Updated: 7 hours ago
When hiring a debt collection agency, you will find that there are two main fee structures, a contingency fee and a fixed rate. Understanding the differences between these two options will help you decide which is right for you before you hire a debt collection agency.
Most debt collection agencies, including Fair capital, operate on a contingency-based arrangement, often called "No Payment, No Fee." A debt collection agency charging on a contingency basis will be entitled to its fee only after successfully collecting your debt.
For example, suppose a landscaping company is owed $10,000 and hires a collection agency for a 25% contingency fee. Upon recovering the unpaid invoice, the agency will receive a commission of $2,500. In contrast, the landscaping company wouldn't have to pay anything to the collection agency if the debt couldn't be recovered.
The Benefits of Contingency-Based Debt Collection Fee
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.
The average debt collection fee is typically between 20% to 40%. Several factors will impact how much a collection agency will charge. So, let's break it down;
Age of account — Older debts are generally more complex to collect, so they typically demand higher fees.
Average balance — Accounts with a small balance will generally face a higher collection fee because they hold a small profit to the agency.
Account volume — A collection agency will generally charge less; If you bring a large volume of accounts.
Industry — Because different industries perform differently and require other tactics, some agencies will charge differently depending on the industry.
Now let's talk about flat-fee debt collection services.
A flat fee debt collection agency structure means the agency will charge a fixed, one-time fee for their services rather than a percentage of the debt recovered. This fee is charged upfront—regardless of results. The flat fee is generally $15 to $25 per account.
When hiring a flat fee debt collection agency, be careful of agencies that may try to charge you twice for their services. Often, these agencies may offer a flat fee for minimal pre-collection or soft collection services that do little or nothing to recover your debt. They will then ask you to upgrade to a full-scale contingency fee collection service, resulting in you paying both a flat fee plus a contingency fee.
Performance Over Price
It's essential to note that when hiring a debt collection agency, pricing is not the only factor to consider. In fact, the performance and successful track record of a collection agency are more critical in ensuring a positive outcome. Opting for a low-priced collection agency that produces inadequate results can prove to be a costly mistake in the long run. It's advisable to invest in a reputable and proficient collection agency, even if their fees may seem relatively higher, as their results will save you money and instill confidence.
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.
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