The concept of “Contingency debt collection” is really simple – Once the Creditor has tried enough to recover his money from the Debtor without success, he finally hires an Expert Collection Agency to collect money from the Debtor. The Creditor does not paying anything for the Collection Agency’s recovery efforts till they actually recover money from the Debtor. The Agency just deducts the contingency fees per the contract and gives the remaining money back to the Creditor. No other costs or hidden fees.
Scenario 1: If the Collection Agency recovers full amount then the Creditor get $600 and the Agency keeps $400
Benefits of Contingency Collections:
1. If a collection agency does not recover any amount, it results in a net loss for them. (Why?) A collection agency invests resources, manpower and expensive softwares to collect money from the debtor, regardless a recovery is made or not. Therefore, the Collection Agency puts their best effort and resources to recover your money.
2. The Creditor has nothing to lose. In fact, most of this past due debt would have been written off as a loss, all recoveries translate into a nice profit.
3. By involving a Collection Agency, you have just given a very strong message to the debtor. He is more likely to pay now than ever before.
4. Collection Agencies are up to date with the latest debt collection laws which lowers the chances of a counter lawsuit verses when your own under-trained employees were doing the recovery.
6. Biggest advantage is off-loading the hard work of debt collection to a 3rd party. Who wants to follow up with a customer/patient again and again? By outsourcing those hard to collect accounts you have also outsourced all the stress and stopped wasting too much time on accounts which have very low chance of ever paying anyway.
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Note: Contingency collections / Collection Calls are best suited for accounts over 120 days past due, for accounts less than that one should consider the flat fee based Collection Letters service.