Debt Recovery

Assigning accounts for collections roughly 60-90 days past due for a maximum recovery rate is recommended.

The recovery rate dips as the account gets old. The following chart demonstrates the relationship between the Account-age and Recovery-Rate.

Still, there are some industries where the average recovery rate is better than others.

Based on clients we came across last year (2021), here is the average recovery rate we have seen, along with our collection agency partner(s).

This is purely our own experience. No collection agency openly publishes the results they achieve by industry. But it should give an idea of what to expect.

Industry	Recovery Rate
Transportation	84.33%
Pool Services	73.67%
Cooperative	70.39%
Propane	66.40%
Fuel/Oil	61.25%
Snow Removal	60.39%
Lawn & Garden	59.87%
Printing	58.19%
Plumbing, Heating, Air	53.30%
Engineering	52.95%
Interior Design	52.90%
Mortgage	48.11%
Travel Agent	44.18%
Distribution	43.30%
Medical / Athena	42.46%
Construction	41.49%
Publishing	40.78%
Credit Unions	40.27%
Retail/Consumer Misc.	39.72%
Pest Control	38.95%
Auto Supply & Repair	38.02%
Restoration Companies	37.73%
Commercial	36.95% – 85%
Contractors, Special Trade	36.76%
Industrial	36.38%
Optometrists	36.27%
Dental	33.29%
Repair Services	31.59%
Waste Management	31.40%
Funeral Services	31.09%
Day Care	29.55%
Business Services	29.43%
Government	28.38%
Utilities	28.36%
Farm Supply	27.52%
Auto Dealers	27.04%
Fire	26.65%
Telephone Communications	25.48%
Member Organizations	25.13%
Elementary/ High School	24.59%
Personal Services	22.83%
Schools Misc.	22.78%
CPA / Accounting	22.16%
Security	21.63%
Trucking, Nonlocal	21.34%
Clothing	20.86%
High Tech	19.87%
Veterinarian	19.25%
Advertising	19.17%
Drug Store	19.11%
Aviation	19.07%
Medical Supplies	18.03%
Rentals, Equip, etc.	17.71%
Newspaper	17.48%
Non Profit	17.28%
Hotel	17.21%
Manufacturing	17.08%
Pharmaceutical	17.00%
Wholesale, Durable	16.94%
Social Services Misc.	16.66%
Insurance	15.38%
Real Estate Management	15.34%
Media	15.22%
Bank	14.93%
Computer Services	14.90%
Bail Bonds	13.97%
Nursing Homes	13.87%
Medical Other	12.94%
College/Univ/ Prof. School	12.08%
Gym/Sports Org	11.41%
Electronics	10.25%
Legal Services / Lawyers	9.94%
Cleaning Service	9.06%
Accounting	8.40%
Moving / Storage	8.32%
Chiropractor	8.26%
House Rent Collection	6.96%

Commercial accounts (B2B) have a better recovery rate than (B2C) accounts.

 

You can legally hire more than one collection agency at a time, provided you do not assign the same account to multiple collection agencies. If one debtor starts getting contacted by different agencies, you can be sued for harassment. 

However, hiring more than one collection agency will be very hard to manage. Keeping track of which accounts have been assigned to Collection Agency “A” and others to Collection Agency “B” is always confusing. Then each collection agency has its own way of recovering the debt. Two different client portals training will be required, and each agency will have separate ways and dates when they pay you or raise an invoice to bill you. Moreover, whenever a debtor calls you directly to make a payment or discuss something else about his debt, you will have to figure out which collection agency has the account of this debtor. It can be quite confusing. 

When does it make sense to hire two collection agencies?

1. Transitioning from Agency A to Agency B: You want to fire your existing collection agency “A” ( say you are unsatisfied with their collection results). Meanwhile, you start assigning all new accounts to this collection agency “B”. Eventually, all your accounts to your old collection agency “A” complete their collection lifecycle, and you are left only with the new collection agency “B”.
2. You are a large company with multiple offices across US. You also have hundreds or thousands of accounts that require collections every month. You decide to hire collection agency “A” for one set of offices and collection agency “B” for other offices. Both collection agencies will work hard to give you better results since you are such a large account for them. They will always have a fear of losing you.

Overall, we recommend that you hire only one collection agency that is licensed nationally. Do your due diligence to shortlist the best one.

Collection agencies typically offer two types of collection services to their clients. “Fixed Fee” and “Contingency Only” services.

In the Fixed fee service, a collection agency sends multiple written demands only.

In the Contingency service, one written debt validation notice is sent, followed by collection calls from an experienced debt collector.

Although the sales guy from the Collection Agency may attempt to sell you a “Fixed Fee” service that costs around $20 an account. Fixed fee may appear more beneficial after hearing all the sales pitch, however, it may not be the best service for you. The biggest advantage a collection agency gets is that the moment you buy their “Fixed Fee” service, they have made money from you even before a single account is placed for collections. 

Unless your accounts are less than 180 days past due, the “Fixed Fee” service may be of little help. After the collection agency fails to recover money for you in the “Fixed Fee” service, they will later insist that you should transfer accounts to the contingency service.

Why go for the “Contingency Only” service?

• No upfront fee is involved.
• A collection agency makes money only if they collect for you.
• Credit Bureau reporting is done for free by most agencies.
• Calls from a debt collector are more impactful than written demands. 
• Most agencies do USPS change of address checks only in Fixed fee service. They do not perform skip-tracing, a more accurate tool for locating the debtor and his phone number. In Contingency service, almost all collection agencies rely on skip tracing.
• A debt collector can negotiate payment terms even with those tricky debtors. For example, he may put the debtor in installments or settle the amount in one lump sum payment slightly lower than the original amount due.
• A debt validation letter is sent out anyway, even during the Contingency only service; therefore your debtor knows the account is with a collection agency. So you do get a considerable benefit from this written demand as well.
• A collection agency takes all the headaches involved in the negotiation and takes money from the debtor. In a fixed-fee service, you have to be the one to manage payment acceptance and negotiation. 
• You just have to notify the collection agency of any payments received from the debtors directly to you. Other than that, sit back, and you will receive the monthly checks for the amount collected.

When is the Fixed Fee service beneficial?

In our experience, it is a better service only if your accounts are no more than 180 days past due. If accounts are less than 120 days past due, it will most likely result in significant cost savings over contingency collections.

If you want less hassle-based recovery, go for Contingency Only collections.

You had submitted accounts to a collection agency, but they have ceased their operations now.

This is a fairly serious situation.

What happens to the accounts they were working on, and what about those debtors in the middle of a payment plan?

Are there any legal aspects involved?

What about the charges that were credit reported? If there is a need to undo the credit reporting for a debtor (say due to some error), how will that be handled?

• Try to retrieve any files, account data, or documentation they have regarding your accounts. Keep records of all communications with the collection agency. If your debtors have made payments to the agency or have arranged a payment plan.
• Explore any potential claims you may have against the agency.
• Are they notifying your debtors about the shutdown and any instructions on how their debt will be handled in the future?
• If the agency was responsible for reporting to credit bureaus, ensure this information is accurately reflected as needed. Make sure that any payments your debtors have made are reported. After evaluation, it may just be better to withdraw all credit reporting submitted by that collection agency for your debtors.
• Double-check that the agency has shut down and that this isn’t a mistake or a scam.

There is a possibility that your old collection agency is not cooperating or is simply unreachable. Their phones don’t work and they have abandoned the office.

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Next, Hire a new Collection Agency. Your priority this time is to look out for a mid-to-large-sized collection agency, regardless of their location. Smaller agencies always carry the risk of shutting down.

Your new collection agency should be able to guide you through the transition process, minimizing the risk. Share all updates that have been received from your old collection agency.

There is a systematic procedure to hand over accounts from one collection agency to another that is legally compliant and convenient. Not all collection agencies are experts in handling this transition.

Need a new collection agency: Contact us today Please mention that your existing agency has closed, and we’ll make the transition easy.

Why Collection Agency Closures Are Happening More Often?

Many collection agencies have shut down recently, and the pressure hasn’t let up. The reasons compound on each other:

• Regulation F: The CFPB’s Regulation F took effect November 30, 2021 and remains the most significant update to debt collection law since the FDCPA itself. It set a hard “7-in-7” call frequency limit, more than seven calls in seven consecutive days about a particular debt, or calling again within seven days of a prior conversation about it, creates a presumption of harassment. It also formalized rules for email, text, and social media contact, each requiring a working opt-out mechanism, and introduced a model validation notice format. Many smaller agencies found it cheaper to close than to rebuild call scripts, dialer logic, and notice templates around these requirements. And the tightening hasn’t stopped: New York City’s own local rule, taking effect in September 2026, cuts the limit to just three contact attempts in seven days and extends it to original creditors, not just third-party collectors, a preview of where local and state rules may be headed elsewhere.
• Debtors aren’t picking up the phone the way they used to. Carrier-level spam filtering and caller ID apps now flag collection-agency numbers as “Spam Likely” or “Scam Likely” at scale. Branded, authenticated calls answer around 62% of the time; unbranded numbers sit closer to 20%, and a number tagged “Spam Likely” is mostly ignored outright. One bad labeling event can drop a number’s answer rate 20-50% overnight, and industry surveys show a majority of businesses have lost real revenue to incorrect spam flagging, some losing well over $100,000. An agency still relying on a pure cold-call playbook is fighting a connection problem that didn’t exist a decade ago.
• Credit Bureau Reporting changes, and they’ve only gotten more restrictive. Starting July 2022, the top three credit bureaus made it harder to report medical debt. Since then, several states, including California, Colorado, North Carolina, and Maryland, have gone further and banned medical debt credit reporting outright. The CFPB’s own broader federal rule on this was vacated in July 2025, an unresolved legal question that leaves some of these state bans in a genuinely uncertain position, but the direction of travel is clear. Medical debt makes up nearly half of consumer debt collections, and “credit damage” as a collection lever has been steadily losing its force for several years now.
• Compliance infrastructure costs keep stacking up. The Gramm-Leach-Bliley Act, effective for collection agencies since June 2023, requires securing consumer data nearly the same way a bank does. That’s on top of state-by-state licensing, many states require a surety bond, some license third-party agencies but exempt original creditors, and the specific requirements rarely match from state to state, plus SOC 2 audits and HIPAA obligations for any agency touching medical accounts. For a small agency, this isn’t one cost, it’s a compounding stack of them, and it’s a genuine reason the math on staying in business stops working.

What to Look in your new collection agency

• Most collection agencies that shut down were small collection agencies. Hiring medium-sized collection agencies with the license to collect consumer and commercial debt across the USA is always advisable.
• They should have a staff of more than 25 people and in business for more than 10 years.
• Immediately hire a collection agency (without delay) because there may have been quite a few of your debtors who were about to pay or were paying their debt in installments.
• Hire a collection agency that offers both fixed fee and contingency fee collections. Accounts less than 90 days past due should ideally be submitted for fixed fee collections.
• You should also be able to download a collection performance report for all your accounts online.
• They should have the license to collect money in all 50 states, which takes care of issues in case your debtor crosses state lines.
• Ask whether bankruptcy and litigious-debtor screening happens on every account before contact, not just when something goes wrong. A smaller, under-resourced agency may skip this step entirely, and that exposure ultimately lands on the creditor whose name is on the account, not just the agency.

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How Nexa Handles Your Portfolio Transition

Moving accounts from a shut-down or struggling agency to a new one is not a flip of a switch, and any agency that promises it will be shouldn’t be trusted on that promise. The prior agency often doesn’t cooperate. Phones may go unanswered, records may be incomplete or missing entirely, and the timeline depends as much on what the old agency will or won’t provide as it does on how fast the new one moves. This is a careful, deliberate process, not a fast one.

What Nexa actually does with an incoming portfolio:

• Verify chain of title on each account, confirming what documentation exists and what’s missing before anything else happens.
• Run a fresh address and bankruptcy scrub on the full portfolio, since accounts sitting idle during a shutdown or transition often have outdated contact information or new bankruptcy filings that need to be caught before any further contact is made.
• For transferred accounts with existing disputes, active legal representation, or prior cease-and-desist notices, files must be reviewed on a case-by-case basis. Seamless transition requires basic cooperation from your prior agency to provide account histories, dispute notes, and attorney contact details to maintain full FDCPA compliance
• Validate remaining statute of limitations on every account individually, since accounts that sat idle during a shutdown may be closer to their legal deadline than the paperwork suggests.
• Re-engage aged balances cleanly, with a compliant first-contact sequence rather than picking up wherever the prior agency left off, since the debtor’s own history with that agency (including its shutdown) is now part of the account’s context.

This takes real time to do properly, and Nexa would rather tell a prospective client that upfront than promise a seamless handoff that doesn’t reflect how this actually works.

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Frequently Asked Questions

What should I do if my collection agency suddenly shuts down?

This requires your immediate attention. Start by securing your account files, debtor contact information, payment histories, dispute records, payment-plan details, and credit-reporting status. Confirm which accounts are still active and whether the agency is holding any debtor payments. Make this process quick as your accounts data may become unavailable after they completely shut operations. Then identify a replacement collection agency that can review the portfolio and manage the transition without unnecessary interruption. The longer accounts sit untouched, the harder they may become to recover.

Can I transfer uncollected accounts from my old collection agency to Nexa?

Yes. Accounts can generally be reassigned after they have been properly closed or withdrawn from the previous agency and the account status has been documented. Nexa should be informed of any existing disputes, attorney representation, cease-communication requests, bankruptcies, settlements, or payment arrangements before collection activity begins. Federal rules place specific restrictions on communications involving disputed accounts, cease requests, and consumers represented by attorneys.

What happens to debtors who were already making payments when the collection agency closed?

These accounts need special attention. Obtain a complete payment ledger showing amounts already paid, remaining balances, payment-plan terms, and any funds still held by the former agency. Debtors should receive clear instructions about where future payments should be made so they are not confused or contacted for amounts they have already paid. Accounts should be reconciled before a new agency resumes collection activity.

What happens to credit reporting if my old collection agency goes out of business?

First determine which accounts the previous agency reported and whether balances, payments, settlements, or disputes are accurately reflected. A replacement agency should not simply assume that the former agency’s credit-reporting information can be transferred unchanged. Credit-reported accounts should be reviewed individually so reporting remains accurate and any necessary updates or corrections can be addressed.

Should transferred accounts use fixed-fee or contingency collections?

It depends largely on the age and condition of the account. Newer accounts that have not undergone extensive collection activity may be suitable for Nexa’s fixed-fee service, starting around $15 per account, where you keep 100% of payments received. Older, difficult, disputed, or heavily worked accounts may be better suited to contingency collections, where the collection agency is paid only when it successfully recovers money.

How do I avoid hiring another collection agency that could shut down?

Look beyond the contingency rate. Evaluate the agency’s years in business, nationwide licensing capabilities, data security, compliance program, staffing, client portal, online reputation, industry experience, and ability to handle both consumer and commercial accounts. Data security is particularly important: the FTC specifically includes collection agencies among the financial institutions covered by its Safeguards Rule, which requires covered businesses to maintain appropriate protections for customer information.

A debt collector lets you make payments in installments or a one-time total amount. Which one should the borrower go for?

Benefits of Paying in Full (in one lump sum payment)

• You can almost always strike a deal to settle the debt for a lower amount (keep insisting). Installments result in more work for collection agencies. They would rather accept a lower amount ( like a 10% or a 20% lower settlement and waive off all interest and extra charges) than work on your debt for months. Moreover, if a borrower skips an installment in the future, it results in even more work for them.
• Peace of mind. The matter is closed, and those pestering collection calls end.
• If you have cash available or can arrange it, then closing the matter in one lump sum payment is best rather than dragging the case. Debt collectors are persistent callers. They get paid a commission on whatever you pay and will keep bugging you until the payment is made. 

Benefits of paying in installments

• The borrower who pays in installments has effectively communicated to the debt collector that he does not have much money in the bank. He is genuinely tight on cash. He can usually settle the deal on the principal amount only and avoid paying any additional interest and fees.
• It gives more time to pay and avoids immediate cash flow problems. 

Benefits of Both (Installments and Full Payment):

• You avoid damaging your credit report.
• No more harassment from collection agencies or their lawyers.

The Russia-Ukraine war will undoubtedly translate to higher consumer and commercial delinquencies. 

Here are several reasons for it:

• Due to higher gas prices, everything has become expensive. Consumers need to shell out money on essential goods (like food, gas, clothes, expenses related to kids, etc.), and debt is something most people tend to put on the back burner. 
• For the majority of the American population, salary increase has failed to keep up with rising inflation. 
•  Commercial businesses have also been struggling with supply chain issues due to the covid restrictions in China; further increase in input costs due to the Russia-Ukraine war has resulted in severe financial stress. They are either not able to produce goods in required quantities or not able to always pass the increased costs to their customers.
• Many analysts predict that we are on the verge of an economic recession, the job market that has been very healthy so far can very well break the trend as corporations and small businesses may try to cut costs by laying off employees.
• Many people are saving money in cash, citing uncertainty.

The urgency for medical practices and small businesses to protect themself against unpaid bills is crucial. Before the financial situation of your debtor becomes worse, it is highly advisable to hire a collection agency and attempt to recover your money. The probability of recovering receivables goes down drastically each month, therefore prompt and intensive steps are sometimes necessary.