Most collection agencies operate on a contingency basis which means that they get paid based on the amount of the debt that they recover. This means that collection agency cost can vary widely, ranging from zero if they recover none of the debt up to 50% of the amount owed in cases, for example, where the debt is owed for a long period (over two years).
Collection agencies cannot justify upfront fees or minimum payments when they have not recovered any money for a client and face stiff competition from agencies that work on contingency. Even when working on a contingency basis agencies charge different percentages based on the size of the debt or the age of the debt. This reflects the fact that the level of effort required is the same whether a small debt needs to be recovered and that older claims have a much lower chance of being successfully collected.
