Account Adjustment Bureau

Factors to Consider in a Collection Agency Agreement

The 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 the last payment date) is 50% The longer an account has been delinquent, the lower the recovery odds that a collection agency can expect 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 collection rates are usually lower than consumer collections in a collection agency agreement However, commercial collections or bad debts are more time-sensitive than a consumer collection A consumer can be unemployed and get back to work In contrast, if a company runs out of money, it is out of business, and your chances of recovery are almost zero

Clients with a high volume of collection business can negotiate slightly better commission rates 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 Suppose a client has impeccable documentation like signed credit agreements, personal guarantees, or collateral agreements Solid documentation allows a collection agency to offset a commission rate discount with the higher recovery percentage they can expect when collecting accounts If your accounts are well documented, 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 New technology can devastate an industry or a client’s industry, leaving customers in a depression, which affects the potential recovery rate of the collection agency

What You Can Expect With an AAB 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