One of the main benefits to working with many collection agencies is that you only pay them when they successfully recover your money. This means if the collection agency fails to collect money on your behalf, you don’t owe a penny. Debt collection agents operate on a commission, usually collecting about one third of the commission.
However, this is not always the case. If you have some small accounts under $500, some collection agencies may require a flat fee to handle those accounts to make it worth their while. But most of the time, it will be based on commission.
A Collection agency earns its money by taking a small percentage of the money they successfully collect. This percentage can range from 10% to 50% with the most common percentage being between 25% and 40%.
The fee is typically based on age and dollar amount. The older the debt the more difficult it is to collect and the agent will require a much higher fee to go after that kind of account. Also, make sure you factor in how difficult it will be to collect. Certain debts are riskier to collect therefore require percentage kept to be greater.
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.
Mallory Megan works for a collections agency that works with a debt collection lawyer. Also, she composes stories on business and finance, the credit industry and collections agencies.
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