Collection Attorneys vs. Collection Agencies

If internal efforts have failed to resolve a debt issue, it may be time to call in a professional. But who? A collection attorney or a collection agency.

Most companies, hoping to avoid legal action, start with the agency. They are usually cheaper than collection attorneys. Initially, collection agencies take many of the same actions against the debtor that you may have already taken,starting with a series of letters and phone contact if the initial letters are not effective. However, the third-party power that collection agencies exhibit combined with specialized phone systems, software, and training often make them more efficient and cost-effective at collecting on delinquent accounts.

The costs for collection services can vary greatly depending on the volume of accounts being submitted, the average size of an account, and the existing age of the accounts. Most collection agencies work on a percentage basis where they only earn fees only on what they collect, while others offer flat-fee pricing. While the pay-for-performance model seems more appealing, most agencies that work on a percentage basis need to charge high percentages and are typically only motivated to collect on larger and easier to resolve accounts.

If your portfolio of bad debt consists mainly of extremely delinquent accounts with high balances using a collection attorney may be your best course of action. A debt collection attorney can force a slow paying individual or company into court and they often exhibit more power than a collection agency, but the costs involved can often make this prohibitive unless the balances to be collected are high. Most collection attorneys charge an hourly fee, collect at least one-third of the amount recovered, or both. They usually charge a minimum fee or may require a minimum amount of debt. Plus, payment to the attorney is typically in addition to any court-related fees and charges connected with a lawsuit, if you decide to pursue a judgment in court.

Debt Collection

When a consumer does not pay a debt, lenders or collection agencies have the right to take reasonable steps to give the consumer a chance to pay. They can usually telephone the consumer and make other reasonable efforts to let the consumer know that the debt is owed and the amount. Consumers can expect to receive letters giving them the same information.

Under most circumstances, lenders – and in some states debt collectors and collection agencies – can sue the consumer to recover money owed.