Debt Collection Agency

How Much Does Debt Collection Outsourcing Cost?

Debt collection agencies charge between 10% and 50% of collected debts, with the primary contributing factor being the age of the outstanding balance. In this guide, we will unpack how the collection process works and what it will cost to outsource it.

Debt Collection – Calculate The Cost

Did you know that around 55 million people in the United States alone have some kind of debt? Debt is an age-old problem and it has long been handled by debt collection services. But what about debt collection outsourcing services?


How do they work and how much do they cost? Are these outsourcing services really worth it for what you need to have done? What kind of factors will affect the cost of these services anyway?

To calculate the total cost, it really depends on the edge of the deck, so for every $100 collected expect to pay the collection agency between $10 and $50. Keep reading and learn more about what debt collection outsourcing services are, how they work, and how much they cost. 

How Does the Debt Collection Process Work?

While the debt collection process is relatively simple, it can be quite intimidating for most people. Debt agencies first start by sending out a notice to the person that has overdue debt. This notice will explain that the account has already passed its due date and that it is important to pay off the debt right away. 

A notice like this is usually enough to scare most people into paying off their debts. However, if the person involved still does not pay off his account, then the debt collection process will become a bit more complex. After sending out the notice, the creditor, such as a bank, will then proceed by turning the person’s account into a “charge off” status. 

This is when things start to get a bit ugly for the debtor. A charge off status means that the person involved will receive a bad mark on his credit report due to being late with this payment. Keep in mind that this only happens if the person has not paid his debt for around 180 days. 

The idea is that most people can pay off the necessary amount of their debts within 180 days. If the person does not pay his debt, the strike on his credit report will be quite significant. The amount that this penalty lower’s one credit score can make one seem financially unreliable. 

It ultimately might make a person have a more difficult time completing certain financial tasks such as opening a bank account, a new credit card, getting a loan, and so on. Also, if the person’s account has a credit card involved, the charge off status will prevent the person from using that credit card. At a certain point, the person’s debt will be whisked off to a debt collector. 

The Details

This only happens once the creditor decides to hire a debt collector agency for the job. At that point, the debtor will no longer need to interact with the creditor concerning this debt but rather with the debt collection agency. After that, the debtor will likely receive something relating to the confirmation of his identity such as a piece of mail from the debt collection agency.

DEBT Collection

This verification step, of course, is very important since the agency wants to make sure they are dealing with the right debtor. After the debtor’s identity has been verified, he will get another piece of mail relating to the exact amount of money he owes to the original creditor. While the debtor can still try and avoid paying back the debt at this point, it will become quite difficult. 

This is because the debt collection agency will be quite persistent. The agency will call the debtor and contact him in other ways, pestering him until he is finally persuaded to pay off the debt. If the debtor is unable to pay off all the debt at once or if he wants to try and pay less, he may be able to do a bit of negotiating with the collector. 

While this doesn’t always work, negotiating the price of the debt with the debt collector can sometimes work in the debtor’s favor. Whatever the case, there will eventually come a point where the debtor pays off all of his debt with the collection agency. At that point, the debt collection agency will finally close his account. 

You might be wondering what might happen if the debtor never pays off the debt. Things tend to get more serious. The debt collection agency may decide to elevate the problem and bring the debtor to court in an attempt to sue him.

How Do Debt Collection Agencies Bill for Their Services?

The way debt collection agencies bill for their services is relatively straightforward. The first thing you should know is that debt collectors, in general, only bill for their services in three primary ways. The first way is a flat fee, the second way is debt buying, and the third way is a contingency fee. 

Find-Trusted Companies

A flat fee is exactly what it sounds like. The debt collection agency will decide on an exact fee to charge for their services. This fee is almost always charged upfront and near the beginning of the process of collecting debts.

A flat fee makes the entire process simpler, although it can be somewhat costly for creditors. Some debt collection agencies have relatively high flat rate fees that are impossible to avoid. Some creditors will refuse to work with debt collection agencies that charge flat rate fees simply because they are too expensive. 

What to Know

In that case, the creditor may instead prefer a debt collection agency that instead does debt buying. As the name suggests, this involves the debt collection agency buying the debt from the creditor. The debt collection agency will charge the creditor fees through the purchase of the debt. 

Usually, the collection agency buys the debt at a price that is much lower than what it is actually worth. This makes the process very simple for both the debt collection agency and the creditor. Then, there are some agencies that only deal with contingency fees. 

In that case, the agency will only receive payment based on a certain percentage of the debt involved. Also, the payment only goes to the debt collection agency as long as the debt is collected. 

How Much Does It Cost To Send a Client to a Collection Agency?

The first thing you should know is that there is no exact fee that is the same across all debt collection agencies for sending clients to collections. Some agencies may be relatively affordable while others may be quite expensive. Usually, the agency will charge based on a percentage of the debt involved. 

Sometimes this percentage is as low as 25% while, in other cases, it may be as high as 50%. You might be wondering what kind of factors may affect the amount that the debt collection agency charges. There are actually several factors that could influence the cost. 

For example, the age of the debtor’s account certainly plays a big role in what is charged. The chances of recovering the debt also play a big part in the total cost. This is because certain debts are more complex to work with than others. 


If the debt collection agency sees that some debt has not been paid for a very long time, it may be impossible for the agency to get the debtor to pay his debt, or it may take a lot of work to get this outcome. For that reason, the debt collection agency will pay more money because the agency is aware that it will take quite a lot of time and effort to accomplish this. 

But of course, that is what creditors are paying for. The creditor doesn’t want to do all the heavy lifting, so the creditor will instead hire a debt collection agency to do all the work instead. That kind of work will come at a price, so you shouldn’t be too surprised at what debt collection agencies charge for taking debt out of a creditor’s hands. 

What Percentage of Money Do Collection Agencies Retain?

In general, debt collection agencies charge around 25% to 50% of the debt involved. However, it is rare for an agency to retain more than 40%. If a debt collection agency tries to charge you around 50%, then you may have mistakenly chosen an agency that is unnecessarily expensive. 

However, 50% may be a normal percentage if the account involved is quite old, usually several years old. In that case, 50% will actually be quite a fitting percentage and it may even be a bit higher than that in some cases. On the other hand, this percentage will be unacceptable if the account involved is still very young, perhaps only a few months old. 

In that case, the percentage should be quite low, usually around 20%. The size of the debt involved will also play a part in the percentage that is charged. If the debt amount is quite small, the percentage charged by the agency will be larger. 

This is because the agency will still have to put in quite a lot of effort to work through that debt and there won’t be much payment at the end without using a high percentage. On the other hand, debts that are very large tend to have low percentage rates. 

How Much Do Collection Agencies Charge To Collect Old Debt Over 1 Year Old?

As mentioned before, the age of the account has a lot to do with how much debt collection agencies will charge. In general, older accounts are harder to deal with because the debtor involved will be more stubborn. For that reason, it makes sense that the debt collection agency will charge more for this extra labor.

For example, if an account is between 1 and 2 years old, it will be common for the debt collection agency to charge around 40% based on the debt involved. This is true whether or not the debt involved is large or small. The creditor will need to pay even more if the account is older than 2 years.

In that case, it will not be unusual for the agency to charge around 50% of the debt involved. While this is indeed a lot of money, if the creditor wants to get the debt off its hands, it will certainly be worth it. 

How Much Do Collection Agencies Charge To Collect Debt Less Than 120 Days Old?

Again, debt collection agencies charge more for older accounts than for younger accounts. An account that is less than 120 days old is quite a young account. Because younger accounts are much easier to deal with than older accounts, it makes sense that most debt collection agencies will not charge very much. 

In general, the agency might charge around 20%. But if the account is between 120 and 180 days, that percentage will go up to around 25%. 

Advantages and Disadvantages of Outsourcing Debt to a Collection Agency?

The main disadvantage of outsourcing debt to a collection agency is that you will have to pay a large chunk of money to the collection agency. In some cases, this may make hiring a debt collection agency an inefficient choice, especially for smaller debts. 

The main advantage of hiring a collection agency, on the other hand, is that the creditor won’t have to deal with stubborn debtors anymore. Instead, the collection agency can do all the heavy lifting.

The creditor only needs to pay a fee for the work and the creditor will have the chance to focus on more important issues. 

All About Debt Collection Outsourcing Services

Debt collection outsourcing services can be extremely valuable to creditors. If a debtor refuses to pay off his debts, a debt collection agency can fix the problem in no time. While a collection agency will charge a creditor a certain amount of money based on various factors, hiring such an agency is almost always worth it. 

To learn more about debt collection services, get a quote here.

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