Who pays collection agency fees: me or the debtor?
Who pays collection agency fees depends mostly on your contract.
Usually you do. On a contingency agreement, the agency keeps its percentage from the money it recovers and sends you the rest. You may be able to recover collection costs from the debtor if your contract or invoice terms say so and your state’s law allows it. Without that clause, plan on absorbing the fee.
Who pays collection agency fees next time: shifting the cost
Add a clause to your agreements and credit applications stating that the customer is responsible for reasonable collection costs and attorney’s fees if the account goes to collection. Have an attorney review the wording for your state. For the current debt, compare what you’d net using the calculator.
More answers
- Customer won’t pay invoice: what do I do?
- What legal action for unpaid invoices can I take if a customer refuses to pay?
- Can you write off unpaid invoices?
- How much do collection agencies charge?
- How do I write a payment demand letter?
- Is small claims court for unpaid invoices better than a collection agency?
- Can I hire a collection agency to collect a debt that’s small?
- How to hire a collection agency: what are the steps?
- How to send someone to collections: what are the steps?
Should I add a collections clause to my contract or invoice terms?
Usually yes. A clause stating that the customer pays late interest, collection costs and attorney fees, where the law allows, gives you a basis to seek those costs later. Ask an attorney to word it for your state.
Will the agency charge my customer collection costs?
Only if your contract with the customer or applicable law allows it. Without such a clause, the agency’s fee usually comes out of what it recovers for you.
Owed money by another business?
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