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.

Collection agencies earn their money by taking a percentage of the money the debtor owes upon successful collection. 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 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.

Article Source: http://www.rightbiz.com

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