Some general “Rules of Thumb” pertain to what rate you should be willing to pay for a debt recovery service. Most of them are material to the “collectibility” of a given account, and include:

        1)  RATES FOR INTERNATIONAL DEBT RECOVERY TEND TO BE HIGHER THAN
             RATES FOR DOMESTIC ACCOUNTS

        2)  RATES FOR LARGER ACCOUNTS OR FOR BATCHES OF ACCOUNTS TEND TO BE LOWER
             THAN FOR SMALLER ACCOUNTS OR INDIVIDUAL ACCOUNTS.

        3)  RATES FOR OLDER ACCOUNTS TEND TO BE HIGHER THAN RATES FOR MORE RECENT
             ACCOUNTS

        4)  RATES FOR ACCOUNTS THAT HAVE BEEN PLACED FOR RECOVERY PREVIOUSLY, OR AS TO
             WHICH A JUDGMENT HAS BEEN OBTAINED, MAY BE HIGHER.  

Historically, the “normal” rate for law firm collections may have been 1/3 of the amount collected. Likewise, the “normal” rate for international collections may have exceeded 1/2 of monies collected. Those rates have changed, almost exclusively downward, due to the competitive nature of the industry. In today’s market, I have witnessed offers for deceptively low rates as low as 5% for domestic accounts, first placements, amounting to several tens of millions of dollars, where the companies are still in business, where there is a personal guarantee on most of the individual accounts and the delinquency is no more than 120 days.

Did I personally give this rate? No. Would I ever give this rate? Never.  More to the point, if I were a company with a debt to place for collection, would I be wise to WANT or try to NEGOTIATE this kind or rate?  In my opinion, NO.

Why - Isn’t getting something for LESS better than paying MORE? Not always. EXAMPLE: Would you shop for a BRAIN SURGEON on the sole basis of who would do the procedure for the basement bargain amount?  Would you shop for AN INVESTMENT ADVISER on that basis?  How about a babysitter, or a bungee-jump instructor?  With so much riding on this decision – your money- prudence must win over thrift. 

The point is that not all debt recovery entities are created equal. Professional training, education and experience vary widely. An intelligent “shopper” keeps those very important factors in mind as well.

Collection companies that offer deceptively low rates cannot afford the resources to effectively settle these debts in your favor.  In the end, you will risk losing time, leverage, and most importantly, capital.

Also, while every account must be worked to its conclusion, and time and perhaps monies, expended in that effort – not every account will be collected, and the rates must reflect that fact in order for a debt collection entity to remain healthy and stay sharp. Additionally, the more realistic the rate, the more resources such debt collection entity can afford to spend on its attempts to collect a particular debt in your favor.

Ok, having said that, what do I consider to be a “fair” rate? One that allows every necessary expenditure in time and money to be made, in order to maximize the chances for its successful collection.

 Fair and competitive International rates: in order to maximize the chances for successful collection of the account should range from 25% to 50%, depending on the factors above. Each case is different however, and we may be able to offer a special rate in exceptional circumstances.

 Fair and competitive domestic rates: should range from 20% to 35%, again depending on the factors above and with lower rates for, once again, exceptional circumstances.