greater pressure can be brought to bear, and re- sults accomplished without resorting to legal action. Assistance from the credit department.—If the credit and collection departments are separated, there should be the clos- est of codperation. The credit man will get all the necessary information from the purchaser directly, by having a friendly business talk in which spades should be called spades. Or he will secure the information through the usual sources. The man who seeks credit should be willing to take the credit man into his confidence. If he shows any hesitancy in doing so, the credit man should consider him very carefully. If the opportunity. presents itself, the credit man may tact- fully give the debtor literature of some kind dwelling upon the use of credit. If the credit man has performed his function properly, the collection department’s work will be made easier. Training the debtor.—Every piece of material sent out by the collection department should be designed to create the impression that the bill wl] be collected when it is due; that there is no doubt in the creditor’s mind about the debtor’s abil- ity to discharge the obligation, and that should there be any attempt to defer payment against the creditor’s will, all the force available will be resorted to; not so much for the re- covery of the money, as to uphold the principles of good business. Special care must be exercised in the preparation of the ad- vanced matter, so that no threats may be conveyed, and yet the idea must be put across that if payment is not made volun- tarily, and in a manner expected of a man cognizant of his best interest, speedy collection will be made, regardless of the inconvenience and expense to the debtor. A large and successful financial institution specializing in automobile paper, claims to maintain the highest possible col- lection percentages, as the result of a clear-cut collection policy. No attempt is made to be diplomatic in the sense of softsoap- ing, as business diplomacy is sometimes taken. Everything PROPHYLACTIC COLLECTIONS 47 from the very beginning points to a strong organization, which does business not only for its own profit, but as an important cog in the economic wheel that turns for the good of all good business people. Foundation for collection on notes.—When a note is dis- counted, the maker receives a complete schedule of payments on which full information of the purchase of the note is set forth. This really lays the foundation on which the collection is built. The next step emphasizes the important points to be observed by the maker. Ten days in advance of each install- ment, a notice of maturity is sent out, on the front of which are given the essential details of the maturity, and on the back a list of the most important requirements, which are actually taken from the note and conditional sale contract. They read as follows: 1. Your note is a negotiable instrument, and was purchased by this financial institution for value, before maturity and without notice. 2. No extension of time will be granted or renewals made under any circum- stances—no changes can be made in a negotiable instrument. 3. The loss, injury or destruction of the property involved shall not operate to release you from payment of the note in accordance with its terms. 4. Failure to receive a notice will not release you from payment of an in- stallment at its maturity. These notices are sent ten days in advance, merely for your convenience in remitting. 5. Every installment must be paid direct to us, sufficiently in advance to be credited before the close of banking hours on the date of maturity. 6. Payments must be made by certified check, bank draft, express or post- office money order. It is not advisable to send cash through the mails. 7. In order to insure the proper credit, return this notice with your remittance, and when writing always refer to your note number, which is shown on the reverse side of this notice. Results.—When the debtor is in possession of all this in- formation, he feels that it is really necessary for him to make a special effort to pay, and when he makes this special effort, he will not only discharge the obligation, but be successful otherwise. It is a policy that makes for better business, and puts real sand in the debtor’s craw, while a wiggly-wobbly policy encourages delinquency. Under this system when an account does become past due, the collection man has something to work on and, strange as it may seem, there is little ill feeling, even when drastic action is taken. The debtor is certainly educated to respect the word of a fair and high-standing business. When he is told that certain steps are to be taken if payment is not in by a certain time, he knows they will be actually taken. 48 INSTALLMENT COLLECTIONS Illustrations——The material reprinted here illustrates the principle of preparing the ground in advance, so as to reduce bad collections to the minimum. The Commercial Investment Trust has the dealer’s endorse- ment on all notes that it discounts. The bulletins headed ‘Collection Procedure That Gets Re- sults,” and ‘‘Next Winter’s Results,” are sent to the dealer, so as to enlist his codperation. The Commercial Investment Trust has found it a very successful procedure to furnish the dealer with a letter to send out to the delinquent purchaser, as outlined in these two bulletins. It enlists the codperation of the dealer in advance, and brings one more lever to bear on a delinquent purchaser. Immediately after these are two samples of propaganda, sent out to the purchaser the very minute that he becomes delinquent. The first is a printed slip, “Protect Your Credit— Be Prompt,” the other two are letters of an educative nature.? *Other letters of the Commercial Investment Trust are to be found among those quoted in Chapter X, which consists of samples of successful collection letters. PROPHYLACTIC COLLECTIONS 49 TECi, InnywasaENEE tiasap CAPITAL $3,200.000. 347 MADISON AVE. AT FORTY FIFTH ST. AUTOMOBILE NEW YORK COLLECTION PROCEDURE THAT GETS RESULTS Gentlemen: It is of the utmost importance to you as well as ourselves that all notes bearing your endorsement be paid at maturity for the simple reason that not only does it insure you against payment because of your endorsement, but gives you the advantage of an enviable collec- tion record where it counts the most. In devising our collection system we took into consideration the difficulties experienceu by dealers in cooperating with us effective- ly, and therefore, perfected a plan by which they are given the bene- fit of collection proceuure designeu to produce the greatest possible results without the expense of highly traineu collection men. The effectiveness of the plan lies in the fuct that just the right pressure.is brought to bear from your end of the line and if the idea is followed religiousiy, you need never have occasion to be called upon to make payment only in extreme ceases - you may never have such & Case. The volume of collections are handled somawnat automatically by the use of carefully prepared form letters causes which develop un- favorable symptons are reserved for special attention. The form letters ure changed every month and it never occurs thut a purchaser gets the same form twice. The letters are individually typed and cannot be distinguished from dictated letters. Where it is possible for you to get in personai touch with pur- Chasers, this should be done and the same support given as indicated by the form letter we have prepureu for you to send out. Where it is not possible for you to get in personal touch with the purchaser, have your stenographer type the form so that it will look like a personally dictated letter and mail it at once. The form to be used in writing to the purchaser to whom we have written .today 1s attached. ‘ie also attach copy of our letter from which you will be able to get the in- formation necessary to fill in your letter. We urge you to follow this plan in detail, as at this particular time a firm stand on collections is necessary and you wiil find that it is compatible with good business practices to insist that every contract pe complied with to the letter. Yours very truly, Assistant Collection hunager, 50 INSTALLMENT COLLECTIONS COMMERCIAL INVESTMENT TRUST PY September 7th, 1921. Mr oC oG.Contral , 33833 Pine Street, Philadelphia, Pa, Dear Sir: Noto 48 799-L-29 Harrold Brothers Den't read this letter = unless you want to protect your best Intoreste The Commercial Investment Trust deal in moneys The note you signed when you bought your car is a negoti- able instrument and was purchased by us for value be- fore maturity an& without notice,according to the ‘established commercial banking practices. Ho person who is worthy of credit will sign a note with the intention of defaulting - no person is worthy of credit who will not comply with the terms of a note he signs. We do not know what the reason is and it would not make any difference if we did,tut we have not received payment of the August 29 instalment af your note. While we know from experience that the courts will uphold out rights, we are averse to legal measures because of the unnecessary expense to which you would be subjected. However, as we do notcarry past due paper,it would be wise for you to consult your lawyer as to what will happen if you do not send us by return mail $55.35. Yours very truly, GFMuse : SF Assistant Collection Manager. P.S. To avoid the possibilities of having t6 pay the ebtire amount in a lump,assure us that you will be prompt in the future. PROPHYLACTIC COLLECTIONS $1 NEXT WINTER’S RESULTS The manner in which notes having maturities a few months hence are handled at this time will have a great bearing on next winter’s results. Collection difficulties in the winter months, even in normal times, are greater than they are during the summer and fall, and we are looking into the future with a view to affording our good dealer clients the maximum protection against having to pay out their own money. Shortsighted purchasers, and there are quite a few of them, who lead a hand- to-mouth existence and who are neglectful, must be given to understand that they must arrange to make their payments promptly at maturity. Every pay- ment made on a note reduces your contingent liability and Increases the pur- chaser’s equity—he would have more to lose in case of default and therefore will be more anxious to protect his interest. When a purchaser fails to pay at maturity and continues to use the car, your liability increases because of the depreciation of the car. At the same time the purchaser is increasing his difficulties and endangering his interest. The best and cheapest insurance you can possibly have is a close follow-up on your delinquent customers. You merely have to coéperate with our collec- tion department which operates the most far-reaching and effective collection systems in existence. You may be surprised to know that the average dealer gets delinquent notices on not more than two per cent. of the paper sent us and that when our collection system is given full codperation, only a small frac- tion of one per cent. causes trouble resulting in actual payments by the dealer. With your support we can wipe out the fraction of one per cent. One of your customers has defaulted in the current installment of his note and we have written him as the reverse side of this sheet indicates. This account is reaching the danger point, but we are confident that if you will follow up our letter by a personal call or with a letter something like the following, immediate and lasting results will be obtained: Dear Sir: Information we have just received from The Commercial Investment Trust indicates that you have defaulted in the payment of the installment of your note. Is this correct? We deeply regret that you have fallen down on this note, as we recom- mended you for this credit, feeling confident that you could be depended upon to carry out any contract you might make. The Commercial Investment Trust have a national reputation for being fair with their clients, but you will readily appreciate the fact that as a financial institution they cannot carry past due paper. It stands to reason that if they do not carry past due paper, they will repossess the car for the recovery of their money. We don’t want to see you lose your car and all you have paid on it, but we know from experience that something serious will happen unless you send them immediately $................. COMMERCIAL INVESTMENT TRUST 347 Madison Avenue New York, N. Y. PROTECT YOUR CREDIT—BE PROMPT The wonderful progress we have made in the past few years and the very high position we hold in the financial world, enabling us to be of the greatest possible service to thousands of automobile buyers, is due to our adherence to the fundamental principles of good business. 52 INSTALLMENT COLLECTIONS While our greatest desire is to cultivate pleasant relations with our clients and be in a position to recommend them for further credit consideration when their notes are paid out, we cannot deviate from the established banking prac- tices and permit any note to remain in default. Over 98 per cent. of the note makers on our books recognize the advantage of being prompt, and when they are in need of credit accommodation of any kind they are backed by their records with the Commercial Investment Trust. It is needless to mention what happens to the few who default, as it is generally known that we are at all times in a position to protect our interest, and will uphold the principles of good business at any cost. We collect on every note. COMMERCIAL INVESTMENT TRUST 347 Madison Avenue New York, N. Y. Dealer Form 2. NOTICE TO DEALERS: Please have a letter prepared after the form of this model and send it to the purchasers to whom we have written our second letters using the note numbers and maturity dates shown in our copies. COMMERCIAL INVESTMENT TRUST (Date) (Purchaser) (Address) (City) (Number) Dear Sir: According to information received from the Commercial Investment Trust, you have not yet made payment of the .........-..+..006 installment of your note which was called to your attention by us some time ago. By your failure to make payment of this installment at its maturity you have seriously jeopardized your own interest and involved us as endorsers. Surely you realize that the Commercial Investment Trust is a financial institution and must get their money even if they have to repossess the car, According to the terms of the note you signed, all remaining installments are due and payable, but we are confident that if you will take up the past due installment immediately and assure us as well as the Commercial Investment Trust that future installments will be paid promptly, you will be permitted to continue in possession of the car and make the regular monthly payments. Wire the Commercial Investment Trust that you have mailed draft for Sitsednls soa oducts and notify us so that we will be in a position to ask them hot to repossess. Yours very truly, Two educative letters—And: here are the two educative letters already referred to: Dear Sir: May we call your attention to the importance of getting your payments in this office before the close of banking hours on the due dates? The .............. installment of your note has not been paid, according to our records. Therefore, we must request you to send us at once $.............. Don’t bother to write. Just pin a certified check, bank draft or money order to this letter and mail it now. Yours very truly, PROPHYLACTIC COLLECTIONS 53 Dear Sir: AUS PeMe weaciske cece senate the current installment of your note matured. Payment has not reached us. Probably you overlooked it, or your letter may be delayed in the mails. However, we take this occasion to remind you of the importance of having your payments in this office at maturity. The amount past due is $................ Yours very truly, Cuaprter VIII AUTOMATIC .FOLLOW-UP METHODS The course of collections.—Presuppose the department to be in good condition, both as to system and personnel—mat- ters you will find discussed fully in the final chapters of the book. By what means is the money to be collected, what im- portance do the managers of commercial and banking collec- tion departments place on the different steps, and what con- structive suggestions has their experience afforded? Skeleton outline—Let us follow the course of collections from the simple reminder stage step by step through to the attorneys. 1. Letters, concerning which a classification may be keyed as follows: (a) Automatic follow-up; testing form letters; mak- ing them personal. Chapter VIII. (b) Dictated letters. Chapter IX. (c) Samples of successful letters. Chapter X. (d) Make-up of the letter and mailing. Chapter XI. 2. Telephone calls and wires. Chapter XII. 3. Last resort methods. Chapter XIII. 4. Adjusters. Chapter XIV. 5. Collection agencies and attorneys. Chapter XV. The statement.—Where a sale is made, the first statement is rendered with the shipment of goods. It is customary on wholesale orders to allow a discount for prompt payment, varying with the trade, but often 2 per cent., if paid within ten days. This amounts to a penalty for slow payment, and is a most effective collection method. On the first of the succeeding month, the statement is sent out, often with a rubber stamp, ‘‘please remit.” For professional services the statements go out usually the first of the month. Some doctors send them out quarterly, or even semi-annually. This is anything but a correct collection procedure. 54 AUTOMATIC FOLLOW-UP METHODS On installment collections a maturity notice is sent out a sufficient number of days ahead to allow for mailing both ways. An apt quotation on credit, or a sales letter, is often enclosed. Forms of maturity notices—An ingenious and highly suc- cessful maturity notice is a desk calendar pad. On the memo space, say for the 14th of each month, if the installment were due the 20th, would be printed in longhand something like: ‘Remember to pay Jones & Co., 145 West Ninth St., $15.96 on furniture first thing this morning.’ Sample maturity no- tice follows: Maturity NOTICE PAYMENT ON AUTOMOBILE NOTE BEARING YOUR SIGNATURE MATURES AS FOLLOWS: RETURN THIS WITH YOUR CHECK TO INSURE PROPER CREDIT INSTALLMENT Due at this office Before 3 P. M. on NO RECEIPT SENT UNLESS REQUESTED (Reverse Side) NOTICE OF MATURITY PAYMENT ON AUTOMOBILE NOTE PURCHASED BY US MATURES AS SHOWN ON REVERSE SIDE OF THIS NOTICE Send remittance by New York Draft (can be secured at any bank), Postal or Express money order (can be secured at Post Office or Express office), cashier check or certified check (can be secured at your bank). All remittances should be made payable to Continental Guaranty Corporation, 248 Madison Avenue, New York, N. Y., should cover full amount as shown on reverse side, and reach us BEFORE CLOSE OF BANKING HOURS—ON THE DATE OF MATURITY. Form letters.—Often it is time to stop letter-writing, and to collect the money. But collecting is becoming more and more inyolved with the art of correspondence, Money is 56 INSTALLMENT COLLECTIONS usually collected through the mails; the greater part, probably, by form letters written in advance, or by the automatic fol- low-up. Where there are a large number of accounts to be collected and the amounts are comparatively small, form letters are used. Testing form letters.—Since form letters are necessary, the first step, of course, is to prepare what the collection manager considers the most productive types of letters. This does not mean simply writing a series of letters which read as if they will “bring home the bacon.” No really efficient collection man will adopt a form letter merely because it impresses him as the kind of letter which will collect the money. He tests it first. A method which has been found to be most successful is used by the collection manager of a large installment house. His company carries from 30,000 to 70,000 open accounts, and the monthly installments range from $2 to $12. There are about fifteen separate articles sold, necessitating as many different collection follow-ups, in order that the various prop- Ositions may be covered specifically. The collection man writes two, and sometimes three series of letters. How a test is made.—To illustrate how a test is made, and the results are compiled, three sets of figures are here shown: Form “X,” Form “Y,” and Form “‘Z.” In arriving at these figures, 2,000 accounts were selected, the amount of each being $8.50. This covered the cost of a mail-order article and was payable in thirty days. Two sets of letters were written, one keyed B-1 to B-6, and the other keyed C-1 to C-6. The B-1 and C-1 were comparatively the same, e.g., 28 per cent. and 28.4 per cent. respectively. From that point on, it will be ob- served that the results began to vary, indicating the strength and weakness of the various letters. If the final result is studied, it will be seen that there is very little difference in the total amount collected by the two sets of letters. However, to see the real result of testing, study form ‘Z,” which includes those letters of the two sets that obtained the biggest returns. On the ‘‘B” series, 2,909 letters were mailed, and the re- turns were 936. The amount collected was $7,959.04, leaving unpaid 64 accounts, or 6.4 per cent. of the total number. On the ‘“‘C”’ series, 2,668 letters were mailed, and the re- AUTOMATIC FOLLOW-UP METHODS 57 turns were 935. The amount collected was $7,947.96, leaving unpaid 65 accounts, or 6.5 per cent. of the total number. Working out the results.—By taking the letters of the two series which brought the biggest results, and working out a set of figures indicating the possible returns if the letters were to be used on the same number of accounts, we get the following results: 2,615 letters would be mailed: 960 accounts collected, totalling $8,160. Here only 40 accounts remain unpaid; or, in other words, the composite series would collect 24 accounts more than the “‘B” series, and 25 more than the ‘‘C.” Form X Key No. Letters Total No. Total amount Per Mailed Amount Returns of Returns Cent. Ba leiaias oss aistetea etd 1,000 $8,500.00 284 $2,414.00 28.4 BS 2 disisseR cree bihia eer ele 716 6,086.00 225 1,912.50 314 LS errr eer ee es 491 4,173.50 123 1,045.50 25,4 Be@incksten si ois lvetis congas 368 3,128.00 145 1,235.56 355 VES cca micea ee 8922 Gas 223 1,892.44 112 950.00 50.2 Ba Ganeciicects go ee OS & 111 942.44 47 401.48 42.6 Totals: ssixcds totes 2,909 sa aaaee 936 $7,959.04 64 accounts uncollected. Form Y Key No. Letters Total No. Total amount Per Mailed Amount Returns of Returns Cent. Cotes a hes saereres 1,000 $8,500.00 280 $2,380.00 28. ee ee oe enn 720 6,120.00 320 2,723.40 44.5 CaS ievisedevtch a. Sudo uw wre dees 400 3,396.60 128 1,086.91 28.5 4. aha oe keR RAS RSS 272 2,309.69 78 658.26 $2. C-5. sete e cnet eens 194 1,651.43 112 953.53 57.8 C26 hain tives es os 82 697.90 17 149.86 20.9 Dotals: sis svaxseass Z2hGR = - awa even 935 $7,947.96 65 accounts uncollected. Form Z Key No. Letters Total No. Total amount Per Mailed Amount Returns of Returns Cent. Bebe snc Sees idkavtevetabeuaces 1,000 $8,500.00 284 $2,414.00 28.4 $255 NG Ae kas 716 6,086.00 319 2,711.50 44.5 ord Gee See eceaea ee 397 3,374.50 127 1,079.50 32. Ba 4g ssid a aeignrneyeeesave 270 2,295.00 107 909.50 39.5 Ci ieeeeus ances 163 1,385.50 94 799.00 57.8 BOs 5259044 seeeuees 69 586.50 29 246.50 42.6 Totals: swe geesoraretud d+ BOWS, seheuneedbsaves 960 $8,160.00 40 accounts uncollected. 58 INSTALLMENT COLLECTIONS Form letters individually typed.—When the writer became head of the collection department of the largest automobile finance corporation, printed collection letters were being sent out at intervals of about a week for the first thirty days after maturity of each installment note. Several hundred thousands of dollars were left uncollected at the end of each current month, Prompt collections are more vital to installment business than to any other, and they are essential enough to any busi- ness. For this reason, I thought it advisable to spend a little more money, if necessary, on collections. Printed or multi- graphed letters give the impression that the matter is not very important, or that we have a great many to send out; ergo, “there are a good many debtors besides me who are re- ceiving this communication.” Neither of these impressions is desirable. Proof that individual letters pay.—tIn May, 1918, we turned the cases over to the correspondents to write individual letters, after only one printed letter had gone out. At the end of that month it was found that the collections improved 41 per cent. in one month. This required a half dozen more correspondents, but paid big. While the early handling of collections by individual letters proved profitable in the way of increased percentages, there were certain formidable disadvantages: namely, the added ex- pense, the increased number of folders out of file that could never be found when letters came in: and the amateurish tone of some of the letters written by the collection correspondents, growing out of the failure to arrange in proper sequence for a climax. Besides, all the time there were thousands of ad- ditional carbons of letters to be filed away. Examples of sets of letters—To overcome these difficulties and at the same time retain the results of individual letters, we worked up a set of letters written by the collection man- ager, to be individually typed, each set to run for a month. Sample sets of these letters are given below. The form given immediately below is a printed notice. By the use of a printed notice, which the debtor can see goes out in an automatic way, little or no irritation is caused. A printed notice is effective as a reminder which does not cause irrita- tion, and may then be followed up by the form letters. AUTOMATIC FOLLOW-UP METHODS 59 Payments on the note which we hold bearing your signature are due in our office on the day of maturity. Yet we have not received remittance covering installment and interest men- tioned below. Perhaps you were a day or two late in mailing money which accounts for its not having been received. If, however, when you open this letter you have not already mailed money, it would be well for you, in order not to prejudice your interests, to send bank draft, certified check or money order for amount past due immediately. Due Date Principal Interest Total Send this notice with remittance AT ONCE TO Letrer No. I. We have not yet received payment for the ................ installment of your automobile note. This bank, with its affiliations at Chicago, London, Toronto and San Francisco, is in close contact with hundreds of bankers throughout the United States. We receive thousands of inquiries from banks, reporting agencies, and business houses, to which we furnish prompt and accurate replies. To have a clean record here is well worthy of any purchaser’s serious consideration. In establishing such a record, promptness is much more valuable than financial worth or ability to pay; and we place this idea before you, as it is often forgotten by many persons who simply neglect certain obligations because other matters are more pressing at the moment. Won’t you be kind enough to send us the amount now due? $............... Yours very truly, Letter No. II. It would be a serious matter for you to have a note fall due at your home bank without stopping in to see the cashier, and making arrangements to take care of it. You would not think of neglecting it. We are your bankers for quite a sizeable note, a note for which your automo- bile was given as security. Surely, as a matter of good business, unless you have already mailed check, you will meet this obligation immediately. $........... aes Yours very truly, Lerrer No. III. When you purchased the motor vehicle, you gave cash in part payment, and a note for the balance. The note was given to your dealer, and assigned to us when we discounted it. Your obligation then is directly due to the salen ynste¥ abouts 028 By6 ROH A Sete akan Bee EU Ra ES RRS tata Corporation. The note contains the following provisions: ‘If any installment of this note is not paid at the time and place specified herein, the ENTIRE AMOUNT UNPAID SHALL BECOME DUE AND PAYABLE FORTHWITH at the election of the holder of this note. And I hereby authorize, irrevocably, any attorney-at-law to appear for me in any court of record in the United States, and waive the issue and service of process and confess a judgment against me in favour of the holder hereof, for such amount as may appear to be unpaid hereon, and to release all errors and waive all right of appeal. As our records show that an installment is now three weéks past due, we are preparing to draw up the necessary papers, and shall avail ourselves of the terms of the note, unless we hear favourably from you by 1eturn mail. 60 INSTALLMENT COLLECTIONS The collection follow-up letters for a department store or a similar concern, do not move so sharply to an issue as those quoted above. Still, there is coming to be a decided change in this respect, for after thirty days, the department stores and shops are bringing their delinquent customers to time with vigorous letters or a draft. Below are the follow-up letters sent out by one of the fore- most retail clothing concerns of New York City. They add: “where these letters do not bring forth a response, special ones are written, the tone of which is governed by the circum- stances and the credit responsibility of the customer.” (First Notice) THE X. Y. Z. COMPANY MENS & BOYS OUTFITTERS STATEMENT OF ACCOUNT NEW YORK WHEN PAYING BY CHECK, IF AGREEABLE TO YOU, DO NOT RETURN THE BILL, BUT DETACH THIS PART AND ENCLOSE IT. YOUR CANCELLED CHECK WILL BE YOUR RECEIPT. THE X. Y. Z. COMPANY ALL BILLS RENDERED THE FIRST OF EACH MONTH AND DUE WHEN RENDERED AMOUNT OF BILL RENDERED (SeconD NoTICcE) MESSRS. THE X. Y. Z. COMPANY REQUEST THAT YOU KINDLY OBLIGE THEM WITH A CHECK FOR YOUR ACCOUNT STATEMENT OF WHICH HAS BEEN RENDERED AMOUNTING TO $ AUTOMATIC FOLLOW-UP METHODS 61 Letrer No. I THE X. Y. Z. COMPANY CLOTHIERS NEW YORK Dear Sir: May we remind you of your overdue account for $..............44- Your check in settlement will greatly oblige. Respectfully, THE X. Y. Z. COMPANY. By John Doe. Letrer No. II THE X. Y. Z. COMPANY CLOTHIERS NEW YORK Form No. 2 Dear Sir: Our previous letter must have been overlooked as we find your past-due account for ...........00e008. is still outstanding. In again bringing it to your attention, we ask that you favour us with a prompt remittance which will be greatly appreciated. Respectfully, THE X. Y. Z. COMPANY. By John Doe. LETTER No. III THE X. Y. Z. COMPANY CLOTHIERS NEW YORK Dear Sir: We must ask prompt attention to your account as it is really long overdue and our previous requests seem to have been overlooked. The amount is Anticipating a prompt remittance, we are Very truly, THE X. Y. Z. COMPANY. By John Doe. 62 INSTALLMENT COLLECTIONS Letrer No. IV THE X. Y. Z. COMPANY CLOTHIERS NEW YORK Dear Sir: We again remind you that your account is still open and long overdue. Not hearing from you to the contrary we will consider ourselves authorized to make sight draft for $..............4..- Very truly, THE X. Y. Z. COMPANY. By John Doe. Records easily kept—No carbons are required in any of these sets, because on the back of the tickler card the clerk may stamp the number of the form letter used before handing the tickler cards over to the operators, from which to write the letters. On the back of the cards is room for a record of letters sent. The key number of the form letters may be stamped on, and a record made of the personally written let- ters, initialled by the correspondent, with the date of writing and date for follow-up. The cards are filed until thirty days past due, according to maturities; so that on the fifteenth of the month, the clerks will pull out all the cards of the twenty-fifth, for the ten-day advance notice; and of the fifth, for instance, for a form letter going out ten days after maturity. Cards more than thirty days past due are kept in a special tickler, and with them are put collections on which there was correspondence, to stop the form letter follow-up. (For full description see Chapter XVII.) Advantages of form letters.—The advantages of form let- ters, worked out in advance, is that they are better than the correspondent’s letters, as the manager works them out him- self. They save drawing files out on everything, because when correspondence comes in and the correspondent has handled the letter with the card and file, he puts his ink follow-up on the back of the card, and it goes into the special follow-up file. And they produce better results. In January, 1919, when the system was put in, collections improved again 19 per cent. Making forms personal.—It requires some ingenuity and imagination to make form letters personal. One of the great troubles with form letters is that so many of them are not AUTOMATIC FOLLOW-UP METHODS 63 written for any one person, but for the public en masse. When the sales correspondent brought in a suggestion for a form letter to the head of one of the two largest mail order houses, the president read the letter through, and then suggested that the correspondent sit down.and dictate that letter to his own secretary, and address the letter to a mutual friend. The correspondent soon saw that the form did not fit that particular person at all, and it was not such a letter as he would think of sending to him; and yet it was his intention to send this letter to thousands, more or less like this mutual friend. The form letter should be made adaptable to each individual in the group, for the letter is not read en masse, but indiyidually. And, further, it can be made peculiarly adaptable to certain classes. A good letter-writer will make the form letter going out to thousands much more personal and appealing than a mediocre correspondent’s personally dic- tated letter to-one man. Professional appeal——When the card from which the let- ters are to be written is made up, there should be typed on the card the profession of the customer; for instance, “insurance.” Then work into the form letters a sentence mentioning the profession. Here is a letter illustrating this principle. Every- one believes he is the busiest person, be he lawyer or whatever. Although you were duly notified of the maturity of your note, and have received one notice since it went to default, apparently the matter has slipped your attention. Doubtless in the rush of business you laid the notice aside, intending to send check “tomorrow,” but that was also a busy day, for /awyers are always busy, and you did the most natural thing in the world—forgot it. We take this opportunity to remind you of the fact that this is a banking obligation you are neglecting. You are sufficiently familfar with banking prac- tice to know that a note must be paid when it is due. Don’t trust it to your memory another minute—please write out your check and mail it zow. The amount required is $.................. Yours very truly, Then letters can be used as forms with a different letter for all the major professions. ‘This idea is not used by any business house we know of except one, but it pulls tremendously. 1. Insurance business.—It is our experience that when an insurance premium becomes due, the insurance people expect us to come across with the amount of the premium. You must know all about that. How can a man whose business standing is such as yours, and who holds a 64 INSTALLMENT COLLECTIONS position such as you do in the state of .......... continue to be delinquent on a “Premium” on your note? The? 43252 50% installment of $...... , together with $...... interest, a total OF $i sncsis , is still unpaid. We shall expect payment to reach our office by 2. Merchant—When you sell a customer a ...... .. he tells you that he will be in on a certain day to settle the account; you rather expect him to come around to pay what he owes at that time, do you not? That is our position. We purchased your note, and the payments were to be made at this office on the ...... day of each month. Lately, those payments have been delayed, and the installment due .......... has not been taken care of, As a business man, you will realize, Mr. ........... , that if every purchaser held back from you in this way, it would cause you no end of trouble; and now that we have called this matter to your attention, we are sure that you will spare us along this line. We should be glad to receive your check by return mail. The amount neces- sary to take care of the . Deeks installment is, interest $..... » principal $...... ; or total of $...... 3. Railway mail clerk—You, Mr. .........+- , have failed to connect with the hunass installment on your automobile note. / If you failed to make an exchange or enclose a special delivery in the middle of a package, you would very likely get minus points. You know that a cer- tain number of those minus points has a serious effect upon your good report. The failure to take up the paper at the bank when due affects your credit standing a great deal worse than the minus points affect your record with the Department. It would seem that a man in your position could be de- pended upon to discharge any obligation he might make in a commendable manner. In fact, the “Black Book” specifically states that a clerk must pay all of his honest debts. We should like to see you make as near 100% on your note as possible. It will help you along if you will forward by retura mail your check for $...... and close out your past-due installment. Timely appeal.—Form letters can be made personal and interesting by being made timely. Here is a seasonal letter that we sent out to our dealers who endorsed notes. This letter went out the first of December. It brought the December collections, which are inclined to slough off a little, right up to the average. We wish to be the first to extend to you the season’s greetings. As the joyous Yuletide Season approaches, we are reminded of the difficulty of collecting which is generally experienced at this time, when extra expenses fall on everyone. To permit a purchaser to fall one bit behind piles up trouble “for future installments. You will find a list of delinquents below. May we urge you strongly, with the weight of our experience behind it, to work with us in clearing up what notes are carried over. from last month, zow, before the Christmas financial strain? Let us do our Christmas shopping early. AUTOMATIC FOLLOW-UP METHODS 65 A holiday dun.—And did you ever hear of getting a pretty New Year’s card on New Year’s day from a corporation you owe, with a genuine season’s greeting on it? The Season’s Greetings: Like all good business people, you want to start the New Year with your old obligations out of the way. Long has it been customary to turn over a new leaf, bright and early, Janu- ary first. We are going to turn over a new leaf, a leaf headed with your name, and it will be to our mutual satisfaction and advantage to have that leaf clean. No matter what the reason may be, the fact is that the December installment of your note is unpaid, although it matured the ........ Now won’t you send us, along with your New Year’s greetings, a check for So srectinacns , and start the New Year with a clean slate? We extend to you our best wishes for a Happy and Prosperous New Year. Yours very truly, : A pay-day reminder.—Well, you know how short you are before pay-day, and how flush when the dawn of pay-day breaks. The Romans must have been paid twice a month, like the most of us now, for they recorded time from the Nones and Ides of the month. Why not send a kindly reminder to arrive just in time for pay-day, like this? Hurray for Tuesday! What a welcome day! It would be hard to get along without it. Yet my pay-day comes but once a month. My records show that you owe a small amount. Don’t you suppose that you could take enough out of your pay envelope today to settle your account? Its just a matter of good business, that’s all. ‘Thank you. CHAPTER IX DICTATED LETTERS: FORM AND PERSONAL Writing to one man.—Let us discuss under this heading (1) forms, and then (2) personally dictated letters. The forms we shall take up are not the forms we described in the last chapter, in which we discussed sets of letters written up in advance, presumably by the collection manager, to go out to all delinquents for a certain length of time after delinquency. The forms we mean to consider here are those used by the collection correspondents in the place of dictating a letter to one man. These forms may be used both in straight collection letters, and in general correspondence. The advantages of forms.—1. Every form letter, or para- graph, is passed on by a collection manager, or some officer, so there is no danger of the correspondents slipping in a phrase which is contrary to the policy of the house. 2. These form letters, or paragraphs, save the time of the dictator, and of the stenographer or dictaphone operator. If one should listen to his own dictation, or to that of a corre- spondent in handling routine matters, he would see that he covers the same cases in the same way and with practically the same language, each time that they come up. He has used a form, not one keyed to any particular number nor one worked out with care; but nevertheless, he has used a form, and in using it he has wasted a good deal of his own and his secretary’s time. 3. A far better grade of letters can be maintained by using form letters and paragraphs. AQ letter is the child of a per- son’s brain, and a correspondent is quite fond of his own ex- pressions. For that reason the form letter stand should be composed of the best letters written by the collection man- ager’s correspondents over a long period of time, and which the manager has revised and standardized. If the form paragraph stand is composed largely of letters written by the correspondents themselves, and if it contains 66 Has Your Letter a Firm Grip? DICTATED LETTERS 67 quite a wide range of letters, then 60 to 75 per cent. of the work can be done by the dictaform. Of course, often, an introduction might well be written for a particular letter, and the conclusion also; and there will be paragraphs, sometimes entire letters, which can better be han- dled by the correspondent without the use of forms. But with this device, routine work may be done in better shape. With this stand I have had a correspondent answer five hundred letters in one day, during a time of emergency—really quite a remarkable record. An indexed card stand.—This dictaform is a stand made up of sheets of cardboard, with tags above each sheet. The form letters are arranged by subjects and numbered; for instance, on the stand I use, the first 30 numbers cover collections: the first 15 to purchasers and the last 15 to customers. From 30 to 60 we have answers to correspondence, alphabetically ar- ranged. Each tag above the letter is numbered, and has the subject printed on it. These tags can be easily celluloided for protection against soil. This stand is double indexed at the beginning. One index is fastened to the stand, and the tabs act as a second index. The correspondents prefer the tabs. But a correspondent will soon get so that he knows the numbers, and needs only to give the number of the paragraph to his stenographer, who has a duplicate stand at her desk. If the correspondent wished to use the second paragraph on page three, he would simply dic- tate “‘three point two.” Specimen sheet.—The simplicity of this device is shown in the sheet on “Prompt Payments” here reproduced: 5 1. Must have overlooked.—All the previous installments on this note have been paid with such creditable promptness that we cannot help but believe that, in some way or other, you must have overlooked the above installment. For this reason, we are bringing it again to your attention. 2. Since you have met promptly.—Since you have met promptly all previous installments on this automobile note, we believe you must have overlooked your payment, now past due. : 3. Promptly, as a rule—The installments on your note have, as a rule, been taken care of so promptly that we are inclined to believe that your failure to send us remittance to cover the one due on .......... is merely an oversight. 4. Surprised to learn.—In view of the commendable promptness with which you have paid previous installments, for the most part, we are surprised to learn that the ...... installment on your note, which was due on ........ is still open. 5. Satisfactory manner of making payment—The ...... installment on your automobile note is still unpaid. In view of the satisfactory manner with which 68 INSTALLMENT COLLECTIONS payments have, for the most part, been made, we feel sure that the matter has, in some way or other, been overlooked. If you have not already done so, please send us your check for the past due installment $.............. 6. Have you forgotten?—Have you forgotten the installment on your auto- mobile truck note, which matured on ........ ? As all the previous install- ments have, for the most part, been paid with such commendable promptness, this is the only conclusion we can arrive at. 7. Creditable promptness—All the previous installments on this note have been paid with such creditable promptness that we feel sure it is only neces- sary to bring it to your attention in order to have this settled up at once. Dictation made easy.—From 30 on are found answers to correspondence. For example, 42 covers Liberty Bonds. Point 1 answers the question as to whether we will accept Liberty Bonds in payment of a note. One can readily see that five to ten minutes of the dictator’s time would be con- sumed in turning out a letter which might just as well be an- swered by the correspondent dictating: ‘‘42 point 1.” 42—Liberty Bonds.— (1) Liberty Bonds in Payment.—While we do not encourage the use of Liberty Bonds for the payment of debts, they are acceptable, of course, at the prevailing price the day and hour received here—provided they are not Registered Bonds. Therefore, in sending bonds as payment on your note, allowance should be made for the variation of the market price. Successful dictated letters.—Before writing a letter, it is well to make up your mind what results you want to get, and work out how these results can be attained. As a Harvard professor would express it: “In the final analysis, the prag- matic is the only test.” Which, being interpreted, means: “The letter is good or bad as it brings home the bacon or fails.” A great many correspondents fresh from college imagine that the letter is a place to express themselves. The letter is not written to express thought but to convey thought. The only thing to do with letters you correct that are welters of self-expression and models of style is to continue to draw red lines through them, at the same time explaining to the correspondent where his letter is not adapted to the man to whom it was written. Terseness and strength—Anglo-Saxon is the language of the people, and of Shakespeare, and of active business. Use it. Employ words that express the vigour and plain simplicity of homely thought. A specific word is stronger than a general one; the short word ordinarily more so than long; idioms than yor’ won 18) f, 99 / DICTAFORM This dictaform is a stand made up of sheets of cardboard, with tags above each sheet. The form letters are arranged by subjects and numbered; for instance, the first 30 numbers may cover collections: the first 15 to purchasers and the last 15 to customers. From 30 to 60 are answers to corre- spondence, alphabetically arranged. J'ach tag above the letters is numbered, and may have the subject printed on it. These tags can easily be celluloided for protection against soiling. DICTATED LETTERS 69 bookish words. The use of figures without the use of figura- tive language is also good, because such words lend force by setting the reader to thinking about them. Make it short.—Cut out unnecessary words. The recipient of a letter is entitled to assume you have done your thinking, and that your letter is the condensed result of thought; not merely a mass of self-expression from which he has to forge your thought. The product should be turned out from the furnace of the writer’s imagination. Avoid participial endings, for a participial phrase is the weakest form of expression; “thanking you for past favours,” “hoping you will send check,” ‘‘trusting you will make it un- necessary to write again.” The new correspondent, like the new driver, stalls when he stops. Personal element again.—Not only must the language be forceful, but it must be simple and the appeal must be personal. A banking concern which was financing automobiles on the installment plan had been trying for some time to collect from a coloured minister near Savannah, Ga. There was no credit in- formation to show that this man was coloured, or a minister; but from the tone of the letters a young correspondent di- vined the delinquent to be a negro clergyman, with some smat- tering of education. Although threats had been used, and the folder was full of typical collection letters, he wrote the following, which brought payment in full by return mail: Brother, before you throw this letter into the wastebasket, think over its con- tents seriously and carefully. This letter might reach you at night after a hard day’s work in which your faithful car has carried you to some home of distress where your presence has been a benediction; it may have carried you to a home where some man or woman has felt alone in the world, and you may have shown him the truth of Bryant’s lofty theme: “In the long way that I must tread alone, Thou wilt guide my steps aright.” I believe, sir, that you are a minister; and as I am a son of a minister, I know exactly what you are up against. The Good Book tells you: “Owe no man anything,” but I am sure the parishioners owe you, as they always do. Surely somewhere, somehow you can secure the amount of the note, I know. Let one of your wealthy parishioners know how you stand, and he will gladly lend you this amount, so as to keep your good car running through the’ streets of Sumpter in your good work. He warmed up and paid! It “fotched” the planter—Another correspondent for a New York City bank pictured a delinquent in Florida as an old gentleman, a typical Southern planter. The short collec- tion letters used in Northern business only produced irrita- 70 INSTALLMENT COLLECTIONS tion, and brought forth no money; and so that correspondent set himself to write a two-page letter in a genial, courteous, complimentary and leisurely style, which he thought would appeal to the man as he had visualized him. The letter brought back a certified check, and with it a most cordial reply, a part of which is quoted: I want to thank you for the friendly spirit, and the interest that you have manifested in my affairs, which was so much more than I expected. I wished when I read the letter that I might invite you to come down to Florida and spend a month with me fishing, but as I am too busy at present to go fishing myself, that is out of the question. I have thought of another way to show my appreciation, and a more substantial way than simply telling you about it in a letter, but I am keeping that to myself for the present. Grape fruit, oranges, promotion.—In about two weeks this correspondent received a large crate of grapefruit and oranges addressed to the bank, and, of course, it got to the ears of the president of the bank; and this correspondent was immediately raised to a position as assistant collection manager. Get your man in your eye, and you will talk to him on paper. Courtesy.—Then, also, you will be courteous in replying to every letter. Our bread and butter depend on our customers or clients. ‘*“T am not sure just what the unpardonable sin is, but I be-- lieve it is a disposition to evade the payment of small bills.’ ” This is a sample from a letter which came to the desk of a letter censor from an exasperated correspondent; a letter that would only pull the purse strings tight. Threats.—Speaking of discourteous letters, avoid threats. Threats are as strong a habit to some collection men as ‘“‘we regret” with some adjustment departments, and one is about as cheap and meaningless as the other. Your debtor friend owes the money, and ought to pay it, and probably will, if you will approach him aright. Ina great many collection businesses, the whole collection procedure seems to follow the course of gradually emphasized demands for the liquidation of the debt through the legal right of the creditor to the money; and when the series of demands has run its course, it results inevitably in turning tMe account over to some attorney to reduce to a judgment. Such a procedure ignores entirely the tremendous pull there is upon any man who is not a thief, when the proper appeal is made to his honour and sense of fairness. DICTATED LETTERS gl Straightforward appeals best.—A certain department store, after a given period, commenced collection efforts with a typ- ical, graded series of threats. Business did not increase and collections grew no better. . One correspondent, with an idea or two of his own, was placed in charge. He began sending out straightforward ap- peals for money, on the basis that it was due, and that the pur- chasers owed it. To let delinquents feel, at the same time, that the house still wanted their business, he enclosed a few sales leaflets. In the particular department of collection giving the most concern, the percentage dropped from 26 per cent. to 19 per cent. the first month, and the second month to 14.1 per cent. Threats should come only when all else fails. They should come like a clap out of the clear sky. Unless the clap clears the sky, let the crash fall immediately. When you have to threaten, carry the threat out. The un- expected is valuable in collection strategy. When you do strike, strike hard and unexpectedly. I have tried to make clear that these letters should be personal, but personal in the second person, not in the first person. The only interesting letter which begins with ‘‘I” is “I enclose check.” Letter censoring.—After the letters have been written, they ought to be censored, whether yours is a large house turning out 20,000 letters a week, or just a few a day. One can al- ways find something to correct in his own letters, when cold. To let the letter hang over a day, acts something like a letter censor. Better yet, for prompt correspondence, have a well qualified person act as letter censor for the department. Outgoing letters are to be read by the censor, and checked for the following points: 1. Policy. 2. Tone (A) Courtesy. (B) Sufficient stress for stage of delinquency. 3. English. 4. Typographical errors. Furthermore, the censor should reject all letters where forms could have been used. This will train the correspond- ents to conserve time and energy. CHAPTER X EXAMPLES OF SUCCESSFUL COLLECTION LETTERS All tested letters—The collection letters quoted in this chapter have all been used by collection managers in different types of installment collections. They have been tested, and have brought in the biggest percentage of returns. In general, installment collection letters must be much more severe than collection letters on an open account, because it is absolutely necessary to collect each installment as it becomes due. When one installment piles on another, we are in for trouble. However, even with only one object in view, that of good collections, it has been found that good-will is a tremendous factor, a much greater one than many an old-fashioned col- lection manager has allowed for. Consequently, when an in- stallment is just a few days past due, we must not be too harsh. The delinquent may have been out of town when the installment fell due, or the payment may be in the mails. It is hard to educate any purchaser to the idea that payment must be actually delivered on the due date. Printed form first—The most common lead at first is to assume that the matter has been overlooked. Often this is done with a printed letter, which has the advantage of being sent out more readily, and of seeming less personal, at a period when a personal, sharp letter is not needed. Friendly reminders.—The four letters reproduced here are all friendly and yet firm, and may be used following the printed notice: Letrer No. I Gentlemen: Thank you for your order given to our representative. The check you intended to send for this month’s installment has not arrived. Not a serious oversight, of course, but for the sake of uniformity in handling thousands of these installment items, PROMPTNESS in remitting is appreciated. You don’t have to write a letter unless you want to—just pin your check, 72 EXAMPLES OF SUCCESSFUL LETTERS 73 money order or currency to this letter and mail it to us in the enclosed envelope. Thank you. Yours very truly, GK-XO. Subscription One year $3.00 Paid $ Balance due $3.00 Letter No. II Your remittance covering the ...... installment on the above numbered note has not reached us. We are confident that your delay is due merely to an oversight, but in justice to yourself and to us, should you not make a special effort to see that the delay does not continue? It is not necessary to write a letter to us, simply put your certified check, bank draft or money order for $...... in the enclosed envelope and mail it today. Yours very truly, Letter No. III The August installment of your note still remains in default. Of course the nature of our banking business compels us to be very strict regarding the payment of these installments at maturity and does not permit of deviation from this practice. Can’t we handle this matter on a businesslike and friendly basis? Please settle at once—$........ LETTER No. IV The check you intended to send us for the amount owing on your note has not yet arrived—no doubt forgotten. May we take this opportunity to remind you that you are slighting a banking obligation? You are sufficiently familiar with banking practice to know that a note must be paid when it is due. Don’t you bother to write a letter—we understand perfectly how such over- sights occur—just pin your certified check or money order to this letter and mail it back to us—$...... principal, interest $...... , total $...... Appeal to reason.—This appeal is used more and more in collection letters. It is the appeal which is back of the best type of sales letter, and as the collection letter is in reality a sales letter, selling good credit or the satisfaction of being paid up, the collection correspondent or manager should try to see things through the eyes of the debtor, and make an appeal which will draw the debtor’s hand up to his vest-pocket, and compel him to take his fountain pen and write a check. 74 INSTALLMENT COLLECTIONS The letter next given, which was remarkably successful, was sent out by an automobile finance concern to purchasers of automobiles on time. The average purchaser of an automo- bile on time makes a salary of from $3,000 to $4,000 a year; some of them make much more. A great many of these pur- chasers are professional men, doctors, etc. Logic and truth win.—It proved successful because it was logical and truthful. The success of a financial institution of the nature of ours depends largely upon its ability to determine definitely in advance where certain sums of money may be placed to the best advantage. Every day thousands of installment notes mature and arrangements are made in advance to place every cent of this money. For instance, thirty days from today our maturities show that a certain amount of money will come in, where- upon we obligate ourselves to place this sum in a certain way which will afford the largest number of clients credit accommodation. It would be un- thinkable for us to fail in the slightest degree to meet an obligation, as we are a part of the financial system of the country upon which all business depends. The class of clients to which credit accommodation is extended—purchasers of motor vehicles—is of such a high rating, and so dependable, that we can be sure practically all notes will be paid when due. However, occasionally, there is a little slowness in the payment of an installment which, in most cases, is due merely to an oversight or a possible delay in the mails. Payment of the recent maturity of your note has not reached us. Won’t you please hurry it along by special delivery? Thank you. * Very truly yours, * Insert installment and amount. In the next letter we have the appeal to reason with a slight tincture of the element of shame. We tell the debtor, plainly, how many times we have approached him. Each time is set off in a paragraph by itself, and made as forceful as possible. The letter paid well. You have received our maturity notice. You have received our first letter. You have received our second letter. And yet you do not send in your long past due installment. Of course, we have other means than letter-writing at our disposal, but we always hesitate to use them. During these busy times, no man has a right, by evading his obligations, to cause extra work, and consume time and money that could be used in a better way. We know you will send us at once the amount now due $ Collection of interest.—Interest is a particularly hard thing to collect, The amoynt is too small to threaten suit. The EXAMPLES OF SUCCESSFUL LETTERS — 75 following appeal to reason on an interest item is the “‘last letter” sent out by one installment house, and proves a most satisfactory effort. We received on.........c cece ee ees payment for the final instaliment of your note. This check came from..............:..00ceeeee On account of certain installments not having been paid on maturity date, interest has accrued. This business is, above all things, the business of dollars and cents, mostly cents. The profits come from small amounts ranging from fifty cents to a dollar or two. : Any one of these items in itself appears almost too small to be noticed, but the total is quite a different matter. For this reason, we are calling your attention to the small balance still due on your note. It is your small share of a large sum. Will you please favour us with your remittance now—$............--00000e ? A publisher’s letter—The letter following is used by a publishing house, and they say it brought very satisfactory re- turns. It has rather too much of the “I” element in it. How- ever, it is personal, it is logical, and it succeeded. Dear Sir: Isn’t this a perplexing situation? The editor says, “Don’t offend a single business man if you can help it.” The sales manager says, “Every man who would want our publications will pay promptly enough if you let him alone.” Mr. says, “Our work is to HELP business men and to counsel them, and you want to handle your col- lections differently from the usual way of dunning the customers of any other business.” But the fact remains—we are just like every other business house—like YOU, we deliver value, and we want money for it. When our representative sent us your order, we entered it in good faith. Our part of the agreement has been fulfilled, so without frills or fancies, I ask you plainly to send the amount now due—$4.00. I am certain your sense of fairness will prompt you to send your remittance today and so make it unnecessary for us to go to further expense. Yours very truly, Effective, but irritating —The next letter is one which is logical, and which “‘gets next to the purchaser.” It brought back results, but caused a good deal of irritation, perhaps on account of its patronizing tone, and perhaps because it was a little too pointed and businesslike for comfort. At least, it was effective. You are entitled to receive from us fair and friendly treatment. That is why so many notices have been sent in an effort to get you to pay up your debt. Your continued silence has puzzled us, as we thought surely your remittance to pay the past-due installment would be in long before this time. 76 INSTALLMENT COLLECTIONS We should be sorry to take action against you, but what would you do if our places were reversed? Legal proceedings will let the public know all about your failure to pay this Note, which fact will not be pleasant for you, especially if you have other creditors. Harsh measures are distasteful to us and would be embarrassing for you. Even if you have to borrow the money, the best thing for you to do now is to send the amount listed above—and send it today. Yours very truly, Harking back to the note.—The next few letters hark right back to the note. The argument in each of these letters can- not be gainsaid. Letter No. I Dear Sir: Is it because you are not familiar with the terms of your note that we have not received payment of the ..............055. installment? We realize that a misunderstanding may subject you to considerable loss and undesirable complications. Therefore, in order to make our position in the matter perfectly clear, we enclose a copy of the note you signed. The form of this note complies with the laws of your State—payment can be enforced accordingly. If you are in doubt about this, consult your lawyer at once. Action will be taken for the recovery of our money unless you send by return Mall $issceecusde ve Setietene Yours very truly, Letter No. II Dear Sir: We regret very mnuch the unfortunate situation outlined in your letter of ListondGadhee taveemesaeaes and we sincerely trust that your financial embarrassment is only temporary. Situations of this kind quite often appear a great deal worse at first than they really are, and as a matter of fact, we rarely hear of a case that does not turn out all right in the end. The Commercial Investment Trust is purely a financial institution, and must operate strictly in accordance with the principles of good business and the regulations applicable to commercial paper. Therefore, extensions of time are not made under any circumstances. Every note is due and payable exactly in accordance with the original schedule of payments. Note makers sometimes find it very convenient to arrange local accommoda- tion to tide them over temporary shortages of funds, and we feel quite sure that you will be able to raise sufficient money to protect your interest as it appears in this transaction. (Details given here.) Yours very truly, Letrer No. III Dear Sir: HERE ARE THE FACTS—USE YOUR OWN GOOD JUDGMENT. 1. The note you signed when you purchased your................. is a negotiable instrument, and according to law is payable at maturity. 2. The note was purchased by this financial institution, for value, before EXAMPLES OF SUCCESSFUL LETTERS 177 maturity, and without notice. We are, therefore, “holders in due course.” The law protects an innocent holder of such a note. 3. Because of the non-payment of the ............eeeeeeeenes installment, our interest is jeopardized, and we will be compelled by the principles of good business to take such action as is authorized by the note for the recovery of our money—the full amount. 4. You can avoid undesirable circumstances, and at the same time protect your equity, by wiring us you have sent $............... Yours very truly, One of the “best pullers.’—The Commercial Investment Trust find the following letter to be one of the very best pullers they use. It gets the money and raises no argument. It is a logical letter, and after reading it, there seems to be nothing else except to pay. The basis for collecting in person is to prove that there is nothing else except to pay. As the debtor wanders off on one tack and another, the good ad- juster raises a barrier showing him that there is nothing else except to pay. That idea is back of this letter. Dear Sir: Your interest demands that you take up the ............-...0.. installment of your note at once, and assure us that the remaining installments will be paid at maturity. Full information as to the requirements was given you on the notice of maturity—surely there can be no misunderstanding. Inasmuch as we do not grant extensions of time, or carry past due paper, a further discussion of the matter seems unnecessary—our policy must be carried out. It is, therefore, advisable that upon receipt of this letter you wire us you are mailing $............ Yours very truly, A shock to the debtor.—One installment house tried an experiment. When the first installment fell due and was not paid, they sent a telegram demanding that the article be re- turned at once. Such an experiment proved a shock to the debtor, for the article purchased was new, and a good sub- stantial payment had been made on it, consequently the pur- chaser was inclined to bend every effort to pay at once. Of course, good-will is lost by any such action, but on the other hand, the purchaser is made to feel that if he does not pay, the article will be seized. While admitting this method to be extreme, still in closing the discussion of the appeal to reason, we reiterate that col- lection procedure on installment collections must be more severe than on open accounts. We simply cannot have one 78 INSTALLMENT COLLECTIONS installment piling on another, unpaid. With the appeal to reason, you must create the feeling that no dilly-dallying will be tolerated. The letter must be strong. Too weak for installments.—Just below is a letter sent out on open accounts. This is simply an appeal to the sense of justice, or to reason, and hardly would do on installment ac- counts, because it sounds too weak and pleading. “Deliberately unfriendly”’—that’s what we think of the way you are treating us. Why don’t you pay? You know we can’t break even on our transaction with you, if we have to keep on writing letters. You know, too, that we have given you your money’s worth. That’s our principle—small sales, big values, satisfied customers, prompt payments. Some others don’t follow this system. They are the ones who deserve trouble. We don’t. Come now, are we not right? Encourage our policy by paying up. Credit appeal——aA credit appeal is an appeal to reason. One of the strongest reasons for paying is that the debtor may be in a position to demand credit in the future. The layman, the ordinary purchaser, has a feeling that if he does not pay one obligation, the general public in some mys- terious manner finds out about it. This is more or less true. Often, on account of this indefinite idea which people in gen- eral have, it is just as well to make the threat of loss of credit also indefinite. To constantly remind the debtor that credit inquiries are always coming in, and are likely to come in regarding him, it is well to put these credit letters on credit stationery. Use of credit stationery.—Of course, on this stationery the credit department has always some statement similar to the following: “All persons are informed that any statement on the part of this corporation, or any of its officers or repre- sentatives, as to the responsibility or standing of any person, firm or corporation, or as to the value of any securities, is a mere matter of opinion; and given as such, and solely as a matter of courtesy, and for which no responsibility, in any way, is to be attached to this corporation or any of its officers or representatives.” This very statement gives the impression that credit refer- ences are always likely to come in. It is only necessary to test a thousand letters sent out on credit stationery, and a thousand letters sent out on collection department stationery, if the de- partments are kept separate, to-see how much more effective a letter with reference to credit is when typed on credit EXAMPLES OF SUCCESSFUL LETTERS 79 stationery. If your firm is a member of the National Associa- tion of Credit Men or of any other credit men’s association it would be well to insert that also on credit stationery used for collection purposes. To the dealer as an endorser.—The letter following is sent to a dealer who endorses his customers’ notes. The appeal here is one of credit. It is an indirect collection letter in that the dealer will assist in collecting, for the sake of keeping his own credit as an endorser. In re: Monthly Statement—In these critical times it is highly desirable that you assist us in pressing collections with the utmost vigour. To do so will lessen your own liability on the notes, and will help to maintain, with the least ex- penditure of your own money, your good credit record. The scarcer money becomes the greater is the value to the dealer of a good credit and collection record. In granting credit, the first question that arises in the mind of a credit man is: “Will he pay?” and to answer that question the credit man investigates first of all to see whether he HAS paid in the past—and paid PROMPTLY. This applies to a dealer’s credit, as it does to any credit. We know you will realize that you will be helping your own business by seeing that every one of your customers “pays on the dot.” You will find attached a list of notes bearing your endorsement. Reaching the truckman.—The next letter was sent out to a truck purchaser who bought the truck on the installment plan, so as to make more money for his business. Obviously, you purchased the truck from the................006. for the express purpose of equipping your business so as to make more profit. In doing so you made use of your credit standing, by giving your note for a large part of the selling price. : In your business, a motor truck is essential—you could not get along without it. However, there is a greater business necessity—CREDIT STANDING— your reputation for being prompt and fair in all your business dealings. Your note is now seriously in default. You have not yet cancelled the As pe Saag sat installment $............ This whole matter must come up for definite decision in the course of the mext week or ten days. Please see that your check gets into the mail immediately. There must have been some adequate reason why the check was not mailed by you on the maturity date, as our preliminary investigation of your credit was very satisfactory; so we should appreciate it if you would accompany your check with a brief letter of explanation. While it is true that failure to meet an obligation like this may damage one’s credit standing, if a check is sent in immediately with an explanation, and future installments are met on time, no harm has been done but what will be remedied, Yours very ttuly, 80 INSTALLMENT COLLECTIONS The appeal of timeliness—The next letter is a success- ful one sent out by a large New York house. Its appeal, you will see, is timely. Dear Sir: LOOK OUT FOR YOUR CREDIT NOW—YOU'LL NEED IT LATER! When business gets back on a normal basis, good credit men will hesitate to grant credit to those who, the reports show, have not discharged their obliga- tions in a creditable manner. Your reason for withholding payment of the................-.. installment of your note is doubtless “slow business.” We fully realize the existing con- ditions and therefore have no desire to increase your difficulties unnecessarily. But you may see from the attached copy that your note provides for full payment upon the non-payment of any installment at its maturity and for attorney fees of 15 per cent if allowed by law. By these terms we will be bound to take action if the payment is not made now. Avoid expense and undesirable circumstances by wiring you have nailed Yours very truly, P. S. For the protection of your credit standing, assure us that future pay- ments will be made at maturity. Suggesting dual loss——The next credit letter makes a dual appeal—that of credit, and that of losing the collateral. It is faulty, in that the appeal is not focussed into a single one; but on the other hand, as this letter goes out rather late on the installment, the combined appeal of good credit, saving credit, and of saving the car is perfectly legitimate. The check you intended to send us for the amount owing on your note has not yet arrived—no doubt forgotten. While it is hard to understand how our several notices and letters could have been overlooked, we cannot believe that a person of your reputation would wilfully neglect a banking obligation. Surely you do not wish at this late date to injure the credit standing which you have established with us, and it should hardly be necessary to remind you that you are also jeopardizing the very large interest you have in the car. Now that the matter has been explained to you, we feel confident that we can depend upon receiving your future payments promptly and that you will, at once, send us your check in settlement of the past due installment, $............ Yours very truly, Future effect good also.—A collection manager used the following letter, and found it unusually satisfactory. It brought good results, and not only collected the past due in- stallments, but had a wonderful effect on subsequent maturities. EXAMPLES OF SUCCESSFUL LETTERS 81 Dear Sir: Not only is it to your best interest to pay the .............. installment of your note now and be prompt in the future, but it is absolutely necessary. Your contract was made to be complied with, and we cannot believe that you would deliberately violate any good business principle. Don’t put yourself in the class with the undesirables who find it difficult to obtain credit accommoda- tion. We have every desire to see you continue in possession of the car, and repair any injury to your credit standing the delay may have occasioned. You can obviate the development of undesirable circumstances by wiring you have mailed draft for $..............0008 Yours very truly, Caused some debtors to whine.—The next letter while it collected a good deal of money, caused some whines. People do not like to be told or shown that their credit standing is not good. Dear Sir: A good credit standing is the greatest asset an individual or firm can possess. Do you appreciate the value of yours? Surely the signing of a promissory note, having as its collateral security the motor vehicle now in your possession, should mean something to you. Your note was accepted subject to the terms as specifically set forth therein— a certain amount to be paid here, on a specified date. Not only is your credit standing at stake, but you are on the verge of con- siderable loss—the car and the amount you have paid on it. Avoid the humiliation to which the repossession of this car would subject you by paying the ...... ....... installment now—wire us today you have mailed Yours very truly, Repossessions.—The first letter here below, you will agree, ought to be effective. It is dignified and decidedly forceful. This letter was written by the president of a very large install- ment corporation, on the 20th Century Limited, going to Chicago, while discussing collection letters with a vice presi- dent. It was tried out, and found more successful than any of the letters used up to that time containing the threat of repossession, although it was not as threatening as some others. In spite of previous requests for your attention to the note, the current in- stallment remains outstanding. If at the end of one week, either an actual remittance or wire that it has been mailed, has not been received by us, we will be obliged to look to the collateral security for the payment of this overdue obligation. We do not wish to make ourselves unpleasant, nor do we wish to take this step. Our business is banking, and not selling, but we feel with the sub- 82 INSTALLMENT COLLECTIONS stantial equity you have established, and which will probably be lost througb Sheriff’s sale, you will want to complete the payments on the machine, and so free it from our lien. Please forward your check for $.............. An A-1 puller—The following letter is an A-1 fuller. It puts the responsibility of failure squarely on the debtor. Dear Sir: What would the loss of your car mean to you? It would mean just this: a total loss of all the money you have paid on it; a reflection on your credit standing that might make it difficult for you to obtain credit accommodation in the future; the humiliation of having the car taken away from you. Probably you have failed to consider the fact that your note is a negotiable instrument, and according to law, is payable as it matures. You cannot pay this note at your convenience, but you must observe the due dates, if you wish to prevent undesirable consequences. Of course, if you will not pay voluntarily,.we will be compelled to resort to the customary action for the recovery of our money. Will you pay the Gateioaie Gila ook cage installment now? Wire you are mailing $.............. Threats to repossess.—A letter threatening repossession which goes to a truck driver should be quite different from one going out to a piano player. The two letters below were sent to truck drivers who failed to pay, and if they could read their A-B-C’s, they could not fail to get them straight. Letrer No. I Now) Miowsseoveocseaaisiannes , the manner in which you have been handling this banking obligation is entirely unsatisfactory, and unless the condition is improved immediately, it will be absolutely necessary to relieve you of the truck. Our leniency in this matter should certainly impress you with the fact that we have every desire to continue business relations with you on the proper basis, but we cannot make it too plain that a further neglect of this matter cannot be tolerated. LetTer No. II Mie i Gite he ee Pasa , Please get this straight. The note you signed provides that payment of each installment shall reach the Guaranty Banking Corporation, Continental & Commercial Bank Bldg., Chicago, Illinois, not later than the close of banking hours on the ................. of the mmanth, Therefore, when payments are not made, the lease (chattel mortgage or contract of conditional sale) is violated, and we are at liberty to repossess the truck. Demand for collateral—Automobile finance companies find it quite advisable, where they are sure that their collateral is worth more than the note, to demand that the collateral be EXAMPLES OF SUCCESSFUL LETTERS — 83 turned over to the dealer. The first of these appeuls is rather a kindly one; but at the same time, it is firm. Letter No. I We like to do even the most unpleasant things in the most pleasant fashion. The condition and terms of the note and contract which you signed, and which we hold, are clearly and specifically given—hence these papers. One of these provisions is that, in the event of default on any installment, we may take immediate possession of the car. We ask, therefore, that you take our car, and place it in the garage of...............eeeeeeee , to whom we shall send a copy of this letter, acquainting him with the matter. If it is not convenient for you to make payment at this minute, drive the car over to the dealer’s garage, and leave it there. If in a week or ten days you think you will be able to provide for the past due items, and will let us know at this time, after turning over your car, of the definite time upon which you will be able to take care of the items, we may be able at that time to have the dealer turn your car back to you, upon payment to date. We are not interested in taking over cars, nor are we interested in making ourselves unpleasant; but this past due money has simply got to be paid promptly. ; LeTrer No. II This is formal demand that you turn our car (truck) over to (name of dealer) for our account. You realize that if we are compelled to resort to legal measures, the car (truck) will be taken, and all costs included in a suit against you. We are notifying (mame of dealer) to accept the car (truck) for us, and perhaps arrangements can be made for you to redeem it a little later. As you have failed to make the payments, if you are still unable to take up the (insert month and date of note) of $............. , we will ask you to wire us that the car (truck) has been delivered to the dealer as demanded. Very truly yours, (REGISTERED MAIL) Full amount due and payable.—On almost all installment notes there is a clause to the effect that if one installment be- comes delinquent, the holder of the note may declare the full amount due and payable. While this argument has proved disappointing, some installment houses continue to use it to some extent, and so we include the following examples: Letrer No. I Dear Sir: The following is a quotation from the face of your note: “Upon non-payment of any installment at its maturity, all remaining install- ments shall become immediately due and payable.” We have not exercised this right, because we had confidence in you, and did not wish to cause you any unnecessary trouble and expense. But, if payment is not made at once, we shall be compelled to resort to the means at our disposal for the protection of our best interest. It is, therefore, advisable for you to wire us you are sending by special delivery $........ Yours very truly, 84 INSTALLMENT COLLECTIONS Letrer No. II Dear Sir: Are you prepared to take up the entire balance of your note at this time? According to the terms of the note, the full amount is due and payable, because of the fact that the........ seReedeleawans installment has matured, and is unpaid. We do not, however, wish to subject you to additional expense or the in- convenience of paying in full, unless there is no other way to protect our interest. Therefore, if you will assure us that future installments will be paid when due, and send by return mail $......... -.+, we will permit the note to run as originally intended. Wire us you are mailing draft. Yours very truly, , Letter No, III Dear Sir: Your failure to take up the............ installment of your note has caused the account to come up for special attention. Upon examination of the file we found that you have not been prompt with your payments, although the credit information we have of you indicates that, when the note was accepted, you enjoyed a good reputation for the discharge of your obligations. We are confident that you are familiar with our requirements, as in the very beginning we sent you full information, and have followed the practice of sending you a notice in advance of every maturity, so that you would not forget to make your payment. Notwithstanding these facts it has been nec- essary for us to write you on a number of occasions before getting payment. Now, we feel that we have given you every opportunity to comply with the terms of your note, and avoid consequences of an undesirable nature. Therefore, we wish to inform you that unless you make immediate payment of the past due installment, and assure us that future installments will be paid at maturity, we shall avail ourselves of the right vested in us by the terms of the note, and demand that the account be closed. In the absence of full payment upon demand, we shall repossess the collateral, and bring suit against you for any deficiency there might be, after the sale of the chattel. We trust you will realize the true state of affairs, and protect your equity by wiring us you have mailed draft for $............ Yours very truly, Threat of additional cost.—Almost all notes contain a clause to the effect that if installments are not paid, any ad- ditional costs which arise must be borne by the debtor. Some- times the wording is full, and heavy and terrifying in its legal phraseology for the debtor’s benefit, so he will surely avoid getting into all the unnecessary trouble foretold. However, their provisions are all boiled down and put in simple lan- guage, in a note from which we quote as follows: “And the undersigned hereby confesses judgment in favour of the holder hereof for the balance remaining unpaid, together with costs, disbursements and 10 per cent. attorney’s fees; And does hereby authorize the holder, or his attorney, to enter judg- ment therefor, against the undersigned.” EXAMPLES OF SUCCESSFUL LETTERS 85 Driving the facts home.—The following letters make use of this appeal effectively. The first one is conversational, and sounds like an individual letter. With the second, a copy of the note is attached, and of course the note sets forth, in large display, the fact that the debtor would have to pay costs. Letrer No. I Dear Sir: A certain man in New Jersey got the idea that he did not have to pay the installments of his note at maturity. Notwithstanding the fact that we wrote him several letters explaining the nature of the obligation, he persisted in paying at his own convenience. When the next installment was not paid at maturity, we frankly told him that unless the money was in our office by a certain time, the matter would be handed to the constable with instructions to seize the car. ‘This, we pointed out, would cost him an additional $90 for fees, as provided by the terms of the note, but he merely said: ‘Go to it.” He never got another letter from us, but one bright morning the constable seized the car. He then came to us, and pleaded for a cancellation of the fees, and the return of the car; offering to pay the balance of the note, but we could not help him. He paid the full amount of the note, plus $90. We have written you many times regarding the manner in which you have been paying your note, but at this time the............... installment is unpaid. We must have remittance of $............ within a certain number of days— use your own judgment. Yours very truly, Letrer No. II Dear Sir: Your interest demands that you send us at once $............ to cover the a seeaG eect cv installment. The note you signed, as you can see from the attached copy, provides for an additional 15% for attorney’s fees, if collection is made by law. It further provides that the entire balance is due upon the non-payment of any one installment. We have no desire whatever to cause you any inconvenience, and we as- sure you we would deeply regret the necessity for action. But, as a financial institution, the innocent purchasers of your note, our only alternative would be to resort to the means at cur disposal for the recovery of our money, if you do not voluntarily remit by return mail $............ Yours very truly, P. S.—A satisfactory explanation of the delay and the assurance of prompt payments in the future may re-establish your credit standing. Cutting down on threats.—In supplying letters giving exam- ples of threats, it is not our idea that they may all be used on one note. The old idea of collection was to key the entire col- lection system to a series of threats. From the initial state- ment clear through until it was necessary to reduce the amount to a judgment, almost no appeal was made, except hammering away with threats; and the results were most meagre and irri- 86 INSTALLMENT COLLECTIONS tating. Not more than one or two threats ought to be made without proceeding to fulfill them. Send through the local bank.—One of the most effective methods of collecting money is to make use of the local banks. If the bank is in the vicinity, a telephone call will turn the trick, or if not a brief telegram is most effective. Two tele- grams to banks follow: TELEGRAM No. I Wire name of reputable attorney who will take possession of truck which is our property, and is being used by........... He refuses to pay for it. Can judgment against him be collected? Many thanks for your kindness. TELEGRAM No. II sis debiesee a8 refuse to honour endorsement. Please wire name good attorney who will take vigorous action, repossess cars, and start suit’ against them. Can judgment against them be enforced? Many thanks. Wire answer. Bank may clear situation—The writer sent one of these wires to Washington, D. C., with the result that the bank im- mediately telephoned to the debtor that they wished to see him about a very important matter, one that could not be discussed over the phone. The debtor came, and the bank impressed on him the seri- ousness of the situation; and in fact lent him enough to cover the obligation. When a debtor, who thinks that he is so far away from the creditor that he is safe, gets a summons from his local bank, he realizes how closely knit is the entire credit fabric. Threats in tabloid form.—Four short sentences comprise the general threat given below. There is an element of humour, but it is rather grim. Letter No. I Théssiesuv ea skew installment is still unpaid. What are you going to do about it? Or is the next move ours? Very truly yours, That is all, but that is enough. One sentence tells the story in the next letter. Letrer No. II Have you mailed remittance or must we take drastic action? EXAMPLES OF SUCCESSFUL LETTERS — 87 Threats on note and contract.—In the following letters, the threat is general, but is based strictly and entirely on the note and contract. Letrer No. I Attached is copy of your note, and contract, which have been assigned to us. We have been exceedingly lenient with you, and we regret that you have not appreciated our consideration. If your check for $............. is not in this bank before 3 o’clock, we shall enforce the terms of the note and contract. Wire us your check is in the mails. Letrer No. IT Dear Sir: Are you sure it is to your best interest to withhold payment of the.......... installment of your note? We know it is not, and we are confident that if you will consult a good lawyer, presenting to him the enclosed copy of your note, he will urge you to remit at once, and avoid undesirable complications. We have no desire whatever to cause you any inconvenience, but as we are the innocent holders of your note for value, we must have our money when it is due. Therefore, we will be compelled to resort to the means at our disposal for enforcing full settlement unless you send us by return mail $............ Yours very ‘truly, Letter No. III Gentlemen: We felt, when we discounted your note, that there would be no question about the payments being made at maturity, because your signed financial statement, as well as your local reputation, convinced us that we had nothing to fear in this respect. It is, therefore, a great surprise to us that you have allowed the April 5th installment of your note te go to default, and remain unpaid for over two weeks. Our surprise is now turned to the conviction that we shall be forced to take very definite and summary means to collect this default. Everything now depends upon the manner in which you make response. Please forward $114.01 principal, $9.50 interest, or a total of $123.51 today. Yours very truly, Letrer No. IV Dear Sir: Considering the information given you in our previous letters regarding the past due installment of your note, we feel that a further discussion of the matter is unnecessary. Therefore, please be informed that we are prepared to exercise our rights without further notice to you. If it is your intention to avoid embarrassing circumstances, wire you are sending draft for $............ Yours very truly, A phrase that grips—-The best sentence in the letter quoted below, reads: ‘Your signature on these papers means something—so does the schedule of payments.” The cor- poration using this letter is well satisfied with results. 88 INSTALLMENT COLLECTIONS Dear Sir: You wish to protect the equity you have established, and maintain your good credit standing, we are quite sure. It seems, however, that you have overlooked the fact that you are directly obligated to this institution, by virtue of a note which is secured by a con- tract covering your purchase. Your signature on these papers means some- thing—so does the schedule of payments. We assure you we have no desire to cause you any loss or inconvenience, but if you will not look out for your own interest by complying with the terms of the note you signed, we will be compelled to resort to the means at our disposal for the recovery of our money. "THE iccisoss cre gpa de ye installment is still unpaid. Wire you have mailed draft Yours very truly, A solar plexus dun.—In the last of these letters, the note is copied into the body of the letter. It is a telling blow of itself, followed by short, almost brutal sentences which made this a compelling communication. We quote the provisions of the note which you signed on............ ‘ If any installment of this note is not paid at the time and place specified herein, the entire amount unpaid shall be due and payable forthwith at the election of the holder of the note. And I hereby authorize, irrevocably, any attorney-at-law to appear for me in any court of record in the United States, and waive the issue and service of process and confess a judgment against me in favour of the holder hereof, for such amount as may appear to be unpaid hereon, together with costs and 15 percent. of the amount due hereon as attorney’s fees, and to release all errors and waive all right of appeal. You have forfeited your right to the............ You have received all the notice that you have a right to expect. Your failure to meet installments is costing us more than this note is worth, and there seems to be no alterna- tive except to make use of our adjuster located in your state to carry out the provisions of the note to the letter. If you intend to pay, forward $............ immediately. Yours very truly, Just to relieve the strain, as is done when they play a little light music between the acts of the tragedy, or as when the fool comes in and jests just before the grand débacle, let us insert a letter sent out by a department store to a delinquent customer. If it is not convenient for you to pay your account in full, we shall deeply appreciate it if you can help us out with a payment of whatever you can spare at present. We do not want to dun you, and if you can’t pay just now, pay no atten- tion to this request until such time as you may be in a position to favour us. We thank you very much for your business, EXAMPLES OF SUCCESSFUL LETTERS — 89 Legal threats.—The letter next given is all to the point. It is a little longer than many an ideal final threat, but there are no wasted words. ‘The only words outside of the bare threat convey the impression that it is made with regret, which is desirable. We regret that you have made it necessary for us to call your attention to the fact that you are not living up to your obligation in the matter of endorse- ment of notes. We should indeed dislike very much to believe that the delay upon the part of............ Company is due to other than oversight. Still, unless a remittance is received by............ or your wire on or before that date that you have mailed it, we shall have no alternative but to resort to the legal means at our command. It is our desire to do you no injustice by taking summary action in a legal way which might reflect unnecessarily upon your standing, so we offer you this final opportunity to take care of your account. Unless you have already sent payment, we must insist that you remit........ principal, together with.......... interest at once, Brief and pointed.—A shorter threat, and one stripped of everything except the essentials, was found very effective by one house, and is given below. The special feature of this letter, you will notice in the lower left hand corner, is, “Ap- proved: Legal Department,” with space below for three per- sons’ initials. Unless you forward the amount required to close by return mail, we shall be compelled to take legal steps against you. We do not wish to repossess thesis sic tres carve , and involve you in the expense and annoyance of a law suit without giving you this final opportunity to take care of the note. Please forward your check covering the principal amounting to $.......... interest $..... saueeae total '$iccxecave sexes Yours very truly, Collection Manager. Approved: Legal Department. A publisher’s final effort.—A publishing house sent the fol- lowing letter as their final threat. This letter in itself is good, but its effect had been weakened by three or four earlier and very similar letters, somewhat more wordy. Dear Sir: Our several letters concerning your account as noted remain unanswered. From your silence we can only assume that you do not intend to send remit- tance, and that it will require legal measures to effect settlement. This, therefore, is to serve as notice that unless you arrange for an ad- justment within the next ten days, we shall, with regret, be compelled to refer the account to our attorney, with instructions to proceed as he may deem best. Yours very truly, 90 INSTALLMENT COLLECTIONS The lawyer steps in:—Immediately below is their attorney’s letter. The 22 nvies's Company, publisher of the magazine..., has placed in my hands for collection the above claim against you. Before resorting to legal action I would urge upon you the necessity of paying this claim immediately. The company has submitted to me its contract together with letters relative to payment. The contract has been carefully examined; it is legally binding, and I shall therefore take the usual steps to enforce settlement unless the matter receives your attention at once. By remitting immediately, you will avoid the annoyance, embarrassment and expense of court proceedings, , Yours truly, The house attorney.—Some concerns consider it more ef- fective to send a letter out over an attorney’s signature. The superiority of a house attorney in threatening legal ac- tion is obvious, as his signature will carry more weight, be- cause of his profession, than that of the corporation itself. A typical set of “friendly” letters.—To conclude this chap- ter, let us insert a contribution from an installment concern handling pianos, talking machines, and furniture. It will be seen through this set of letters that good-will is looked upon as a very serious factor. One cannot afford to antagonize the customers of a large department store. I quote the following from Mr. H. C. Greene, Collection Manager of Bloomingdale’s department for musical instru- ments and furniture. Impersonal in tone.—‘“‘In handling a large volume of busi- ness, for reasons of economy, the greater part of the collection letters must necessarily be forms,” said Mr. Greene. ‘‘As the form letters are intended to collect the bulk of the money that is due, nothing can be more important than the careful word- ing of these letters. They must fit the average case; but for that very reason we must remember that they will not exactly fit many cases where they must be used. “Tt is best, therefore, to keep these letters rather impersonal in tone on the whole. Knowing in advance that many people will take offense at receiving any collection letter, even when it is deserved, we can at least make our letters dignified but friendly. The iron hand in the velvet glove is what wins. “Tt is a mistake to send too many form letters in succession without response, but a series of form letters may be followed EXAMPLES OF SUCCESSFUL LETTERS 91 up to advantage by carefully dictated letters or telegrams. If one of the form letters succeeds in drawing a reply from the customer, a satisfactory outcome may safely be predicted. “When an account is a little behind, the customer ‘paying short’ without any explanation, it is well to send the letter which follows: It is not enough to pay your monthly installments regularly, when there are arrears left over from other months. We send you a statement every month, showing the amount of your arrears. If you do not understand why you are behind in your payments, we shall be glad to explain it, any time you wish to call or write. Otherwise, we shall expect an immediate payment of............ “This gives the customer an opportunity to explain, if he was under the impression that he was up-to-date, and the mat- ter may easily be adjusted. If he is intentionally withholding part payment, he will probably tell why; if not he should be followed up systematically. For instance: We mailed you a notice more than a week ago, but as yet have received no remittance to take care of your............ installment. We assume that you have simply overlooked this payment. If this is the case, will you please attach money order for............ , and return at once. “This allows for the possibility that the notice of pay- ment due may have gone astray, or that the customer may have mailed his remittance, which was not received or was improperly credited. It is always better to say ‘we have no record of payment’ than to assume that the customer failed to pay. The second letter is more insistent. Your....... .....installment still appears on our books as unpaid, despite the fact that we have taken particular pains to notify you of this delinquency. You will recall that when you signed your contract, you agreed to make your payments promptly. We had hoped that there would be no necessity for our reminding you, and we still feel that you mean to be prompt with these payments. If there is any reason for this delinquency other than a mere oversight, will you kindly explain it to us by return mail, so that we may govern ourselves accordingly? “But this second letter is nothing more than a reminder, still giving the customer the benefit of the doubt. “Before another installment falls due, it is well to send a letter like this: As no reply has been received to our letter of June 17 we must again call your attention to your............ installment. 92 INSTALLMENT COLLECTIONS Payment was due on......... , and you can readily see that your account is seriously in arrears. Please do not neglect this matter for another day. It-is advisable to keep your account in good shape for more reasons than one. Kindly remit............ at once. “The best argument at this stage is to point out the cus- tomer’s own interest in avoiding a heavy payment in one month. Of course we assume that he is not going to put us off another month. If so: We always strive our utmost to maintain the most pleasant relations with our customers. Naturally, we expect some co-operation from you. But you have not done your share, for in spite of our repeated requests, you have not paid the in- stallment due............ That we may continue our present friendly relationship, will you please send at once your remittance of............ “Two installments having passed, we are now justified in using a ‘veiled threat,’ which will inevitably bring in a few angry replies, but in most cases a check or a satisfactory explanation. A more direct argument follows: We have patiently written to you, again and again, to remind you of the arrears on your account. Because we have been so lenient with you, however, you apparently feel that you can make these payments to suit your own convenience. As it seems that you are not fair to us in this matter, we have decided to treat this account the same as all other delinquencies. If you would save yourself any further inconvenience in the matter, how- ever, we would suggest that you forward at once a remittance of......... “It would be a waste of time to-keep on threatening with- out acting, but we may try a final ‘bluff.’ ” Our patience is now exhausted. Written requests do not seem to have the slightest effect upon you. We have endeavoured to show you where you will be the loser by the course you are pursuing, but apparently we have not succeeded. It is either your move or ours—in other words you will have to send us your remittance immediately, or we shall place your account in the hands of our Collection Department, which will proceed to enforce our claim against you. If you would save yourself the usual inconvenience following such action on our part, we would most strongly urge the immediate payment of.......... New business solicited.—While it is a collection man’s job to collect from the debtors, it is just as much a job to bring in new business from the good customers. The following let- ter worked wonders when sent out with the final papers. EXAMPLES OF SUCCESSFUL LETTERS 93 General Letter Sent to All Purchasers Who Pay Promptly. The prompt manner in which you have met all payments on your note for spapendvinterainase’s has been extremely gratifying. You have established a fine record with us. One virtue of a good record is that it is HERE TO STAY, and will be avail- able for reference when you want similar accommodation in the future. If the time comes that you need another motor vehicle, do not hesitate to ask for the GUARANTY PLAN. Remind your dealer that you are favourably known to us. If, at any time you should wish to use our name as a credit reference, we should be pleased to have you do so. Yours very truly, CHAPTER XI THE MAKE-UP AND MAILING To attract attention.—Collection letters should attract at- tention from the first. This may be accomplished in part by stationery and make-up. What do you think of the following string letter? A letter was tied with a string and the ends of the string were left dangling. Do you remember when you were young and the good folks sent you down town after something—they were very likely to tie a string around your thumb to make certain you would not forget? Those were happy days, were they not? But, there is no reason why the days of now should not be just as happy; and it is just as certain that some of us are likely to forget the little things of yesterday. Because of that, we are sending you this little reminder—not to forget to pay the enclosed statement. Very truly yours, P. S. Tie the string and you won’t forget. Blue at non-payment.—A public utility collection man- ager sent out a card printed in red on the eleventh of the month. His next letter was in blue, and you will see on read- ing it that it is a good letter. From the psychological view- point it is clever, attention-getting, does not take itself too seriously, and is sympathetic. Blue,—that is how I feel after not having heard from you in response to my overdue notice. And I shall feel even more blue when I have to instruct my line man to end your service. I will not do this if you make a settlement of your account before that day, Illustrating collection letters—A men’s furnishing house has quite a clever self-addressed envelope to enclose with bills, headed “To our Accounting Room.” Beneath this caption is a picture of a man with an old-fashioned quill pen over his ear, making tracks thither with the letter. The Bell Floral Company has a judge engraved at the top of one of its collection letters and, below: You be the judge; We shipped the flowers. If you say, “Write it Off,” We will do so, as the Bell Floral Co. believes The customer is always right. Otherwise fill in the attached. The attached is a blank check. 94 THE MAKE-UP AND MAILING 95 Timing the follow-up.—Very often letters go out at regular intervals, irrespective of mailing times. Adjusters with whom I have spoken have brought this point out. A concern will send out letters, say five days apart, to ranchers in Montana, where it would require a couple of weeks for the letter to reach the addressee, and the answer to come back; to say nothing of the fact that ranchers usually go for their mail only two or three times a month. The mailing schedule—From New York, the number of days advisable to allow for mailing in the various States is indicated in the following schedule: State Days State Days Alabama. oss 2ssiscenes 7 Nebraska ..i3s6s0ss00. 10 Arizona ovis siecniaces 11 Nevada. siox cscnscveaccinnes 10 Arkansas ............- 8 New Hampshire ....... 7 California ............ 17 New Jersey .......... 6 Colorado ............. 12 New Mexico .......... 11 Connecticut ........... 6 N. Y. C. & Bklyn....... 5 Delaware ............. 6 New York State....... 6 District of Col......... 6, North Carolina ...... 6 Florida. i s.s3s44 castes 7 North Dakota ......... 9 Georeia: sicis se eosiaereigiars 7 Ohio: ssecaswenuesiaas 7 Tdaho) «...os2 dente ties 9 Oklahoma ............ 8 Illinois ...........0006 6 Oregon ........cee ee eee 18 Indiana saccrscanpenas 6 Pennsylvania ......... 6 DOW se 2k Sareralantterentuenere 7 Rhode Island ......... 6 Kansas scsc2cersace cease 7 South Carolina ....... 7 Kentucky ............. 6 South Dakota ......... 9 Louisiana ............. 8 Tennessee ............ 7 Maine: <1vecteeconewnys 7 WexaSh se phiedaietiekenavecda’s 12 Maryland ............ 6 Utah ssinssseacosconave nn ney 10 Massachusetts ......... 6 Vermont ............. 7 Michigan ............. 6 VITBINIA .ocdes Sek cece 6 Minnesota ............ 8 Washington ........... 18 Mississippi ..........-- 7 West Virginia ......... 7 Missouri ............. 7 Wisconsin ............ 7 Montana ............. 10 Wyoming ............. 10 The envelope.—Often it is advisable to send a collection let- ter in a plain envelope, especially if a series of letters has been written without results. The reason is apparent; a debtor might be wary or angry and not even open the envelope. It usually pays to enclose a return envelope, but this is a matter which you can decide readily for yourself, in the same manner that form letters are tested. You will also find that if your accounts are numbered, it will be a great saving to have a girl write the number of the account on the return envelope in pencil. When the check comes back, almost invariably en- 96 INSTALLMENT COLLECTIONS closed in this return envelope, it can be applied immediately without the delay and trouble of going to the indices. A certain company which has as its clients almost exclusively men of large wealth has found it difficult to reach its clients, because the secretaries throw the letters aside. The com- pany has hit upon a device which has been successful; that of sending out plain envelopes often of odd shape and size, hand addressed. The writer has adopted the same plan in writ- ing to wealthy debtors. Deliberate mixing of envelopes.—The collection manager may write to his salesman that he is informed that such and such a customer in his territory has failed to pay, and that he has written his customers that he is preparing the papers to place the matter in the hands of his attorney; if this fails, that he wishes to explain the whole matter to the salesman involved. Another collection manager writes to the post office depart- ment about a delinquent employee, or again he writes to a hotel manager about an employee, and asks if he can suggest anything before placing the account in the hands of an attorney. These letters to the salesmen and employers find their way into an envelope addressed directly to the debtor. Mistakes have been made in mailing, and why not take advantage of these mistakes. At least it would be more considerate than to send these letters to the employers, or to the post office department, and is almost as likely to bring results. CHAPTER XII *"PHONES AND WIRES IN COLLECTING Advantages of the telephone.—For reasonable distances the telephone is the best instrument of collections. It allows an explanation on the part of the debtor, and brings the situa- tion first hand to the collection manager. The debtor is flat- tered to have the collection manager call, while he may be irritated at a collector’s personal call. The ’phone gets first attention, the collector last. A high calibered man who handles the ’phone can talk to fifty cases to one of the collector’s. In a small town it has the advantage of publicity, for one always fears that other people on the line may hear. Members of the quicker-witted sex will often say that they have mailed the check, and will then pro- ceed to do so. But you can see by the postmark that the check was mailed after the phone call. And if a woman says she has failed to get the notice, you can assure her of your per- sonal attention to her account; and when you look it up, you will probably find that the notice went out all right. Gets debtor’s immediate attention.—The ’phone gets you by the office boys, straight to the ear of any debtor. Your mes- sage comes out, clear of the distraction of your appearance and clothes, and makes a peculiar, uncomfortable, impersonal appeal. It is easy to get him committed to some kind of prom- ise the first time to get rid of you, if nothing else; and you can flash back at him at your leisure, until he starts at every tele- phone call, and finally sends the check. One of the largest Chicago department stores makes it a policy to telephone out that their collection man will happen into the neighbourhood in a couple of days. The store is mere- ly calling up so that the customer may know that the man is going to come around to save the customer the trouble of writ- ing a letter, or purchasing a money order, when it is really un- necessary. The department store will be glad to offer the same service that it does in making deliveries at the door, by 97 98 INSTALLMENT COLLECTIONS sending a man to the door to collect the money. This scheme works wonderfully, for no one wants a collector around—he always comes when the neighbours are visiting. Use of wires.—Wires are short long-distance calls. Their incisive message is delivered almost before a stenographer can get a letter out. The purpose of a telegram is speed. A wire is written fast; it goes out fast; it brings back the money fast. Most useful they are on large amounts. A debtor will seldom stand up against the irritation and publicity of a series of three telegrams a few days apart. He will make some kind or a settlement. Every time they were used, the following wires brought in a proportion of thirteen out of fourteen hopeless collections: 1. Have You Mailed Check?—Have you mailed check for............ pay- Mente. cee seas eae Dollars wii cscs cents ? 2. Has Check Been Mailed?—Has check for........ amount been mailed? Wire answer. 3. When Was It Mailed?—Check for.......... installment has not reached this office. When was it mailed. 4. Wire Yes or No.—Action pending. Has check been mailed? Wire yes or no. 5. Avoid Undesirable Circumstances—Avoid undesirable circumstances by sending check for............ dollars to cover............ ANd sss jira’ in- stallments note held by this bank. Advise you wire check sent so unnecessary action will not be taken. 6. Action Pending.—Action pending wire from you that check for........... dollars is in mails. 7. Send Certified Check Immediately—Send us immediately certified check Diisesneteras ciclo ; otherwise surrender automobile; leave with......... AE pecivarasets for us. Unless you comply we shall seize automobile and this would be expensive for you. Have bank wire us remittance is being mailed if you intend to pay. 8. Has Check Been Mailed?—Has check been mailed or shall we act as authorized by contract? 9. Have You Remitted? Have you remitted $........ to cover the........ installment of............ note? Please wire answer, as we contemplate mak- ing collection as provided by conditional bill of sale. \ *PHONES AND WIRES IN COLLECTING 99 10. Night Letter—Special Representative Will Call—Have you mailed CHECK: D) sstomsntepneeee.: our letter...... if not it will be necessary for our special representative to call on you in which case fee for services will be added terms of note. 11. Special Representative—You must have your bank wire us that sree ota era dollars has been sent us. Telegram must reach us by............ otherwise our special representative will leave immediately at your expense for commenced to take prompt and summary action. 12. Bank.—Wire name of reputable attorney to effect collection. Can judgment be collected? Many thanks for your kindness. 13. Abtorney—Take possession our truck now in hands of............ immediately. Sell it for enough to cover balance due and your fee. Telegraphic money getters—-The Western Union claims that 90 per cent. of the wires sent for collection purposes bring results. Their tested forms, as well as those of the Postal Telegraph, which are equally good, can be procured at any telegraph office. Any method which has been proved to produce results is certainly worth trying when collections are slow. Last-resort uses for wires.—Further wires may be used to the debtor’s own bank for the name of an aggressive attorney. The bank will almost invariably get in touch with its customer, which makes him realize the seriousness of the situation. Fre- quently the bank will lend him money. A telegram may be sent to the employer, with good results, asking for his assis- tance or suggestions as to how to avoid legal proceedings, and frequently the employer will send his own check, and permit the employee to pay him back in installments on pay days. Often a telegram will bring results when sent to the business address. In the first place, the man is more businesslike in his office than in his home, and he doesn’t like to have tele- grams come to his place of business. We had a mayor of a town in Arkansas who simply would not pay $500 which he owed. I suggested to the correspon- dent, who had tried everything in the line of telegrams, letters and drafts, that he send a wire to the town hall. The reply was a scorching one; but nestling in the folds of the letter_was a check for $500. 100 INSTALLMENT COLLECTIONS Registered letter.—Often after telegrams have been sent out, it is well to come back to the registered letter: ‘Have you mailed check or must we bring suit? Final.” Your account was due............ We sent you the following letters: We wired you on the............ that we would bring suit. We are now drawing up papers to forward to an attorney, and if you wish to avoid the expense and notoriety of legal proceedings, you must have your bank wire §$............ immediately. This is fizal. CHAPTER XIII LAST-RESORT METHODS Some of these methods may serve you——Where you can collect after others have failed is right where you begin to stand out from the rest of the department. This chapter will outline several pet successful methods of successful collec- tion men, many of which the writer has picked up in an inter- change of experiences, and which have proved effective on trial. Others are from his own direct experience. Collections offer the great advantage over credits in that one has an opportunity to come back. If a credit is passed in- advisedly, on account of the lack of information or through misjudgment, the merchandise or money is out of the house; but the collection man can come back to the attack when reinforced. The ideas given here have collected hundreds of thousands of dollars after the correspondents had long since failed to get a rise from their dire threats of ‘“‘prompt and summary action.” Would it not be well to read them with the thought in mind: “Ts there anything in this method I can use.” Review credit information.—First of all it is well to go carefully through the credit folder, bringing it up to date. In wholesale collections you may obtain the name of the jobber or the distributor, and a courteous letter asking their codp- eration will often bring in the money. The credit folder usually will give you other information of real value. The most striking case in my own experience with the credit folder was that of the S.... Auto Company in Georgia. At that time I was in the legal department of a large corporation. All the accounts of the S.... Auto Company came over to the legal department for collection, and they represented about $30,000. Two well placed letters collected the money. In getting out the credit folder, I noticed that the automobile dealer’s father was vice president of nine banks. I wrote one letter to the distributor, and received a reply from them that they were going to send their adjuster up to help Mr. S.... out with his collections. I wrote a letter to his father telling him that, 101 102 INSTALLMENT COLLECTIONS no doubt, his son’s Southern pride had prevented him from giving the true status of the case. In reply, the father wrote that if we would draw on him through one of his banks for two notes a week, he would see that the drafts were taken care of. That was all there was to that collection—just a little careful reading of the credit folder. Inspection of the collateral Whenever there is collateral behind the loan, an inspection of the collateral is wonderfully effective. In the case of a piano or an automobile, the piano or car check should be made immediately after threatening repossession. ‘This is one of the most effective means of col- lection, because it represents our long arm stretched out over the country to grab, if necessary; and our far-seeing eye fo- cussed on the very number of the car the purchaser has in his garage. After the credit bureaus or attorneys find out whether the man has the collateral in his possession, make an actual inspec- tion of collateral, with an estimate of its value, and request a credit report on the purchaser. An attorney will usually ask from two to five dollars for such a check. Some of the credit bureaus, such as the Retail Credit, will not care to make these checks on individual purchasers, but will make them on deal- ers in case of acceptances. Concerns which check collateral—I quote here a letter trom a credit man in one of the largest automobile finance con- cerns in New York, who has continual recourse to checking cars. The companies he mentions will, no doubt, check other collateral just as readily as automobiles. We do not appear to have any written list of agencies, but below I am pleased to give you the names and addresses of those that we have used from time to time: - Retail Credit Company, 171 Madison Avenue, New York City. This company will check only cars in the hands of dealers. Bureau of Credits, Gotham National Bank Building, New York City. This bureau will check cars in the hands of purchasers as well as in the hands of dealers. Hooper-Holmes Bureau, 80 Maiden Lane, New York City. These people will also make both purchaser and dealer car checks. U. S. Fidelity and Guaranty Co., 47 Cedar St., New York City. This, as you probably know, is an attorney service, and while they do not make a general practice of making car checks, they have, from time to time, done so for us. However, occasionally, the attorney demands an extra fee if the assignment entails a little work. The four agencies mentioned above are national, and I be- lieve I am correct in saying that they will make car checks in LAST-RESORT METHODS 103 any part of the United States. And here are ‘a few local com- panies that will do this sort of work: Globe Reporting Company, 29 West 34th Street, New York City. This is a company that was recently organized. They will check cars both in the hands of purchasers and dealers, in and around New York City. Leslie’s Mercantile Agency, 12 Pine Street, Albany, N. Y. This company will check cars both in the hands of purchasers and dealers in and around Albany. H. J. Warner, First National Bank Building, Albany, N. Y. This gentleman will also make car checks on both purchasers and dealers in and around Albany. Printed letter, supposedly from agency.—Although this method is mechanical and stereotyped, you might find it sur- prisingly successful still. It is a common practise for a law list firm and collection agency to supply its client with a pad of printed collection letters. The wording is such as to give the impression that the form is sent out by the agency direct, . which has been handed the item to collect, and which is start- ing its campaign with a printed letter addressed to the pur- chaser, advising immediate payment, but direct to the creditor. Of course such letters must go out in plain envelopes, as the letters are actually mailed by the firm, which is making a last stand to enforce collection before turning the item over to an attorney, or using other methods. The letters issued by Martindale’s, the Bonded Attorneys, and United States Fidelity and Guaranty Company are much used. The idea in all of the letters is similar to that in the one reproduced: (note) (with) The amount of your overdue (account) (without) interest is $............ The undersigned begs to advise that immediate settlement will obviate. the necessity of placing this claim for prompt action in the hands of an Attorney who will, on our notice, be covered by the bond of the United States Fidelity and Guaranty Company, which we hold. Holding bond of United States Fidelity and Guaranty Company Value—These letters are gotten out quickly and easily. On account of their cold, wholesale appearance they seem to come from the agency, and one is impressed by the fact that he can expect little consideration. They are most effective on indi- 104 INSTALLMENT COLLECTIONS viduals of little business experience, because the slow-paying firm is probably used to this type of collection effort. Renew note with additional security.—If payment is not forthcoming after the merely persuasive arguments have been used, the case must be analyzed very carefully. We must al- ways remember that it may be actually impossible for the debtor to pay the amount we ask within the time allowed. In selling musical instruments on the installment plan, com- petition has extended the term of payment so far that the amount of a weekly or monthly payment is surprisingly small. One can buy a piano for about $25 down and $10 or $15 a month. A victrola may be bought for $5 a month or even less. The result is that practically anybody can buy a piano or victrola, or thinks he can. It is by no means uncommon for a day labourer making perhaps $25 a week, to buy a player-piano, and to pay for it, too. In such cases, everything depends on steadiness of employment. Very often there will be several wage earners in the family, so that the risk is divided. Even then, however, the margin of safety may be so slight that the unemployment of a single member of the family will put an end to payments on an in- stallment account. A serious illness or in fact any misfortune that may befall a family will generally hold up payments. Now, all these things tend to increase tremendously the factor of “collection resistance;” at least temporarily. The cus- tomer may even wish to return the property, and thus get rid of his obligation. Sometimes this is necessary; but very often a sympathetic understanding, and a little extension of time will keep the account on the books. Character and ability count.—If the debtor has character and ability, it may be best to carry him along. In that case, it is well to get some additional security, and to arrange for payment as soon as possible. Perhaps he will give an install- ment note. Try to arrange for an endorser and for collateral to the note, or for a mortgage note or an assignment of goods. If the debtor’s position is getting worse, and he is losing the confidence in the trade, it is well to be the first to close in on him. Or very often, where he, ‘himself, could not borrow, you may be able to arrange a loan, working with him through his own bank or otherwise; or you may suggest some of the more modern borrowing methods with which he may not be familiar, such as the Morris Plan Bank. LAST-RESORT METHODS 105 Discount debtor's note at his own bank.—In the country districts, the farmer’s bank may not wish to lend him the money and pay you at the time of your visit, but will almost always agree to a plan which is nearly as good to you as money; and by which they virtually lend only their credit. The farmer’s bank will give you a certificate of deposit, due at har- vest, and take the farmer’s note due at that time, possibly se- cured by a crop lien. The certificate of deposit may easily be discounted. If you get your debtor’s mortgage note discounted at his own bank, and let him know you have done so, his obligation is then to the bank, and he will pay where he has only half in- tended to pay you. It is well also to discount a note where his friend acts as endorser, for the same reason. Aiding the debtor directly—The next two methods are diametrically opposite. The first of these is for you to help him yourself. You will no doubt be able to get him a contract, if he is out of work, with the influence of your corporation or company, where he could not get one himself. Speaking from experience, there is more satisfaction in having a collection taken care of in that way than there is in any foreclosure pro- ceedings, and it makes friends instead of enemies. The Ad- vance-Rumley Co., one of the leaders in tractors and heavy farm machinery, makes it a policy when their adjusters cannot collect direct, to get the debtor who owes for his thresher to assign the debts owed him for threshing. The farmer might keep Bill, the thresher, waiting any length of time for his money, but has quite a different proposition on his hands when he finds his obligation assigned to a professional collector who does not know him, nor care to know him, but who is there on the spot to get the money in the quickest way. Seek cause for criminal action The other method is quite at variance with trying to help direct, and is to study the case to determine whether there is anything criminal in the trans- action, and any cause for requesting the action of the prosecut- ing attorney. It is remarkable how a man who owes money, and who has paid everything he has, and gone to his friends without success, can raise funds from some magic source; from friends who would not help him except in his extremity, when you have the goods on him, and he is brought face to face with a jail sentence. I well remember a case where we discounted $12,000 worth 106 INSTALLMENT COLLECTIONS of truck notes in Ohio. As the deal was a big one, the cor- poration thought it advisable to send an expert over from New York to work with me in clearing up the situation. This expert advised the trucks to be painted up and sold, on the ground that paint is worth $100 a gallon when you are try- ing to sell, but I carried my point: exactly the opposite course of action. The element of fraud.—I remembered that we had dis- counted these notes for $12,000 but a month or two before. The Young Wrecking Company would give us only $700 for the fleet of trucks; so there must have been something wrong with the trucks which served as collateral to the notes we had discounted. The adjuster whom I sent to the factory, found that the trucks had been sold three years before, and with this informa- tion, we were prepared to take criminal action. The purchaser of the trucks, and the dealer who endorsed the notes, had both gone into bankruptcy after we had dis- counted the notes; but with this evidence of fraud, it was not difficult to collect the full $12,000, together with interest, etc. We sold the trucks at auction, and intended selling them as low as possible, so the evidence would show their value as col- lateral had been misrepresented, but the attorneys for the de- fense bid the trucks up among themselves, so that from the proceeds of the auction sale alone, we received much more than if we had painted the trucks, and tried for higher prices. The balance due us came in as soon as the debtors could possi- bly pay, and without the necessity of criminal action. Easy, when you have the goods.—Just to illustrate how easy it is to collect against unscrupulous debtors where you have the goods on them, a certain truck dealer in Chicago owed a corporation, engaged in automobile financing, sev- eral thousand dollars. He boasted openly that the former credit manager, who had been discharged, would discount any note, even on a fire-plug for $3,000, if the papers were made up a certain way. We could not seem to make him pay up on his endorsement. He owned so little that a civil action would have been throwing good money after bad; but a little careful checking-up showed that one of the notes was discounted be- fore one of the trucks had actually been built, and that the dealer must have had payment from the finance company while the truck was still in the state of blue prints. LAST-RESORT METHODS 107 That made a very different situation. Of course, while we could not write threatening the man with criminal action, for the U. S. Courts are not a collection agency, our debtor friend, while talking over the ’phone, heard the creditor’s conversa- tion when the collector very carelessly did not put his hand over the mouth-piece: ‘‘Shall we take the money that he is of- fering, or jug him?” When I went down to my office next morning, half an hour ahead of time, there was this brazen truck dealer, for once frightened. He had a certified check for $1,000 in his hand, which a lumberman friend had lent him, and the next Satur- day he had another from another friend; and he made pay- ments from week to week until he was paid up, with not the slightest need of the previous jogging up. Beating political influence.—One of the largest truck deal- ers in Detroit was related to the leading political family. Now when a finance company discounts a note, the purchaser signs a note made out to the dealer, then the dealer assigns it to the finance company. The finance company discounts the note and sends the proceeds to the dealer, so he is paid, and notifies the purchaser they have purchased the note and that payments should be made direct to the finance company. This truck dealer conceived the rather unoriginal idea of collecting from the purchasers, representing to them that he sold the truck, and that payment should be made direct to him; and in this way he acquired several thousand dollars. No threats of putting him in jail were effective, for he relied upon his political friends. However, much to his surprise, he found himself in the patrol-waggon, and then in jail. A special edition of one of the leading papers came out with the account of his arrest in front page headlines, but his friends bought up the entire edition, except the first two or three papers which had been sold. They paid us up in full for what he owed, and he was released. It was said afterwards that there was a shake-up in the dis- trict attorney’s office as a result of this episode. Adjuster the best recourse.—If the debtor is near to one of the adjusters, or if an adjuster can be sent from the office, collection is a comparatively simple matter. This is, by all odds, the best method of collection, and we will discuss it in the next chapter. CHAPTER XIV THE ADJUSTER AND HIS METHODS Qualifications for success.—The adjuster can work with no set rules, because each claim is a distinct problem in itself, to be handled as the circumstances, and the particular parties in- volved, require. He must be decisive, discreet, always prop- erly sympathetic, at times as relentless as the elements, and of course, he must have plenty of ‘‘nerve.” Some employers think only a “hard-boiled” individual is capable of handling this sort of work; that debtors can best be dealt with by the man who always assumes a threaten- ing attitude, supplemented by a loud warning of dire results unless the claims be settled on demand. To my mind, nothing is more fallacious than this conviction, because I have ob- served that successful adjusters are the ones who approach the debtor with the same dignity and self-respect they would main- tain in any other phase of work. The fact that a man owes a debt does not always mean that he is dishonest; indeed he may be a very high type of man, and possibly more honest and upright than the adjuster who would berate and abuse him. Adjuster must get full information.—The adjuster should always try to get every available fact from the debtor, and ascertain the debtor’s viewpoint. Then, if the debtor is honest, and willing to pay, the adjuster can, in all likelihood, point out ways of getting the money. If the debtor is dishonest, he will ‘ have to be dealt with according to the circumstances involved. Some time ago an adjuster went to a small town to collect a $4,000 default on a note, and he found that Mr. F., the debtor, was an estimable and perfectly honest man; but that his funds were tied up so that it seemed utterly impossible for him to raise $100. The adjuster and Mr. F. met on friendly terms, and talked of this indebtedness, more or less as they would of any other transaction; and in the beginning, their conversation was interspersed here and there with matters wholly irrelevant to the subject. Finally Mr. F. said: “By the way, what will you do if I don’t pay you today?” 108 THE ADJUSTER AND HIS METHODS _ 109 The adjuster, still maintaining the same cordial attitude re- plied: “Why, Mr. F., the answer to that question is obvious. What is there for me to do? I must attach the collateral, and, of course, I always do what I must do.” The debtor’s expression became more serious, and he said frankly that this sort of action would ruin his reputation, and that he was absolutely helpless, and couldn’t raise the money. Bank comes to the rescue——The adjuster asked why he couldn’t get a loan from his bank. The reply was that the bank had already loaned him over his limit. Then the ad- juster suggested that both of them go to the bank, to see if some special arrangements could not be made. This they did, with the result that they were ‘“‘turned down.” Then the adjuster suggested that they go to the only other bank in town; and, after a fifteen-minute talk with three of the directors, they agreed to make this loan, if Mr. F. would turn over his business to them. ‘The adjuster went back to Mr. F.’s office, while Mr. F. went to his own bank, and he shortly returned with a certified check for $4,000. Discretion a virtue.—It is always very harmful for an ad- juster to talk too much in discussing a claim. It is much more efficacious to maintain an attitude of reserve, and keep the debtor in the dark as to what the adjuster is thinking about. When the adjuster speaks his mind too freely, the debtor then knows how he will plan his attack, and the debtor, when he is unwilling or unable to pay his obligations, will take advantage of any bit of knowledge that he may have. I know of a case where an adjuster cleared up an old claim simply by asking questions, and giving no information himself, with the result that the debtor was afraid the adjuster knew of a crime that had been committed. An adjuster should never make a threat unless he is pre- pared to do what he says he will do. If he determines on his course before he interviews his man, and if he is of the proper type of determination, the debtor will see by the adjuster’s very attitude, and will understand from the true ring of his voice, that this man is to be reckoned with; and he will not try to parley, nor to squeeze out of his predicament through fatu- ous promises or excuses. Adjuster must clean up the claim.—It is the adjuster who sums up the situation, and handles the collection. Many of the last-resort methods discussed in the previous chapter are 110 INSTALLMENT COLLECTIONS in the hands of the adjuster to work out; such as getting cer- tificates of deposit from a bank, assignment of goods, or an installment, collateral, or endorsed note. If the adjuster does not handle the collection to a conclu- sion, the collection manager should make him go right back and do so; for, even though he will come away and feel well satisfied with a partial result, he will be just irritated and de- termined enough to clean things up in fine shape if the collec- tion manager makes him go back. Department store adjustments.—The customers of depart- ment stores are very often women, who, on account of their inexperience in business, and their social standing and the con- sideration usually accorded them, become very touchy about having a collector or adjuster coming to their door. The department stores will very often have a collector leave his card, even if the people are at home. It will easily serve the purpose, because the customer will know that another time he may not be so considerate; and at the same time, the debtor appreciates the tact displayed, and will probably pay without stopping the account. A collector or adjuster finds it advisable to get exactly the amount due, with interest, if collecting on a note. A blank check, made out with a regular check writer, just ready for the busy man’s signature, will receive immediate attention. Methods of keeping in touch with adjusters.—One of the most important things in handling adjusters is to always be able to keep in contact with them, and have their mail go to them direct. The wholesale department of Carson, Pirie & Scott, of Chicago, does not call its men ‘‘collectors” or “‘ad- justers,” but “‘salesmen.”” Their salesmen do their collecting also. These salesmen send in a card once a week: on the left margin of this card, they print the days of the week, and the representative fills in opposite each day where he will be, at what hotel, and marks with a check the hotels where he wants his mail sent. Other houses handling adjusters furnish forms which are mailed in daily, and give instructions for mailing a week from date. Any changes in routing are to be telegraphed in. Other managers route their adjusters. Mixed-up accounts.—Of all collections, the most difficult to adjust by mail, and the most easily cleared up by personal THE ADJUSTER AND HIS METHODS | 111 contact, are those where a difference appears between the records of the debtor and yours. Sometimes such errors can be cleared up by mail. An East- ern collection manager makes a decided effort to get a state- ment from each concern whose account is overdue, on the theory that the best of bookkeepers make mistakes, and no one will pay unless he knows he owes. When an account is overdue this manager asks» 1. Does our statement of your account agree with your figures? 2. Do you think we should receive payment at once? 3. When are you going to send us your check? Often information comes in that corrects bookkeeping mis- takes. Often a satisfactory letter of explanation comes in and sometimes a check. To avoid misunderstandings.—A difficult feature of collect- ing an account, especially over a period of three or four years, is the opportunity which long term accounts afford for trouble- some misunderstandings between an installment house and its customer. Errors in bookkeeping will sometimes occur, and where there is none, a customer will sometimes claim that his account has not been properly credited. It must be remembered that there are many people who are always suspicious of an in- stallment house, and always ready to believe that they are being defrauded. It is important to straighten out every mis- understanding as promptly as possible, to avoid a long and extensive correspondence. There is nothing more annoying on both sides than an ac- count which drags along, month after month, always a little behind; the customer always claiming that he is up to date in his payments. The customer’s claim should never be ignored. He should always be given an opportunity to prove that he is right. Every collection man, however, has had the experience of having a crook take advantage of the possibility of a mistake to delay payment. Value of personal contact—But while adjustments may sometimes be made by mail, the fact that we call our outside men ‘adjusters’ instead of ‘‘collectors,” indicates that their work is frequently of just this nature—clearing up differences. 112 INSTALLMENT COLLECTIONS A local or long distance telephone call of the following nature has proved highly successful : “Good morning, Mr. Minepace, this is Mr. Rooney, with the Goodwin Company. We have been carrying your account so long that I want to meet you. Can I drop inat........ ; if you will be in? Or perhaps there is some other time that might be more convenient for you.” By this method, the customer is pleased, and is in a receptive mood for the visit, at which any differences may easily be cleared up in a friendly conversation; the object of both being to get at the bottom of the misunderstanding together. CHAPTER XV ATTORNEYS AND COLLECTION AGENCIES Care in selecting an attorney——We shall not go into the purely legal aspects of collections in this book, for the field of legal procedure has been thoroughly covered by numerous writers. Where there are legal complications, a lawyer’s ad- vice must be obtained, or the case put in the hands of attor- neys. ‘A man who tries his own case has a fool for a client.” Just what is the place of attorneys and collection agencies? They are convenient dumping grounds for hopelessly uncol- lectible items, unless the attorney or collection agency is un- usually well qualified for this line of work. Often attor- neys regard collections merely as more or less of a necessary evil, so when it is decided to turn a claim over to an attorney, it is necessary to see whether he really wants the claim. Usu- ally the younger attorney, such as is to be found in the bonded list, gives by far the most satisfactory results. Before sending to the attorney, give the debtor a definite time by which to pay, and then when that time arrives, carry out the threat." The account may be sent direct to the attor- ney, or it may be turned over to the house attorney. The house attorney.—The house attorney was a wonder- fully successful collection medium, until this agency became so commonplace that its effectiveness was discounted. An at- torney is engaged, or more often, a collection expert who is a member of the bar, is hired at a reasonable salary, and the impression is given that he is an outside attorney, so that when the corporation turns collections over to “our attorney,” it may be to the man at the next desk, who uses stationery of his own, and perhaps a box number at the postoffice, so as to have a different address. This procedure is an advantage, in that it often collects direct, and furthermore, the house attorney gets a percentage of the attorney’s fee, if he forwards it to his local corre- *Examples of successful attorney letters may be found in Chapter X, 113 114 INSTALLMENT COLLECTIONS spondent, and his rake-off reverts to the house. Although the house may save a part of the fee of the correspondent attor- ney, their local attorney is sure to lose interest when his fee is cut down. While this practise may sometimes bring results, it smacks of shystering. The established collection department usually has a list of attorneys of its own, made up from one of the lists of bonded attorneys. Exemptions.—When an attorney gets a claim, he will try first of all to settle without suit. Often a suit is inadvisable, as the debtor may be judgment proof. In Dun or Bradstreet legal exemptions are given by States in reference to this point. The Credit Men’s Association Year Book, and Martindale’s list of bonded attorneys also give this information. The ex- emptions, given State by State and revised up to the minute, are to be found in Chapter XVI. Difficult to get action.—It is quite difficult to get action when a claim has been placed in the hands of an attorney, es- pecially in the West and South. The debtor and attorney may be friends, or at least friendly. If brought to trial the jury may feel that it is a case of an opulent foreign corpora- tion oppressing their fellow citizen. To avoid any possibility of damage suits arising from mak- -ing threats in an illegal manner, it is well to keep in constant touch with an attorney. Review losses for future guidance.—Finally, let us recom- mend strongly that, where you are unable to collect, and have had to charge off to reserve for credit losses, it is always ad- visable to look carefully over a case, to see what mistakes have been made, and what profit, by way of experience, can be gotten out of the loss. Although no money can be squeezed out of hopeless col- lections, it certainly is advisable to get all the information out of them possible, in order to avoid a repetition of a sim- ilar loss. The Good Book says: ‘‘Then finally, my brethren, if there be any virtue, if there be any praise, think on these things.” It is a thing, after all, to think of—these collections of ours— those that turn out badly and those that turn out better. There will often be virtue, but seldom praise. Our good ATTORNEYS AND COLLECTION AGENCIES 115 work slips away, and makes up the sum total of profits. Our mistakes, and those of the entire organization, are turned into stone against us in the charge-off list. If you collect well, they will say: ‘‘good credits.” If.you fail, they will say: “poor collections.” Really, collection men, is not that true? CHAPTER XVI DIGEST OF LAWS OF THE VARIOUS STATES ON CONTRACTS OF CONDITIONAL SALE AND CHATTEL MORTGAGES ONE of the real difficulties in deciding on how a difficult collection, one involving collateral covered by a legal instru- ment of some kind, should be handled, is the varying laws in different states. When one looks them up in a law book, he is confronted with a language difficult to understand and the danger that a new decision may have changed the aspect in the state. The following reviews were made up from reports from lawyers in the various states, revised by the Uniform Sales Service up to the minute. Harring & Harring on “Conditional Sales” and the Uni- form Sales Service are both most valuable in this connection. They keep their clients informed of any changes in the laws by means of a loose-leaf system with frequent supplements. Conditional sale—When property is sold on the install- ment plan of payment, it is the general custom for the seller to ask the buyer to sign a written order or contract, and when this contract provides that the seller shall retain the title until the total price is paid, it becomes what we call a conditional sale contract. In nearly all of the states such a contract will be enforced, and the seller may take possession of the prop- erty if the buyer neglects or refuses to pay the purchase price. Under such a transaction, the buyer has possession of the property which does not belong to him and to which he does not hold the title, until the seller is fully paid. This feature of the conditional sale was looked upon as being unfair to other creditors and persons having dealings with the buyer, who found property in his possession to which he did not have title. It was said that a conditional sale was a secret lien and no one except the parties to the secret would know whether a man owned anything that was found in his possession. On account of this, nearly all of the states have passed laws 116 DIGEST OF LAWS OF VARIOUS STATES 117 which require that one taking a conditional sale on property that is delivered to the possession of another, must place this contract on the public records, so that everyone will know whether the person who has possession of the property also has the title to it and the right to regard it as his own. These laws require that the conditional sales contract must be either filed or recorded, and, if the seller neglects to record the contract, he cannot claim the property from the buyer as against other parties who extend credit or take some action believing that the buyer owned the property that was found in his possession. Just how a conditional sale is to be filed or recorded in the different states is explained in a summary of the state laws, contained in this chapter. It may be noted here that some of the states never con- sidered a conditional sale as a valid legal instrument as against third parties. The states which have rejected the general rule outlined on this subject are as follows: Illinois, Louisiana, Michigan and Pennsylvania. For explanation of the forms of contracts used for installment sales in these states, see summary of state laws which follows. Exemption.—One of the subjects reviewed in the notes which follow refers to property that may be claimed exempt. Nearly all of the states have laws which are intended to prevent a person from becoming destitute, and these laws provide that, no matter how just the debt may be that is due, certain property may not be taken from the debtor to enforce payment. These laws are commonly referred to as exemption laws. They refer principally to one who is re- garded as the head of a family and has others dependent upon him for support. In nearly all the states, certain arti- cles of household furniture are exempt. Also certain land and the buildings thereon, when used as a home, are declared exempt. These laws are generally referred to as homestead exemption laws. To claim this exemption, it is necessary that the property be occupied as a homestead, and, in certain states, the privilege of claiming a homestead exemption must be placed on record. It is often the custom to insert a clause in a note or contract that the party who signs waives his exemptions as against the collection of the amount due on the note or contract. In a number of the states, either all or part of 118 INSTALLMENT COLLECTIONS the property declared exempt by law may be waived in this way, so that it may be taken to satisfy the debt. In many other states, it is held contrary to public policy to allow a waiver of exemption, and it is accordingly held that such a clause in the contract will not be enforced. It is important to note that exemption may not be claimed as against a debt due for purchase money. A conditional buyer could not claim property held under the terms of a conditional sale contract as exempt, even though it may be an article of household furniture that would be exempt as against other creditors. The same rule applies as to a mortgage given to secure purchase money. Election of remedies.—When the seller undertakes to collect money due under the terms of a conditional sale con- tract, the question often arises as to how far he may go without losing title to the property. As a general rule, it may be said that the seller can take possession of the prop- erty if the buyer defaults in payment. Ordinarily the seller can keep payments that have been made and declare them forfeited or as rental for the use of the property. If the seller does not take the property but brings a suit against the buyer for the price, he may waive his title, and if he is not able to -collect a judgment against the buyer, the can not afterwards take possession of the property. There is such a diversity of decisions among the different states on this subject that it is not possible to explain it in a compre- hensive manner in these pages. The important point to bear in mind is that the terms of the conditional sale contract made between the seller and the buyer control very largely the rights of the parties. Anyone who undertakes to draw a conditional sales agreement should word it in such a way as to include the most remedies that are available and at the same time omit from the agreement anything which would indicate an intent to take the property and declare payments forfeited after the buyer had paid a substantial part of the price. It is the forfeiture feature of conditional sales that has proved objectionable, and quite a number of the states have passed laws requiring that payments be re- funded or a re-sale of the property be made, to determine the buyer’s equity, or in some other way steps be taken so as to protect the buyer from losing the property after he DIGEST OF LAWS OF VARIOUS STATES 119 has paid a substantial part of the purchase price. The Uniform Conditional Sales Act contains many very elab- orate and involved provisions which are intended to protect the interest that the buyer may have in the property as represented by the payments made. In states where this Act has been adopted it is, perhaps, not safe to take possession of conditional sale property without the assistance of counsel, so that the precise letter of the statute can be followed and any penalties arising from failure to comply with the statute can thereby be avoided. This is also true as to states such as Ohio, Missouri, New York, and a few other states where they have rather severe laws regulating what must be done when the seller takes possession of property that is subject to a conditional sale contract. In the summary of laws for the states, which follows, brief reference will be made to the remedies of the parties and the requirements of the state law. Foreclosure.—By foreclosure is meant the steps that the mortgagee takes if payment is not made. It is the custom of business men to use a form of chattel mortgage which provides that, in case of default in payment, or other irregu- larities, the mortgagee may take possession of the property, sell it, credit proceeds and sue the mortgagor for the bal- ance, if there is anything still due on the debt. Or if he collects more than the amount due from the sale of the property, he must pay the surplus over to the mortgagor. This process of dealing with property that is subject to a chattel mortgage is called foreclosure by sale. It is not necessary to go into court at all to take such action. If the mortgagee can take possession of the property peacefully, he is entitled to do so. If the mortgagor resists, he, of course, may not do anything that would constitute a breach of the peace, such as breaking open doors and destroying property in other ways. A mortgage almost always provides that the mortgagee, when he takes possession of the prop- erty, can sell it at public or private sale, and, if it is sold at public sale, that the mortgagee has the right to be one of the bidders at such sale. The mortgagee may bid in the property and if the amount that he bids is less than the balance due on the debt, he may then bring suit against the mortgagor for the balance. The right to sue in a case 120 INSTALLMENT COLLECTIONS of this kind is often referred to as the right to a deficiency judgment. In the summary of state laws which follows, it is seen that in a good many of the states the mortgagee may take pos- session of the property and foreclose under the general rules relating to foreclosure by public sale. These rules may be either statutory or rules that have been thoroughly established by court decisions. Although the statute may fix a method of taking possession of the property for the purpose of fore- closure, this does not ordinarily set aside the terms of the mort- gage relating to the same subject. In other words, if the mort- gagee acts in accordance with the terms of the mortgage in taking possession of property ‘he will be acting within his rights, even though the state law as to foreclosing a chattel mort- gage is not strictly followed. In other words, the state laws relating to foreclosure are not exclusive of other methods as provided in the mortgage instrument. Instead of foreclosing by public sale as just explained, the mortgagee may in some states take legal action at the outset, which is referred to as judicial foreclosure. It is not common practice to proceed by judicial foreclosure unless the property is involved with other liens and mortgages and large sums of money are at stake. When a chattel mortgage is foreclosed by public sale, it is, of course, always necessary that someone representing the mortgagee be present to take possession of the property and to see that the sale is properly conducted. If the sale is not properly conducted and the property does not bring an adequate price, the mortgagor may bring suit for damages against the mortgagee. The law is definitely established that the interest of a mortgagor in chattel property will be fully protected and this interest is not waived or for- feited in any way because of default in payment. The right to redeem the property still continues until the property has been disposed of by a sale fairly and honestly made, so as to obtain a price for the property that is commensurate with the payments made by the mortgagor, less reasonable depreciation and the costs and expenses of foreclosure by public sale. It may be mentioned here that when the state law provides a particular manner of foreclosure by public sale, printed DIGEST OF LAWS OF VARIOUS STATES 121 blanks prepared in accordance with such laws are almost always available and copies may be obtained by the mort- gagee, although he may not be located in the state where the mortgage is being foreclosed. Uniform Conditional Sales Act.—An act to make uniform the laws of all the states relating to conditional sales has already been adopted in Arizona, Alaska, Delaware, New Jersey, South Dakota, West Virginia, and Wisconsin. ‘The requirements of this law as to filing and recording a contract, are explained in the summary for each of these states. The rights and remedies of the seller and buyer under the Uniform Conditional Sales Act are quite similar to the rights and remedies of the parties to a chattel mortgage. The act provides that to sue for part or all of the price is not a waiver of title, and, if the property is resold and not a sufficient amount realized to pay the debt, the seller may recover a deficiency judgment. If the seller elects to retake the property he may give notice by registered mail to the buyer, and this notice must be given not more than forty days or less than twenty days before the property is taken. If the buyer does not pay upon receipt of such notice he forfeits his rights to obtain possession of the property, but he does not forfeit all the payments that have been made. When the seller obtains possession of the property he may hold it for a period of ten days. If one-half of the total price has been paid and the buyer does not redeem within the ten-day period, the property must be sold at public auction within thirty days from the time that the seller takes possession. If less than 50 per cent. of the price has been paid, the seller is not required to dispose of the prop- erty at public auction unless he is requested in writing to do so by the buyer. Penalty.—In the summary which follows, a brief state- ment is made of the laws relating to disposing of property that is subject to a conditional sale or chattel mortgage before the debt is fully paid. In almost all of the states, to dispose of property with fraudulent intent is made an offense which is punishable by a fine or imprisonment. Requirements.—The requirements of the different states when a chattel mortgage or a conditional sale is used may be briefly outlined as follows: 122 INSTALLMENT COLLECTIONS ALABAMA Conditional sale—Filing or recording.—The original con- tract must be recorded in the office of the probate judge of the county where the buyer resides and it should also be recorded in the county where the property is delivered if it is a different county. The buyer must sign the contract but it is not necessary that it be acknowledged or signed by witnesses. The fee for recording is 15c for each 100 words. A landlord has a lien, but it is not superior to a conditional sale that is promptly recorded. Exemption.—Personal property to the value of $1,000, .and a homestead to the value of $2,000, may be claimed exempt. Rights and remedies of seller and buyer—An attorney's fee can be collected. Repossession is controlled by statutes. At the request of the defendant, the jury ascertains the amount of the debt due and the value of the chattel. If the debt is less than the value of the chattel, the defendant has thirty days in which to redeem. If the vendor retakes the chattel without suit, he rescinds the contract and cannot sue the vendee for the balance of the purchase price. The recovery of a judgment by the vendor does not divest the title of the vendee. Penalty.—No law is found which expressly refers to con- ditional sales. See comment under chattel mortgage for this state. Chattel mortgage.—Filing or recording—The original chattel mortgage must be recorded in the office of the pro- bate judge of the county where the mortgagor resides. The fee for recording is 15c per 100 words. It is not necessary that the mortgage be acknowledged or attested by witnesses. When property is brought in from another state, it is not necessary to record the chattel mortgage until three months after the property is delivered. The landlord has a lien, and, to avoid this lien, the mortgage should be recorded promptly. Exemption—See comment above for this state. Rights and remedies of parties—Attorney’s fees may be collected. Chattel mortgage is foreclosed in this state in the same manner as has just been explained for conditional sales. DIGEST OF LAWS OF VARIOUS STATES 123 Penalty—If the mortgagor wrongfully disposes of the property, he may be punished by a fine of not over $500 and also by imprisonment not to exceed six months. ARIZONA Conditional sale—Filing or recording—The Uniform Conditional Sales Act is the law in this state. The contract must be filed within ten days in the office of the recorder for the county where the property is delivered. A copy of the contract may be filed, and it is not necessary that it be acknowledged or signed by witnesses. The fee for filing is 75c. The landlord has a lien, but he may not take property subject to a conditional sale, if the contract is promptly filed. Exemption.—Personal property to the value of $1,000 and a homestead to the value of $2,500 may be claimed exempt. Rights and remedies of seller and buyer—Attorney’s fee may be collected. The rights and remedies of the parties are controlled by the provisions of the Uniform Conditional Sales Act. See comment in head notes hereto. Penalty——The penalty for wrongfully disposing of prop- erty is a fine of not over $500 or imprisonment for not more than one year. Chattel mortgage.—Filing or recording—The original or a true copy of the chattel mortgage must be filed in the office of the recorder of the county in which the mortgagor resides, and also in the office of the recorder of the county in which the property is delivered, if it is a different county. Both the mortgagor and mortgagee must acknowledge and sign an affidavit of good faith. The fee for filing is 75c. Exemption.—See comment above for this state. Rights and remedies of parties —Attorney’s fees may be collected if provided for in a note or mortgage. A chattel mortgage may be foreclosed as explained in the head notes hereto. See discussion under the heading of foreclosure. Penalty—The penalty is a fine of from $100 to $5,000 or imprisonment of from one to five years. ARKANSAS Conditional sale-—Filing or recording.—It is not necessary to file or record a conditional sale in this state. It is valid 124 » INSTALLMENT COLLECTIONS without filing or recording. The landlord does not have a lien. Exemption.—Personal property to the value of $500 and a homestead to the value of $2,500 may be claimed exempt. Rights and remedies of seller and buyer.—Attorney’s fees may not be collected. As a general rule, to sue for the purchase price vests the title to the property in the buyer, and the seller must rely on his judgment for collec- tion. The seller may also take action that is called impound- ing the property, which is a proceeding similar to foreclosure, as explained above. Penalty.—If the value of the property is over $10, the offender may be imprisoned not less than six months nor more than ten years. If less than $10 he may be fined not less than $10 nor more than $50. Chattel mortgage.—Filing or recording.—A chattel mort- gage must be filed in the office of the recorder of the county where the mortgagor resides. The mortgage must be signed in the presence of two witnesses and the mortgagor must also acknowledge the execution of the mortgage. The fee for filing is 25c. Exemption—See comment above for this state. Rights and remedies of parties—Attorney’s fees may not be collected. A chattel mortgage may be foreclosed by public sale, as explained in the head notes hereto. See discussion under the subject of foreclosure. Penalty——The penalty for wrongfully disposing of prop- erty is the same as just explained in reference to conditional sales. ‘CALIFORNIA Conditional sale-—Filing or recording.—It is not necessary to file and record a conditional sale in this state. It is valid without filing or recording. The landlord does not have a lien. Exemption.—Personal property to the value of $1,000 and a homestead to the value of $5,000 may be claimed exempt. Rights and remedies of seller and buyer.—Attorney’s fees can be collected in the event of suit. There is no statutory form of repossession. An election to sue for the price waives the vendor’s title as a general rule. However, if DIGEST OF LAWS OF VARIOUS STATES 125 there is a clause in the contract providing for the redelivery of the chattel to the vendor, the vendor may sue for the price and retain the chattel until full payment is made. If there is a clause in the contract providing that the vendor may seize and sell the chattel at public auction, credit the amount realized to the vendor and sue for the deficency, such deficiency judgment can be enforced. The vendee is not entitled to a refund of payment made. Penalty—No statute is found which refers to conditional sales. See comment under chattel mortgage for this state. Chattel mortgage.—Filing or recording.—Chattel mort- gages must be acknowledged by the mortgagor, contain an afidavit of good faith by all of the parties signing the mortgage, and be recorded in the office of the recorder of the county where the mortgagor resides, and also in the office of the recorder of the county in which the property is delivered, if a different county. The fee for recording, depending on the number of words, amounts to about $1. The landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties——The mortgagee may retake the property and foreclose, if so provided in the mortgage instrument. Ordinarily, an election to sue for the total mortgage debt vests the title in the mortgagor, and the mortgagee may not thereafter retake the property. This rule in the California courts is an exception to the general rule in other states, where it is held almost universally that to sue for a mortgage debt does not prevent further action as to taking possession of the property for the pur- pose of foreclosing. Penalty—The mortgagor may sell or dispose of his in- terest in the property by giving notice to tne mortgagee, but, if he disposes of it with intent to defraud, he is deemed guilty of stealing and may be punished under the statute against larceny. COLORADO Conditional sale-—Filing or recording.—The original con- tract must be recorded in the office of the county clerk and recorder of the county where the property is delivered. The buyer must acknowledge his signature to the contract. 126 INSTALLMENT COLLECTIONS The fee for filing is 25c. The landlord does not have a lien. Exemption.—A homestead to the value of $2,000 may be claimed exempt; also, certain specified articles of personal property may be claimed exempt. Rights and remedies of seller and buyer——Attorney’s fees may be collected. There is no statutory form of reposses- | sion. The vendor has three remedies: to retake the property, keep the payments already made, and abandon collection of future installments; to leave the chattel in the possession of the vendee and sue for the amount unpaid; to retake the property, sell it, apply the proceeds on the note and sue for the deficiency. The vendee cannot recover payment when the property is retaken. Penalty—No law is found which refers to conditional sale property. See comment under chattel mortgage. Chattel mortgage—Filing or recording—The original mortgage must be recorded in the office of the county clerk and recorder of the county where the property is delivered. The mortgage must be signed by the mortgagor, who must also acknowledge his signature before a notary or other oficer. Fee for filing is 25c. The mortgage must be re- newed within thirty days after it is due.. A landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties—Attorney’s fees may be collected. The general rules explained in the headnotes hereto under the subject of foreclosure apply to chattel mortgages in this state. Penalty—The penalty for disposing of property subject to a mortgage with intent to defraud is the same as punish- ment for larceny under the state law. CONNECTICUT Conditional sale-—Filing or recording.—The original con- tract must be filed in the office of the town clerk in the town where the buyer resides. It is necessary that the buyer acknowledge that he signed the contract. The fee for filing is $1. But it is not necessary to file the contract for the sale of certain goods, as follows: household furni- ture, musical instruments, phonographs and phonograph sup- DIGEST OF LAWS OF VARIOUS STATES 127 plies, bicycles and other property that the buyer may claim exempt under the general law. Exemption.—A homestead to the value of $1,000 may be claimed exempt. Rights and remedies of seller and buyer—As a general rule, an election to sue for the price waives the title of the seller and the buyer becomes owner of the property, but, if the seller sues for only a part payment instead of the full price, it would not necessarily follow that he would lose title to the property. Penalty.—If the buyer disposes of the property with intent to defraud, he may be fined not more than $500 or im- prisoned not more than five years. Chattel Mortgage.—Filing or recording—The original contract must be recorded in the office of the town clerk in the town where the property is delivered. ‘Two witnesses must sign the mortgage and it must also be acknowledged by the mortgagor. The fee for recording is $1. A land- lord does not have a lien in this state. Exemption.—See comment above. Rights and remedies of parties——Attorney’s fee may be collected. General rules explained in the headnotes hereto under the subject of foreclosure apply to chattel mortgages in this state. Penalty.—The penalty for wrongfully disposing of prop- erty is a fine of not over $500 or imprisoriment of not over five years. DELAWARE Conditional sale—Filing or recording—The Uniform Conditional Sales Act is the law in this state. The original contract or a copy thereof must be filed within ten days in the office of the register of deeds of the county in which the property is located. It is not necessary that the con- tract be acknowledged or signed by witnesses. The fee for filing is $1. Exemption—No homestead exemption. Rights and remedies of seller and buyer—For explanation of the rights and remedies of the seller and buyer under the Uniform Conditional Sales Act, see the head notes hereto. Attorney’s fees may be collected. A landlord has a lien and 128 INSTALLMENT COLLECTIONS could probably claim certain rights in the property in posses- sion of the buyer, even though the contract has been filed. Penalty—The penalty for wrongfully disposing of prop- erty is a fine of not over $500 or imprisonment for not more than one year. Chattel mortgage—Filing or recording.—The original must be recorded in the office of the recorder of the county in which the property is delivered. The mortgagor must acknowledge the signing of the mortgage and also make an afidavit of good faith. The mortgage must be recorded within ten days from the day on which it was acknowledged. The fees for recording depend on the number of words and also on the county, and may run from $1.25 to $2. Exemption.—No homestead exemption. . Rights and remedies of parties—As explained in the head notes hereto, the mortgagee may take possession of the prop- erty in case of default, sell it at public or private sale and make an accounting of the proceeds, and, if he does not obtain enough to satisfy his debt due under the mortgage, he may sue the mortgagor for the balance remaining unpaid. Penalty—The pénalty for wrongfully disposing of prop- erty is a fine of not over $500 or imprisonment for not more than one year. DISTRICT OF COLUMBIA Conditional sale——Filing or recording.—The original con- tract must be recorded in the office of the recorder of deeds. The buyer must acknowledge that he signed the contract. The charges for filing are 50c. if the contract is 200 words or less, and, if more than 200, 15c. for each additional 100 words. A landlord has a lien, but he could not take condi- tional sale property if the contract was promptly recorded. Exemption.—Personal property to the value of $300 is exempt, but there is no homestead exemption. Rights and remedies of seller and buyer——Attorney’s fees may be collected. The seller’s rights depend to some extent upon the terms of the contract. If the contract provides that the seller may take possession of and sell the property in the nature of a foreclosure proceeding, the courts will enforce the contract. Penalty—If the buyer wrongfully disposes of the prop- DIGEST OF LAWS OF VARIOUS STATES 129 erty, he may be fined not over $100 or imprisoned not over ninety days. Chattel mortgage——Filing or recording.—The original mortgage must be recorded in the office of the district re- corder of deeds, where the property is delivered. The mort- gagor must acknowledge the signing of. the mortgage. The fee for recording is 50c. for the first 200 words and 15c. for each additional 100 words. Exemption.—See comment above for this state. Rights and remedies of parties——Mortgages may be fore- closed as explained in the headnotes hereto. Penalty.—If the buyer wrongfully disposes of the prop- erty, he may be fined not over $100 or imprisoned not over ninety days. FLORIDA Conditional sale-—Filing or recording—lIf the contract is recorded, the original must be sent to the clerk of the circuit court of the county in which the buyer resides. The seller, not the buyer, must acknowledge the signing of the contract. The fee for recording is 20c. for the first 100 words and 10c. for each additional 100 words. Contract retains title in vendor for two years without the necessity of filing or recording. At the end of two years it is neces- sary to record in order to be protected against third parties. A landlord has a lien for rent, and, to avoid any question about his rights under the lien, the conditional sale contract should be recorded before the property is delivered to the buyer. Exemption—The exemption is 160 acres homestead in the country or one-half acre in the city, and personal prop- erty to the value of $1,000. A waiver of exemption is not enforceable. Rights and remedies of seller and buyer——When contract so provides, attorney's fees can be collected unless the action is in a court of the justice of the peace, in which case the fee cannot exceed $5. To sue for the purchase price vests title in the vendee. Buyer is not entitled to a refund if the chattel is replevined. If the contract contains a power of sale, the vendor may foreclose and collect a deficiency judg- ment from the vendee. ‘There is no statutory form of repossession. 130 INSTALLMENT COLLECTIONS Penalty —See comment under chattel mortgages. The law does not expressly refer to conditional sale. Chattel mortgage—Filing or recording.—The original is to be recorded in the office of the county clerk and recorder of the county in which the property is delivered. The mort- gagor must acknowledge the signing of the mortgage, or a witness who signs at the same time may also prove the signature of the mortgagor. The fee for recording is the same as for recording a conditional sale. Exemption.—See comment above for this state. Rights and remedies of parties—There is a law in this state which declares that a chattel mortgage should be only a lien rather than outright title for the mortgagee. This statute places some limitation on the remedies of the mort- gagee, and it is probably necessary to foreclose by filing a case in court rather than by public sale. There are special laws in this state relating to the foreclosure of mortgages on live stock. Penalty.—If the mortgagor disposes of the property with intent to defraud, he may be fined not over $500 or im- prisoned not more than one year. GEORGIA Conditional sale-—Filing or recording.—The original con- tract must be recorded in the office of the clerk of the superior court of the county in which the buyer resides. At least one witness must sign the contract in addition to the purchaser. To be recorded, it is necessary that the pur- chaser acknowledge that he signed the contract, or a witness may prove the signature of the buyer. The fee for record- ing is 15c. per 100 words and, in addition, a docket fee of 10c. A landlord has a lien in this state, but this lien is not superior to a conditional sale that is placed on record at the time the buyer obtains possession of the property. Exemption.—A debtor may claim exempt a homestead to the value of $1,600. He may also claim exempt fifty acres of land or more, depending upon the number of minor children. The homestead exemption may be waived by con- tract except as to property to the value of $300, which may not be waived. Rights and remedies of seller and buyer.—An attorney’s fee may be collected only in cases where the debtor is given DIGEST OF LAWS OF VARIOUS STATES 131 ten days’ notice before suit is filed. To sue for the price does not, as a rule, waive the right of the seller to take the property. The seller has a remedy under the law of this state that is called Purchase Money Attachment. Some cases hold that if the property is to be retaken, the seller must account to the buyer for payments that have been made, less the rental value of the property for the time the buyer had it in his possession. It has also been held that the seller may take possession of the property and sell it, and if not enough is realized to pay the debt he may sue the buyer for the balance. As stated in the headnotes hereto, the remedies of the parties to a conditional sale under the law of this state depend, to a large extent, upon the terms of the contract. If property subject to a con- ditional sale is lost or destroyed before payment, the seller must stand the loss unless it is otherwise provided in the contract. Penalty—The penalty for wrongfully disposing of prop- erty subject to a conditional sale is the same as punishment for misdemeanors under the state law. Chattel mortgage.—Filing or recording.—The original mortgage must be recorded in the office of the clerk of the superior court of the county in which the mortgagor resides. The mortgage must be signed by the mortgagor and by at least one witness. The mortgagor must acknowledge, or the witness may prove, his signature. Fee for recording is 15c. per 100 words and a fee of 10c. for entering the mortgage on the filing docket. A landlord has a lien in this state, but this lien is not superior to a chattel mortgage that is promptly recorded. If property subject to a mortgage is brought into Georgia from another state, the mortgage may be recorded any time within six months, but, to obtain pro- tection against the lien of the landlord, recording should not be delayed beyond the day that the mortgagor obtains possession. Exemption.—See comment above for this state. Rights and remedies of parties—The mortgage may be foreclosed by public sale. The state law provides for cer- tain things to be done when foreclosure is made in this way, but the state law does not prevent foreclosure in a way pros vided in the mortgage instrument. It is also possible to foreclose in this state by an action in equity. If the amount 132 INSTALLMENT COLLECTIONS of the debt is less than $100, foreclosure may be had be- fore a justice of the peace. The mortgagor always has the right to redeem the property by paying the debt and costs. This right continues up until the day that the property has been disposed of by judicial action or by a public sale of the property and such sale must be conducted in a fair and im- partial manner. Attorney’s fees, when provided for in note or mortgage, may be collected, provided the mortgagor is given ten days’ notice before suit is filed. Penalty.—If the mortgagor disposes of the property with fraudulent intent, he may be charged with the commission of a misdemeanor and punished accordingly. ‘The court may stop the prosecution in such cases if the accused makes an accounting to the mortgagee for the value of the property and pays all costs. IDAHO Conditional sale-—Filing or recording.—A law became ef- fective in this state May 5, 1921, which requires a condi- tional sale contract or a true copy thereof to be filed in the office of the county recorder of the county where the prop- erty is delivered. The buyer must sign the contract, but it is not necessary that it be acknowledged or signed by any witnesses. ‘This filing law does not apply to contracts of conditional sales on the following articles: household goods and furniture, musical instruments, motor vehicles, farm implements and machinery, property exempt from attach- ment or execution, nor to any contract on which the amount to be paid is less than $100. The fee for filing is 25c. It is not necessary that the contract be refiled, as it continues in force until the debt secured is fully paid. A landlord does not have a lien in this state. , Exemption.—A debtor may claim exempt certain specified articles of personal property to the value of $1,000. He may also claim exempt a homestead to the value of $5,000, but, to claim the homestead exemption, it is perhaps nec- essary that he have on record, in the office where deeds are recorded, a declaration that he claims his exemption under the Homestead Law. Rights and remedies of parties.—An attorney’s fee may be collected in this state, if so provided in a note or contract. As DIGEST OF LAWS OF VARIOUS STATES 133 a general rule, to sue for the contract price waives the title of the seller to the property, and to take the property cancels the debt. Ordinarily, payments that have been made by the buyer are considered as forfeited. There may be exceptions to the statements just made, in cases where the conditional sale contract may provide for other remedies. The seller may not start an action of judicial foreclosure, as this remedy is held not to apply to conditional sale contracts. Penalty—For the buyer to dispose wrongfully of condi- tional sale property is regarded as larceny and may be punished accordingly. ILLINOIS Conditional sale-—Under the law of Illinois, a conditional sale contract does not afford any protection to the seller as against other creditors of the buyer. A conditional sale is good between the parties, but as against a landlord and attaching creditor or trustee in bankruptcy, the seller has no protection. A chattel mortgage is regarded as the best form of security for installment sales. Exemption—A debtor has a general exemption on prop- erty to the value of $1,000, but such exemption may not be claimed on a stock of merchandise. Rights and remedies of seller and buyer.—Attorney’s fees may be collected if the note or contract on which suit is brought so provides. If the buyer has paid a substantial sum under the terms of the conditional sale contract, the courts are not inclined to favor the rule that all payments are for- feited if the property is retaken. The buyer’s rights in the property are protected by the court decisions in this state. To sue for an installment due on a conditional sale contract would perhaps not be regarded as a waiver of title to the property, but to sue for the total amount, take judgment and issue an execution on such judgment, would no doubt be a waiver of title. If the conditional sale contract provides that the property may be sold at public sale in the same manner as a chattel mortgage is foreclosed, such provisions in the contract may be enforced. Penalty.—If the buyer disposes of the property with intent to defraud, he is guilty of a misdemeanor and may be fined twice the value of the property and imprisoned in the county jail not over one year. 134 INSTALLMENT COLLECTIONS Chattel mortgage.—Filing or recording.—The original mortgage must be recorded in the office of the county recorder of the county in which the mortgagor resides. In Chicago, re- cording must be made in the office of the clerk of the municipal court. The mortgage must be recorded within ten days from the day that it is made. The mortgage must be ac- knowledged by the mortgagor before a justice of the peace or a clerk of the municipal court. The mortgagor may also designate someone else to acknowledge the mortgage for him, if he executes a power-of-attorney to that effect. The fee for recording is 10 cents for each one hundred words. A landlord has a lien, but this lien is not superior to a chattel mortgage which is promptly recorded. Exemption—See comment above for this state. Rights and remedies of parties—The state law provides that a mortgage on household goods may not be foreclosed by public sale, but must be foreclosed by an action in the court of records. As to other property, the state law pro- vides that the property is subject to the mortgage, and must be foreclosed in the county where it is located or where the mortgagor resides. The sheriff may also be authorized to take and foreclose on property by public sale if the mortgage so provides. Except as to household goods, the method of foreclosing by public sale provided by the state law does not necessarily make invalid a mortgage which provides for fore- closure by public sale in a somewhat different manner. As stated in the headnotes hereto, to sue for a mortgage debt does not waive the lien of the mortgage. If a judgment for the mortgage debt is not paid, the mortgagee may thereafter take possession of the property and foreclose according to law. Penalty—lIf a mortgagor disposes of the property to a third party and does not tell him about the mortgage, such third party may recover from the mortgagor twice the value of the property. See also comment above under heading of Penalty. € INDIANA Conditional sale-—A conditional sale is valid under the law of this state against all third parties as well as between DIGEST OF LAWS OF VARIOUS STATES 135 the seller and buyer. It is not necessary to file or record the contract. A conditional sale holds title in the seller without this being necessary. A landlord does not have a lien in Indiana. Exemption.—Either real or personal property to the value of $600 may be claimed exempt. Rights and remedies of seller and buyer——In a contract a note provides for an attorney’s fee which may be collected if suit is filed. If the seller sues for the contract price, he loses title to the property. If he retakes the property, the buyer, as a general rule, forfeits the payments that have been made. Although the conditional sale may provide for a public sale of the property, if the buyer fails to pay, the courts would probably not enforce the contract. It is held that the remedies of the parties to a conditional sale will not be regarded in this state on the same basis as remedies of the parties to a chattel mortgage. Penalty.—For disposing of property with intent to de- fraud, the conditional buyer may be fined not over $100, or imprisoned not over thirty days. Chattel mortgage.—Filing or recording—The original mortgage must be recorded in the office of the county re- corder of the county in which the mortgagor resides. It must be recorded within ten days after the mortgage is made. It is necessary that the mortgage be acknowledged by the mortgagor. The fee for recording a mortgage of 600 words or less is $1. A landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties—There are no special statutes in this state relating to the foreclosure of a chattel mortgage. The mortgagee may foreclose by public sale as provided in the mortgage instrument. For explanation of foreclosure by sale, see headnotes hereto. IOWA Conditional sale-—Filing or recording.—The original con- tract of sale or a true copy must be filed in the office of the county recorder of the county where the buyer resides. Both the seller and the buyer must sign the contract. It is 136 INSTALLMENT COLLECTIONS also necessary that either the seller or the buyer acknowledge the contract before it can be filed. The fee for filing is 25c. The landlord has a lien under the law of this state, but this lien is not superior to a conditional sale that is promptly recorded. Exemption.—A debtor may claim exempt household goods to the value of $200, forty acres of land if located in the country, and one-quarter acre of land if located in a town or village. Rights and remedies of seller and buyer.—If a note or contract so provides, an attorney’s fee may be collected. The cases in this state do not clearly define the rights and remedies of the parties to a conditional sale. In some cases it is held that the buyer forfeits payments that are made, and if the seller elects to sue for the price, he waives the title to the property. Other cases hold that the seller may fore- close and that a conditional sale will be regarded about the same as a chattel mortgage. The terms of the contract determine to a large extent the remedies of the seller under the law of this state. It might be said that to sue for an installment due on a conditional sale would not waive the title of the seller to the property, but to take a judgment and proceed with further legal action to enforce payment would have the effect of passing title to the property to the buyer, even though the judgment were not paid. Penalty—For the buyer to dispose of conditional sale property with intent to defraud is regarded as larceny, under the law of this state. Chattel mortgage.—Filing or recording—The original mortgage or a true copy must be filed in the office of the county recorder of the county where the property is de- livered. The mortgagor must acknowledge his signature. Fee for filing is 25c. A landlord has a lien in this state, but this lien is not superior to a chattel mortgage which is promptly placed on record. Exemption.—See comment above for this state. Rights and remedies of parties —When a mortgage or note provides for the payment of an attorney’s fee, it may be collected. The mortgage may be foreclosed by public sale or by judicial foreclosure. See explanation of these two methods in the headnotes hereto. DIGEST OF LAWS OF VARIOUS STATES 137 KANSAS Conditional sale-——Filing or recording.—The original con- ditional sale or a true copy must be filed in the office of the register of deeds of the county where the property is de- livered. The contract must be signed by the buyer, but it is not necessary that it be acknowledged or signed by a witness. ‘The fee for filing is 25c. A landlord does not have a lien under the law of this state. Exemption.—Debtor may claim household goods exempt, or one hundred and sixty acres of farm land, or one acre if located in a village. Rights and Remedies of Seller and Buyer—The law of this state prohibits the collection of attorney’s fees in a suit on a note or contract, but such a provision in a contract does not make the contract void in other respects, but only as to the collection of the fee. If the contract so provides, the seller has a wide choice of remedies under the law of this state. He may sue for part or all of the price. He may thereafter take possession of the property, and taking back the property does not necessarily prevent further action for the contract price. If the contract so provides, the seller may also foreclose by public sale, and if the debt is not fully paid in that way, he may bring suit against the buyer for any deficiency remaining unpaid. It does not follow that the remedies mentioned apply to every conditional sale contract. The contract must provide for foreclosure by sale, or otherwise it is not certain that this remedy will be available. Penalty—No law is found on this subject. Chattel mortgage.—Filing or recording.—The original mortgage or a true copy must be filed in the office of the register of deeds of the county where the mortgagor resides. It is not necessary that the mortgagor acknowledge his sig- nature or that the mortgage be signed by witnesses. The mortgage must be renewed after the expiration of two years. The fee for filing is 25c. A mortgage on household goods must be signed by both husband and wife. A landlord does not have a lien in this state. Exemption.—See comment above for this state. Rights and remedies of parties—Although a mortgage or note may provide for the payment of an attorney’s fee, in 138 INSTALLMENT COLLECTIONS case of suit this provision is void and the fee may not be collected. The law of this state provides that a mortgage may be foreclosed by sale. Printed hand bills must be posted ten days before the sale of the property takes place. The method of foreclosure provided by the state law does not exclude foreclosure as provided in the mortgage instru- ment, provided that sale of the property is conducted in a fair and impartial manner. Penalty.—If the value of the property is $20 or less, a fine of not over $100 may be imposedi and also imprisonment in the county jail not over one year. If the value of the property is over $20, it is deemed grand larceny and may be punished by imprisonment at hard labor for not over five years. KENTUCKY Conditional sale-—Filing or recording.—The original con- tract must be recorded in the office of the county clerk of the county where the buyer resides. At least two witnesses must sign the contract in addition to the buyer. The buyer must also acknowledge before a notary that he signed the contract, or his signature may be proved by the oath of one or both of the subscribing witnesses. The fee for recording amounts to about $1.75. If the amount secured is over $200, there is also a state tax of 50c., which must be paid at the time the contract is recorded. ‘The landlord has a lien in this state. This lien is superior to a conditional sale unless the contract is recorded not later than the day that the property is delivered to the buyer. Exemption.—In addition to household goods, a debtor may claim exempt a homestead to the value of $1,000. Rights and remedies of seller and buyer—An attorney’s fee may be collected if so provided for in a note or contract. The seller has a wide choice of remedies, as a conditional sale, no matter what the terms of the contract are, is re- garded the same as a chattel mortgage under the law of Kentucky. The seller may sue for the debt, and, if he cannot collect a judgment, he may take the property and sell it at public sale. If the full amount of the debt is not paid, he may sue the buyer for the balance still due. The buyer does not forfeit payments in case the property is retaken. The seller is obliged to foreclose by selling the DIGEST OF LAWS OF VARIOUS STATES 139 property so that the interest of the buyer therein can be determined, and, if it exceeds the balance of the debt, the seller must make an accounting of any proceeds to the buyer. Penalty—The conditional buyer who disposes of the property with wrongful intent, may be fined not less than $100 or not more than $500. One who buys the property with notice that the title is held by someone else, may also be fined not less than $100. Chattel mortgage.—Filing or recording.—A chattel mort- gage must be signed, witnessed, acknowledged and recorded in the office of the county clerk. The requirements as to recording a chattel mortgage are precisely the same as just mentioned for a conditional sale. The fee for recording and the rights of a landlord in reference to a chattel mortgage are just the same as mentioned for a conditional sale. Exemption.—See comment above for this state. Rights and remedies of parties——The rights and remedies of the parties to a chattel mortgage are substantially the same as the rights and remedies outlined in reference to the conditional sale. Penalty—To dispose wrongfully of property that is sub- ject to a chattel mortgage is punishable by a fine of not less than $10 or not more than $1,000, and imprisonment of not less than fifteen or more than ninety days. LOUISIANA Conditional sale——Filing or recording—As a_ general rule, the ordinary form of conditional sale is not valid under the law of this state. But a contract in the form of a lease, which gives the buyer an option to purchase the property after he has paid the rental for a certain number of months, has been held to be a valid lease under the law of this state, although the parties to the contract intended that the property was to be sold, rather than leased. Under the Louisiana law the seller of personal property has a right re- ferred to as a vendor’s privilege. When a contract provides that the seller reserves the vendor’s privilege the seller has the right to take back the property if payment is not made, but this privilege does not protect the seller against all third parties. It is not necessary to record a lease, contract or a vendor’s privilege. A landlord has a lien which is superior to a 140 INSTALLMENT COLLECTIONS conditional sale. But this lien has been set aside as to purchase money due for farming utensils. Exemption —Exemption may be claimed on household goods and a homestead to the value of $2,000. Rights and remedies of seller and buyer.—An attorney's fee may be collected if so provided in a note or contract. The remedies of the seller under the Louisiana law differ quite essentially from the law of all other states. The law of sales is governed to a large extent by the Louisiana Code, which derives its origin from the French law and is based upon the Code Napoleon. Other states have laws based upon the English system of jurisprudence, so that it is some- what dificult for lawyers not trained in Louisiana law to understand just what the rights and remedies of buyer and seller are in that state. Penalty.—As the buyer of property on conditional sale is regarded as the owner under the law of this state, he would not be guilty of any offense by disposing of the prop- erty. If the property disposed of was subject to a lease or ° vendor’s privilege, the buyer might become liable, under the general law relating to larceny and fraudulent disposal of property. Chattel mortgage.—Filing or recording—The original chattel mortgage or a certified copy must be recorded in the office of the recorder of mortgages in the county (parish) where the property is delivered, and also where the mort- gagor resides, if it is a different county. Two witnesses must sign the mortgage, and before it can be recorded it must be “‘passed by Notarial Act.” This makes it necessary for the parties to the mortgage and also the two witnesses to go before a notary public and swear to the execution of the mortgage in a very formal manner, and until this is done, the chattel mortgage is not entitled to be recorded. The fee for recording is 50c. For rights of landlord see comment above in reference to conditional sale. Exemption.—See comment above for this state. Rights and remedies of parties—See comment above for this state. Penalty——To dispose of or move property with fraudu- lent intent is deemed a misdemeanor and may be punished by a fine of not over $500 or by imprisonment for not over twelve months. DIGEST OF LAWS OF VARIOUS STATES 141 MAINE Conditional sale——Filing or recording—The original contract must be recorded in the office of the town clerk of the city or town where the buyer resides. If the buyer does not reside in a town it must be recorded in the office of the county register of deeds. The contract must be signed by the buyer, but it need not be acknowledged or signed by any witnesses. A minimum fee of 25 to 50c. may be charged and in addition 15c. for each one hundred words in excess of 500. A landlord does not have a lien. Exemption.—Property to the value of $500 may be claimed exempt and, in addition to this, certain articles of household goods. Rights and remedies of seller and buyer—The state law provides that attorney’s fees may be taxed as part of the costs in certain cases. The state law also provides that the remedies of the parties to a conditional sale are substantially the same as of the parties to a chattel mortgage. See remedies of chattel mortgage in headnotes hereto. Penalty——To dispose of property with intent to defraud may be punished with a fine of not over $1,000 or im- prisonment of not over one year. Chattel mortgage.—Filing or recording—The original chattel mortgage must be recorded within twenty days from the day that it is made. It must be recorded in the office of the clerk of the town or city where the mortgagor resides. It is not necessary that the mortgage be acknowledged or signed by witnesses. The fee for recording is 50c. for the first five hundred words and 15c. for each additional one hundred words. If there are not over two hundred and fifty words, the fee is 25c. The landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties—There are certain state laws which fix the rights of the parties to chattel mortgages, but these do not change the general rules outlined in the headnotes hereto. To sue for a mortgage debt does not lessen the rights of the mortgagee against the property. If the debt or judgment therefor is not paid, he may take the property for the purpose of foreclosure. If the sale of the property does not satisfy the debt, he may sue for a de- 142 INSTALLMENT COLLECTIONS ficiency. If the proceeds of the sale exceed the balance of the debt, he must account to the mortgagor for the surplus. Penalty.—The penalty for disposing of property with in- tent to defraud is a fine of not over $1,000 or imprisonment for not over one year. MARYLAND Conditional sale.—Filing or recording—The original contract or a memorandum must be recorded in the office of the county clerk of the county where the buyer resides. It is not necessary that the contract be signed by witnesses or acknowledged. The landlord has a lien under the law of this state and this lien is perhaps superior to the rights of the vendor even though the contract is recorded. The fee for recording is one and one-quarter cents for each 10 words and five cents for indexing. Exemption.—Property to the value of $100 may be claimed exempt. Rights and remedies of seller and buyer.—Attorney’s fees may be collected. The courts of this state have not definitely decided whether an election to sue for the contract price would be a waiver of title. The terms of the contract would seem to control the remedies of the parties. However, the courts do not favour a forfeiture of payments made under the terms of a conditional sale. It has been held that an action of judicial foreclosure may be maintained when other par- ties are claiming a lien on the property that is subject to the contract of conditional sale. Penalty.—The penalty for disposing of conditional sale property with wrongful intent is imprisonment in the county jail for not over six months or a fine of not over $500. Chattel mortgage.—Filing or recording—The original mortgage must be recorded in the office of the county clerk of the county where the mortgagor resides. In Baltimore the mortgage must be recorded in the office of the city clerk. The mortgage must be signed by the mortgagor and at least one witness and the mortgagor must acknowledge before a notary or other oficer that he executed the mortgage. It is also necessary that the mortgagee sign an afhdavit that the mortgage was made in good faith. A landlord has a lien which is probably superior to a chattel mortgage. The DIGEST OF LAWS OF VARIOUS STATES 143 fee for recording is one and one-quarter cents for each 10 words and twenty cents for entering and indexing. Exemption—Property to the value of $100 may be claimed exempt. Rights and remedies of parties——Attorney’s fees may be collected. The rights and remedies of the parties to a chattel mortgage are controlled by the general law as ex- plained in the headnotes hereto. Penalty——The penalty for disposing of property with wrongful intent is imprisonment in the county jail for not over six months or a fine of not over $500. MASSACHUSETTS Conditional sale—Filing or recording.—Except when the property sold is attached to the real estate, a conditional sale is valid without filing or recording being necessary. When the property sold becomes a fixture by being attached to the real estate, it is necessary that the original contract or memorandum be filed in the office of the clerk of the town or city where the real estate is situated. Both the buyer and seller must sign the contract, but it is not neces- sary that it be acknowledged or signed by witnesses. The contract must be recorded within 10 days. When furniture is sold on conditional sale, it is necessary for the seller to furnish a copy of the contract to the buyer. All payments and charges must be endorsed on this copy if the buyer so requests. A landlord does not have a lien. The fees for recording are 25c. for the first page, not over 224 words, and 20c. for each additional page. There is also a charge of 10c. or more for indexing, according to the number of names signed to the contract. Exemption.—Property to the value of $800 may be claimed exempt. The claim for exemption must be recorded. Rights and remedies of seller and buyer.—When the seller retakes property in this state, he must hold it for fifteen days to give the buyer a chance to redeem upon payment of the balance due. If the buyer does not pay and redeem the property, the payments that he has made are regarded as forfeited. There is, however, a special law referring only to household furniture which preverts all payments from being forfeited when they are made on household goods and the 144 INSTALLMENT COLLECTIONS seller takes back the property. To start a suit for the con- tract price is regarded as an election which vests the title to the property in the buyer. Penalty—The penalty for wrongfully disposing of prop- erty subject to a conditional sale is a fine of not over $100 or imprisonment for not over one year. Chattel mortgage—Filing or recording.—A chattel mort- gage or a conditional sale, if given for security, must be recorded in the office of the town or city clerk where the mortgagor resides. It must be recorded within 15 days of the date of the mortgage. The law does not require that a mortgage be acknowledged. Exemption.—See comment above. Rights and remedies of parties—Before property subject to a chattel mortgage can be taken, the mortgagor must be given seven days’ notice. The state law provides for various other things to be done in order to foreclose a chattel mort- gage. The mortgagor may redeem the property any time before it is sold at foreclosure sale. Penalty—The penalty for disposing of mortgaged prop- erty with wrongful intent is a fine of $100 to $1,000 and im- prisonment for not over one year. MICHIGAN Conditional sale—Filing or recording.—Under the court decisions of this state, most conditional sales are held not to be valid unless they are acknowledged and recorded the same as a chattel mortgage. For explanation of how a chattel mortgage is recorded see comment appearing hereafter for this state. A landlord does not have a lien. Exemption—A homestead to the value of $1,500 is exempt. A stock of goods to the value of $250 may be claimed exempt. _ Rights and remedies of seller and buyer.—Attorney’s fees may not be collected under the law of this state. The seller may sue for part or all of the price without waiving title to the property. If the contract provides for foreclosure by public sale, the seller may deal with the property in that way and sue the buyer for any deficiency remaining unpaid after the property has been sold. For the seller to endorse over con- ditional sale notes does not waive the seller’s title, and the DIGEST OF LAWS OF VARIOUS STATES 145 endorsee of the notes may take action to obtain possession of the property in the same way as the original seller could have done. Penalty.—If the value of the property is less than $25 the offender may be fined not over $100 or imprisoned not over three months. If over $25 in value the fine may be not over $250 and imprisonment not over two years. Chattel mortgage—Filing or recording.—The original mortgage or a true copy must be filed in the office of the township clerk or city clerk or city recorder of the city in which the property is delivered. If the mortgagor has authority to resell the property, such as a stock of merchan- dise, the mortgage must also be recorded in the office of the county register of deeds. This is true also of the con- ditional sale when the buyer has authority to resell the prop- erty which is subject to the terms of the conditional sale contract. The mortgagor must make an affidavit setting forth that the mortgage was made in good faith, and this affidavit must be attached to the mortgage at the time it is filed. The mortgage holds good for a period of one year and may be renewed by filing it again within thirty days be- fore the time of the first filing expires. The fee for filing is 25c. A landlord does not have a lien in this state. Exemption.—See comment above for this state. Rights and remedies of parties—Even though provided for in a note or contract, attorney’s fees may not be collected under the law of this state. The rights of a party to a chattel mortgage are substantially the same as outlined in the discussion of foreclosure in the headnotes hereto. Penalty.—lf the value of the property is less than $25, the offender may be fined not over $100 or imprisoned not over three months. If over $25 in value, the fine may be not over $250 and imprisonment of not over two years. MISSISSIPPI Conditional sale—Filing or recording.—Except for pro- tection against a landlord’s lien, it is not necessary to record a contract in Mississippi for a period of three years. After three years, and to protect against the lien of the landlord, it is necessary that the original contract be sent for recording to the clerk of the chancery court of the county where the 146 INSTALLMENT COLLECTIONS property is delivered. The buyer and at least one witness should sign the contract. The buyer must acknowledge that he signed the contract or the subscribing witness may prove by his affidavit that the buyer signed the contract, before it will be entitled to be recorded. The fee for recording is 10c. for each 100 words. The landlord has a lien under the law of this state which can only be avoided by recording the contract not later than the day the property is delivered to the buyer. When goods are sold to a trader or retail dealer, it is also necessary that the contract be recorded under the law of this state that is called the Business Sign Statute. Exemption.—Property to the value of $250 and also a homestead of not over $3,000 in value are exempt. Rights and remedies of seller and buyer.—Attorney’s fees may be collected. The seller may sue for the contract price without losing his title to the property. If he is not able to collect, he may afterward take possession of the prop- erty. He may foreclose by selling the property, and if the proceeds of such sale are not sufficient to pay the debt he may sue the buyer for the balance remaining unpaid. When the property is retaken, the seller must account to the buyer for the payments that have been made. If these payments amount to more than a reasonable compensation for use and depreciation, the seller would be required to refund. Condi- tional sales are regarded as being the same as the chattel mortgage, so far as the rights and remedies of the. parties are concerned. Penalty —No particular law is found on this subject. If property was disposed of with intent to defraud, the offender would no doubt be liable under the general law against larceny. Chattel mortgage.—Filing or recording.—The original mortgage must be recorded in the office of the clerk of the chancery court of the county in which the property is de- livered. The mortgagor must acknowledge that he signed the mortgage and two witnesses should also sign. Instead of the mortgagor, one of the witnesses may prove the execu- tion of the mortgage so that it may be recorded. The fee for recording is 10c. for each 100 words. Landlord has a lien, but this lien is probably not superior to a chattel mort- gage which is filed not later than the day that the property is delivered, DIGEST OF LAWS OF VARIOUS STATES 147 Exemption.—See comment above for this state. Rights and remedies of parties—An attorney's fee may be collected. The rights and remedies of the parties to a chattel mortgage are substantially the same as just mentioned for a conditional sale. See also discussion of foreclosure by public sale in the headnotes hereto. Penalty—See comment under conditional sales for this state. ; MINNESOTA Conditional sale-—Filing or recording.—The original con- tract must be filed in the office of the register of deeds of the county where the property is delivered. The contract must be signed by the buyer but it is not necessary that it be acknowledged or signed by witnesses. The fee for filing is 25c. A landlord does not have a lien. Exemption.—Property to the value of about $1,500 may be claimed exempt. Eighty acres of farm land, or one-half acre if located in a town or village, may be claimed exempt as a homestead. , Rights and remedies of seller and buyer——Attorney’s fees, when provided for in a note or contract, may be collected. To sue for the purchase price passes the title of the property to the buyer. If the property is retaken, the payments made are forfeited, as a general rule, and the buyer is no longer responsible for the price. If the contract so provides, the seller would in some cases have the right to foreclose. The older cases held that foreclosure was not an available remedy, but the more recent decisions seem to take a contrary view and allow foreclosure of a conditional sale. Penalty—To dispose of property with wrongful intent is punishable by a fine of not over $500 or by imprisonment for not over one year. Chattel mortgage.—Filing or recording—The original mortgage must be filed in the office of the register of deeds in the county where the mortgagor resides. [wo witnesses must sign the mortgage, in addition to the mortgagor. It is also necessary that the mortgagor acknowledge his signature. In addition to this, the mortgagor must sign an affidavit stating that the mortgage was made in good faith, and this affidavit must be filed with the mortgage. The fee for filing is 25c. A landlord does not have a lien. 148 INSTALLMENT COLLECTIONS Exemption.—See comment above for this state. Right and remedies of parties—Attorney’s fees may be collected. For other rights and remedies of the parties to a chattel mortgage, see discussion in the headnotes hereto under the heading of foreclosure. Penalty—To dispose of property with wrongful intent is punishable by a fine of not over $500 or by imprisonment for not over one year. MISSOURI Conditional sale——Filing or recording.—The original con- tract or a true copy must be filed in the office of the county recorder of the county where the buyer resides. In St. Louis, the contract is to be recorded in the office of the city recorder of deeds. The buyer must sign the contract but it is not necessary that it be acknowledged or signed by witnesses. The fee for filing is 10c. A landlord does not have a lien in this state. Exemption.—In the country and small towns a homestead is exempt to the value of $1,500 and in cities to the value of $3,000. Rights and remedies of seller and buyer-—An attorney’s fee may be collected. If property is retaken, the seller can keep only payments to cover the reasonable rental value of the property for the time that it was in the possession of the buyer. All other payments must be refunded, and the amount refunded must be not less than 75 per cent. of the amount that has been paid. The seller must refund pay- ments before he is entitled to take possession of the prop- erty. The seller may regard the conditional sale as a lien on the property and start an action in the nature of a judicial foreclosure. When this is done it is not necessary to tender back payments that have been made. The court will decide if the buyer is entitled to any refund. Penalty—No law appears to have been enacted which expressly refers to the wrongful disposal of property subject to a conditional sale. Chattel mortgage.—Filing or recording.—The original mortgage or a copy must be filed in the office of the county recorder of deeds of the county where the mortgagor resides. In the city of St. Louis the mortgage is to be recorded in the DIGEST OF LAWS OF VARIOUS STATES 149 office of the city recorder of deeds. The mortgagor must sign the mortgage, but it is not necessary that it be acknowl- edged by him or signed by witnesses. The fee for filing is 10c. A landlord does not have a lien in this state. Exemption.—See comment above for this state. Rights and remedies of parties——An attorney's fee may be collected. If the amount secured by a mortgage is less than $100 the state law provides the manner in which it must be foreclosed. If the amount secured is over $100 the mort- gage may be foreclosed under the power of sale as may be provided in the mortgage itself. For explanation of fore- closure under a power of sale see discussion in headnotes hereto under the heading of foreclosure. Penalty.—If the value of the property is less than $50, the penalty is a fine of not over $100 and imprisonment for not over six months. If the value of the property is over $50, the offender may be fined not less than $100 and imprisoned in the penitentiary or the county jail from six months to five years. MONTANA Conditional sale——Filing or recording.—The original con- tract or a true copy must be filed in the office of the county clerk of the county in which the property is delivered. The buyer must sign the contract, but it is not necessary that it be acknowledged by him or signed by witnesses. The fee for filing, together with a certificate, amounts to $1. A landlord does not have a lien. Exemption.—A homestead to the value of $2,500 may be claimed exempt. Rights and remedies of seller and buyer-—An attorney’s fee may be collected. The state law provides that the seller must deal with property subject to a conditional sale in prac- tically the same manner as if the property were subject to a chattel mortgage. For rights and remedies of parties in such cases, see discussion in the headnotes hereto under the subject of foreclosure. Penalty—No law is found which expressly provides for a penalty for wrongfully disposing of conditional sale property. Chattel mortgage——Filing or recording—The original mortgage or a certified copy must be filed in the office of the 150 INSTALLMENT COLLECTIONS county clerk or recorder of the county where the property is delivered. The mortgagor must acknowledge that he signed the mortgage. The mortgagee must make an affidavit that the mortgage was made in good faith. The fee for filing is $1. A landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties-——An attorney's fee may be collected. A mortgage may be foreclosed under a power of sale as provided in the mortgage and the sheriff of the county may be designated as the party to take the property and sell it and account for the proceeds to the mortgagor and mortgagee. For further explanation of foreclosure under a power of sale, see headnotes hereto under the subject of foreclosure. Penalty—To dispose of property subject to a chattel mortgage is regarded as larceny in this state. NEBRASKA Conditional sale.—Filing or recording.—The original con- tract or a true copy must be filed in the office of the county clerk of the county in which the buyer resides. The seller must attach an affidavit to the contract describing the prop- erty and explaining the interest he has in it. The contract must be signed by the buyer, but it is not necessary that it be acknowledged by him or signed by witnesses, and the buyer is not required to acknowledge the contract. The fee for filing is 25c. A landlord does not have a lien in this state. Exemption.—Personal property to the value of $500 and a homestead to the value of $2,000 may be claimed exempt. Rights and remedies of seller and buyer.—Under the law of this state an attorney's fee may not be collected. The seller may not retake property on which more than one-third has been paid. In such cases he must hold the property for a period of twenty days during which time the buyer may redeem the property by paying the balance due. If the seller does not give the buyer a chance to redeem in this way, the payments made must be refunded. As a general rule, to start a suit for the price waives the seller’s title. Penalty.—No law is found which expressly refers to con- ditional sales. DIGEST OF LAWS OF VARIOUS STATES 151 Chattel mortgage——Filing or recording.—The original mortgage or a true copy must be filed in the office of the county clerk of the county in which the mortgagor resides. It is not necessary that the mortgage be acknowledged except in the case of household goods. The fee for filing is 10c. A landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties—Attorney’s fees may not be collected. A mortgagee has only a lien on the property under the law of this state. To foreclose he must sell the property as provided by the state law and make an account- ing to the mortgagor. Penalty.—The penalty is a fine of not less than $100 or imprisonment for not less than one year nor more than ten years. NEVADA Conditional sale.—Filing or recording.—It is not neces- sary to file or record a conditional sale contract in this state. It is valid and protects the seller against third parties with- out the necessity of filing. A landlord does not have a lien. Exemption.—A homestead to the value of $5,000 may be claimed exempt. Rights and remedies of seller and buyer.—Attorney’s fees may be collected. The courts of this state have not decided what the effect would be of bringing a suit for the total price. No doubt the terms of the contract would be fol- lowed to a considerable extent. For the vendor to take a chattel mortgage on other property of the buyer, as addi- tional security, has been held not to be a waiver of title on the property that was subject to the conditional sale con- tract. Penalty.—For disposing of property with wrongful intent, there is a fine of not less than $500 or more than $1,000 and imprisonment of not less than six months or more than one year. Chattel mortgage——Filing or recording.—The original mortgage must be recorded in the office of the county recorder of the county in which the mortgagor resides, and in the office of the county recorder of the county in which the property is delivered, if it is a different county. The mortgagor must sign the mortgage. Both the mortgagor 152 INSTALLMENT COLLECTIONS and mortgagee must make an affidavit that the mortgage was made in. good faith, The fee for recording amounts to about $1.50. Exemption.—See comment above for this state. Rights and remedies of parties—Attorney’s fees may be collected. The rights and remedies of the parties to a chattel mortgage are regulated to a considerable extent by the state law. For general rules as to foreclosure, see com- ment in the headnotes hereto under the subject of fore- closure. Penalty—For disposing of property with wrongful intent, there is a fine of not less than $500 or more than $1,000 and imprisonment of not less than six months or more than one year. NEW HAMPSHIRE Conditional sale—VFiling or recording—tThe original con- tract must be recorded in the office of the town clerk of the town in which the buyer resides. Both the seller and the buyer must make an affidavit that the contract was made in good faith. The contract must be recorded within twenty days after the delivery of the property. The fee for recording is 17c. for each 224 words. A landlord does not have a lien. Exemption.—Property to the value of $500 may be claimed exempt. .. Rights and remedies of seller and buyer—There are very few cases which have decided the rights of the parties to a contract in this state. The terms of the contract would no doubt control to a considerable extent. Penalty.—No statute is found on this subject. Chattel mortgage.—Filing or recording—The original mortgage must be recorded in the office of the town clerk of the town in which the mortgagor resides. Both the mort- gagor and mortgagee must sign an affidavit that the mort- gage was made in good faith. The fee for recording is 25¢. for each 220 words. A landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties——¥or explanation of the general rules on this subject, see discussion in the headnotes hereto under the subject of foreclosure. Penalty.—No statute is found on this subject. DIGEST OF LAWS OF VARIOUS STATES 153 NEW JERSEY Conditional sale-—Filing or recording.—The uniform con- ditional sales act is the law in this state. It is necessary to file the original contract or a copy within ten days in the office of the county register of deeds or county clerk in the county in which the property is delivered. The buyer must sign the contract, but it is not necessary that it be acknowledged or signed by witnesses. The fee for filing is $1. A land- lord has a lien, but he cannot avoid a conditional sale, unless he holds the position of a judgment creditor. Exemption.—A homestead to the value of $1,000, if recorded, may be claimed exempt. Also personal property to the value of $200. Rights and remedies of seller and buyer.—Attorney’s fees may be collected. For explanation of the rights of seller and buyer under the Uniform Conditional Sales Act, see headnotes hereto. Penalty.—For wrongful disposal of property there is a fine of not over $500 or imprisonment for not more than one year. Chattel mortgage—Filing or recording—The original mortgage must be recorded in the office of the county clerk of the county in which the property is delivered. It is neces- sary that the mortgagee make an affidavit, which expressly states what the consideration was for the execution of the mortgage. The fee for recording ranges from 10c. to 20c. per folio, with a minimum charge of 75c. The landlord has a lien, but this lien is not superior to a chattel mortgage which is recorded not later than the day on which the mortgagor obtains possession of the property. Exemption.—See comment above for this state. Rights and remedies of parties—Attorney’s fees may be collected. The state law regulates the manner in which a mortgage on household goods must be foreclosed. As to other property, general rules outlined in the headnotes here- to would be applicable. Penalty——For wrongful disposal of property subject to a chattel mortgage, the penalty is the same as the penalty affixed for a misdemeanor under the state law. 154 INSTALLMENT COLLECTIONS NEW MEXICO Conditional sale—Filing or recording.—The original con- tract must be filed in the office of the county clerk of the county in which the property is delivered. It is not certain under the law of this state whether the seller or buyer must acknowledge the signing of the contract. Until this point is fully settled, both of the parties should acknowledge the con- tract before it is filed. Fee for filing is 25c. A landlord does not have a lien which would entitle him to avoid a con- ditional sale which is properly recorded. Exemption.—Personal property to the value of $500 and a homestead to the value of $1,000 may be claimed exempt. Rights and remedies of seller and buyer—Attorney’s fees may be collected. There are very few cases: which decide the rights of the parties to a conditional sale in this state. Penalty.—For disposing of property with wrongful intent there is a fine not to exceed twice the value of the property and imprisonment not to exceed six months. Chattel mortgage.—Filing or recording—The law which regulates the filing of conditional sales also refers to and includes chattel mortgages. The comment just made in reference to conditional sale, applies fully to a chattel mort- gage. ‘The fee for filing is the same and the rights of the landlord are the same. Exemption.—See comment above for this state. Rights and remedies of parties—Attorney’s fees may be collected. The state law provides the method by which chattel mortgages may be foreclosed. For explanation of foreclosure, see comment appearing in the headnotes hereto, under the subject of foreclosure. Penalty.—For disposing of property with wrongful intent there is a fine of not over twice the value of the property and imprisonment of not over six months. NEW YORK Conditional sale—Filing or recording—Except in Greater New York City, a conditional sale contract or a copy thereof is to be filed in the office of the town or city clerk of the town in which the buyer resides. The buyer must sign the contract, but it is not necessary that it be DIGEST OF LAWS OF VARIOUS STATES 155 acknowledged or signed by witnesses. The clerks are entitled to charge fees for filing, indexing, searching, issuing receipt, and other items which make a total of from 25c. to 60c. These are the charges outside of Greater New York City. A landlord does not have a lien. In Greater New York City the place of filing depends upon the residence of the buyer. In the Borough of Brooklyn, contracts are to be filed in the office of the register of Kings County; in the Borough of Queens, in the office of the clerk of Queens County; in the Borough of Richmond, in the office of the clerk of the County of Richmond; and in the Borough of Bronx, in the office of the register of the County of Bronx; and in the Borough of Manhattan, in the office of the register of the City and County of New York. If the buyer resides in a different registration district than the place where the property is delivered, the contract should also be filed in the district in which the property is located. When a contract is sent for filing, it is required to be in- dorsed on the back (outside) with the names of the seller and buyer, their residences and the place in which the prop- erty is located. The fees for filing consist of different items as above enumerated and usually amount to about 80c. There is also a special law in this state which regulates the filing of contracts when the property sold is to be attached to the real estate. In such cases the contract must contain a description of the premises and buildings where the goods are delivered and if the goods are delivered in a city, the contract must show the section and the block within which the goods are located. ‘The contract must be filed in, the office of the register of the city or county or with the county clerk, in the district where the premises are located. © Each contract must be indorsed with the names of the parties as explained above. It is not necessary that the contract be acknowledged or signed by witnesses. The contract must be renewed before the expiration of one year. The seller must attach a statement when renewing the filing, which shows his interest in the property at the time the filing is renewed. In addition to the fees above outlined, the registration officer may charge 50c. for each block indexed. There is also a charge of $1 if the amount secured by the contract is $100,- 000 or more. _Exemption—A homestead to the value of $1,000 may be 156 INSTALLMENT COLLECTIONS claimed exempt if notice thereof is recorded. Personal prop- erty may be claimed exempt to the value of $250. Rights and remedies of seller and buyer.—lIt is the general custom to provide in notes or contracts for the payment of attorney’s fees if suit is filed. The lower courts have held that such a provision may be enforced, but no decisions are found on this subject by the court of last resort of this state. The state law provides the manner in which conditional sale property must be taken. It is necessary for the seller to hold the retaken property for thirty days, and if the buyer does not pay the amount due and redeem the property, it must be sold at public auction within sixty days from the time that the seller takes possession. If the seller does not comply with this law, the buyer may recover all payments that have been made. In New York City a conditional sale may be fore- closed by an action in the nature of judicial foreclosure. The state law provides for this, but it does not apply to con- tracts made outside of Greater New York, and in New York City it applies only to cases where the Municipal Court has jurisdiction. An election to sue for the price does not waive the title of the vendor. But to take a judgment and issue an execution thereon and collect part of the price is an irrevocable election which vests the title in the buyer, and the seller may not thereafter claim the property. Penalty—The penalty is the same as the punishment for misdemeanor under the state law. Chattel mortgage.—Filing or recording.—A chattel mort- gage must be signed by the mortgagor, but it is not necessary that it be acknowledged or witnessed. It is to be filed both where the mortgagor resides and where the property is delivered. The office in which the chattel mortgage is to be filed is the same as in the case of the conditional sale, as outlined above. The place of filing in Greater New York is also the same. If the property subject to the mortgage is removed from one filing district to another, the mortgage should be promptly refiled in the district to which the prop- erty has been removed, and the same process of refiling should be observed when the mortgagor changes his resi- dence from one filing district to another. There is also a special law in this state which refers to a chattel mortgage on stocks and bonds. In such cases the mortgage must be filed not later than the next day after the debt has been DIGEST OF LAWS OF VARIOUS STATES 157 created which the mortgage is intended to secure. A chattel mortgage upon the property of a corporation, such as a telephone or electric light company, must be recorded the same as a real estate mortgage in each county where the property mortgaged is located. Within thirty days before the expiration of one year, a mortgage must be renewed by refilling a copy. This may be done in substantially the same manner as above explained for conditional sale. The fees for filing or renewing a chattel mortgage are computed in the same manner as above explained for conditional sale. When offered for filing, the mortgage must be endorsed with the names of parties, their residences and the location of the property. Exemption.—See comment above for this state. Rights and remedies of parties——When provided for in note or contract, attorney's fees may be collected. See also comment on this subject under the discussion of con- ditional sale for New York. It is the custom to foreclose a chattel mortgage under a power of sale as may be pro- vided in a mortgage instrument. For general rules applicable in such cases, see headnotes above under the subject of fore- closure. Penalty—For wrongfully disposing of property subject to a mortgage, the penalty is the same as the punishment for a misdemeanor under the state law. NORTH CAROLINA Conditional sale-—Filing or recording.—The original con- tract must be recorded in the office of the clerk of the superior court of the county in which the buyer resides. The buyer must acknowledge his signature to the contract, or if witnesses sign, one of the witnesses may prove by his oath that the buyer signed the contract, and this will entitle it to be received for record. After the contract has been pro- bated by the clerk of the superior court, it is recorded by the register of deeds. The fees for recording vary for the different counties and the number of words in the contract. The charge for the average contract would somewhat exceed $1. A landlord does not have a lien in this state. Exemption.—Personal property to the value of $500 may be claimed exempt and also a homestead to the value of $1,000. 158 INSTALLMENT COLLECTIONS Rights and remedies of seller and buyer.—Attorney’s fees may not be collected in this state. If property is retaken by the seller, it must be resold after posting notices twenty days prior to the time that the sale takes place. The state law requires conditional sales to be foreclosed in the same manner that a chattel mortgage is foreclosed. A contract providing for forfeiture of payments will not be enforced. Penalty—No law is found on this subject which refers to conditional sale. See comment on this subject for chattel mortgages. Chattel mortgage.—Filing or recording.—The original mortgage must be recorded in the office of the clerk of the superior court of the county where the mortgagor resides. It is necessary that the mortgagor acknowledge his signa- ture to the mortgage or one of two subscribing witnesses prove the signature of the mortgagor. The fees for recording are the same as above explained. A landlord does not have a lien. Exemption—See comment above for this state. Rights and remedies of parties——Attorneys fees may be collected. To foreclose a mortgage, it is necessary to give twenty days’ notice. For general rules applicable to foreclosure, see discussion in the headnotes hereto. Penalty.—F¥or wrongfully disposing of property the pen- alty is the same as the punishment for a misdemeanor under the state law. NORTH DAKOTA Conditional sale-—Filing or recording.—The original con- tract must be recorded in the office of the register of deeds of the county in which the property is delivered. The buyer may. acknowledge the contract, or if two witnesses sign, it is not necessary that the buyer acknowledge. The fee for filing is 25c. A landlord does not ‘have a lien. Exemption.—Under certain conditions, personal property to the value of $1,000 may be claimed exempt. Also a homestead to the value of $5,000. Rights and remedies of seller and buyer—Attorney’s fees may not be collected in this state. To sue for the price is held to pass the title of the property to the buyer. If the property is retaken, the buyer forfeits the payments that have been made. DIGEST OF LAWS OF VARIOUS STATES 159 Penalty—For wrongful disposal of property the penalty is the same as punishment for a misdemeanor, if the value of the property does not exceed $100; the same as the punishment for a felony, if the value of the property is over $100. Chattel mortgage.—Filing or recording.—The original mortgage must be filed in the office of the county register of deeds of the county in which the property is delivered. If two witnesses sign the mortgage, it is not necessary that it be acknowledged, but, if witnesses do not sign, the buyer must acknowledge his signature before the mortgage can be filed. It is also necessary that the copy of the mortgage be delivered to the mortgagor, and the instrument filed with the register of deeds must show that this has been done. A landlord does not have a lien. The fee for filing is 25c. Exemption—See comment above for this state. Rights and remedies of parties——Attorney’s fees may not be collected. Mortgages may be foreclosed as explained in the headnotes hereto. Penalty——For wrongful disposal of property subject to a chattel mortgage, the penalty is the same as above mentioned for conditional sale. OHIO Conditional sale—Filing or recording.—The original con- tract or a true copy must be filed in the office of the county recorder of the county where the buyer resides. The vendor must sign an afhidavit stating that he claims the title to the property and the amount that is due to him. This affidavit must appear on the contract itself and not on a separate paper. The fee for filing is 25c. A landlord does not have a lien. Exemption.—Personal property to the value of $500 and a homestead to the value of $1,000 may be claimed exempt. Rights and remedies of seller and buyer—If more than 25 per cent. of the price has been paid, the seller must refund before he has a right to take possession of the property. The seller is entitled to deduct only the reasonable rental value which may not exceed one-half of the amount that has been paid. To take a judgment and make a levy on conditional sale property passes the title to the buyer. A 160 INSTALLMENT COLLECTIONS conditional sale may be foreclosed by action, and when this is done, it is not necessary to tender back payments that have been made. Penalty.—For wrongfully disposing of property subject to a conditional sale, there is a fine of not over $500 and imprisonment for not over three months. Chattel mortgage—Filing or recording.—The original mortgage or a true copy must be filed in the office of the county recorder of the county in which the mortgagor re- sides. The mortgagor must sign the mortgage and the mortgagee must make an affidavit that the mortgage was made in good faith. The mortgage must be renewed before the expiration of three years. The fee for filing is 25c. A landlord does not have a lien. Exemption—See comment above for this state. Rights and remedies of parties—The courts of this state hold that a provision in a note or mortgage for payment of attorney’s fees will not be enforced. Except as to house- hold goods a chattel mortgage may be foreclosed under a power of sale, as explained in the headnotes hereto. See discussion under the subject of -foreclosure. Penalty——The penalty for wrongful disposal of property is a fine of not more than $500 and imprisonment for not more than three months, but if the amount due on the mortgage exceeds $35, the imprisonment may be not less than one year nor more than five years. OKLAHOMA Conditional sale-—Filing or recording—The original con- tract or a true copy must be filed in the office of the county register of deeds of the county where the property is de- livered. The contract must be signed by the buyer, but it is not necessary that it be acknowledged or signed by wit- nesses. It must be renewed every three years. The fee for filing is 25c. A landlord does not have a lien. Exemption.—A homestead to the value of $5,000 may be claimed exempt. Rights and remedies of seller and buyer.—Attorney’s fees may be collected. To bring suit for the total contract price seems to be regarded as an election which passes the title of the property to the buyer. The terms of the contract DIGEST OF LAWS OF VARIOUS STATES 161 might control to a certain extent, as in one decision the court said that the seller might obtain judgment and still retain a lien on the property. If the contract provides for fore- closure by public sale, the seller is entitled to enforce it in that way, and also sue for a deficiency judgment. Penalty. No law is found which expressly refers to con- ditional sale. See comment under chattel mortgages for this state. Chattel mortgage—Filing or recording—The original contract must be filed in the office of the county register of deeds of the county where the property is delivered. The mortgagor must sign the mortgage. If two witnesses sign at the same time it can be admitted to record without the acknowledgment of the mortgagor. If witnesses do not sign, the mortgagor must acknowledge his signature. The fee for filing is 25c. A landlord does not have a lien. Exemption—See comment above for this state. Rights and remedies of parties——Attorney’s fees may be collected in foreclosure proceedings, if conducted by an attorney of record. The state law provides the manner in which a mortgage may be foreclosed by a public sale. The procedure is substantially the same as outlined in the head- notes hereto under the heading of foreclosure. Penalty——F¥or disposing of property subject to a chattel mortgage, there is a fine of not over $500 and imprisonment for not more than three years. OREGON Conditional sale-—Filing or recording—Except when the property sold is attached to the land so as to become a fixture, it is not necessary to file or record a conditional sale in this state. When it is attached to the land, the original contract must be filed in the office of the county clerk or recorder of the county in which the property is delivered. The vendor must indorse on the contract “Notice” describ- ing real estate to which the chattel has been attached. The contract must be recorded within ten days after the chattel has been attached to the real estate. The fee for filing is 25c. A landlord does not have a lien. Exemption.—A homestead to the value of $1,500 may be claimed exempt. 162 INSTALLMENT COLLECTIONS Rights and remedies of seller and buyer.—Attorney’s fees may be collected in certain cases, but if the note or contract provides for the payment of a certain per cent. as a fee, the court will disregard it, as the court reserves to itself the right to allow or fix any fees that may be taxed. As a general rule, it is held that to sue for the contract price passes the title to the buyer, and payments made by the buyer are regarded as forfeited if the property is retaken. But if the contract provides for foreclosure by public sale, the seller may enforce it in that way. Penalty——The penalty for wrongful disposal of property subject to a conditional sale is the same as the punishment provided for larceny under the state law. Chattel mortgage.—Filing or recording—The original mortgage must be recorded in the office of the county re- corder in the county in which the property is delivered. The mortgagor must sign the mortgage and he must acknowledge it unless two witnesses also sign. When two witnesses sign, one of them may prove the signature of the mortgagor, so as to entitle the mortgage to be recorded. The fee for recording is 20c. for each 100 words. A landlord does not have a lien. Exemption —See comment above for this state. Rights and remedies of parties——As to attorney’s fees, see comment above for this state. The state law provides the manner in which a mortgage may be foreclosed by public sale. The method of foreclosing is not essentially different from the rules outlined in the headnotes hereto under the subject of foreclosure. Penalty—The penalty for disposing of mortgaged prop- erty is the same as the punishment provided for larceny under the state law. ‘ PENNSYLVANIA Conditional sale—Filing or recording.—Except in cases where the property sold is to be attached to the land, a conditional sale is not valid under the law of this state as against creditors or other third parties. When the property sold is attached to the land, the original contract must be recorded in the office of the prothonotary of the county where the property is delivered. Both the seller and the DIGEST OF LAWS OF VARIOUS STATES 163 buyer must sign the contract. Seller must also make an affidavit verifying the terms and provisions of the contract. The contract must be recorded before the chattels are at- tached to the land. A landlord has a lien, under the law of this state, which is superior to a conditional sale. This lien may be avoided only by having the landlord waive his right at the time the property is delivered on the leased premises. Exemption.—Personal property to the value of $300 may be claimed exempt. Rights and remedies of seller and buyer.——An attorney's fee may be collected. When property attached to the land is retaken, the seller must give f:ve days’ written notice to the buyer. The buyer then has fifteen days in which to redeem the property by paying the balance due, and, if the buyer so requests, the property must be sold within forty days and an accounting made of the proceeds. Penalty——The state law does not expressly refer to con- ditional sale. To dispose of property that is subject to a lease or bailment is deemed larceny under the state law. Lease or bailment contract.—It is the custom of this state to use a lease or bailment contract to secure sales made on the installment plan. The lease used almost always pro- vides that the party who intends to sell remains the owner of the property, and the party who intends to buy pays rental therefor at the rate of a certain amount for each month. The lease will also provide that it is to run for a definite length of time, and, at the expiration of that time, the property is to be returned to the original owner or lessor. After it has been so returned, the lessee or intended buyer shall have the right to buy the property by paying a nominal sum, which is usually fixed at $1. Under the state law, a contract of this kind is held to protect the lessor or seller against other creditors of the buyer, with the exception of the landlord having a lien for rent. A lease or bailment contract accomplishes the same purpose as a conditional sale and affords protection against third parties, which cannot be obtained under the ordinary form of conditional sale, as the courts have repeatedly held that retaining title to prop- erty by the seller will not be enforced against third parties when the buyer is permitted to remain in possession of the property. 164 INSTALLMENT COLLECTIONS Chattel mortgage——Except in very few cases, the chattel mortgage has no force or effect under the law of this state and it is very seldom used as security. Exemption.—See comment above. RHODE ISLAND Conditional Sale——Filing or recording.—lIt is not neces- sary to file or record a conditional sale under the law of this state, as it is valid and protects the seller against third parties without the necessity of filing or recording. A land- lord does not have a lien. _ Exemption.—Personal property to the value of $300 may be claimed exempt. Rights and remedies of seller and buyer——Attorney’s fees may be collected. There are very few court decisions on the rights of the parties to a conditional sale in this state. The terms of the contract would perhaps be followed to a considerable extent. Penalty.—No law is found which fixes the penalty. Chattel mortgage—Filing or recording—The original mortgage must be recorded in the office of the town or city clerk or recorder of deeds of the town or city in which the mortgagor resides. It is necessary that the mortgage be acknowledged by the mortgagor and it must be recorded within five days from the day that it is signed. The fee for recording is 15c. for each 100 words. A landlord does not have a lien. Exemption—See comment above for this state. Rights and remedies of parties——Attorney’s fees may be collected. Mortgages may be foreclosed as explained in the headnotes hereto under the heading of foreclosure. SOUTH CAROLINA Conditional sale—Filing or recording—The original contract must be recorded in the office of the county clerk of courts or the register of deeds, depending upon which county the ‘contract is to be recorded in. It is to be recorded in the county in which the buyer resides within ten days from its date. The buyer must acknowledge the signing of the DIGEST OF LAWS OF VARIOUS STATES 165 contract, or his signature may be proved by a witness who signs at the same time. Fee for filing varies in different counties, being 50c. or more, according to the number of words contained in the contract. The landlord has a lien in this state, but he cannot take possession of property sub- ject to a conditional sale, unless he pays the balance that is due to the seller. Exemption.—Personal property to the value of $500 and a homestead to the value of $1,000 may be claimed exempt. Rights and remedies of seller and buyer.—Attorney’s fees may be collected. Conditional sales are regarded very much the same as a chattel mortgage and the parties would have about the same remedies. The terms of the contract would control to a large extent. Penalty.—If the value of the property is less than $20, a fine of not over $500 may be imposed and also imprison- ment of not over thirty days. If the value of the property is over $20 the term of imprisonment may be fixed at not to exceed two years. Chattel mortgage.—Filing or recording—The original mortgage must be recorded in the office of the county clerk or register of deeds within ten days of the date on which the mortgage is delivered. The mortgage must be signed by the mortgagor and a subscribing witness, who may prove the signature of the mortgagor so that the mortgage can be admitted to record. Fee for recording is 50c. or more, depending upon the county and the number of words con- tained in the mortgage. If the mortgage is under $100, it may be filed instead of recorded, and at a lesser fee. There is also a law in this state which requires a mortgage to de- scribe the property in writing or typewriting and not printing. A landlord has a lien, but it is not superior to the rights of a mortgagee whose mortgage has been duly recorded. Exemption—See comment above for this state. Rights and remedies of parties——An attorney's fee may be collected. Penalty.—If the value of the property is less than $20, a fine of not over $500 may be imposed and also imprisonment of not over thirty days. If the value of the property is over $20, the term of imprisonment may be fixed at not to exceed two years. 166 INSTALLMENT COLLECTIONS SOUTH DAKOTA Conditional sale.—Filing and recording—The Uniform Conditional Sales Act is the law in this state. The original contract or copy must be filed within ten days in the office of the county register of deeds of the county in which the property is delivered. The buyer must sign the contract, but it is not necessary that it be acknowledged or signed by wit- nesses. ‘The contract is valid for a period of three years, and then may be renewed. The fee for filing is 10c. A landlord does not have a lien. Exemption.—Personal property of about $1,000 in value and a homestead to the value of $5,000 may be claimed exempt. Rights and remedies of seller and buyer.—An attorney's fee may not be collected in this state. For rights and remedies of parties under the Uniform Conditional Sales Act, which is a law of this state, see discussion in headnotes here- to under the heading of Uniform Conditional Sales Act. Penalty——For wrongful disposal of property subject to a conditional sale, there is a fine of not over $500 or imprison- ment for not more than one year. Chattel mortgage.—Filing or recording—The original contract must be filed in the office of the county register of deeds of the county in which the property is delivered. Two witnesses must sign the mortgage at the time that it was signed by the mortgagor. A copy of the mortgage must be delivered to the mortgagor, and the instrument placed on record must show that this has been done. A mortgage when properly filed is valid for a period of three years, and may then be renewed. The fee for filing is 10c. A land- lord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties—An attorney’s fee may not be collected. The methods for foreclosing a mortgage. are provided to some extent by the state law. For general rules explaining how a mortgage may be foreclosed by public sale, see the headnotes under the subject of foreclosure. Penalty—The penalty for the wrongful disposal of prop- erty subject to a chattel mortgage is imprisonment for not over one year in the county jail or not over three years in the state prison, and a fine of not over $500, DIGEST OF LAWS OF VARIOUS STATES 167 TENNESSEE Conditional sale——Filing or recording.—Conditional sale is valid under the law of this state, without the necessity of filing or recording. A landlord does not have a lien. Exemption—A homestead to the value of $1,000 may be claimed exempt. Also certain specified articles of personal property, such as household goods. Rights and remedies of seller and buyer.—If property is retaken in this state, it must be advertised and resold within ten days. In certain cases the buyer can waive this right to have the property resold. If the property is sold and the proceeds of the sale are more than the balance due on the debt, the surplus must be paid over to the buyer. If the seller fails to resell the property, the buyer may recover the payments that he has made. Penalty—For wrongful disposal of property there is a fine not to exceed $50 and imprisonment for not over six months. Chattel mortgage—Filing or recording—The original mortgage must be recorded in the office of the county register of the county in which the mortgagor resides. The mortgagor must acknowledge his signature to the mortgage, or, if two witnesses sign, the mortgage may be proved for recording by the affidavit of the witnesses. The fee for recording is 10c. for each 100 words. A landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties——Mortgages may be fore- closed as explained in the headnotes hereto under the heading of foreclosure. Penalty.—The penalty for disposing of property with intent to defraud is a fine of not over $50 or imprisonment for not over six months, or both. TEXAS Conditional sale-——Filing or recording.—The original con- tract must be filed in the office of the county clerk of the county in which the property is delivered and also in the office of the county clerk of the county in which the buyer resides, if it is a different county. It is not necessary that the contract be acknowledged or signed by witnesses. The fee for filing is 25c. A landlord has a lien in this state, but 168 INSTALLMENT COLLECTIONS this lien is not superior to a conditional sale which is promptly filed for record. There is also a special law in this state relating to a conditional sale of property which is to be at- tached to the land. so as to become a fixture. In such cases, the contract must contain a description of the land and also a description of the machinery that is to be attached. On the back of the contract there must be indorsed a statement that it is a lien on machinery situated on land. This contract may be filed in the office of the county clerk of the county in which the real estate is situated. The fee for filing is 25c. Exemption.—A homestead to the value of $5,000 may be claimed exempt, as well as certain articles of personal prop- erty, such as household furniture and wearing apparel. Rights and remedies of seller and buyer—Attorney’s fees may be collected in this state. Quite a number of cases have keld that an election to sue for the contract price is an aban- donment of title, and the seller may not thereafter reclaim the property. The rights of seller and buyer depend to a considerable extent upon the terms of the contract. Other cases hold that a conditional sale may be declared a lien, and an action to foreclose may be maintained and the seller may also recover a deficiency judgment. No doubt a con- tract would be foreclosed by public sale if the contract so provided. Penalty.—To dispose of property subject to a conditional sale with fraudulent intent is punishable by imprisonment of not less than two years nor more than five years. Chattel mortgage.—Filing or recording.—A chattel mort- gage is to be signed and filed for record in exactly the same manner as just outlined for conditional sales. The state law provides that a conditional sale shall be regarded as a chattel mortgage, and the law applicable to chattel mortgages also applies to conditional sales. Exemption.—See comment above for this state. Rights and remedies of parties.—Attorney’s fees may be collected. A mortgage may be foreclosed by public sale as provided in the mortgage or as provided by judicial fore- closure. For further explanation, see headnotes hereto under the subject of foreclosure. Penalty—To dispose of property with intent to defraud may be punished by imprisonment of not less than two years nor more than five years. DIGEST OF LAWS OF VARIOUS STATES 169 UTAH Conditional sale—Filing or recording.—It is not neces- sary that a conditional sale be filed or recorded under the law of this state. It is valid against all third parties with- out this being necessary. A landlord does not have a lien. Exemption.—Personal property to the value of $1,000 and a homestead to the value of $2,000 or more, depending upon the number of minor children, may be claimed exempt under the law of this state. Rights and remedies of seller and buyer.—Attorney’s fees may be collected. To sue for the total price is regarded as an election which transfers the title of the property to the buyer. If property is retaken, payments made by the buyer are in most instances regarded as forfeited, but if the seller takes additional security for the price, this is not a waiver of title. Penaliy—The penalty for disposing of property with fraudulent intent is imprisonment for not over six months, and a fine not to exceed three times the value of the prop- erty. Chattel mortgage.—Filing or recording.—The original chattel mortgage or a true copy must be filed in the office of the county recorder of the county where the mortgagor resides. Both the mortgagor and mortgagee must sign an afidavit that the mortgage was made in good faith. It is also necessary that one or more witnesses sign at the time the mortgage is made. When filed, the mortgage remains valid for a period of two years, and may then be renewed. A landlord does not have a lien under the law of this state. Exemption.—See comment above for this state. Rights and remedies of parties.—An attorney's fee may be collected. The state law provides the manner in which a mortgage may be foreclosed. For explanation of the gen- eral rules relating to foreclosure of mortgages, see head- notes hereto under the subject of foreclosure. Penalty.—The penalty for disposing of property with fraudulent intent, is imprisonment for not over six months, and a fine not to exceed three times the value of the prop- erty. 170 INSTALLMENT COLLECTIONS VERMONT Conditional sale-——Filing or. recording.—The original con- tract must be recorded in the office of the county clerk of the town in which the buyer resides. The contract must be signed by the buyer, but it is not necessary that it be ac- knowledged or signed by witnesses. ‘The contract must be recorded within thirty days after the delivery of the prop- erty. The fee for recording amounts to about $1 for the first 500 words and 20c. for each additional 100 words. A landlord does not have a lien. Exemption.—A ‘homestead to the value of $500 may be claimed exempt. Also certain articles of personal property such as household furniture. Rights and remedies of seller and buyer.—lIf the seller takes possession of the property, the state law requires that it must be sold at public auction. The seller must give ten days’ notice before. the sale takes place and give a written notice to the buyer. If the buyer does not redeem by paying the amount due, the property must be sold, and if there is any surplus after the costs and expenses and the debt due the seller are paid, such surplus must be paid over to the buyer. To obtain a judgment does not waive the seller’s title. Penalty—The penalty for disposing of property with fraudulent intent is a fine of not over $200 and imprison- ment for not more than one year. Chattel mortgage.—Filing or recording.—The original contract must be recorded in the office of the county clerk of the town in which the mortgagor resides. The mortgagor must sign the mortgage, and both the mortgagor and mort- gagee must make an affidavit that the mortgage was made in good faith. The fee for recording amounts to about $1 for the first 500 words and 20c. for each additional 100 words. A landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties——Chattel mortgage may be foreclosed in substantially the same manner as thas just been explained in reference to a conditional sale. For further explanation of foreclosure, see discussion in the headnotes hereto. Penalty—For disposing of property with intent to defraud there is a fine of not over $200 and imprisonment for not more than one year. DIGEST OF LAWS OF VARIOUS STATES 171 VIRGINIA Conditional sale-—Filing or recording.—The original con- tract or a memorandum must be filed in the office of the county or corporation clerk at the place where the property is delivered. Contract must be filed within five days after de- livery of the property to the buyer. The buyer must sign the contract but it is not necessary that it be acknowledged or signed by witnesses. The contract must also show when the payments are to be made and the amount due, and also the date the contract is made. The fee for filing is 25c. A landlord has a lien, but this lien would not be superior to a conditional sale which is placed on record before delivery of the property to the buyer. Exemption.—A homestead to the value of $2,000 may be claimed exempt. Rights and remedies of seller and buyer.—Attorney’s fees may be collected. The state law provides the way in which the seller may sue without losing title to the property. This law is substantially the same as action of judicial foreclosure as explained in the headnotes hereto. A justice court is also given jurisdiction in foreclosure cases involving small amounts. Penalty.—For disposing of property with wrongful intent the penalty is the same as punishment for larceny under the state law. Chattel mortgage.—Filing or recording—The original chattel mortgage must be recorded in the office of the county clerk or the corporation clerk within ten days. It must be recorded in the county or corporation where the property is delivered. The mortgage must be signed by the mortgagor and must be acknowledged by him, or his signature may be proved by one of two witnesses who also sign at the time the mortgage is made. The fee for recording is 75c. A landlord has a lien, but if a chattel mortgage is recorded before the property is delivered, it will be superior to the lien. Exemption.—See comment above for this state. Rights and remedies of parties ——Attorney’s fees may be collected. Chattel mortgage may be foreclosed in about the same manner as just explained with reference to a con- ditional sale. 172 INSTALLMENT COLLECTIONS Penalty.—For disposing of the property with wrongful in- tent the penalty is the same as punishment for larceny under the state law. WASHINGTON Conditional sale——Filing or recording.—A copy of the contract or a memorandum thereof must be filed in the office of the county auditor of the county in which the buyer resides. Contract must be filed within ten days after the property is delivered. The contract must be signed by the buyer, but it is not necessary that it be acknowledged or signed by witnesses. The fee for filing is 50c. A landlord has a lien, but this lien is not superior to a conditional sale which is promptly filed for record. Exemption.—A homestead to the value of $2,000 may be claimed exempt. Rights and remedies of seller and buyer—Attorney’s fees may be collected. To sue for the contract price is regarded as an abandonment of title and the seller may not thereafter reclaim the property. To indorse conditional sale notes has been held a waiver of the title. If the seller retakes the property, the buyer is no longer responsible for the price, and the payments that he has made are usually regarded as for- feited. If the contract provides for foreclosure by public sale, the seller may enforce it in that way. Penalty.—For disposing of conditional sale property with wrongful intent, there is a fine of not more than twice the value of the property and imprisonment for not more than six months. Chattel mortgage.——Filing or recording.—The original mortgage must be filed within ten days in the office of the county auditor of the county in which the property is deliv- ered. The mortgagor must sign the mortgage and also ac- knowledge his signature thereto. He must also make an afidavit that the mortgage was made in good faith. The mortgage is valid for two years and may then be renewed. The time is computed from the time that the mortgage becomes due. Fee for filing is 10c. A landlord has a lien, but this lien is not superior to a chattel mortgage which is promptly filed for record. Exemption.—See comment above for this state. DIGEST OF LAWS OF VARIOUS STATES 173 Rights and remedies of parties——Attorney’s fees may be collected. The mortgagee may proceed in this state by judicial foreclosure or by seizing and selling the property at public sale. The state law regulates the disposal of prop- erty which is subject to a chattel mortgage, but the state law is substantially the same as the method of foreclosing out- lined in the headnotes hereto under the discussion of fore- closure. Penalty.—For disposing of mortgaged property with fraudulent intent, there is a fine of not over twice the value of the property and imprisonment for not more than six months. WEST VIRGINIA Conditional sale.—Filing or recording—The Uniform Conditional Sales Act is the law in this state. The original contract or a copy must be recorded within ten days in the office of the clerk of the county court of the county in which the property is delivered. The buyer must sign the contract, but it is not necessary that it be acknowledged or signed by witnesses. When filed, the contract is valid for a period of three years and may then be renewed. ‘The fee for record- ing depends upon the number of words contained in the con- tract and usually amounts to about $1.25. A landlord has a lien, but this lien is not superior to a conditional sale which is recorded before the property is delivered to the buyer. Exemption.—Personal property to the value of $200 and a homestead to the value of $1,000 may be claimed exempt. Rights and remedies of seller and buyer.—Attorney’s fees may not be collected in this state. The rights and remedies of the parties are controlled by provisions of the Uniform Conditional Sales Act. See explanations in the theadnotes hereto under the subject of Uniform Conditional Sales Act. Penalty—For disposing of property with fraudulent in- tent there is a fine of not over $500 or imprisonment for not more than one year. Chattel mortgage.—Filing or recording.—The original mortgage must be recorded in the office of the clerk of the county court of the county in which the property is delivered. The mortgage must be signed by the mortgagor and also acknowledged by him, but if two witnesses sign, one of them 174 INSTALLMENT COLLECTIONS may prove the signature of the mortgagor, and his ac- knowledgment may then be dispensed with. The fee for recording is about $1.25. A landlord has a lien, but this lien would not be superior to a mortgage which is recorded before delivery of the property. If a mortgage is assigned to a third party, it must be acknowledged and recorded, but this is not necessary if the assignment is made only as col- lateral for a loan. Exemption.—See comment above for this state. Rights and remedies of parties—An attorney’s fee may not be collected. For rights and remedies of parties to a chattel mortgage, see discussion in the headnotes hereto under foreclosure. Penalty.—For disposing of the property with fraudulent in- tent, there is a fine of not over $500 and imprisonment of not over six months. WISCONSIN Conditional sale—Filing or recording—The Uniform Conditional Sales Act is the law for this state. The original contract or a true copy must be filed within ten days in the office of the clerk of the town, village, or city in which the property is delivered. The buyer must sign the contract, but it is not necessary that it be acknowledged or signed by witnesses. The fee for filing is 10c. A landlord does not have a lien. Exemption.—Personal property to the value of $200 and a homestead to the value of $5,000 may be claimed exempt. Rights and remedies of seller and buyer——An attorney’s fee may be collected. The rights and remedies of the parties are controlled by the provisions of the Uniform Conditional Sales Act. See explanation in headnotes hereto. At its last session the Wisconsin Legislature made a change in the remedies of the seller and buyer, which provides that the goods may be retaken without complying with certain sec- tions of the Uniform Conditional Sales Act. Penalty——The penalty for disposing of the property with wrongful intent is a fine of not over $500 or imprisonment for not more than one year. Chattel mortgage.—Filing or recording.—The original mortgage or a true copy must be filed in the office of the DIGEST OF LAWS OF VARIOUS STATES 175 clerk of the town, village or city in which the mortgagor resides. The mortgage must be signed by the mortgagor, but it is not necessary that it be acknowledged or signed by witnesses. When filed, the mortgage is valid for two years, and may then be renewed. The fee for filing is 12c. A landlord does not have a lien. There is also a special law in this state which refers to a mortgage on a stock of merchandise in the possession of a retail merchant, and such mortgage is declared valid if the provisions of the law are fully complied with. Exemption.—See comment above for this state. Rights and remedies of parties——Attorney’s fees may be COllected. The state law provides the manner in which a mortgage may be foreclosed. ‘The procedure under the state law is similar to the method outlined in the headnotes hereto in the discussion of foreclosure. Penalty—The penalty for disposing of mortgaged prop-: erty with fraudulent intent is a fine of not over $100 or imprisonment for not more than six months. WYOMING Conditional sale-—Filing or recording—The original con- tract or a true copy must be filed in the office of the county clerk of the county in which the property is delivered. The seller must make an affidavit describing the property, stating that he retains the title thereto. This affidavit must appear on the contract when it is filed. Fee for filing is 25c. At the expiration of one year the contract must be renewed. The landlord does not have a lien. Exemption.—Personal property to the value of $500 and a homestead to the value of $2,500 may be claimed exempt. Rights and remedies of seller and buyer.—Attorney’s fees may be collected. There are not many cases which decide the rights of the parties to a conditional sale in this state. One case held that a contract providing for foreclosure by public sale was not inconsistent with the law relating to con- ditional sale. Penalty—No law is found which refers to conditional sale. See comment under chattel mortgage for this state. Chattel mortgage.—Filing or recording.—The original contract must be filed in the office of the county clerk of the 176 INSTALLMENT COLLECTIONS county in which the property is delivered. If a mortgage is signed in duplicate in the presence of two witnesses and the mortgage shows that a copy of it has been delivered to the mortgagor, it may be admitted to record without other formalities. It is also necessary that the mortgage state that it is given as security. A mortgage on a stock of merchan- dise of a retail merchant is also valid under the law of this state. The fee for filing is 25c. A landlord does not have a lien. Exemption.—See comment above for this state. Rights and remedies of parties—Attorney’s fees may be collected. The state law provides the manner in which a mortgage may be foreclosed. For general explanation wf foreclosure, see discussion in the headnotes hereto under the subject of foreclosure. Penalty——For disposing of mortgaged property with wrongful intent, there is a fine of not more than $500 and imprisonment for not more than ten years. CHAPTER XVII FOLLOW-UP SYSTEMS ANALYZED Objections to many systems.—It is true that every ac- count must be handled on its merit. It is also true that one must give the impression that he knows all about this account, as though it were one of the few delinquent. Nevertheless, where the collection manager supervises collecting several thousand accounts, some system is required. Let us pass quickly over some of the common systems of follow-up, and point out the objections to them. 1. Follow-up date on the correspondence file-—This could be considered only for a small business. It requires too much time to go over all the files to bring up the folder on the date desired. They are too bulky to look over, to take over to the records, and besides, the files are not necessary in writing the preliminary collection letters, if a system can be devised so that the folders of accounts with incoming correspondence can be brought up. 2. Extra carbon filed ahead for follow-up purposes.—This offers the great objection that the majority of the accounts will be paid by the follow-up date; so there is all the waste in looking up carbons on paid accounts, whereas there is a sys- tem that will bring up only the unpaid accounts on the follow- up date. 3. Ledger card attached to outside of folder, with a place for follow-up.—The writer has seen this tried, and it is not adaptable to a large business. In the first place, it is neces- sary to inspect all cards for the follow-up, which is a waste of time. In the second place, by having the card attached to the folder, the unit is in too constant demand; for the card must go to the files when there is filing, and the file must go to the posting table when there is posting. 4. A personal tickler file on small cards—The objection is the waste of time in the extra card, when the ledger card may act both for follow-up and for a record, and appear for at- tention only when in arrears. 5. Master sheet or control book.—Here it is necessary to copy off all the names and numbers of both paid and unpaid, 177 178 INSTALLMENT COLLECTIONS and then compare the paid as well as the unpaid with the records. All this copying off may be avoided, as well as any attention whatever to paid accounts. 6. Personal inspection of all ledger cards——The objection is the amount of work that might be avoided, but the system is well adapted to smaller businesses, or to a geographical covering of a city by collections. ture Co., of New York, has found it peculiarly adapted to its The Ludwig Bauman Furni- business. Immediately below is a typical ledger card. _ Where a duplicate card is required for collection purposes as in the system explained below, the collection card is usually of a different colour. B/R NUMBER MATURITY................. DATE MAKER PAYEE DUE DATE | PRINCIPAL TO PRINCIPAL | INT. || DATE BY | RECPT CASH NUMBER BE PAID PAID PAID 7. Duplicate system of cards with collection cards filed by maturities ——Perhaps the best all-round system, for installment collections especially, is that evolved by the Continental Guar- anty Corporation and widely adopted, which is described in detail. Two groups of cards made.—The collection ledger cards are first divided into two separate files, (1) cards requiring a regular follow-up, and (2) cards requiring a special follow-up. The regular follow-up files, or tubs of cards, are made up of cards that are entirely up to date, or less than thirty days past due. The special tubs of delinquent cards are made up of cards more than thirty days past due. have nearly all the cards in it. The regular file will 4 FOLLOW-UP SYSTEMS ANALYZED 179 The arrangement of the cards in each of the two card files is different. The regular file is arranged by maturities; the special, strictly numerically, without reference to maturities. The regular file-—These cards, as already stated, are all arranged by maturity dates. All notes maturing on the first day of the month are filed back of a tab numbered 1. Those maturing on the second, back of a tab numbered 2, etc. The bulk of the cards are in the regular follow-up, of course, for here are all the cards paid to date, or less than thirty days delinquent. Within each maturity date there are two groups. ‘The first includes those paid to date, and the second those from one to thirty days delinquent. It is convenient to have a tab within each maturity date; the first labeled ‘‘paid,” for those paid to date, and the second labeled “unpaid,” for those from one to thirty days past due. Of course the cards under ‘“‘paid” and “unpaid” are each arranged numerically. How the regular file works.—For example: Suppose we are to send out a maturity notice ten days ahead of the ma- turity date, and then two form letters, one ten days after maturity, and the second twenty days after maturity. Im- agine today is the twentieth of the month. Maturity notices are to go out ten days in advance for the last day of the month, which is ten days ahead. The clerk looks back of the tab with the “30” on it, those maturing on the thirtieth. She finds them divided into “Paid” and ‘‘Unpaid,” comparatively few being ‘‘Paid,” for few pay in advance. She takes out all the cards back of “30” “Unpaid,” and sends out a notice on every one of them. There is no waste motion in looking over cards. Remember now, we are imagining that today is the twen- tieth of the month. We should send out the ten-day letter for unpaid installments maturing ten days before, or on the tenth, and the twenty-day letter for those maturing on the first, and still unpaid. For the ten-day letter the clerk picks up the bunch of cards back of tab “10” “Unpaid.” By this date the majority of the cards will have been dropped in their numerical place, back of ‘‘Paid,” by the posting girl. For the twenty-day letter she picks up the ‘Unpaid’ bunch back of maturity tab “1.” After the last follow-up within the thirty-day period, the 180 INSTALLMENT COLLECTIONS card is marked ahead for a follow-up, and put in the apecs file, which we will now describe. The special or delinquent file-—Cards requiring the special follow-up find their way to this file for one of two reasons: either they are more than thirty days past due, and require a special or individual follow-up effort; or correspondence has come in, making a special follow-up necessary. The old cop- per-plate set of letters cannot be continued when an answer comes in, and special correspondence is started. The arrangement in this file is strictly numerical, and with- out reference to the maturity dates at all. Cards automat- ically are put back in the regular file by the posting clerks when payment comes in, and the card is brought up to within thirty days of up to date. On correspondence.—When a letter comes in, the card is attached to the letter with the file, and after the corre- spondent has answered the letter, he writes on the back of the card the date of this letter, his initials, and the number of the form used, if any; and the date for the next follow-up. For example: 7/29 B.W.G. 8/5 This card then goes to the special file. To bring up the cards in the special file, daily inspection of the back of the cards is required. This is no prohibitive task, as the special file will be comparatively small. Geographical divisions——For a corporation doing a na- tional business of a few score thousand installment accounts, a geographical division of the collection cards, and a corre- sponding geographical division of accounting cards, and of cor- respondence, is advisable. Under this plan the arrangement of the cards would be exactly as outlined above for each geographical division. The cards should still be kept by maturity dates, and should still be subdivided in each maturity into two sections—‘‘Paid” and “Unpaid.” Also, when in the regular file any become more than thirty days delinquent, they should still be transferred to the special file as outlined above. By this very successful plan, the cards are segregated in different files by territories. The cards will run in numerical order, but not consecutively, as they may be broken up into possibly five or six territories. With the cards segregated FOLLOW-UP SYSTEMS ANALYZED 181 this way by territories, and by maturities, the length of time between follow-ups will be governed by the mailing distance of each territory. A table of mailing time is given in this book in Chapter XI. These cards may be kept within the territory, right at the elbow of the correspondents. Stencils——In a system of this kind the stencils would be arranged just like the cards: first by date, then by territory, numerically arranged. In addition, the stencil should have a numeral in the right-hand corner which will indicate the month in which the last payment is due. This will make it possible to pull the stencil from the file when the last pay- ment has matured. Cuapter XVIII GETTING YOUR MEN STARTED RIGHT Case of too much pep.—My first collection manager was of the typical, old-fashioned kind. He was so full of energy that if I didn’t watch out I would become all taut, trying to defend myself and my ways. The only thing to do was to impersonate a sandy beach, and let the waves wash over me and over me. I soon discovered that the debtors were doing the same thing, under his methods. There are two classes of people who, in business, are not treated with courtesy and respect: applicants for a position and debtors. Perhaps, not having the business background, I knew no better than to treat these two classes as quite hu- man, but what success I have had in business I trace to my treatment, first of applicants, and second of delinquents. The applicant is a potential employee. There is no time to bind him to you, and fire his enthusiasm, like the time when he is warming the anxious seat. Letter to unsuccessful applicants.—Besides, there is no time a man needs a good word more than when he is looking for a position. May I quote a letter I sent to the unsuccess- ful applicant! The automatic typewriter soon turns them out, but the good feeling towards the corporation, and the reac- tion on the recipient of the letter may be seen from one of the more interesting replies to the following form: We were pleased to have the opportunity of reading over your answer to our advertisement of ............eeeeeeee iin ‘the? s ovewadawarerseeasusas The place, we are sorry to say, has been filled, but we are writing to you definitely to that effect, so that you can make your plans accordingly. Really, there is nothing more discouraging than to make an application, and receive no answer; for I know, personally, how that is. It is calling out and hearing no echo. / You have only been out the expense of a postage stamp in making the applica- tion, so there is not much loss, is there? Your letter of application was good, and we have no doubt but that you are capable of holding down a good position, and will make yourself increasingly valuable to some concern. With best wishes, I am 182 GETTING YOUR MEN STARTED RIGHT 183 A REPLY Dear Sir: Your letter of the 31st ult. did more good than getting the position. You must have had a telepathic flash, and while your missive calls for no reply, I am taking the liberty of addressing you, just to assure you that the sentiments expressed therein did not go amiss. I only want to encourage you in the good practice you have in writing little notes of cheer where the usual practice is to let the applicants “ride.” If we or our friends ever buy an automobile on time, we know where we can deal with safety. I hope your collection correspondent proves 100 per cent., and that the cause for writing this lengthy diatribe, will plead my pardon. Most sincerely, The successful applicant—If you are the man in charge, take hold of the young employee as he enters your service. His hopes and future are now unstable. Fire his enthusiasm at the outset, outline the business broadly, and start him to » taking notes, both mental and on paper. Tell him plainly, at the very beginning, when his work is corrected, that if he does not agree with the corrections he should say so, and you will persuade him, if you are right, and will be glad to have him persuade you, if he is right. As he learns the business, ask him to make suggestions. A few days with the policy book, the form-letter stand, and with your best collection man, will save the concern the costly errors incident to piling on the work before the man is really ready. Tell the man plainly that you do not want him to take your criticism and suggestions on his letters or work simply because you are the boss; that where you make criticism or sugges- tions, you want the man to carry them out because he sees that they are right. Any other way of handling intelligent labour is un-American and unproductive. The importance of collections demands good men and good handling. Personal contact.—The finest way in the world to keep the correspondence personal is to get out, at least once a month, and feel the pulse of the trade. No collection man- ager does well to keep his men in the office continually, for it damages both the men and the business. Harotp C. GREENE. The chapters of this book have been written on installment collections without specializing in any particular line. Some of these chapters have been written by successful credit and collection managers in representative installment businesses, such as fur- niture, musical instruments, automobiles and books. We thought it worth-while to have a special chap- ter on furniture and musical instruments, on account of the preponderence of installment sales in these lines. This chapter was written by Mr. H. C. Greene. Mr. Greene, Harvard 1914, is collection manager of installment collections at the Bloomingdale De- partment Store. They collect on pianos, victrolas and furniture, handling a great many thousands of accounts, small for the most part, and covering along period. He has made for himself an enviable rec- ord in beating the figures of his predecessors, al- though this is anything but an easy collection period. 184 CHAPTER XIX FURNITURE AND MUSICAL INSTRUMENTS Fixing terms.—The modern department store contains un- der one roof almost every conceivable kind of merchandise, from a mouse-trap to a, grand piano. After finding your house or apartment, you can furnish it completely, as well as feed and clothe your family, by shopping in a single store. If it is impossible or inconvenient to pay cash every day, you find that several different kinds of terms prevail. Ordinary purchases, of course, can be charged on your monthly bill—after you have satisfied the credit office. You never know just what credit limit has been set on your account, unless you charge in one month more than the store had an- ticipated. Even then, the limit may be temporarily raised to avoid offending you, if your habits of payment are known to be good. It is not within the scope of this chapter to suggest the methods by which the estimate of your responsibility is arrived at. It may be said, however, that few persons would expect to have a piano, or a large purchase of furniture, charged on the monthly bill. Even a victrola, in any of the more expensive models, is generally sold on special terms. Credit a salable accommodation.—Terms are fixed in every trade by common usage, developed by competitive conditions. Every merchant would prefer to sell for cash, if that could be made the rule for all. But credit is a form of accom- modation that is salable like any merchandise, and it is gen- erally demanded. Within certain limits, it is accepted as a legitimate stimulus to trade. In retail selling of pianos and victrolas, the terms vary somewhat, but competition has brought about long and fairly uniform terms, wherever one may buy. It is natural that the terms will be long in the case of any article that is fairly ex- pensive, and is durable enough to give security to the seller. But it is obvious that the seller must carefully consider his security in case of default in payments, if he is to run so long a risk. Depreciation determines deposits.—Pianos must generally be paid for in from two to four years, and victrolas in from 185 186 INSTALLMENT COLLECTIONS one to two years. Furniture accounts and general merchandise installment accounts generally run from six to eighteen months, and sometimes longer. A deposit, generally ranging from $ per cent. to 10 per cent. of the purchase price is always re- quired in the case of pianos and victrolas. The deposit is gen- erally much larger in the case of furniture, often running as high as one-third of the purchase price. The fact that more time is given on pianos than on automobiles, for instance, is chiefly due to the element of depreciation, which is generally much slower in pianos. This also accounts for the relatively smaller deposit. Furniture is apt to get harder use, and the terms therefore bear a closer analogy to the terms on auto- mobiles. Even with hard use, a good piano should stand up for considerably more than four years, while a good motor might depreciate seriously in that time. Form of sale-—As noted above, it is customary in selling pianos or other costly merchandise, to retain title or an in- terest in the property as a precautionary measure. The usual forms are the chattel mortgage and the conditional sales contract. There is some difference of opinion about the rel- ative merits of the chattel mortgage and the conditional sales contract, where either may be used in the same State. One of the largest piano concerns in New York City uses one form, another uses the other. It is evident therefore that either form may be used successfully. Credits, and the moral risk—While the seller is apparently sure to get either his money or the return of the property, when sold on these terms, there is still a risk of loss. It is not good business to sell pianos, or anything else, with a large percentage of repossessions. And yet pianos are frequently sold to people of very limited responsibility, who would not ordinarily be considered safe risks on open account. Much of the success of an installment business, therefore, depends upon the ability of its credit man to judge the risk. Like every credit man, he must have the courage to take a chance—but not too long a chance. Knowing that he has security for the indebtedness to be created, he is always in- terested in the probable income of the purchaser, but he is even more concerned with the moral risk. The first question is generally less difficult, because the terms are such as almost any wage earner can meet—if he is a steady worker. But the character of the applicant for credit FURNITURE AND MUSICAL INSTRUMENTS 187 must be carefully considered. Even the security does not dis- pense with the need for common honesty. If a man is to pay even $10 or $15 a month for three or four years, he must have a certain stability of character. Character as a credit factor.—It would. be foolish to sell a piano to a man who is found to be a gambler, or one who is frequently out of work, even if he is able to pay a sub- stantial deposit at the time the account is opened. The piano would probably come back in a few months in bad condition, to be resold at a loss. Of course, every credit man must guess wrong sometimes, when he has to look so far ahead.” A good credit man must possess a certain instinct for sizing up character during his first meeting with the applicant. He may confirm his impressions by the usual investigations, but this should be chiefly ‘“‘a matter of form,” as customers are so often reassuringly told. One large New York concern has recently abandoned the practise of sending investigators out, except in rare cases. Collections.—Once the sale is made, the customer may have no further relations with the seller, except through the accounting department. There is an opportunity to build up good-will and to secure a favourable reputation, if the book- keeping is accurate, so that the customer feels entire confidence in the house he is dealing with. An installment account should be a source of satisfaction to both parties concerned, as long as payments are made regularly. But experience shows that in the course of a year, nearly half the installment buyers come in contact with the collection department. Differences between open and installment accounts.— There are two important differences between collecting open and installment accounts. One lies in the length of time. In the early stages of a delinquent account the procedure is much the same. During the first month or two, a customer having both a monthly account and an installment account with the same store will only receive pleasant reminders of the state of his account, in either case, if he neglects to pay on time. The practise of department stores varies considerably in this re- spect, but the use of form letters is most common. *I know of a case where a man of unquestionable reputation, after holding a responsible position for many years, illegally sold his piano when it was partly paid for, and was later imprisoned for forgery. 188 INSTALLMENT COLLECTIONS It is an open question whether the collection of all retail accounts is not made too perfunctory a matter. Statistics show that in retail collections, all over the country, it is only rarely that more than 50 per cent. of the outstanding bills are collected within thirty days.. A New York department store that attains an average of 65 per cent. is considered exceptional. Installment accounts are apt to run a little bet- ter than this, probably because the security is borne in mind by the more conscientious debtors. With either class of ac- count, it is necessary to change the tone of the collection letter, if payment is not forthcoming after a month or more. Then appears the other real difference between the two kinds of accounts. In the case of open accounts, the seller can always refuse further credit, but he has only one legal remedy—suit for the amount due. Where the seller is secure, he has also the right to repossess the property by replevin proceedings, if surrender is refused. This involves a loss to the purchaser of all he may have paid while in possession of the property. ‘These facts must be brought home to the installment buyer, if he wilfully refuses to go on with his payments. But more often it is simply a case of difficulty in catching up with a few pay- ments that have lapsed. Reselling the instrument.—A good collection man should be able to keep his customers “sold” without continually re- sorting to threats, until the case becomes hopeless. As the customer wanted a piano enough to agree on a certain price, it is fair to assume that he is still of the same mind. If not, he must be “resold.” The argument becomes stronger as the customer buys an increasing equity in the property. The prin- ciple of “resale,” is well elaborated in a recent book on collections.” Organization of the department.—The specific method of procedure to be used in any installment business varies, of course, with the requirements. Generally speaking, collec- tion by mail is the most effective as well as the most economical plan. But it is advisable to have one “outside” man, or more, depending on the size and nature of the business. This will greatly facilitate the work. 1Beebe, “Retail Credits and Collections.” ? Gardner, “New Collection Methods.” FURNITURE AND MUSICAL INSTRUMENTS 189 The form of office organization also varies. One man of sufficient experience should be able to handle three or four thousand accounts. With a large volume of business, two general methods are possible. One might be called the ‘‘ver- tical” type, where each man handles a certain number of ac- counts, taken alphabetically, numerically, or by territory. This has an advantage of flexibility, because the force can readily be increased to keep pace with a rapidly growing volume of business. The other way may be called the “horizontal” type. By this method the early stages of all delinquent accounts are handled by one person, chiefly by form letters. The accounts that remain uncollected after a certain time are then passed to another person, who dictates such letters as may seem called for in each case. Those remaining then go to a third person, who may be able to dispose of them, or to take the necessary action. This system is adapted to handling a large volume of business. It is only slightly less flexible than the other method, as any number of correspondents may be added at any stage of collection; and the length of the periods, too, may be ad- justed so as to divide the work evenly, where there is a small force. A combination of both methods may be used in the more difficult stages of collection, where the accounts are di- vided up “vertically,” though the general scheme - is “horizontal.” Legal department.—There is some advantage in having a so-called “Legal Department” handle the last phase of col- lection, using an attorney’s letter-head, if there is a qualified attorney to sanction it. Actual litigation, of course, demands the services of a good lawyer, either inside the office or out. CHAPTER XX HONESTY AND COLLECTIONS Personal experience confirms impression of basic honesty. —I am thoroughly sold on folk’s basic honesty, and have lent money, endorsed checks, etc. for absolute strangers. For it, I have been called a ‘Don Quixote in business,” but as I have never lost a cent, I see no reason for changing. When I taught school, upon finishing college, there never came a vacation but that I left a few hundred dollars in the hands of students, but I never lost a cent. When unknown customers have come to town and asked the accommodation of having a check cashed, the accounting department would say that it was not their policy to cash checks for strangers, but the cashier would often add: ‘The collection manager up- stairs will often endorse a check, and then we will cash it.” I have endorsed checks for all kinds of people, from Swed- ish farmers to theatrical managers, with never a cause for worry. Ihave even gone as co-signer on a Morris Plan bank note, when there was no other way out for a man to save his face, and I had never seen his face before. In assuming a contingent liability of this kind, the acid test is: does he think ‘business is business.’ If his fundamen- tal idea is: ‘‘business is business,”-I wouldn’t lend him money. I wouldn’t take his money. As Virgil says: “’Timeo et Danaos dona ferentes.” (I fear the Greeks even when bearing gifts.) And I would be more wary of a man working for a client, than of a.man working for himself. Examples of dishonest practises—Quite frequently an au- tomobile dealer would send in a note signed by someone in part payment for a car when no car had been delivered. Some- times the credit would be passed, and the note discounted. Once the firm of M E & M , Inc., of Chicago, came in with a note signed by the Motor Co., Inc., cov- ering two trucks. The note was discounted. They brought in a third note but the credit department ruled that they must secure some additional endorsement. They organized the Universal Co., Inc., whose endorsement appeared in 190 HONESTY AND COLLECTIONS 191 proper form. After they had received some $11,000 on the notes, the three concerns went into bankruptcy in rapid suc- cession, and among the officers of the three concerns appeared M 4 E and M , in varying order of precedence, and of course, as the three companies were incorporated, the individuals were free from any civil action. : At the very time they brought in the third note, endorsed by another combination of. themselves, incorporated, Mr. E suggested that the finance companies get together and effect a clearing house for credit information, a splendid idea, and one that was put into effect, but not in time to catch him. A crooked photographer’s trick.—An expert photographer went into the truck business in Arkansas, a so-called ‘‘Arkansas Yap.” He organized, in imagination, a Rural Motor — Co., and a truck-selling partnership, (also in imagination) composed of himself and the richest man in town. He sent in notes properly signed, and even photographs of the trucks. When the first installment fell due, the dealer was wired that an adjuster was being sent to collect. When the adjuster arrived he found that the company pur- chasing the trucks never existed, and that there was only one truck, of which the pictures had been taken in variousi posi- tions, and touched up before mailing; and that the rich man denied any connection with the partnership. Furthermore, the culprit had suddenly died, and it may have been a case of suicide. Let us hope it was, for if so, it puts him up on that same high level of repentance with Judas, who hanged himself when he realized what he had done. How many modern business men, think you, would have the grace to hang themselves, no matter who was defrauded or who suffered—‘“business is business.”’ Temptations of the collection man.—Among those who work for someone else, the class which I have designated as the most inclined to be “clever”? or crooked, is the collection manager class. He is constantly subjected to temptation. Someone will give his wife the finest coat in the house if he will put off the note one month. He is offered $1,000 if he will call off a criminal action. A firm of attorneys who want his employer’s business, and wish to impress on him their po- litical drag, arrange to get him off from a charge of speeding. But these temptations are nothing to those insidious bribes to use questionable means which will get him ahead in busi- 192 INSTALLMENT COLLECTIONS a or- repay the corporation for what they have done for im. In a partnership of foreigners, one partner had disappeared with a car he owed us on. I bribed his partner, with fifty cents, to get in my car, and point out the other partner’s house as we drove by. He crouched low in the car in passing, and showed only a finger which pointed at the house. ‘Look- et-um, look-et-um.”” Was the offer of a bribe justified? Is deception justified?—A postmaster in North Dakota owes on a car. Letters and wires do no good. Suppose we write to the Post Office Department at Washington, a good straight letter. ‘The post office “Black Book” makes a fail- ure to pay a debt a serious matter. The letter to the Post Office Department gets into the envelope to the postmaster, and brings back a hurried remittance. It surely was better to send the letter to the postmaster, than to stir up trouble for him in Washington, but is deception like this ever justified? The R Brothers of Montana, have owed for three years on their endorsement of two notes. They have every- thing in their wives’ names, and are execution proof. They find their credit restricted on account of such debts, and they want a “‘clean bill of health,” as they express it. They say they will settle 50-50 on the debts, as they have with other finance houses. A ’phone call or two shows that the other finance houses have accepted a fifty per cent. settlement rather than nothing at all. Say on one of the notes, conversion has taken place, and he is insured against conversion, but evi- dently he doesn’t know it. You accept a 50-50 settlement on the two notes, which covers all he owes—anyway you have in- surance on one. Was the holding back of the truth justified? Beating a thief with a lie-—In a case where the purchaser disappeared with the car, I put a detective, a prize find from one of the big international agencies, on the case. One morn- ing I had a ’phone call from him. He had located the thief, following him from Moline, Ill. to Chicago, and was telephon- ing from the factory where he worked, for directions. I told him to let the thief see the colour of a warrant, get him to sign a release on the car, so there could be no question, and get the car. He returned with a signed release, and a state- ment that the car was at his mother’s in a suburb. I told the detective to take a man from the office and hurry to the moth- er’s, while he was still frightened by the warrant. He might HONESTY AND COLLECTIONS 193 get over his fright, and try to hold the car until he could get away with it again. -Sure enough, when they arrived, the mother had a telegram, and would not give up the machine. ““Let me see your wire, Madam,” said the detective. It read, “Hold car.” A light broke on Detective Mac. ‘Oh, I see how that is, Madam. In the Morse code, an ‘H” is three dots, and an “S” is four dots. The operator failed to hit it the last time. What he meant to say is “‘Sold car,” for he sold it to me. See, here is his release, certified to by a Notary Public.” “Why, yes, that’s it, to be sure. You'll find the battery in the cellar,” she replied. Unfavourable reactions on collection men.—But it takes no imagination to visualize another scene where a banking institution has located a car, and it is a pile of junk, and the insurance company has tendered its check for $500 on the theft claim, for they have not found it. To get the check the bank- ing institution has to endorse under a statement that they have no knowledge where the car is. In the discussion, the one consideration is whether or not the insurance company might get something on them with a check so endorsed. When dealing with crooks, “fight fire with fire,” they say. But then the collection man is burned. All the drag is down- wards. The danger of principles slipping is a very real one. Getting a broader view.—For the collection man to keep from being a pest and a chronic nuisance, or what is worse, a little sinuous himself, he must get away occasionally from his surroundings, and back to his good influences. He must get his perspective again; a bigger and better view, to enable him to do his cramping work in a bigger way. The eminent Southern orator and New York business man Gray did it by going back to his mother. Church may shift the scenes; or the mountains; or even a few minutes with a poet like Bryant. GREEN RIVER * € # K That fairy music I never hear, Nor gaze on those waters so green and clear, And mark them winding away from sight, Darkened with shade or flashing with light, While o’er them the vine to its thicket clings, And the zephyr stoops to freshen his wings, But I wish that fate had left me free To wander these quiet haunts with thee, 194 INSTALLMENT COLLECTIONS Till the eating cares of earth should depart, And the peace of the scene pass into my heart; And I envy thy stream, as it glides along, Through its beautiful banks in a trance of a song. * * » Though forced to drudge for the dregs of men, And scrawl strange words with the barbarous pen, And mingle among the jostling crowd, Where the sons of strife are subtle and loud— I often come to this quiet place To breathe the airs that ruffle thy face, And gaze upon thee in silent dream, For in thy lonely and lovely stream An image of that calm life appears, That won my heart in my greener years. While it may not be the kind of reading in which most col- lection managers indulge (and few collection managers would like to be like most collection managers), what passage could give one a broader view through the vista of time than Addi- son’s ‘Reflections on Westminster Abbey.” When I look upon the tombs of the Great, every emotion of envy dies in me; when I read the epitaphs of the Beautiful, every inordinate desire goes out; when I meet the grief of parents upon a tombstone, my heart melts with com- passion; when I see the tombs of the parents themselves, I consider the vanity of grieving for those we must quickly follow. When I see kings lying by those who deposed them; when I consider the rival wits placed side by side, or the holy men who divided the world in their contests and disputes, I reflect with sorrow and astonishment on the little competitions, factions and debates of mankind. When I read the several dates on the tombs of some that died yesterday, and some 600 years ago, I consider that Great Day when we shall all of us be contemporaries and make our appearance together. APPENDIX A RESUME ON COLLECTIONS ARRANGED ALPHABETICALLY Adjusting—To feel the pulse of the trade, every corre- spondent should get out occasionally and do personal adjusting. A successful adjuster will approach the debtor with the same dignity and self-respect that he would maintain in any other phase of work. Although he should be properly sym- pathetic, at times he must be as relentless as the elements. After he has found out all the circumstances, he may lay out his course, or be able to make some suggestions such as the Morris Plan Bank. One cannot throw a collection man into the wastebasket like he can a collection letter. Amounts to close.—In sending out requests for final install- ment, it is well to include interest for amount to close. It only leads to delay and dispute to state the time up to which the figure holds good, so say “if paid immediately.” A ttitude.—A collection man must be careful not to get into the wrong attitude towards the debtor. A debtor is simply a person who owes money, and everyone owes money. Carbons.—No carbons need be made for automatic follow. up letters, but each correspondent may be provided each month with a set of letters, and can tell from the stamp on the back of the card which letter is used. All carbons should be initialed by the correspondent who wrote them. Cards.—lIf less than thirty days past due, and if no corre- spondence has come in which should interrupt automatic fol- low-up, cards should be filed by maturities, with division mark between the different classes of paper, if the system advocated in this book is used. Special follow-up consists of notes more than thirty days past due, and those on which correspondence has come in which would interrupt the automatic follow-up. See Chapter XVII. Change of Dates.—We do not recommend granting change of dates on notes, nor obligations of any nature. Frequently, dealers and purchasers will request that the dates on the notes 195 196 INSTALLMENT COLLECTIONS be changed to their pay day. To grant a seven days’ extension on each installment on a ten month note will be a total ex- tension of 70 days, which one could not consider; also the mechanism would be complicated, and a slip likely to be made that would prove most irritating. Checks.—It is poor business to request a check, because one has to pay exchange on checks, which amounts to consider- able each month. It is worse business to object to personal checks when sent in by a good customer. (Protested Checks are covered under that heading.) Collection suggestions —First of all, read the contract and purchaser’s statement carefully for information; then go through the folder for letters from him. If you can find some- thing on which to hinge your letter, some promise or some peculiarity of the man, you will collect where previous threats have failed. If a personal letter brings in no results, wire that you will sue, or repossess, and have check of collateral made; and finally, wire that adjuster will come at his expense. . Complaints——Answers to complaint letters should go out over the signature of the collection manager, and be complete, honest and conciliatory. Contract forms.—There are three forms of contracts: con- tract of conditional sale, mortgage, and the lease. The difference between them is as follows: in the contract of conditional sale, the vendor holds title until the payments are completed. In the mortgage, the mortgagee holds actual title, while the vendor holds legal title for equity in the col- lateral. In the lease, the vendor has the collateral and only leases it out to the lessee for the term of one year. These different forms are used in different States, on account of the varying laws. For instance, the lease is used because, if a contract of conditional sale were used, it would be necessary for the vendor to pay all that had been paid in before he could repossess. The mortgage is generally used in the States of Ohio, Mis- souri, Louisiana, Colorado, and in the City of Chicago. The lease is necessary for Pennsylvania only, and the con- tract of conditional sale is used in the other States. Correspondence.—lIf letters come to a correspondent late, for his own protection, it is suggested that he write in ink on A RESUME ON COLLECTIONS 197 the margin the time and date received—for example: 3: 10/8/29. Correspondence should be constantly separated from fol- low-up work and handled first. ‘There is no necessity for more than two piles, one being handled immediately, and the other to be handled later. If a correspondent has several piles, he will be distracted in looking from one to another. Where a letter concerns other departments, it is best to send it on by messenger, with carbon of your letter attached. The amount due should appear on every collection letter. Dictaforms.—Form letters are very useful because they re- quire less time than specially dictated letters. They may be approved by the officers, who take responsibility for them. Doing the routine work with form letters permits a corre- spondent to spend more time on difficult cases. See Chapter IX. Duplicate cards ——When a duplicate card is made up and put in either the maturity or special file, another card is to be made up and stamped ‘Duplicate,’ and put in the other file. If the original card comes back, it will be checked against the duplicate at once. Election of remedies.—In the majority of the States, es- pecially in the West and South, the repossession of the col- lateral constitutes a bar to securing a deficiency judgment. See laws in different States on election of remedies, Chapter XVI. Extensions ——Business is based on a quick turnover of money. Further, in many States, where one has an endorse- ment, to grant extensions to the purchaser relieves the en- dorser of his liability. Where the dealer is dealing direct with the purchaser, more extensions are required to maintain friendly feeling for further business. Filing cash letters.—In filing, letters from purchasers and dealers enclosing remittances and requiring no reply may be placed in a separate file, one envelope for each day. They are filed according to the dates received. Where files go to the stenographers or dictaphone opera- tors, they should file, on the top of the folder, the letter which they have answered and on top of that the carbon of the out- going letter. The original outgoing letter will be clipped on the outside. Filing memoranda.—It is the correct procedure to make 198 INSTALLMENT COLLECTIONS a memorandum of every telephone conversation of any kind, or any incident of any importance, for the files. First installment.—One should pay particular attention to the first installment of every note, and see that he starts using more vigorous measures on the first installment than on others. A good start is everything. The collateral is worth much more than the note at the outset. Follow-ups.—Follow-ups are divided into two classes which are handled quite differently. The automatic follow-up, under the system advocated in this form, goes out at specified times, without reference to the folders or the cards themselves, until the obligation is, say, thirty days past due. The special or delinquent follow-up is operated by the correspondents from the cards, and takes care of obligations more than thirty days past due, or less than thirty days past due, on which corre- spondence has come in. By this arrangement, each file con- tains tags for the thirty-one (31) days, back of which are the cards, with maturities, arranged by classes, with separating marks for the paid and unpaid. Each file contains a special follow-up. (Chapter XVII.) Each file has its own typist, who fills in the different letters, a few at a time, with the object of having a minimum number of cards out of place. Before letters are written, the cards may well be checked against the accounting cards so that no letters are written when money has just come in. As the cards are taken out for the typists by a card clerk, they are fastened together with a clip, and the card clerk - keeps a record of the number out, and the particular maturi- ties out. The typists and the checker each count the num- ber of cards in the clip to see that they have received the num- ber indicated by the card clerk. In this way, few cards are in the works, and they can easily be found. After the letters are typed, the checker reads the letters to see: 1. Whether letter should go out at all. 2. Addresses. 3. Numbers and maturities. 4. Correct amount. 5. Good typing. The cards are then returned to the card clerk, who counts them to see that she receives the same number back. A RESUME ON COLLECTIONS 199 On the back of the cards are stamped the date, follow-up going out indicated by the number of days after maturity, and the follow-up date. The number of days required for an answer from the ad- dressees in various States is indicated in the schedule in Chap- ter XI. When the last automatic follow-up letter goes out 29 days after maturity, if 30 days is the maximum period, a follow-up is put on the back by the card girls, and placed in the special file. If correspondence comes in which should interrupt the au- tomatic follow-up, the correspondent puts a follow-up date on the back of the card, and sends card to the special file. Form letters —Advantages of form letters are: (1) A greater volume can be handled; (2) Form letters have been censored, and approved by the officers, and no statement which would prejudice business from any angle other than collection appears in them, or which might be made by a collection corre- spondent without the broader knowledge of business. These letters are compiled from the best letters written in the collection department, with additions made by some of the officers of the corporation. The letter censor should not permit dictated letters to go out where a form letter or form paragraphs would cover the situation. Interest —When a valued customer makes his last payment, he probably is in urgent need of the note and contract, and even if there is an interest shortage, it is best to forward the note and contract immediately, and at the same time state how much is due for interest shortage, how it arose, and ask for remittance. This will prevent irritation. Interest, how to collect-—If a letter fails, draft with papers attached will often clear up the note, as a purchaser will pay $2.80 at his own bank to get the papers, rather than have the draft go back unhonoured. Legal advice.—The following legal advice was given some time ago by a prominent lawyer of New York City: “Two or three cases have come to my attention where the dealers have proceeded, as they claim, in accordance with advices from this corporation, and it happens that in such cases they have not strictly complied with the statutes of the State, and the vendees have recovered judgment against them. 200 INSTALLMENT COLLECTIONS “I cannot emphasize too strongly that we should not in any way attempt to advise a dealer as to his legal rights or how to enforce them. ‘This constitutes the practise of law by a cor- poration, which is strictly forbidden by the statutes. Recently it was necessary for one of the trust companies to engage Judge Hughes to defend it before the Court of Appeals on the charge of practising law, simply because one of the clerks gave a customer a printed form of mortgage which had been prepared by the trust company’s attorney for the general use of the trust company. While Judge Hughes was successful in distinguishing this from the general practise of law, the highest court found it necessary to write two opinions on the subject, showing how closely the question of practising law is scrutin- ized by the courts. ‘When the customers get into trouble and consult their at- torneys and make charges that they acted upon the advice of this corporation, the question is raised as to why the corpora- tion attempted to give such legal advice.” Maturity notices—On the maturity notices only the follow- ing information is necessary: the installment, if any, amount, the date, name and address, number and maturity date. The stencil furnishes the information, except for the installment, which is stamped in with a rubber stamp; the date, which is stamped in with a dater; and the amount, which is filled in with pen. All maturity notices go out say ten days before maturity, depending on territory. If an installment is not paid, a men- tion of the next installment may go out at the same time as the 20-day letter for previous installment. In typing or check- ing the maturity notice, if the name on the card does not agree with the stencil, some change slip has failed to get around. Phones.—One should make a memorandum for the folder of every phone call. Protested checks.—Good banking does not approve of re- depositing protested checks, except in cases where a request is made to redeposit by the bank. Posting.—Posting is done most rapidly by each card clerk in his own card tub, without removing cards from file. The clerk pulls the card, lifts up the card behind it, posts on card, initials item which has been posted, and puts the card back in file. 4A RESUME ON COLLECTIONS 201 Repossessing of collateral.—In repossessing a collateral, be sure of the law in the State on the election of remedies. (Re- fer to Laws of States in Chapter XVI.) If a collateral is informally taken from a purchaser, secure a release from him. After one repossesses a collateral, and secures a release from the purchaser, it would be reasonably safe to sell without advertising, and at public auction. Return Envelopes—A return envelope should go out with every letter from the collection department, and bear in pencil the ledger number. Route.—Each adjuster should send a route list showing where he expects to be for a week ahead. Such a route list must be forwarded every night. In making up a route list, one should put a heavy x opposite the towns where he will ex- pect to get mail. Stencils —An impression of the stencil should be compared with the contract to see that the card and stencil are correct. Threats——When you have to threaten, carry it out. Wires——The purpose of a telegram is speed. A wire goes through the dictaphone department fast; it goes to the pur- chaser fast, and it brings in money fast. Wires are short long- distance calls. A debtor will seldom stand up against the irri- tation of a series of telegrams two days apart; he will make some kind of settlement. Wires, their costs—Ten words are allowed for a telegram, and all words over ten are charged per word. Day letters cost 50 per cent. more than a telegram. A night letter con- sists of 50 words, and costs the same rate as a ten-word wire. A night message contains ten words, and costs about two-thirds of the straight wire rate. Day letters should not be used much for collection purposes. They are more expensive than night letters, more irritating for that reason, and if sent in the afternoon any considerable dis- tance, are likely to be delivered during the night. When a telegraphic service department informs you that a wire has not been delivered, there is the possibility of con- version or skipping. BIBLIOGRAPHY COLLECTIONS IN INSTALLMENT BUSINESS Richter, Conrad. A book in German on German installment laws. Skinner, Edward M., “Credits and Collections.” A strict search through libraries and catalogues of publication houses fails to reveal any other book on installment business. CREDITS AND COLLECTIONS Beebe, D. E., “Real Credits and Collections.” Bryan, C. W., “Credit, Its Meaning and Moment.” Cassell, R. J., “The Art of Collecting.” Church, F. P., “Modern Credit Methods.” Colwell, Stephen, “The Ways and Means of Payment.” Shaw Co., A. W., “Credits and Collection Methods.” Shaw Co., A. W., “Credits and Collections.” Shaw Co., A. W., “Credits, Collections and Finance.” Shaw Banking Series, A. W., “Credits and Collections.” Davis, Robert M., “Public and Private Credit and Banking.” Douglas, C. H., “Credit Power and Democracy.” Dun, R. G. & Co .» “A Brief Synopsis of the Collection Laws of the United States and Canada.” Ettinger and Golieb, “Credits and Collections.” Gardner, Edward H., “New Collection Methods.” Galloway, Lee, “Credit and the Credit Man.” Goddard, F. B., “Giving and Getting Credit.” Haggerty, J. E., “Mercantile Credit.” Lawrence, H. C., “Making Him Pay.” Lawrence, H. C., “Turning Him Down.” McAdow, F. H., “Efficient Credit Management.” Meyer, C. A., “Mercantile Credits and Collections.” Shaw Co., A. W., “Ninety-six Plans for Collecting Money by Mail.” Prendergast, Wm. A., “Credit and Its Uses.” Shryer, “Collecting by Mail.” Skinner, E. M., “Credits and Collections.” Zimmerman, T. J., “Credits and Collections.” 202 INDEX A Adjuster (see Collector) | for department stores, 110 qualifications, 108, 109. used to avoid and clear up misun- derstandings, 110-112 Alabama, 122-123 Anglo-Saxon words, 2 Arizona, 123 Arkansas, 123-124 Attorney, care in selecting, 113 house, 90, 113, 189 often unsatisfactory, 114 B Bank, as means of collection, 86 references on credit, 22-23 Bankruptcy, credit to a former bank- Tupt, 21 Cc Calif-rnia, 124-125 Chattel mortgage, of, 7 provisions described for each state in alphabetical order, 122-176 sample form, 30 where used, 14 Collateral, inspection of, 102-103 Collections (see Methods of collect- ing) appeal to good credit, 40-42 appeal to pride, 40 foundation for, 47 importance of, 3-4 part salesmanship, 45-46 personal element in, 37-39, 183 psychology of, 31-43 secret of, 2 Collector (see Adjuster) determination essential for, 43 importance of high type of, 4 part salesman, 35-37, 45-46 Colorado, 125-126 essential feature 203 Competition, cause of increased in- stallment sales, 5 Connecticut, 126, 127 Contract of conditional sale, essential feature of, 6, 116-117 provisions described for each state in alphabetical order, 122-176 where used, 14 Corporation, credit to a, 21 Courtesy, requisite in collections, 15, 70 Credit, checking typical cases, 26-27 compared with cash business, 11 economic laws of, 12-13 factors in passing, 19-30, 186-187 information, 24-25 investigation, 14-15 system and records, 27-28 to a corporation, 21 to a former bankrupt, 21 D Debtors, attitude of collector toward, 33-34 classes of, 32-33 Delaware, 127-128 Dictaform, 67-68 District of Columbia, 128-129 E Election of remedies, 118 (see remedies of seller and buyer for states arranged alphabeti- cally, 122-176) Examples of letters, appeal to reason, 73-74 based on contract, 76-77 credit appeal, 79-80 department stores series, 90-92 friendly reminders, 72-73 legal threat, 84-90 on note and contract, 87-88 professional appeal, 63-64 registered, 100 204 repossession, 81-84 securing dealer’s co-operation, 49-53 sets of form letters, 59-62 threats of additional costs, 84-85 timely appeal, 64-65 Exemptions, 114-115, 117 ; (see Exemption under headings: Conditional sale, and Chattel mortgage, for each state, ar- ranged alphabetically, 122-176 F Filing and recording liens, 29 (see Filing and Recording under headings: Conditional sale, and Chattel mortgage, for each state arranged alphabetically, 122- 176 Florida, 129-130 Follow-up system, duplicate system of cards with collection cards filed by maturities, 178-181 necessity of, 15 objection to many, 177-178 stencils, 181 Foreclosure, 119-121 Form letters, advantages of, 62, 66 dictaform, 67-68 making them personal, 62 professional appeal, 63-64 sets of, 59-62 testing, 56-57 timely appeal, 64-65 Forms of sale, difference in, 6-7 laws vary in different states, 14, 122-176 relative merits, 7, 186 G Georgia, 130-132 H Honesty, 190-194 examples of dishonest 190-191 honesty basic motive for paying debts, 37 practices, Idaho, 132-133 Illinois, 133-134 INDEX Indiana, 134-135 Installment sales, advantages of, 7-8, 14 as investment for buyer, 6 dangers of, 7 ethics of, 8 reasons for increase in, 5 Towa, 135-136 K Kansas, 137-138 Kentucky, 138-139 L Lease, essential features of, 6-7 where used, 14 Letters (see Examples of letters) appeal to reason, 73-74 based on contract, 76-77 censoring, 71 cutting unnecessary words, 2 essential qualities, 69-70 faulty application and reply, 1 form, 56-65 make personal, 2, 70 make-up of, 94 strength attained by Anglo-Saxon words, 2 testing form, 56-57 Louisiana, 139-140 M Mailing schedule, 95 envelope, 95-96 Maine, 141-142 Maryland, 142-143 Massachusetts, 143-144 Maturity notices, 54-55 Methods of collecting (see collections) criminal action, 105-107 discount note, 105 inspecting collateral, 102-103 renew note with additional security, 104 review credit information, 101-102 Michigan, 144-145 Minnesota, 147-148 Mississippi, 145-147 Missouri, 148-149 Montana, 149-150 INDEX N Nebraska, 150-151 Nevada, 151-152 New Hampshire, 152 New Jersey, 153 New Mexico, 154 New York, 154-157 North Carolina, 157-158 North Dakota, -158,159 O Ohio, 159-160 Oklahoma, 160-161 Oregon, 161-162 P Penalty, for fraudulently disposing of mortgage property, 121 (see Penalty under Conditional sales and Chattel mortgage for each state arranged alphabeti- cally) Pennsylvania, 162-164 Promptness, increases profit, 3 increases sales, 4 requisite, 15-16 saves losses, 3 R Repossession, letters, 81-84 necessary phase of installment busi- ness, 16-17 Resale, 34-36, 188 Rhode Island 164 Ss South Carolina, 164-165 South Dakota, 166 205 Strength obtained by Anglo-Saxon words, 2 cutting unnecessary words, 2 System (see Follow-up systems, also) credit, 27-28 organization of department, 188-190 T Telephone, advantages of in collec- tions, 97 Tennessee, 167 Terms of payment, must be mutually satisfactory, 16 vary with nature of goods, 6, 185 Texas, 167-168 Threats, 39, 70 of additional cost, 84-85 of repossession, 81-84 based on note and contract, 87-88 legal, 89-90 Turnover, affected by tions, 3 slow collec- U Uniform conditional sales act, 119 Utah, 169 Vv Vermont, 170 Virginia, 171-172 Ww Washington, 172-173 West Virginia, 173-174 Wires, examples of, 98-99 to bank, 86 last resort uses, 99 a shock to the debtor, 77 Wisconsin, 174-175 Wyoming, 175-176 10. A FEW SALIENT POINTS FOR COLLECTORS A salesman thinks of profit; a collection man of avoiding loss. . If you collect well they will say, “Good credit.” If you fail, “Poor collections.” . Your appeal to an executive in a well-appointed office with a row of push buttons handy on his desk would be quite different from your line of talk to a garage man who, after wiping his hands with cotton waste, sits down in his little back office to read what the finance people have to say. . Your job is not to work folders off your desk, but to collect money as promptly and pleasantly as possible. A threat that would put you into a defiant attitude will have the same effect on your debtor. . When you do have to strike, strike hard and unexpectedly. Remember that the unexpected is just as valuable in collection strategy as in military. . A collection that is easy today is difficult tomorrow, and the next day—impossible. . There is a man in every folder buried in a forest of leaves. . A delinquent debtor knocks at the base of the modern credit structure. The creditor has not only a legal, but a moral right to the money. Shakespeare likened man to an instrument on whose emotions we can play at will. If this is so, the collector’s job is to strike the key and tune him up on his notes.