Contingency Collections, also called Traditional Collections, is the most popular debt collection service to recover your money from defaulters.
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 a Professional Collection Agency to collect money from the Debtor. The Creditor does not pay anything for the Collection Agency’s recovery efforts till they actually recover money from the Debtor. The Agency deducts the contingency fees per the contract and returns the remaining money to the Creditor. No other costs or hidden fees.
| For example: If a Creditor assigns an account to a Collection Agency with an outstanding amount due of $1000, and a collection agency charges a 40% contingency fee thenScenario 1: If the Collection Agency recovers the full amount, then the Creditor gets $600 and the Agency keeps $400 Scenario 2: If the Collection Agency recovers only half the amount ($500) then the Creditor gets $300 and the Agency keeps $200 Scenario 3: If the Agency recovers nothing, they get nothing. No Collection – No Fees |
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 uses expensive softwares to collect money from the debtor, regardless a recovery is made or not. Therefore, the Collection Agency puts its best effort and resources into recovering 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 powerful 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 versus when your own under-trained employees were attempting to make a recovery.
5. Most agencies can do contingency debt collections in both English and Spanish, even attempting to locate a missing debtor using advanced skip tracing.
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 that have a very low chance of ever paying anyway.
7. Many collection agencies offer customizable strategies and plans to meet the specific needs of businesses, increasing the likelihood of successful debt recovery.
8. Collection agencies keep records of the debts they attempt to collect and the process they follow. This documentation can be useful if a business decides to write off the debt as a tax deduction or if it ends up in litigation.
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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.