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What You Need to Know About Debt Collection Agencies

Aug 17, 2007
Every service has its cost, and the tag price attached to debt recovery is determined by debt recovery agents. While it is obvious that a debt gone bad is not a good thing, spending more money for its recovery is not a trifle matter either. It is best to know the fees involved beforehand so be informed by reading on.

There are two pricing methods adopted by debt recovery agents. They are as follows:

1. Contingency pricing: This method is dependent on the amount of debt to be recovered and involves a certain percentage (varying from 10 to 50 percent) of the said debt.
2. Fixed pricing: This refers to a fixed amount regardless of the amount of the debt.

Contingency pricing compared to fixed pricing is a more difficult approach to understand between the two. The former relies on several factors such as previously mentioned, the amount of debt to be recovered. Moreover, contingency pricing is also affected by the duration that the debt has been overdue. Those debts that have been overdue for a lesser duration attract a higher fee while the so-called older debts are given a cheaper rate. This simply entails that chances of debt recovery is inversely proportional to the age or time overdue of the debt in question.

If volume of orders or cases is a topic of consideration for pricing, then the agent will usually adjust the pricing scheme accordingly.

The contingency pricing method is often used by agents in individual cases of debt recovery. On the other hand, if an individual or a company has several debt recovery cases to be handled by the agents, a fixed pricing is often applied. To better illustrate this concept, relate the act of buying on wholesale to the fixed pricing method - the more the merrier! Since there are several cases to be handled on an annual basis, it becomes convenient for both parties to settle for a fixed rate. In this case, this benefit of having a fixed price per project is again dependent on the quantity of debt recovery cases to be handled by the said agent.

Lastly, take into consideration the rate of recovery of your agent before making your decision. The rate of recovery simply denotes the average percentage that the agent is able to retrieve of the debt cases handled by him/her. A higher percentage of rate recovery will translate to higher returns for you as compared to a low rate recovery.
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
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