and just what steps have been taken up to the present time to secure the payment of the account. It is a wise policy to leave this responsibility with the collector and not to consume time with requests for reports on collection progress.

Collection attorneys usually furnish a special form of draft, similar to the following:

If payment is made on this form usually only I per cent collection fee is charged, but if payment is not made, the courtesy of his service entitles him to proceed with collection of the claim in the regular way. For this reason attorney's draft forms should never be used unless you wish the attorney to handle your claim from that point.

Observe that space is left for the itemization of the account on the draft. This usually (especially on long overdue accounts) hurts the pride of the customer, and in many cases he forthwith pays the draft and closes the account.

Personal calls are often effective, but usually expensive. The size of the account, the distance, etc., determine the advisability of using personal collectors. Salesmen, also, are frequently able "on their next round" to collect stubborn accounts, when it is not against the policy of the house to have solicitors or salesmen do the collecting. When they are permitted to do so, they are usually bonded.

Frequently a registered or special delivery letter serving final notice for payment upon the customer secures payment.

When all other usual methods have failed to secure payment of an account, except in cases justifying adjustments, extensions, etc., recourse to attorneys and legal proceedings is necessary. However, the average lawyer is not a good business man and once a claim is turned over to an attorney the customer is usually lost. Attorneys have a very distinct place in handling troublesome accounts for a collection department but great care should be exercised to secure the services of only reputable ones. Frequently collection departments handling a large volume of business have their own legal departments.

Many credit departments use one or two good attorneys in the collection of their bad accounts to whom they turn over all claims which are sent by them to corresponding attorneys in the localities where debtors are located. On account of the number of claims an attorney can thus forward local attorneys the fees are divided, costing the seller no more for the collection of an account, and at the same time relieving him of the necessity of "following up" the attorney located at a distant point. This also assures the seller of securing the services of the attorney best able to give him service

There are many collection agencies in business-some good, some bad. A collection department should use great care in selecting an agency, if it desires to enlist such services; frequently it is more of a problem to secure money from some agencies than to get it from the debtor in the first place.

Particular care should be used in selecting agencies that agree to collect a certain amount on bad accounts in consideration of advance fees.

The large and responsible agencies are perhaps better able to serve the average collection department than many of the attorneys. Some of these agencies publish lists of delinquent debtors for the use of their clients which often are of much value to credit departments. When debtors become aware of this fact they sometimes will pay when other arguments have failed to secure payment. R. G. Dun and Company, in addition to other service provided for their subscribers, conduct a collection department.

Justices of the peace, in small towns, often make very effective collectors. The debtor is frequently personally known to such an official, and it hurts the debtor's pride to have his debts placed in his neighbor's hands for collection.

In whichever way a "hard" account is handled, whether by the attorney within the collection department, the local attorney, the justice of the peace, the collection agency, or by any other method which may be used, one fundamental principle should be followed if it is at all possible. Success is measured by the ability to collect the account only if a certain number of the "hard" customers can be educated by the collection department to finally respect the general policies of the house. For that reason it is of the utmost importance to have the right kind of men making the collections and writing the collection letters.

REFERENCES

Brewster, Stanley F. Legal Aspects of Credit, Chap. XXIII. New York, Ronald Press Co., 1923.

Dulin, R. M. Collection Letters, pp. 1-95. New York, Ronald Press Co., 1924.

Griffin, Bryant W. Installment Sales and Collections, Chaps. II, VIXX. New York, Prentice-Hall, Inc., 1922.

Prendergast, William A. Credit and Its Uses, Chap. XVII.

CHAPTER XXI

TRADE ABUSES AND CREDIT ETHICS

Bad Habits in Business. It is quite customary among professional men to discuss what is often termed "unprofessional conduct" or "sharp practice." With the tendency to develop a professional spirit among business men has also come a belief that "tricks of the trade" in business which are unfair and not in accordance with the Golden Rule of business should be noted and marked as "trade abuses." The existence of such a sentiment should gradually develop a popular disapproval which, in the end, would tend to eliminate many of these trade abuses.

In credit transactions there are many opportunities for such trade abuses. The credit contract has many possibilities for violation, most of which, though not serious in and of themselves, are insidious attacks upon the integrity of business and demand a courageous attitude on the part of the intended victims and competitors. Business organizations are fast realizing the possibilities of creating a sentiment of business ethics, such as is expressed in the Credit Monthly of January, 1923:

The Committee expresses a unanimous and firm belief that a stronger and more courageous attitude should be shown toward the violation of credit contracts that are commonly designated as trade abuses. It stands to reason that if this attitude were displayed, trade abuses would be checked.

The cancellation of orders given and received in good faith, the return of merchandise without justification or permission, the improper deduction of discount, the making of unjust claims and failure to meet terms of sale are very expensive, are very costly when properly analyzed, and, on the whole, cause severe losses to creditors and debtors. This loss is material and moral.

We appeal as a Committee for a wise appraisal of the real effect of trade abuses and for a better understanding with all parties to trade agreements, that contracts entered into must be carried out, else losses will happen and strains be placed unnecessarily on the commercial relation of people with one another. There must enter into the situation a sense of human justice and commercial honor. The creditor must insist and be satisfied with nothing less than the proper treatment of contracts. The debtor must be satisfied with nothing less than to execute his contract properly.

Taking of Unearned Discount.-The term "cash discount" should better be designated as "cash premium," for that is in reality what the 1 or 2% off for ten-day payment is. The new term would help in overcoming some of the confusions and evils that make the cash discount one of the annoying questions in the credit department. The origin of the difficulty with the cash discount is that the taking of the premium is left to the honor and good faith of the buyer, who does not want to miss the chance to make an important additional profit. The result is that if the moneys are not available or banking facilities are insufficient to permit the sending of a check within the specified time, the buyer feels that he must take the premium nevertheless and has been allowed to get the notion that these extra days will make no material difference.

Very few credit men have escaped experience with the taking of discounts after the time set, even though a few days of grace may customarily be given. The amount of the discount and the terms upon which it is granted are definite parts of the sales contract and really represent one element in the consideration of such a contract. It is hard, however, to impress the person accustomed to take advantage of this discount period with the idea that it is the same as a remittance of $2.40 a dozen for a particular variety of canned goods when the original contract called for the price of $2.45 per dozen.