Table of Contents

How Much Do Collection Agencies Charge? A Complete Guide for Businesses

Pepper Smith October 24, 2025

A business is built on dreams. Turning an idea into something real takes vision, execution, and perseverance. And growing a business in 2025 isn’t exactly. Companies go to great lengths to exceed customer expectations, offering convenience like financing, BNPL options, or subscription-based services.

The upside? Increased sales and recurring revenue. The downside? Missed or delayed payments. What starts as a minor hiccup can quickly disrupt cash flow. Managing collections is tedious, frustrating, and time-consuming. Hiring a collection agency can help, but it comes with a cost. Understanding these costs is critical for any business looking to protect cash flow while keeping customer relationships intact.

This guide explores how much collection agencies charge, what affects fees, real examples, alternatives, and when paying for collections makes sense.

What Is a Collection Agency?

A collection agency is a professional service businesses hire to recover overdue payments. They handle the follow-ups, reminders, negotiations, and legal steps, all while following proper rules.

Why hire one? Collection agencies:

Save time by chasing payments for you

Reduce the risk of legal mistakes

Minimize friction with customers

Bring expertise and tools your team may not have

In short, they let your business focus on growth while pros handle the money chase.

How Much Do Collection Agencies Charge?

Types of Collection Agencies and Their Pricing Models

Collection agencies use different models to charge for their services:

Contingency Fee: Agencies take a percentage of the debt they successfully recover. This aligns their incentives with yours. Typical rates range from 20% to 50%, depending on the age of the debt and the complexity of collection.

Flat Fee: A fixed amount per account, regardless of the outcome. Fees usually range between $10 and $50 per account.

Hourly Billing: Agencies charge for the time spent pursuing debts. Rates range from $30 to $100+ per hour.

Hybrid Model: Combines a flat fee with a contingency charge, offering a balance between predictability and performance-based costs.

Average Collection Agency Fees in the U.S.

Pricing Model	Typical Fee Range	Notes
Contingency	20%–50% of recovered debt	Higher for older, complex debts
Flat Fee	$10–$50 per account	Independent of recovery outcome
Hourly Rate	$30–$100+ per hour	Often used for commercial debts

Consider this:

A $500 overdue invoice at 30% contingency costs $150 if collected.

A $5,000 overdue invoice under the same model costs $1,500.

Flat fees are predictable: $25 per account, regardless of size.

Also, smaller firms, particularly those relying on loan-financed operations, tend to face higher risks and, therefore, higher collection costs. Sustained high-interest rates exacerbate default risk, making agency fees a significant consideration for companies on a tight budget.

So, How Much Does It Cost to Hire a Debt Collector?

➮ Factors that Influence the Answer

There are several variables that play a role in how much a collection agency charges a business. Let’s go over them:

✦ Age of the Debt

Older debts are harder to collect, increasing effort and fees. For example, a 30-day overdue invoice may cost 25% contingency, while a 180-day overdue invoice may reach 40–50%.

✦ Debt Amount

Smaller debts may have a higher percentage cost because the agency must justify its effort relative to the potential recovery.

✦ Industry Complexity

Healthcare or finance debts may require more documentation, legal checks, or specialized negotiation, raising costs.

✦ Volume of Accounts

Handling hundreds of accounts may allow discounted rates per account, while single, high-value accounts may be charged a higher fee.

✦ Debt Type

Commercial debts often need custom contracts and negotiations; consumer debts may be simpler but involve more regulatory compliance.

✦ Geography & Regulations

Local laws can affect fees. Some states allow interest recovery or additional charges; others do not.

Let’s take the following for an example:

Small BNPL retailer: 50 overdue accounts of $200 each → flat fee = $1,250, contingency 30% = $3,000

SaaS company: 10 overdue accounts of $5,000 each → contingency 25% = $12,500, flat fee = $500

This aptly illustrates how costs vary depending on debt size, type, and recovery model.

➮ Hidden Costs to Watch Out For

Even beyond the headline fees, watch for:

Legal Fees: Some agencies charge extra if litigation is required.

Administrative Fees: Account setup, reporting, or communication charges.

Interest & Late Fees: Can be passed on if allowed by original agreement or law.

Upfront vs. Contingency: Some agencies may require a small upfront fee even in contingency models.

➮ Why an In-House Collection Team May Not Always Be the Best Bet

While it can seem like a more feasible option, managing collections in-house has its pitfalls:

Resource Intensive: Following up on overdue accounts can occupy your team for hours each week.

Legal Risks: One misstep in debt collection practices could land your business in legal trouble.

Relationship Strain: Aggressive collection tactics may alienate your customers.

Expertise Gap: Professional agencies have specialized knowledge and strategies that in-house teams often lack.

In short, an in-house approach can cost more in time, reputation, and missed opportunities than hiring a professional agency.

➮ Case Study: When a Collection Agency Made Sense

Consider a mid-sized online retailer offering BNPL options. Over six months, $150,000 in payments went overdue. Their in-house team spent hundreds of hours sending reminders and negotiating payments but only recovered $25,000.

They hired a collection agency at a 30% contingency fee. Within three months, the agency recovered $90,000. Even after paying the agency $27,000, the business ended up with a net gain of $63,000 and reclaimed valuable staff time to focus on growth activities.

➮ So, Is Hiring a Collection Agency Worth It?

It depends. Ask yourself:

Do you have a large number of overdue accounts?
Are internal resources limited or stretched thin?
Are overdue amounts substantial enough to justify fees?
Do you lack collection expertise internally?

If you answered “yes” to most of these, hiring a collection agency might be the right move.

Alternatives to Hiring a Collection Agency

Traditional collection agencies aren’t the only way to recover payments. One modern alternative is Recuvery, a platform that turns overdue payments into a win-win for businesses and customers.

Recuvery blends advanced collections technology, full-service expertise, and mobile-first tools to help businesses collect payments faster while giving customers flexible repayment options. The platform works in three simple steps: upload overdue accounts, send polite, branded reminders, and let customers resolve balances online through web or mobile apps.

Unlike traditional agencies, Recuvery focuses on: