Home » Finance » Credit

The Cost Of Hiring Debt Recovery Agents

Aug 17, 2007
When a bad debt goes to a recovery agent, the latter would charge a fee based on the amount to be collected, the time it has been overdue etc. This article discusses the pricing mechanism adopted by recovery or collection agencies for reclaiming an overdue debt.

There are two ways in which the agency does the pricing for debt collection - a contingency pricing and fixed pricing. In the former, the collection agency retains a percentage of the amount recovered as fees while in fixed pricing, the fee is charged on per month basis or per account basis irrespective of the amount collected.

In contingency pricing, the percentage of the collection agencies' commission depends on the size of the debt to be collected, and varies broadly between 10 and 50%, but more commonly between 20 and 40%. The fee percentage may also vary with the time the debt has been overdue, less for under a month old debt and more for debts that are 1 year or more old. The chances of recovery diminish with the age of the debt. Smaller debts attract higher percentage so that it is worth while for the agents to pursue them.

When finalizing a debt collector, it is important to look at the recovery rate of the collector. Recovery rate denotes how much the collector has actually been able to recover the previous debts. It is better to go with a collector with a higher percentage of recovery rates even if the fees are more as the net amount that you receive finally may be more in that case. For example for a 1000 dollars worth of debt, a recovery rate of 70% and a commission of 30%, the net amount that you would receive is $490 whereas a recovery rate of 50% and a commission of 25% would fetch you only $475. Contingency pricing excludes unrecovered debt, but for small value debts, the agents may not be willing to offer contingency pricing.

When there are many delinquent cases pending with a company, fixed rate contracts are better than contingency pricing contracts. In fixed price contract, the agents may charge a fixed amount per month like say $10/month for one year or $120 for 4 accounts in a year etc. They also specify how many requests they are going to file in a year and keep track of them for the amount charged.

For smaller debts, a flat fee agency is often the best choice as collectors that are paid on a percentage and don't make as much on smaller amounts.
About the Author
Tristan Andrews writes useful articles about collection agencies. Discover and explore the world of debt collections. Find out how using a collection agency can expand your financial horizons at http://www.advinfoc.com
Rating:
Please Rate:
(Average: Not rated)
Views: 108
Print Email Report Share
Article Categories
    • Artists
    • Gambling
    • Humanities
    • Humor
    • Movies
    • Music
    • Photography
    • Tattoos
    • Television
    • Classic Cars
    • Motorcycles
    • Recreational Vehicles
    • SUVs
    • Trucks
    • Vans
    • Branding
    • Business Opportunities
    • Careers and Jobs
    • Corporate
    • Customer Service
    • Direct Mail
    • Entrepreneurship
    • Ethics
    • Financing
    • Franchising
    • Home-Based Business
    • Human Resources
    • Import and Export
    • Leadership
    • Management
    • Market Research
    • Marketing and Advertising
    • Negotiation
    • Network Marketing
    • Networking
    • Organizational
    • Presentation
    • Project Management
    • Public Relations
    • Small Business
    • Strategic Planning
    • Team Building
    • Telemarketing
    • Training
    • Data Recovery
    • Databases
    • Games
    • Hardware
    • Networks
    • Operating Systems
    • Programming
    • Security
    • Software
    • Spyware and Viruses
    • Ask an Expert
    • College and University
    • Home Schooling
    • K-12
    • Languages
    • Online Education
    • Psychology
    • Coffee
    • Cooking
    • Gourmet
    • Recipes
    • Wine and Spirits
    • Acne
    • Aerobics
    • Alternative Medicine
    • Beauty
    • Cancer
    • Cosmetics
    • Depression
    • Diabetes
    • Diseases and Conditions
    • Fitness Equipment
    • Fitness
    • Hair Loss
    • Heart Disease
    • Medicine
    • Men's Health
    • Muscle Building
    • Nutrition
    • Skin Care
    • Supplements and Vitamins
    • Weight Loss
    • Women's Health
    • Yoga
    • Arts and Crafts
    • Babies
    • Collecting
    • Elderly Care
    • Genealogy
    • Hobbies
    • Parenting
    • Pets
    • Pregnancy
    • Woodworking
    • Feng Shui
    • Gardening
    • Home Appliances
    • Home Security
    • Interior Design
    • Landscaping
    • Affiliate Programs
    • Article Marketing
    • Auctions
    • Audio
    • Banner Advertising
    • Blogging
    • Broadband
    • Domain Names
    • E-Books
    • E-Commerce
    • Email Marketing
    • Ezines and Newsletters
    • Forums
    • Internet Marketing
    • Link Popularity
    • Pay-Per-Click
    • Podcasting
    • RSS
    • Search Engine Marketing
    • Search Engine Optimization
    • Security
    • Social Media
    • Spam
    • Video
    • Viral Marketing
    • Web Design
    • Web Development
    • Web Hosting
    • Copyright
    • Cyber Law
    • Intellectual Property
    • National, State, Local
    • Patents
    • Regulatory Compliance
    • Trademarks
    • Buying
    • Selling
    • Baseball
    • Basketball
    • Boating
    • Cycling
    • Extreme Sports
    • Fishing
    • Football
    • Golf
    • Hockey
    • Hunting
    • Martial Arts
    • Running
    • Scuba Diving
    • Soccer
    • Swimming
    • Tennis
    • Dating
    • Divorce
    • Marriage
    • Weddings
    • Astrology
    • Buddhism
    • Christianity
    • Faith
    • Hinduism
    • Islam
    • Judaism
    • Meditation
    • Metaphysical
    • New Age
    • Cable and Satellite TV
    • Cell Phones
    • Communication
    • Gadgets and Gizmos
    • GPS
    • Satellite Radio
    • Video Conferencing
    • VoIP
    • Addictions
    • Coaching
    • Goal Setting
    • Motivational
    • Stress Management
    • Time Management
    • Clothing
    • Electronics
    • Fashion
    • Gifts
    • Jewelry
    • Causes and Organizations
    • Environment
    • History
    • Holidays
    • Men's Issues
    • Nature
    • Philosophy
    • Politics
    • Women's Issues
    • World Affairs
    • Air Travel
    • Camping
    • Cruises
    • Destinations
    • Outdoors
    • Article Writing
    • Book Reviews
    • Copywriting
    • Fiction
    • Non-Fiction
    • Poetry
    • Quotes
    • Screenplay
    • Tools and Resources