How much do collection agencies charge?
How Much Does It Cost to Hire a Collection Agency?
When hiring a debt collection agency, you will encounter two main fee structures: a contingency fee and a fixed rate.
Understanding the differences between the different payment structures is essential before you hire a debt collection agency to choose what's right for you.
Most debt collection agencies, Including Fair capital, use the contingency-based model, often referred to as "No Payment No Fee" collections.
A debt collection agency operating on a contingency fee will be entitled to its fee only after successfully collecting your debt.
For example, a landscaping company is owed $10,000 and hires a collection agency at a 25% contingency fee. Assuming the agency successfully retrieves the past-due invoice, they will be entitled to $2,500, and the landscaping company will get $7,500.
The Benefits of Contingency Fee Debt Collection
Pay Only for Performance. 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 retrieve your money.
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.
Factors that Impact collection cost
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.
With a flat fee, you get charged a fixed fee upfront—regardless of results, age, volume, industry, average balance, or any other variable.
The flat fee is generally $15 to $25 per account.
Choosing the right agency
Passing your outstanding debts to a trusted debt collection agency allows you to focus time, energy and resources on production—and success!
Fair Capital delivers effective third-party collection services at affordable rates. Drop us a line if you're considering outsourcing your collections or looking for a new collection agency! We'd love to talk to you.
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