When should I use a collections agency and how much do they usually cost?

If you are an individual or small business owner and you don't have staff to call your customersregarding collecting unpaid debt, you may want to look into hiring a collection agencyto collect the debt. You have a better chance of receiving the moneyby using acollection agency because your debtor will take the matter more seriously. Collection agencies usually charge between 15% and 50% of what they recover.You willstill end up with more moneythan if you try to collect the debt onyour own. When selecting a collections agency, you should ask the following questions:

• Do they carry errors and omissions insurance in case they make an error?
• How they plan on going about collecting the debt-writing letters,telephone calls or both?
• Their results rate?
• Do they use skip tracing to locate the debtor if they moved and left no forwarding address?
• Amount oftheirfees. You should check with a few agencies to compare fees as well.
• Ask for references.
• Look for an agency that works with individuals or small businesses.

Some collection agencies will purchase a group of debts for a percentage of the amount owed. Typically that amounts to 1% to 5% of the face value of the debt. When they collect, they make a profit on the difference they paidfor the face value of the debtand what they collect from the debtor.

If you decide to sue your creditor, you shouldspeak with a debt collection attorney to assist you.The attorney canexplain your rights and legal remedies. The attorney will represent you in courtandhelp you collect on any judgment you obtain against the debtor.