How Do Debt Collectors Determine Their Rates and Fees?

Turning to a debt collection agency to collect bad debts is rarely an ideal situation. Just having to go that route means a creditor will not get everything it’s due. That leads to the question of how debt collectors determine their rates and fees. Guess what? There is no simple formula.

Debt collection is a business like any other. Collection agencies need to charge rates high enough to cover their costs and earn enough profit to make running the business worthwhile. How an agency determines that is based on a whole host of factors howitstart.

The Type of Debt

Debts come in a variety of shapes and sizes, so to speak. You have your general debts resulting from unpaid bills. Those bills can be anything from utility bills to monthly cell phone charges. These are typically smaller debts collected through standard procedures partyguise.

You also have larger debts that are not the result of court action. When court networthexposed action is involved though, you’re dealing with a civil judgment. Turning civil judgments over to a collection agency generally means higher rates and fees simply because collection costs are higher.

The Payment Model

Collection agencies also employ different payment models. Some agencies buy debts just like they would any other asset. Under this model, the collection agency never pays the full value of the debt being purchased. It is always a percentage, and the percentage can be lower than 50% in some cases makeeover.

The other payment model is the contingency model. Judgment Collectors, a Utah judgment collection agency serving several states, operates on contingency. Rather than buying judgments, they simply collect on behalf of their clients. Their fee is a percentage of the total amount collected, whatever that might be.

The Age of the Debt

Believe it or not, the age of the debt in question makes a difference. Older debts are harder to collect because debtors have found ways to avoid paying. They will continue avoidance for the foreseeable future. This puts collection agencies at a decided disadvantage. They stand to collect less, so that will impact how much they charge lifestylefun.

The Size of the Debt

Next up, the size of the debt in sdasrinagar question plays into how much a collection agency charges. The larger the amount owed, the more likely the agency will have to settle for less than the total due. As a percentage of that total, larger debts tend to yield lower collections.

The combination of debt age and size is the primary reason collection agencies urge customers to not wait too long before turning debts over to them. It is best to get working on unpaid debts as soon as possible. That way, agencies can maximize the total they collect factnewsph.

The Costs of Collecting


Collection agencies must consider how much they will spend collecting a particular debt. One way to prevent loss is to charge fees to cover collection expenses as they occur. Another option is to charge a single flat fee. Most agencies just roll the costs into their standard rate schedule, though.

The Likelihood of Collecting

Finally, collection agencies look at the likelihood of collecting on a given debt. The lower the likelihood, the higher their risk. They charge more when the risk is higher. They need to in order to protect against possible losses.

It should be clear that there isn’t a single formula for determining how much collection agencies charge. The most important thing to understand is that it is okay to shop around. There are enough collection agencies competing for business so Celebrity height that finding one with acceptable rates shouldn’t be a problem.

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