- Collection Letters cost about $15 per account are best suited for accounts that are less than 120 past due. Debtor pay directly to you. It is a very effective, yet a low cost solution. ( “Step 1” and “Step 2” service).
- Collection Calls are better for accounts that are over 120 days past due, or have finished the collection letters service and are still unpaid. This service is contingency based and you get about 60% of the amount recovered. Agency keeps 40%. (“Step 3” service).
- Legal Suit is recommended if the accounts is still unpaid, or if the balance is significantly higher. Fees varies. (“Step 4” service)
Contact us for a free consultation regarding these services.
Collection agency fees for various stages:
Majority of clients initiate the debt collections activity from “Step 2”.
|Stage||Collection Cost ||Best for accounts age|
|Step 1 – Letters 1st Party |
( 5 reminder letters sent on your name for each account. Account not in collections yet. Fixed Fees.)
| ||Between 30-60 days|
Step 2 – Letters 3rd Party
|Between 60-120 days|
Step 3 – Collection Calls
|No upfront fees, you get charged only when a collection agency recovers your money. Fees is typically 40 percent of the amount collected. You get 60% back.||After 120 days|
Step 4 – Legal
|Fees varies and communicated in advance ( Usually between 30% to 50%).||After above efforts have exhausted|
Thumb Rule: Go for the better one not the cheapest one
Imagine: Collection Agency “A” charges $15 and is able to collect $50. Collection Agency “B” charges $20 but is able to collect $75. Which one will you select? >> Agency “B” <<
Recovered money that goes back into your pocket can be hundreds or thousands “more” when a better collection agency is involved. Charges of various collection agencies in USA does not vary too much, but performance does. It is undoubtedly better to stick with an agency which has better collection rates than its peers, even if it charges a few extra dollars per account for fixed fees collections or even 10% more for contingency based collections than other agencies. Some agencies genuinely charge more since their services are superior, or they invest more in their resources used for collections.
Important points to know and ask the collections agency:
- You can start collections from any step mentioned above, and not necessarily “Step 1”.
- For the Fixed Fees service, ask if the agency offers any kind of guarantee on the recovery rate.
- For Fixed Fees service, what is the policy on expiration of accounts?
- Do they send collection letters in colored print or in black and white prints. It’s better to pay extra for colored prints as they have maximum impact.
- Can they send both Spanish and English collection letters.
- Are the Scrubs performed, if it includes Litigious debtor, Bankruptcy, USPS Change of Address.
- If their entire operations are USA based.
- Do they have an online portal where you can Submit accounts, View reports and Place stops on collections activity of a debtor.
- A larger collection agency does not necessarily mean that its better.
B2B collections which carry higher balances fall under commercial collections category where the contingency rates are much lower because they carry higher balances.
We at Nexa, have shortlisted a few collection agencies based on their performance and experience of staff. Use our contact form to get connected with one of them. This is a free service.