How Does A Collection Agency Get Paid

One of the major benefits to working with a collection agency is that you only pay a fee if they successfully collect on the file you give them. This means if they can’t collect your money, you don’t pay a dime. 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.

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 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.

Rapid Recovery Solution is a commercial collection agency . You are welcome to reprint this article – but get your own unique content version here.