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How Does A Collection Agency Get Paid

Jan 5, 2008
One of the major benefits to working with a collection agency is that you only pay a fee if they successfully collect on the file you give them. This means if they can't collect your money, you don't pay a dime.

However, this is not always the case. If you have some small accounts under $500, some collection agencies may require a flat 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 could be responsible for some other charges related to their collection efforts including fee-based background checks, court costs, 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.

Be sure to read the contract 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 requiring you to sign anything.
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