Debt Collection Agency Fees
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.
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.
A Collection agency can earn its fee by taking a small portion of the money they successfully collect on. The percentage can range from 10% to 50% with the average 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.
You may also be responsible for several other charges related to their collection efforts including fee-based background checks, travel, filing fees, and long-distance phone 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.
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