The debt collection agency plays as middlemen between the debtors and creditors. If debtors exceed the limited time the creditor can consider using the debt collection agency to recover the amount owed. The creditor has to pay a certain amount of money to the collector typically a percentage of money collected. This in return will greatly affect your business if the amount is recovered.

How do collectors charge?

Different agencies charge differently depending on the situation at hand. Before choosing the right collection agency for your recovery process you have to consider many things like reliability, past experience etc., but the most important thing you should mind is the charge fee. There are many collection agencies and each deal with different types of debts. Debt collection agencies charge using three methods; flat fee, contingency and debt buying.

Contingency method charges

To determine the contingency fees charged the collection agency has to consider four factors. The age of the account, the average balance at that moment, the Account placements volume and the industry in which the client operates.

The debt age is very important because it determines how successful the recovery will be when collecting due accounts. Thus, the older the account the higher the contingency rate. If the balance is small large energy may be used to recover for small reward making the charge fees to be higher. The outsourced Account volume to be recovered determines the fees charged. When you have large Account number the fee may be lower. Different industries have different practices when recovering debt thus charges will differ from industry to industry.

Buying debt charges

When a creditor is not in a position to recover his debt from a customer he can opt to sell that debt to agencies that buy debt. The creditor will group several accounts having same features and sell them to the debt buyer. Debt buyer can then choose from the listed account the recent accounts, those that have not been worked on and old accounts the collectors failed. Debt buying agencies buy the account packages via bidding process and pay a certain average of debt face value. The debt type influence amount paid to the creditor. The collectors are paid once they collect the amount.

Flat fee debt collection charges

When recovering your debts via flat fee debt collectors you will pay the fixed fee per debt collected. This is quite risky because you have to pay a certain fee up front. You have to pay collectors even if they did not recover the whole amount. This method is slow, long and stressful.
Most debt collector’s work under debt collection agencies, however, some are independent. Each collection agency specializes in different types of debts so very important before visiting that collection Agency.

A good and recommendable agency limits its work within the statute of limitations when collecting debts. If need be the collectors can go to an extent of referring cases to lawyers. The lawyer’s files lawsuits against creditors who do not want to pay.