What do Collection Agencies Charge for their Services?

Posted by Ryan Howard


If one or more clients are past due, it affects your business. Phone calls have not been returned, collection letters are unanswered... is it time to write it off or hire a debt collection agency? When considering outsourcing debt collection, many organizations hesitate due to cost. Understanding what to expect during the debt collection process is helpful to determine agency fees. Not all debt collection agencies or customer situations are the same and thus cost could vary. 

Would you consider working with a debt collection agency who doesn't get paid unless you do?

How Collection Agencies CHarge

 Debt collection agencies charge in a few different ways and in general, it depends on the situation. There may be other factors that determine which collection agency may be the better partner for your business but fees are also very important to understand. Typically, agencies charge in three ways:

  • Flat Fee:  A flat fee is a specific fee that is charged upfront in the collections process.
  • Debt Buying: Collection agencies buy the debt from you at a reduced cost and obtain their fees through the collection of the debt.
  • Contingency: The collection agency's payment is a percentage and contingent on the amount of debt collected.

With contingency fees, debt collection agencies only get paid on the debt amounts that are collected. If nothing is collected, there is no charge.


Contingency Fees Explained

There are four factors that determine the contingency fee charged on an account:

  • Age of Account 
  • Average Balance
  • Volume of Account Placements
  • Industry 

When collecting on past due accounts, the age of the debt will determine the success of recovery. In general, the older the debt, the less likely it will be fully recovered. Therefore, a contingency rate will be higher on older accounts. For instance, rates may be tiered by age in this way:

Sample Rates (Actual fees may be lower)
Age Fee Percentage
30 - 90 days 20%
90 - 180 days 25%
6 - 12 mos 33%
1 - 2 yrs 40%
2 yrs + 50%

Size also matters. Smaller balances may take large efforts to collect for little reward, therefore, the fees will be higher. For instance:

Sample Rates (Actual fees may be lower)
Balance Fee Percentage
$1 - $1000 35%
$1000 - $5000 25%
$5000 - $50,000 20%
$50,000 - $500,000 15%
$500,000 + 10%


The volume of accounts outsourced for collection will also determine the fee rates charged by debt collection agencies. Fees may be lower for a larger number of accounts.

The numbers above are examples of contingency fee percentages and how they are affected by age and average balance. These numbers may also be affected by industry. Every industry has their own best practices when it comes to debt collection and because of that, the age, volume and average balances may be different. Contingency fees on healthcare accounts, for instance, will be considerably lower than fees collected on property management accounts.


Performance-Based Collections

At BYL Collections, we don't get paid unless you do. Therefore, we do our best to collect for our clients while strictly adhering to regulations such as the Fair Debt Collection Practices Act, HIPAA medical privacy laws, and the Telephone Consumer Protection Act. We work with your customers by offering a multitude of payment options to bring accounts current. Our staff has specialized experience in such industries as financial, healthcare, property management and B2B collections. Our contingency collection fees offer little risk to your business. We offer customizable debt collection reporting options, quality and consistency so you know where your accounts stand at all time. Request a personalized quote today.

More than 60% of our new clients are referred by existing clients. 


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Topics: Debt Collection Vendor, Collection Agency Fees