Debt Collection Agency Fees
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.
Notwithstanding, this isn’t always the case. If you have a few smaller debts ranging form $10 – $500 each, the collection agency could require a fixed fee to handle those small accounts to make it profitable for them.
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 variance of the fee is typically based on how old the debt is. Older debts can be more difficult to collect and the agent will require a higher fee to go after those accounts. Also, make sure you factor in how difficult it will be to collect certain debts. As a general rule of thumb, the riskier the debt, the higher the fee.
You may also be responsible for several other charges related to their collection efforts including fee-based background checks, travel, filing fees, and long-distance phone calls.
Before a collection agent works on a single claim, they will write up a contract 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 account release form 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 asking you to sign it.
Mallory Megan works for a collections agency that works with a debt collection lawyer. She also does stories on business, finance, the credit industry and collections agencies. Click here to get your own unique version of this article with free reprint rights.
