How does a Collection Agency get paid
One of the key benefits to working with most collection agencies is that you only pay when they successfully collect on a past-due account. This means if the agency can't collect money on your behalf, you don't owe anything.
However, this isn't always the case. If you have several small debts of just a few hundred dollars each, the collection agency might require a fixed fee to handle those accounts to make it worth their while.
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 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.
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 agency will work a single claim, they will write up an account release form that details the terms of your working arrangement including their responsibilities, the fees, any additional expenses, and customer service policies.
As with any contract make sure you read it 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.
However, this isn't always the case. If you have several small debts of just a few hundred dollars each, the collection agency might require a fixed fee to handle those accounts to make it worth their while.
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 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.
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 agency will work a single claim, they will write up an account release form that details the terms of your working arrangement including their responsibilities, the fees, any additional expenses, and customer service policies.
As with any contract make sure you read it 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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posted by Credit Counseling at
8:35 AM
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