How Much Do Collection Agencies Charge?

Fair Capital

Mar 29

3 min read

Updated: Sep 15

Before diving into the topic of debt collection costs, let us first acknowledge that there are two primary pricing models in this industry. On one hand, we have the contingency fee structure, and on the other, there's the flat fee model.

Through this guide, we'll shine a light on the key differences between the two main pricing structures in the debt collection industry – the contingency fee and the flat fee. We'll delve into the benefits and drawbacks of each, equipping you with a broader understanding to aid in your decision-making process. And most importantly, we'll provide clarity on what exactly a debt collection agency might charge you, regardless of whether you opt for a contingency fee or a flat fee model. So, let's roll up our sleeves and dive in!

Collection Agency Costs:

How Much Does It Cost to Hire a Collection Agency?

Collection agencies generally use either a contingency fee—an agreed percentage of the amount actually recovered—or a flat fee for defined collection activity. Pricing varies by account age, balance, volume, documentation, industry, dispute status, and whether legal action is required. Ask for a written fee schedule that clearly explains what is included.

Contingency Fee

Many debt collection agencies, including Fair Capital, offer a contingency-based arrangement, often described as “no recovery, no fee.” Under this model, the agency earns its agreed fee only after it successfully recovers funds for the client.

For example, suppose a landscaping company that's owed $10,000 and engages a collection agency at a 20% contingency fee. Once the agency successfully recovers the debt, the landscaping company receives $8,000. The remaining 20%, or $2,000, is retained by the agency as its commission. However, should the agency fail to retrieve the debt, the landscaping company doesn't owe any fees to the collection agency.

How much can you expect to pay? Generally, the fee falls between 20% and 40%, influenced by several factors:

Age: Older debts, being trickier to collect, tend to incur higher fees.
Balance: Small-balance accounts often attract a higher fee due to the relatively lower profit margins for the agency.
Volume: Bulk accounts could help you negotiate lower fees.
Industry: The nature and performance of different industries could impact the fees.

Benefits of Contingency-Based Debt Collection

Pay Only for Results. The most significant advantage of using a contingency fee arrangement is that you don't have to worry about paying the collection agency unless they successfully recover your debt.
Maximum Results. You can rest assured that a contingency-based collection agency will give its utmost to your accounts. Because they don't get paid unless you get paid, the agency will be highly motivated to do everything in its power to bring you the best possible result. This may also provide some peace of mind–if a collection agency is willing to risk not collecting a fee for the work they put into things, you probably have a good chance of retrieving your debt.
No Up-front Fees. An additional advantage of using a collection agency charging on a contingency basis is that you don't pay anything while your debt is still outstanding.

Flat Fee

Alternatively, some agencies charge a fixed, one-time fee, typically between $15 and $25 per account, regardless of whether the debt is recovered.

When comparing flat-fee programs, confirm whether the service is limited to pre-collection letters or soft collection and whether additional contingency or legal fees apply if the account needs further escalation. Ask for the complete pricing schedule in writing.

Performance Over Price

Pricing should not be evaluated alone. Compare the agency's experience with your account type, compliance program, reporting, communication, escalation options, and how it calculates recovery results. A lower fee can cost more if the service is too limited to produce a meaningful recovery.

In conclusion, it is important to understand a debt collection agency's pricing, structure, and fees to determine which agency to hire. At Fair Capital, we offer a transparent pricing structure that clearly outlines our fees, making it easy to understand exactly what you will be paying.

With our unique and advanced approach and a strong track record in debt recovery, Fair Capital is a reliable and trustworthy choice for your debt collection needs. Don't let the stress of unpaid debts weigh you down any longer – hire Fair Capital to handle your debt collection and get the money you are owed.