Commission Rates

Commission Rates

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Paying a lower rates for the same auto insurance is good,but in the collections field, paying too low a rate can hurt you.

Agencies with really low rates and unrealistic recovery rates are only able to do that by picking the low hanging fruit. Typically they will only work the accounts that they feel they have the highest chance of collecting without doing a lot of work. Agencies that work hard on ALL your accounts, and help with Asset Recovery on the more difficult ones, will have a higher commission rate, but you will actually recover more money in total (see our comparison example below). The truth is that a professional collection agency will usually send you a larger check each month than a bottom-rate agency, and will also provide you with additional services that lessen your account management workload.

Conversely a bottom rung agency with super low rates will only work the accounts that they can collect quickly and easily from so all the other ones will be ignored or written off from the very beginning.

Agencies such as these advertise great recovery percentages – around 40% to 50%. However, these recovery percentages are computed by using only  active accounts. All accounts marked   closed, uncollectable, returned, unable to locate,  and a few similar categories are being omitted when they  calculate their recovery percentages. This is a very deceptive practice, but is easy to detect. To find the real collected percentage just divide the actual collected funds you’ve received from an agency by the  total dollar amount of the accounts that you send over to an  agency.

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The factors that affect commission structure

1) How long the account(s) have been overdue

2) Type of account(s)

3) How many account(s) you send over

4) Average dollar amount of the account(s)

A professional agency, will look at these factors and calculate the amount of work and actual cost of collecting your accounts. The rate they quote will reflect their calculation of collect-ability, and industry averages for recoverability for the specific account type , as well as your business's specific needs. This will allow them to work all the accounts and give you a total higher recovery amount.

This is why with collection agencies too low a commission rate usually means less money coming back to you.

Commission Comparison on $10,000 Placement

AGENCY 1 20% commission 20% recovery (industry average for generic agencies) Will collect $2000.00 of the $10,000.00 placed

Will retain $400.00 for commission

Will send you a check for $1600.00

Net return on accounts = $1600.00

AGENCY 2 40% commission 40% recovery (double the industry standard) Will collect $4000.00 of the $10,000.00 placed

Will keep $1600.00 for commission

Will send a check to you for $2400.00

Net return on accounts = $2400.00


Agency 2 will not only return more of your money, they will have cleaned out more overdue accounts, and taken the time to treat all your customers professionally and offer appropriate repayment plans. You will usually also get better service,and reporting from Agency 2.

To summarize, you should select the agency that will put the most dollars back in your company's accounts rather than the one with the lowest rates. Weed through the proliferation of misleading numbers and seek out the agency that will give you the best results.