Law

True Cost Of Hiring A Commercial Collection Agency

Everyone is aware that managing a business or company, and the cash flow is a financial pain point. It is always exciting to land a new client, but it turns into depression and anxiety when the client does not pay you, and the debt adds up. You may contact Chicago debt attorneys if the case goes to court, but in this case, you might consider contacting and taking advice from a commercial collection agency.

True cost of hiring a commercial collection agency

Commercial collection agencies are experts in business debt collection. They convince debtors to settle their debts faster and more often. Their practices and laws are very different from personal collections. The Federal Debt Collection Practices Act (FDCPA) does not include commercial collections. 

Hiring a commercial collection agency is taking help from professionals to handle the debtors while you can focus on your work. They understand the inner mechanism of collection agency systems and know how to maximize the client’s chance of getting paid. 

The true cost of hiring a commercial collection agency varies. Most agencies have two ways of billing arrangements. The first one is a contingency basis. It means they will be paid only after collecting money from debtors. The rates are based on the size of the collection and the time or age of the collection period. The second way is a flat fee. Collection agencies use both approaches.

Benefits of a contingency fee structure

The contingency method creates an agreement where the creditor pays the collection agency a percentage of the debt if they successfully recover the money from the debt. But, if the collection agency can not generate the debtor funds, no money is earned or paid. In this way, both the creditor and the collection agency have aligned interests–and both will make money if the agency succeeds, and no one makes money if nothing is achieved. 

It is attractive to most creditors because they are hesitant to spend money while collecting a debt. We hear most of the time, “ I do not want to throw good money after bad.” it mainly occurs when the agency has exhausted the pre-litigation collection efforts, and the remaining option is contingency litigation which costs around $500 to $1,200. It is surprising when a business that is owed $30,000 to $100,00 is reluctant to invest $1,000 for litigation. The contingency model for pre-litigation collection is something the creditors generally prefer over anything. 

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