Collection Agency Pricing
March 11, 2010 by Mallory Megan
Filed under Business Finance
One of the key benefits to working with most collection agencies is that you only pay when they successfully collect on a past-due account. This means if the agency can’t collect money on your behalf, you don’t owe anything. Debt collection agents operate on a commission, usually collecting about one third of the commission.
However, this is not always the case. If you have some small accounts under $500, some collection agencies may require a flat fee to handle those accounts to make it worth their while. But most of the time, it will be based on commission.
Collection agencies earn their money by taking a percentage of the money the debtor owes upon successful collection. This percentage can range from 10% to 50% with the most common percentage being between 25% and 40%.
The fee is typically based on age and dollar amount. The older the debt the more difficult it is to collect and the agent will require a much higher fee to go after that kind of account. Also, make sure you factor in how difficult it will be to collect. Certain debts are riskier to collect therefore require percentage kept to be greater.
Some agencies will charge you for several other charges related to their collection efforts including fee-based background checks, court costs, filing fees, and long-distance telephone calls.
Before a collection agency will work a single claim, they will write up an account release form that details the terms of your working arrangement including their responsibilities, the fees, any additional expenses, and customer service policies.
Be sure to read the contract over carefully for any fine print or contract language that seems confusing. If you notice discrepancies in the contract, make sure the agency fixes the problems immediately before requiring you to sign anything.
Mallory McGuinness is employed by a collections agency that works with a debt collection lawyer. Also, she does pieces on business, finance, the credit industry and collections agencies. Visit the Uber Article Directory to get a totally unique version of this article for reprint.
