Dunning

     Most debtors pay on time. For those who don't, a polite reminder or inquiry is often sufficient to prompt either payment or a mutually acceptable agreement extending the debtor's time to pay. However, if payment is still not forthcoming persistent demands for payment (dunning) may begin. The creditor may make these demands itself or assign the debt to a collection agency for collection.

     You should be aware of some of the legal limits on collection behavior.  Common law tort, such as intentional infliction of emotional distress, considered in the Midas Muffler case, or invasion of privacy, establishes some limits on collection behavior. A federal statute, the Fair Debt Collection Practices Act, more thoroughly and precisely constrains the behavior of collection agencies and others, including lawyers, who collect consumer debt on behalf of creditors. State legislation or administrative regulations in some states, including California, constrain the behavior of both collection agencies and creditors collecting on their own behalf if the debt is a consumer debt.  In addition, most collection behavior must cease if the debtor is in bankruptcy because the filing of a bankruptcy proceeding by or against a debtor invokes an automatic stay.  The effect of the automatic stay on collection behavior is explored more fully in Commentary.Automatic stay. 

     Should dunning prove unsuccessful, the unsecured creditor may give up (with the right to claim the bad debt as a deduction on income tax returns), may wait and try again later, or may turn the matter over to an attorney for litigation. As we shall soon see, the secured creditor has an additional option - - pursuit of or the threat to pursue collateral.