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What is a Collection Agency?

Collection Agency Agreement rates

There are several factors that affect the collection commission rate charged and the terms of a collection agency agreement. A main factor can be the age of an account before it is placed for collection. However, there are other combinations of commission factors that determine rates and term when negotiating a collection agency agreement.

Every Client has different needs and debtor demo graphics. Below you will find a synopsis of the main points AAB considers when negotiating a collection agency agreement.

Factors to consider in a collection agency agreement

Age of the account or accounts listed is the main factor determining commission rates on an agency agreement. The standard collection industry commission rate for accounts over one year old (from date of last payment) is 50%. The longer an account has been delinquent the lower the recovery odds that can be expected by a collection agency. On the other end of the scale 30/60/90 day overdue accounts get commission rates as low as 10%. Most rates are somewhere in the middle and should be clearly defined in a collection agency agreement.

Commercial or business to business collections are usually negotiated at a lower rate than consumer collections in a collection agency agreement. However, commercial collections or bad debts are more time sensitive than a consumer collection. If a Client has a mix of consumer and commercial accounts then commercial and consumer rates should be stated in an agency agreement.

Clients with a high volume of collection business can negotiate slightly better commission rates based on collection volume levels, which should be clearly defined in a collection agency agreement. A collection agency realizes what they discount on commission rates will be made up by account volume. This is why most agencies insist on volume levels or milestones in their agency agreement.

Account documentation always plays a role when negotiating a collection agency agreement. If a Client has impeccable documentation like signed credit agreements, personal guarantees or collateral agreements then this can be factored into an agency agreement. A collection agency knows they can offset a rate discount with the higher recovery percentage they can expect when collecting accounts that are backed with solid documentation. If you happen to have well documented accounts be sure to emphasize this point when negotiating your collection agency agreement.

In the case of Commercial debtor accounts the Client’s industry may factor into the collection agency agreement. Industries have cycles that go up and down like companies. A new technology can devastate an industry or a Client’s industry customers can be in a depression, which affects the potential recovery rate of the collection agency.

What you can expect with an AAB Collection Agency Agreement

AAB strives to provide an agency agreement that is fair to both sides. When you contact us a collection professional with a minimum of twenty years of experience will factor in some of the points listed above. Once we reach an agreement AAB will provide a customized collection agency agreement.

Keep in mind that every day that clicks by decreases your chance of recovery. Contact an AAB professional by phone or request a free consultation to discuss a collection agency agreement.
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