Debt collectors outrageous costs

[Card Player]

What is the name of your state? FL

I am stumped. I have several people and small companies owe me about $350 on average each.

Debt collectors seem to want crazy money and commission rates for recovery. In many cases, after paying their fees, they would recover less than I owe them!

Any ideas?

Please help!

[GulfBreeze]

Originally Posted by Card Player

What is the name of your state? FL

I am stumped. I have several people and small companies owe me about $350 on average each.

Debt collectors seem to want crazy money and commission rates for recovery. In many cases, after paying their fees, they would recover less than I owe them!

Any ideas?

Please help!

If these people owe you the money, why would you have someone else go after them. If someone owed me money, I would be the one asking them. The reason these guys want so much is, they really don't plan on collecting it and in case they don't, they still get something for their effort (as little as it may be...sending "scary" letters and calls....lol). You could do the same....and save yourself alot of money.

[Chien]

OP- It’s not clear to me whether you’re looking for solutions to your A/R problem or are objecting to the fees and costs requested by CAs to help you solve it. It’s purely a cost-benefit problem and, being in business, I would think that you could understand it. Some of the debt collectors who regularly post here may choose to amplify. The response you’ve received is a vicarious swipe at the ARM industry.

If these people owe you the money, why would you have someone else go after them.

One assumes that you’ve tried and been unsuccessful or that you decided your time was more profitably spent in other pursuits

If someone owed me money, I would be the one asking them.

That’s probably true. We don’t know. The member is presently “askee” rather than “askor”.

The reason these guys want so much is, they really don't plan on collecting it.

That is so ludicrous that it’s a waste of bandwidth. If you had a service business that never delivered or tried to deliver, judge it’s longevity and, by extension, the statement. Besides, the member knows otherwise.

You don’t talk about the nature of your business and the nature of the debts. Neither do you mention the age of the obligations, the supporting documentation, the profile of your debtors or what you’ve already done before approaching CAs. I could add to that list but, at the least, it represents some of the things you’ve been asked. Let’s cut to the bottom line. You’re not a large volume creditor, it will cost to set up and service your accounts, the collectibility is an unknown and, while it’s flattering to be approached, flattery doesn’t make payroll. You’re not the most attractive client.

Assume a best/worst scenario. Worst is that you’re offered a recovery fee of 50% and best is that 50% of your claims can be collected. Assume that “several” is 12 claims, for ease of discussion (it may be more but, if it were 100s, I expect you’d say it). A CA earns $1,050.00 working your $350.00 average claims.

For that, you’re set up as a new client, data entry is done on your claims, and the cost of generating and mailing written demands is incurred, in additional to generating and mailing reports and collection proceeds to you. We haven’t talked about the cost of collectors making calls and the additional cost of skip tracing debtors, if your claims are old. I would guess that the percentages offered were high to you but none hit 50%.

The numbers may differ a bit, but it doesn’t pay to service you. Moreover, having an agency try and then fail will just confirm your low expectations. You’ll have to change how and with whom you do business and accept the status quo as a cost of doing business until you make changes. If your average delinquent A/R is always going to be around $350.00 and limited in number, I expect the burden will remain on you.

[Debt Guy]

Originally Posted by GulfBreeze

You could do the same....and save yourself alot of money.

And you know this how? What experience as a creditor do you have using 3rd party contingency fee agencies?

[debtcollector`]

The reason CAs want fees is because your business isn't worth taking. Several low dollar accounts is a waste of time to do the paperwork on. The only agencies you are going to find that are interested in those accounts are not agencies you want to place with.

It costs several thousand dollars per month per collector to staff the seat. Assuming $3 - 6k, the agency has to bring in $9 - 18k per collector just to keep them employed. Since the agency will average 25%, the collection gross will have to be $36 - 72K per collector per month.

Most collection agencies liquidate 7-8 percent of the portfolio per month for a period of time. For the ease of math, I'm going to use 10 percent liquidation per month. That means the agency needs $360,000 to $720,000 per collector per month in debt.

Your $350, or even $5,000, doesn't rise to the level of interest.

DC