Nexa Collections

Selecting a Collection Agency Just Because It’s Cheap? Never.

A collection agency is not a “low-bid vendor.”
It’s a business partner trusted with your brand, your customer relationships, and your cash flow.

Choosing an agency the way you’d choose the lowest-priced plumber is one of the fastest ways to lose money twice:
first in unpaid balances… and then in bad recovery performance.

Here’s the reality: collection agencies know exactly what their competitors charge.
So when you see an agency offering rock-bottom contingency fees, ask the obvious question:

How are they funding the work it takes to actually recover your money?

Because the fee is not the goal.
The recovery is the goal.

Why “Low Fee” Can Mean “Low Recovery”

Agencies that charge higher contingency fees aren’t foolish.
There’s a reason they can justify it: they invest more effort and better talent into recovering accounts.

A good collector is in high demand.
They don’t work harder for less. That’s not how the world works.

When an agency agrees to collect at too-low contingency fees, it often signals one of these problems:

  • They can’t afford strong collectors

  • They don’t devote enough time per account

  • They run a “volume machine” (quantity over quality)

  • They cut corners on compliance and supervision

  • They create reputation risk for you

  • Their data security is not up to mark. Collection agencies are required to have bank level GLBA secure systems. Unfortunately, not all collections can effort it, putting them and you at risk.

And if the agency uses inferior-quality collectors, your business reputation becomes the collateral damage.

Collection Agencies Have High Overhead Costs (For Good Reason)

Let’s break down what a serious collection operation actually costs.

  • Experienced, top-tier collectors are expensive.
    Most collectors are commission-based contractors. They earn a percentage of what they collect.
    If the agency’s contingency fee is too low, the collector’s earnings shrink—so the best collectors won’t stay.

  • Supervision + professional workspace matters.
    A well-run operation needs oversight, support staff, training structure, and the right equipment.
    Ask yourself: do you want low-wage collectors working from home, or overseas, handling your accounts?

  • Ongoing training on Federal + State laws is non-negotiable.
    Collection laws change. Scripts change. Call practices change.
    Agencies that don’t train regularly risk violations—and your brand absorbs the blowback.

  • Secure data handling + annual security audits are not cheap.
    You share sensitive customer information. Secure systems means money, hiring an inhouse IT security engineer.
    If a third-party agency gets breached, imagine the liability and chaos for your company.

  • Skip tracing and recovery tools cost money.
    Effective recovery requires subscriptions to real services—advanced skip tracing, not “basic tracing for the namesake.”

  • Being licensed, bonded, and insured costs money.
    Protection against counter-lawsuits isn’t optional—it’s operational hygiene.

  • Client portals, reporting, document uploads = IT costs.
    A professional system for submitting accounts, monitoring progress, and running performance reports requires investment.

Bottom line:
Hiring a collection agency just because it offers rock-bottom fees—without investigating further—can be costly.
You often get what you pay for.

Optimum Collection Fees (What’s “Too High,” “Too Low,” and “Just Right”)

This is what we consider generally healthy contingency pricing.

For Consumer Collections (B2C)

  • Over 50% contingency is usually unacceptable and too high
    (unless the debt is more than 2 years old and extremely difficult to collect)

  • 50% is slightly on the higher side

  • 45% to 50% is considered acceptable

  • 35% to 45% is typically the sweet spot for a strong agency

  • Below 35% may be too low unless the balance is over $10,000

Performance Beats Fees (Simple Math, No Drama)

Let’s say you assign a balance of $10,000 to a collection agency.
You have two options: Agency A and Agency B.

Agency A

  • Charges 40% contingency

  • Recovers 50% of the balance (recovers $5,000)

  • You receive $3,000 after fees

Agency B

  • Charges 25% contingency (sounds amazing on paper)

  • Recovers 30% of the balance (recovers $3,000)

  • You receive $2,250 after fees

Performance wins.
Any business owner would pick Agency A.

Because you don’t deposit “low contingency fees” in your bank account.
You deposit recovered dollars.

Let Me Repeat (Because This Is Where People Get Tricked)

Collection agencies know their competitors’ pricing.
They don’t charge higher fees “just because.”

They charge higher because:

  • the work is harder than it looks

  • good collectors cost more

  • compliance requires constant investment

  • recovery performance takes time and talent

Now, to be fair:
Not every low-fee agency is automatically bad.
And not every higher-fee agency is automatically great.

But if an agency is offering a rock-bottom rate, ask why.
Ask what you’re getting for that price.
And make a mindful selection.

For Commercial Collections (B2B)

Commercial accounts typically involve higher balances and more complexity, so pricing works differently.

  • Contingency fees are typically between 15% and 35%

  • A collection agency will give you a quote depending on:

    • the balance size

    • the age of the account

    • the complexity of the case

  • There is no fixed fee in most B2B commercial scenarios

Final Thought

The cheapest agency is rarely the one that returns the most money.
In collections, “cheap” can quietly translate into:

  • fewer attempts

  • weaker collectors

  • lower recovery

  • higher reputation risk

  • bigger losses over time

So don’t hire based on fees alone.

Hire based on performance, professionalism, and protection of your brand.