After reaching a settlement with a creditor it is very important to review the Settlement Letter prior to sending payment. The best way to protect yourself and your money is make sure the creditor provides you a valid Settlement Letter.
There are specific items and language that should be included on all Settlement Letters. These items are outlined below. Should your letter be missing one of more of these items, you should read: ‘What to do if a creditor will not provide a valid Settlement Letter'.
Settlement Payment Date:
The Settlement Letter is a contract between you and your creditor. In order for a contact to be valid, it must contain a date. If you were to send payment without knowing when the payment is due, the creditor could try to say the payment arrived late, even though it did not. Having the payment due date on the letter is one of the most important aspects of a settlement letter.
Even if you have verbally discussed the settlement amount with the creditor, this must be outlined on the Settlement Letter. Just like with the settlement due date described above, if you send the settlement payment without having it in writing, the creditor could come back and say that the amount you sent was not the agreed upon settlement amount. While it is rare a reputable creditor would do this, it is best to protect yourself and make sure the Settlement Letter contains the Settlement Amount.
‘Paid/Settled in Full’ Language:
Having language on the Settlement Letter that the settlement amount satisfies your account in full is for your protection. The exact words may be different, but the general idea is that the Settlement Letter should contain a statement that once your payment is received your debt is settled or paid in full or satisfied. Language like this protects you from the creditor coming back and trying to collect on the balance of the account that you are not responsible for.
Original Creditor Account Number:
Having the original account number on your letter is to properly identify that you are resolving the correct account. It is typical that once the Original Creditor (the bank or lending institution you opened your account with) refers your account out for collection that it may move around to a few different collection agencies prior to you resolving the account. The collection agency you resolve your account with should have maintained proper records and have the Original Creditor’s account number on file. Having this account number on the Settlement Letter protects you from another collection agency trying to collect on this debt, in error, at a later point in time. This is something that doesn’t happen very often, but when it does it is simple to prove that the account has been resolved if your Settlement Letter contains the Original Creditor’s Account number.