What Are The Different Charges For Debt Collection Services?

Debt collection agencies specialize in pursuing payments of debts owed by individuals or businesses. Debt collection agencies are crucial for businesses because if accounts go unpaid, the businesses pay the price. In order to recover revenue and manage all accounts in an optimal fashion, many businesses and companies hire debt collection agencies.

Before choosing a debt collection agency it is important to know how much these agencies charge for the debt collection services. Different debt recovery agencies have different rates. However, debt collection agencies in USA have two main payment structures:

·         Flat Fee Collections: Flat fee is the fixed fee that is charged by debt recovery agencies upfront in the collection process. Businesses pay a consistent rate for the different packages, irrespective of the account size. This usually includes either first or third-party collection services.

·         Contingency-based Collections: Most debt collection agency in USA have shifted to a contingency-based payment model for debt recovery services. In this payment model, the debt collection agency shall charge the clients only if they successfully collect the dues. In this payment model, the average fees range from 25% to 50% of the total amount of debt recovered by the agency. This is decided contractually between the business and the debt collection agency.

In a contingency-based payment scale, the fees charged depend on the following factors:

• Age of the account: The likelihood of recovery decreases as the consumer debt ages.
• The average balance size of accounts: More fees are likely to be charged for accounts with smaller balances.
• Volume of accounts transferred over to the agency: The fees charged by the debt collection agency may be lower for larger account volumes.
• The industry served: Each industry has different volumes, ages, and revivable accounts. Therefore, debt recovery services have different prices for different industries.

Before opting for a debt recovery collection agency, it is important to know about the two different types of services provided by these agencies, first-party and third-party collection services.

·         First-party collections: This type of collections originate from the clients. In this method, the debt recovery services include letter writing and phone calling services. The modus operandi may vary from on debt collection agency to another.

·      Third-party collections: When the consumers do not respond to the first-party collection services, a business may opt for third-party collection services. In this stage, all communication is made from the debt collection agency, and not from the client themselves.

Making the Right Choice

There is no dearth of debt collection agencies in the US. However, it is imperative to correctly assess the services provided by a particular debt recovery collection agency before choosing them for your business. Timely and efficient collection of debts is essential for the proper functioning of a business. While some debt collection agencies are suited for small business, others cater to bigger business groups. Carefully assess the needs of your business before choosing the right debt recovery collection agency.

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Created on Nov 23rd 2020 01:58. Viewed 241 times.

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