Short answer
Most collection agencies work on contingency: they keep a percentage of what they recover and charge nothing on accounts that never pay. Quoted rates commonly run between 25 and 50 percent, with fresh, high-balance commercial accounts at the low end and aged, small-balance consumer debt at the high end. Flat-fee programs price early-stage letter-and-call treatment per account instead, and debt buyers pay cents on the dollar to own accounts outright rather than charging a fee.
Contingency pricing follows expected recovery. The variables an agency prices are the age of the accounts, since recovery falls sharply after charge-off, the average balance, the debt type, commercial versus consumer versus medical, and the quality of the documentation that comes with the placement. A portfolio of recent commercial invoices with clean paper collects well and prices low; a tranche of years-old, small-balance consumer accounts prices high because most of the work produces nothing. Some agencies also tier rates by placement volume or offer a lower rate once an account moves to litigation with costs advanced by the creditor.
Two cautions round out the picture. First, the fee comes out of recoveries, so the cheapest rate is not the best deal if the agency's recovery percentage lags; compare net-back, the dollars returned per hundred placed, rather than the headline rate. Second, whether collection costs can be added to the consumer's balance is a legal question governed by the underlying contract and state law, not an agency pricing choice. Creditors comparing agencies should also verify the agency's licenses in their customers' states before placing, which our verification guide walks through.
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