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The Best Collection Agency Services of 2021

By
Donna Fuscaldo
,
business.com Staff
| Updated
Jul 20, 2021

We've reviewed the best collection agency services for 2021. See up-to-date comparisons on features and the best prices for the top-rated agencies.
Best Collection Agency for Small Business
Summit Account Resolution
Online portal
Upfront, transparent fees
Tailored collection strategies
Best B2B Collection Agency
Prestige Services Inc.
Negotiable rates
Free quotes available
Online portal
Best Collection Agency for Affordability
Rocket Receivables
Flat-rate pricing
Online portal
Licensed in 50 states
Best B2C Collection Agency
IC System
80+ years' experience
Online portal
Multipronged approach
We've reviewed the best collection agency services for 2021. See up-to-date comparisons on features and the best prices for the top-rated agencies.
Updated 07/20/21

We updated our FAQs to include information on the benefits of early collection intervention and how collections can impact your business' online reputation.

With more than 4,000 collection agencies in the U.S., finding the right one for your business can be challenging. To simplify your search process, we conducted a thorough analysis of more than 30 collection agencies. We examined the rates these services charge, the collection strategies they employ and their success rate in recovering debt. There are four agencies we selected as our best picks.

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How We Decided
Our team spends weeks evaluating dozens of business solutions to identify the best options. To stay current, our research is regularly updated.
30
Considered
17
Researched
4
Selected

Compare Our Best Picks

  Summit AR Prestige Services Inc. Rocket Receivables IC System
Collection rates 7-50% 22-33% Starting at $14.95 per account; 50/50 split 25%
Minimum debt  $50 minimum collection $200 minimum collection None N/A
B2C or B2B B2C and B2B B2B B2C and B2B B2C and B2B

Our Reviews

Summit Account Resolution: Best Collection Agency for Small Business

Contingency rates start at 7%, which are lower than many rivals.
Its low minimum account balance of $50 is affordable for many small businesses.
The collection agency discourages clients from submitting past-due accounts that are two years or older.

Summit Account Resolution offers an online portal, transparent fees and tailored strategies. It's for those reasons and more that it is our choice as the best debt collection agency for small businesses. It's a great solution for any small business looking to collect on delinquent accounts that have been inactive for up to two years. Summit AR typically pairs with forward-flowing companies that have recurring debt needs; however, that is not a requirement.

Unlike many competitors, Summit AR provides services for both B2C and B2B collections. It serves a variety of industries in the United States, including commercial, medical, dental, employee reimbursement, and consumer and court-ordered obligation, child support and spousal support. Although Summit AR services every state, it is best to speak directly with a representative if you are seeking collections in Hawaii, Nevada, New Mexico, New York City or North Carolina, as those locations have special restrictions that can complicate seeking debt repayment.

Collection rates run from 7.5% to 50% of each account. Consumer rates average at 35%, while commercial rates are slightly less. The agency only requires a minimum of $50 to be collected on each account, and it operates on a contingency basis, so you are not charged any fees until after the debt has been collected. It also provides additional services such as accounts receivable recovery assistance, SMB accounts receivable consulting, skip tracing and litigation.

Summit AR's online portal gives you 24/7 access to your accounts. There is also a placement portal, which enables you to conveniently add new accounts for collection, and a status portal, which allows you to check the live status of current accounts. You also receive an account manager as your dedicated point of contact. Summit AR prides itself on its "P.H.D. (preserve human dignity) philosophy" to give its clients assurance that their debtors will be treated with respect, transparency and dignity.

Read Summit Account Resolution Review

Prestige Services Inc.: Best B2B Collection Agency

Prestige charges 22% prior to attorney involvement.
Collection efforts begin as soon as the account is submitted to PSI.
Prestige only collects commercial debt, which may be too limiting for some businesses.

Prestige Services Inc. (PSI) pairs excellent features with strong customer service, making it our choice for the best B2B collection service. It has every feature a business needs to recover debt from delinquent commercial accounts, including a skip-tracing department, an online portal and full-service litigation.

This agency provides debt collection services exclusively for B2B accounts. Since B2B and B2C collections use different investigation techniques, it is ideal to have an agency that specializes in one or the other. The U.S.-based company seeks collections from virtually any commercial industry in the United States, Canada and Mexico.

PSI prides itself on offering contingency rates 5% to 10% lower than most competitors, although it does require a $200 minimum collection. Rates are typically charged at 25% for accounts from $200 to $3,000, and 22% for accounts from $3,000.01 to $20,000; however, they are often negotiable on a case-by-case basis. If your account goes to litigation, fees can rise to 40%. PSI offers volume account and litigation discounts on select inquiries.

Commercial collection accounts are easy to register and monitor via PSI's online portal. The placement portal gives you unlimited access to free quotes, and you can easily add new accounts as your collection needs fluctuate. Live status updates are provided for each account online. Unlike many competitors, PSI's status updates include detailed collection notes about agency-to-debtor interactions. In addition to online reporting, PSI offers pre-collection services, 10-day free demand services, free final-notice forms, skip tracing and post-judgment collections. If your account requires legal action, your PSI agent will contact you and request your approval before moving forward with litigation.

PSI prides itself on providing quick, efficient services. You can expect it to come to a conclusion about the status of your account within the first 45 days. After your debtor has paid PSI, it will release a remittance check to you at the end of the month with payment details.

Read Prestige Services Inc. Review

Rocket Receivables: Best Collection Agency for Affordability

The company offers both flat-rate and contingency-based pricing.
Customers can add and remove accounts in real time using Rocket Receivables' online portal.
Its flat-rate pricing is very affordable, but customers have to pay more for stepped-up services.

Collection strategies are as unique as the customers who aren't paying their bills. To recover debt, it requires different tactics depending on the age of the account and amount of money owed. For cash-strapped small business owners or those who don't need extensive services, Rocket Receivables is our pick as the most affordable collection agency.

Pricing

Rocket Receivables offers a flat-rate pricing plan and a contingency-based one. With Rocket Receivables' Stage One Fixed Fee Collections plans, customers are charged a flat rate based on the number of accounts in collections. The more accounts you need help with, the less it costs. Rocket Receivables charges $21.95 per account for 10 accounts, $17.95 per account for 25 accounts and $14.95 per account for 50 accounts. Rocket Receivables provides customized pricing for businesses with more than 50 accounts. Stage One services are geared toward accounts that are 120 days or less past due.

Rocket Receivables Stage Two Contingency Collections steps it up a bit, but small businesses pay for the extra services. Unlike other collection agencies that take a percentage of the debt recovered, Rocket Receivables splits it 50/50. You won't pay if the collection agency doesn't recover any debt for you, but it's not the cheapest. In stage two, Rocket Receivables turns the collections over to its skilled collectors, who send demand letters and start legal action if necessary. Any accounts that aren't resolved in stage one are automatically transferred to stage two without any added fees. Stage two is for hard-to-collect debt that is more than 120 days old.

In addition to low prices with its fixed-rate plans, Rocket Receivables has a good track record recovering debt. While it doesn't list its recovery percentage on its web site, it states that its success rate is four times the industry average. Over the last 10 years, it has recovered more than $6 billion in debt for more than 60,000 clients.

Features

When it comes to recovering money, Rocket Receivables has several strategies it can employ. Some of those services include demand letters, skip tracing and litigation services. Rocket Receivables is licensed to operate in all 50 states and services many industries, including banks, municipalities, credit unions, insurance agencies, retailers, manufacturers, and education providers.

This collection agency also stands out when interacting with your debtors. You want a company that treats your customers with respect, understands what they are going through and won't harass them at all hours of the day. Rocket Receivables leads by example, fostering a culture where the focus is always on ethical practices and high principles. It also takes data security seriously. The collection agency meets the data security and compliance standards that are necessary to serve all the markets including banks and government agencies.

Pros of Rocket Receivables 

For business owners who don't want to pay a lot for collection services or don't have too much hard-to-collect debt, Rocket Receivables delivers. The flat-rate pricing and tiered level of service in phase one meets the needs of many small businesses. You don't have to worry about hidden fees or extra charges when you hire Rocket Receivables.

It also has an online portal that uses advanced technology to make it easy to add new accounts and monitor existing ones. Searching and running reports in Rocket Receivable's online portal is also easy. You can search by the average age of the account, recovery rates per account and the cost to collect the debt. To keep customers' data secure, Rocket Receivables uses what it calls a Cyber Security Management System. With it, data is encrypted in transit and there is multi-factor authentication. That should give business owners peace of mind their data and that of their debtors is secure.

Cons of Rocket Receivables

Rocket Receivables flat-rate pricing makes it a top pick for affordability, but it has some limitations. Its 50/50 split with its contingency pricing plan is higher than the low end of the industry average. If you want to place a lot of older accounts, more than 120 days past due, with Rocket Receivables it can get expensive. Therefore, if you need a lot of help in collecting debt, you may be better off with a different service.

There are also limits to what you can achieve in stage one. If your accounts are less than 120 days old, they fall into stage one. It doesn't matter how much debt it outstanding or how hard it's been to collect on your own. If you want to use advanced tactics from day one Rocket Receivables isn't for you.

It's also worth noting that TSI, Rocket Receivables parent company, is not an accredited member of the Better Business Bureau. However, it does have an A- rating. Rocket Receivables doesn't disclose its collection recovery rate, although it says it's four times the industry standard.

Customer Service

Rocket Receivables places a lot of emphasis on educating customers and visitors to its website. The company maintains a detailed FAQ page, posts video tutorials and offers online training resources. It also has a blog that is updated regularly. You can contact customer service via phone, email or by filling out an online form.

More

IC System: Best B2C Collection Agency

IC System has been around for more than 80 years.
It's licensed/and or bonded in all 50 states, as well as Guam and Puerto Rico.
The 25% collection rate isn't the lowest in the industry.

IC System is a full-service collection agency, recovering B2B and B2C debt for more than 80 years. Its years of experience, ethical collection agency tactics and its technological prowess make it our pick for the best B2C collection agency.

IC System recognizes the need to use a diverse approach with account and collection methods to recover funds owed to your business. Therefore, it offers two levels of collection services.

Pricing

For recent past-due accounts, IC System has its Recovery Plus program. It's a two-stage program in which the client pays a flat rate of $14.95 per account. The first step is that IC System issues a demand letter letting the debtor know that the account has been turned over to the agency and that it will begin collection action. If the money is recovered at this stage, you keep 100%. Recovery Plus also includes credit reporting on certain accounts, analytical modeling and skip tracing.

For older and harder-to-collect debt, IC System has its contingency pricing plan, Premier Collect. The rate for this plan starts at 25%. With the Premier Collect program, customers receive credit reporting to the major bureaus, attorney referral services and litigation referral services if legal action is required. To collect from hard-to-locate debtors, IC System employs several strategies such as skip tracing.

IC System doesn't disclose its recovery rate on its website; however, the company states on its website that it has a good success rate over the years recovering debt.

Pros of IC System

There's a lot of reasons IC System is one of the largest collection agencies in the U.S., and experience is a big one. IC System has been in business for more than 80 years. It has collected debt for thousands of customers and serves numerous industries, including healthcare, dental, small and medium-size businesses, communications, government, and education.

Another pro is that IC System is accredited by the Better Business Bureau and has an A+ rating.

If your business is collecting consumer debt, you want to choose a collection agency that is licensed and/or bonded in all states and territories. In some instances, consumers may live miles away from where the debt was originally serviced, so a collection agency that operates in every state is important. IC System is licensed and/or bonded across the country, as well as in Guam and Puerto Rico.

Technology is at the forefront of what IC System does. The company claims it was among the first collection agencies to move to computers; today, it operates a robust online portal. Through this portal, customers can submit new accounts, check the status of current accounts, generate reports and view statements.

In checking active collections, customers can view notes and see how many calls and letters have been sent to the debtor. You can also view payments and reversals. IC System gets to work on accounts that are uploaded via IC System's online portal within 24 hours.

Cons of IC System

There is no doubt IC System has the experience to effectively collect consumer and commercial debt across the country, but it's not the cheapest collection agency. It charges a 25% collection rate. Getting an accurate quote requires contacting the company via phone, email or a form found on its website.

While its clear IC System is doing something right to be in business for more than 80 years, it doesn't disclose its recovery rate on its website. It's worth inquiring about the success rate before becoming an IC System customer.

IC System serves a lot of industries, which means it may not be the best fit if your business is very specialized. You need to make sure your industry is one of the ones IC System has experience collecting debt for.

Customer Service

IC System has a client service team at the ready to field calls Monday through Friday from 8:00 a.m. to 5:00 p.m. Customers can also contact the client service team via email and online form.

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Collection Agency Pricing and Negotiation

Most collection agencies charge a fee based on a percentage of the debt collected. That fee typically ranges from 20% to 50%. Some collection agencies charge less, and some offer a fixed pricing plan.

The factors that determine the fees you'll pay include the amount of the debt being collected, the age of the account, the effort required to recover debt and if litigation services are needed.

Businesses seeking to collect commercial debt tend to pay less than consumer-facing enterprises. Expect to pay between 20% and 25% for commercial debt and between 30% and 50% for consumer debt. If there is a high volume of debt, the rate may be lowered.

Most collection agencies don't charge you until they collect a debt. Known as contingency pricing, it gives you peace of mind knowing that if the agency can't collect the debt, you won't be out any extra money. Collection agency may also charge extra for litigation and other services.

The longer your accounts remain delinquent, the lower the success rate of collecting. Collection agencies are most successful with accounts that are 60 to 90 days delinquent. Older debts could cost more to recover.

Here is a breakdown of the costs of each of our mega picks:

  • Summit Account Resolution: Rates range from 7% to 50% for each account, with a $50 minimum to be collected. Litigation fees are additional, and rates are contingent. 
  • Prestige Services Inc.: Rates are 22% upon collection before attorney involvement and 33.33% upon collection, if an attorney is engaged. There are discounted rates on larger files and on a case-by-case basis. There is a $200 minimum collection, and rates are contingent.
  • Rocket Receivables: Rates are either fixed or contingent depending on the level of service. With its Stage One fixed-fee collection plan, you pay per account – prices range from $14.95 to $21.95. The price gets cheaper the more accounts you place in collections. Rocket Receivables charges a 50/50 split for its contingency plan. There is no minimum collection amount. 
  • IC System: Depending on the age of the debt, you have two pricing models to choose from. Recovery Plus is its flat-rate service, which costs $14.95 per account and includes direct letters to customers. Premier Collect is its contingency plan, starting at 25%.

When trying to determine the cost of collection agency services for your delinquent accounts, factor in the agency's minimum requirements and additional litigation fees it charges. When discussing pricing, ask for the total cost with all fees included.

The rate an agency charges is negotiable, so ask these key questions before hiring one:

  • Does it charge fees aside from the standard account percentage?
  • Does it offer discounts based on a large volume of accounts or large collection amounts?
  • Does it offer additional features or discounts for ongoing arrangements?
  • Does it offer volume discounts for litigation?

Some collection agencies require contracts, but many let you cancel accounts at any time if no debt has already been collected. Termination fees may apply.

Buying Guide

What to Look for in a Collection Agency

Collection agencies offer a bevy of services beyond sending demand letters and contacting customers via phone. Some of those features are common across the industry, while others are offered as add-ons. Here are the main services collection agencies offer and why they matter:

SKIP TRACING AND LITIGATION

Most collection agencies provide skip tracing as a standard practice. Skip tracing involves scanning databases, pouring over the internet and using other tactics to find hard-to-track debtors.

If skip tracing and formal demand letters don't work, many collection agencies offer litigation services if you pursue legal action against a debtor. If lawyers get involved, the best agencies won't charge you until the debt is recovered.

ONLINE CLIENT PORTAL AND STATUS UPDATES

Most services offer an online portal, enabling business clients to add newly delinquent accounts, track the progress of current accounts, and access reports. All of that can help you plan your cash-flow needs.

LOCATION CAPABILITIES

Whether you operate locally, nationally, or internationally, the markets the collection agency serves matters a lot. You don't want to work with a collection agency that is not licensed to collect in your state or that doesn't have an international presence. Most collection agencies state on their website which states they are licensed in, but confirm with them before hiring them.

AGENCY COMPLAINTS, REVIEWS AND REPUTATION

Collecting unpaid debt must be approached carefully and tactfully. The way a collection agency treats debtors reflects on you. If they are empathetic and understanding, your customer may be more willing to pay. If they are rude or employ aggressive tactics, your reputation may take a hit. It also hurts your chances of collecting the debt. You want a service that is reputable and honest – one that fights to recover your funds without tarnishing the good name of your company. As you narrow your choices down, ask for references and check them.

CUSTOMER SERVICE

You don't want to have to chase down your collection agency when you have questions or concerns. You want to choose a collection agency that responds to you quickly.

Hiring a Collection Agency

Business owners hire collection agencies at different stages of the recovery process. Some try to collect on their own through several attempts before seeking help. Others move once the bill is 30 days past due. What makes sense for your business depends on how much debt is owed and the situation of your debtor. Is he or she trying to pay it back, or are calls and letters going ignored? Is the debt only 30 days past due or longer? Do you have an existing relationship with the customers?

If you get nowhere, the next step is to send a formal demand letter. This is a written document detailing the debt owed. A formal demand letter can be an effective step in resolving the debt. It's also a requirement in some states if you believe you'll take legal action against the customer. The longer you wait to collect a debt, the more difficult it is to recoup any of it.

If a demand letter fails, it may be time to call in the professionals. When looking for an agency, come up with an amount you are willing to settle for. Collection agencies charge different rates. If you have an idea of what portion you want back, that informs your search. Make sure to verify the company is legitimate and accredited, has positive ratings, and abides by laws like the Fair Debt Collection Practices Act.

It's also worth confirming that the collection agency complies with regulations put in place in 2019 when the U.S. Court of Appeals ruled against the Consumer Financial Protection Bureau's attempt to permit debt collection agencies to send collection notices to consumers by digital means (e.g., hyperlinks, emails and text messages). Some agencies may not comply, which could pose a risk to your business if you work with them.

After narrowing your search to a few credible agencies that serve your industry and location, compare important features like skip tracing, litigation, demand letters, pre-collection, and free final-notice forms. The best collection agencies are highly reputable, have a lot of experience and offer advanced services like an online portal to add your accounts.

Frequently Asked Collection Agency Questions

WHY SHOULD YOU OUTSOURCE YOUR COLLECTIONS?

When you have delinquent accounts, debtors might ignore your acquisition attempts and refuse payment. While you can make calls and send demand letters, collection agencies have advanced tactics to retrieve your money.

The longer debts go unpaid, the less likely they are to be repaid. If you prioritize outsourcing your collections to the proper agency as soon as possible, you have a higher chance of recouping the full amount.

WHAT IS THE AVERAGE COLLECTION RATE FOR A COLLECTION AGENCY?

The cost of hiring a collection agency varies. Agencies typically charge a percentage fee based on the type of collection (commercial or consumer), the amount of debt to be collected and the volume of business you provide.

Some agencies charge a flat fee; however, most charge a contingency percentage rate of 20% to 50%. Depending on the amount of debt you need to be recovered, commercial debt collection fees are typically 20% to 25% of the sums collected, and consumer debt collection fees are typically 30% to 50% of the sums collected.

If your case goes to court, expect to pay additional legal fees. Your agency will notify you before taking your cases to court, giving you the option to accept or decline. Most agency fees, including litigation, are typically charged after your debts are recovered.

HOW LONG CAN A COLLECTION AGENCY ATTEMPT TO COLLECT A DEBT?

While some collection agencies also operate as billing companies, most begin to collect on accounts that are 60 to 90 days past due. Each state has a statute of limitations, which restricts the length of time a debt can be collected. In most cases, states allow collection agencies to pursue debtors for four to six years after the last active payment on the account.

CAN A BUSINESS BE SENT TO COLLECTIONS?

If a business is past due on its payments, it can be sent to collections. The business then has 90 to 120 days to repay their debt, and if they fail to do so, the creditor can either sue the business or sell the debt to a commercial debt collection agency.

WHEN SHOULD A SMALL BUSINESS HIRE A COLLECTION AGENCY?

For a small business, tracking down unpaid invoices can turn into a full-time job. If your company is having trouble allocating time for this task, hire a collections agency. Another consideration, other than time, is if a particular client or company is hard to collect from. If you're dealing with a difficult debtor, collection agencies are trained to handle this challenge so you can get what you're owed.

HOW DO I HANDLE ACCOUNTS SENT TO A COLLECTION AGENCY?

Small business owners forced to send accounts to collections are often left wondering, "Now what?" Should you consider an account a bad debt and write it off, or should you list it as pending income? The short answer: Don't write it off as bad debt – yet.

The strategy behind hiring a debt collection agency is to get some or all the money you are owed, so it's better to classify it as an "other charge or awaiting collection" and add it to an account specifically for assets in collections.

If the money is not collected or you only get a portion of it, you would then write off the balance as bad debt.

CAN A COMPANY TURN A DEBT OVER TO A COLLECTION AGENCY IF PAYMENT IS BEING MADE?

Small business owners have the right to place an account in collections if the bill is past due, even if the customer is making payments. That doesn't mean a few days late, but if the bill has gone unpaid for months and the client now wants to make some type of payment, you are not obligated to accept it.

It's up to the business owner, but if the client is showing a good-faith effort, it's often cheaper to collect the debt on your own than work with a debt collection agency.

WHAT ARE THE PROS AND CONS OF HIRING A COLLECTION AGENCY?

Hiring a debt collection agency has its benefits. When you contract with a collection agency, you tend to recover past due bills quicker than you would on your own. It also takes some pressure off you. Instead of worrying about sending demand letters or making phone calls, the collection agency does the work for you. Litigation protection is another perk. If you use DIY bill collection tactics that are too aggressive, you could face legal action. A debt collection agency knows the rules and regulations. They shoulder the risk if a debtor looks to sue.

There are some drawbacks to using a collection agency, and the big one is the fees. Collection agencies charge fees ranging from 20% to 50% of the debt. The older the debt is, the more it costs to recover it. The agency's tactics can also affect your business. If the agency is too aggressive, you may lose customers or gain a negative reputation.

ARE YOU RESPONSIBLE FOR DEBT YOU SOLD TO A COLLECTION AGENCY?

When you sell the debt to a collection agency, they pay you a percentage and chase after the debt on their own. Once you sell the debt, you no longer have any involvement with it. You tend to get pennies on the dollar when you sell the debt to a collection agency.

How Does an International Debt Collection Firm Work?

U.S.-based businesses and entrepreneurs who have clients or customers located in other countries can experience problems collecting a debt owed to them. Further, due to differing rules and regulations depending on the country your customer is based in and different time zones, collecting that debt can be more complicated.

An international debt collection firm specializes in recouping money from individuals and companies in other countries. These companies usually have contacts around the globe, are knowledgeable about international laws, and follow the best collection practices based on the country and jurisdiction they are operating in. Many offer services for U.S.-based companies as well as foreign ones. If you are evaluating hiring an international debt collector to recover money owed to you, we recommend that you work with an international collection agency that is licensed, bonded and insured. 

If a Company Only Has Small Balance Accounts, Is It Worth It to Hire a Collection Agency?

Most collection agencies will collect outstanding debt that exceeds $50. If you or your staff are spending too much time chasing down past-due bills and it's hurting productivity or customer service, you may want to consider hiring outside help.

Another reason to consider hiring a collection agency is that these services are knowledgeable about the Fair Debt Collection Practices Act (FDCPA). If your collection tactics violate the FDCPA, you could face potential issues with the Consumer Protection Bureau and your state's legal authorities.  Last, the number of customers who are past due will also determine whether it makes sense to hire a debt collector. If it's only a handful of customers who are past due, that may be manageable, but if you have several customers who owe you money, it may be best to hire help.

How can small businesses hire a collection agency?

Hiring a collection agency starts with conducting your research. Collection agencies cater to different industries and business types, which means not all of them will be right for you. For example, some collection agencies require a certain number of accounts in collections.

For your research, read reviews of different collection agencies, look at their Better Business Bureau standings, and read what customers are saying online. Once you narrow down your list of potential agencies, take the time to contact them. Ask about their qualifications and credentials, success rate in recovering debt, customer service tactics, and fees.

It's also important to discuss how the agency will work with you. Is there an online portal where you can track your accounts' progress? Does the agency have live customer support, or are you assigned your own customer service representative? Finally, ask for references that can vouch for the service, and check them. Once you've done all that, you'll feel confident in your choice for collection agency.

What can small businesses do to collect debts on their own?

Small business owners can deploy several strategies on their own to recover debt. It's when those efforts aren't successful that it's time to call in the professionals.

Many small businesses dealing with past-due bills will first try reminders through email, by text, over the phone or in person to get the customer to pay. Some wait until a bill is 30 days past due – or even longer if they have a strong relationship with the customer. Whatever timeframe you set, the first step is to send out reminders.

If that fails, the next step is to send a formal demand letter – a written document detailing what the client owes and ways to repay it. Using the demand letter to offer a payment plan or forgive part of the debt can be an effective strategy. Some states require a formal demand letter if you plan to take legal action against a customer.

The longer you wait, the harder it is to recover debt. If you are still getting nowhere after all that, it's time to consider hiring a collection agency.

What kind of businesses hire collection agencies?

From dry cleaners to retailers, collection agencies attempt to recover debt for an array of businesses. If there is debt to be collected, there is an agency that will try to recoup it. With so many collection agencies in the market, some try to differentiate by catering to specific industries. Others will only collect debt from consumers, while some work solely on B2B accounts. Then there are the collection agencies that will recover from both. You're type of business, industry, and size of the debts will dictate which collection agency makes the most sense.  

Why is the collection agency's reputation important?

When you hire a collection agency, it is an extension of your business. If you hire one that uses aggressive tactics to recover debt, it could hurt your relationship and reputation with customers, or worse get you in trouble with regulators. Not to mention if you go with a less scrupulous firm, they may charge inflated prices or fail to recover any debt.

What are the benefits of early intervention when it comes to collecting debt?

Typically, small businesses wait for at least a month or a month and a half before taking steps to collect on a past-due bill. However, acting sooner, say five or seven days past due, can yield better results. The sooner you begin to collect past-due debt, the more likely you are to recover it. Intervening early requires you to evaluate the credit history of your customers to pinpoint any payment risks, create different account groups based on their payment history and develop control groups to determine how many customers will default. That takes effort on your part. The other option is to outsource it to a debt collection agency. The money it costs to outsource it is typically worth it though.  Keep in mind that some customers won't pay unless they are notified or contact is made, which is another reason early intervention can be beneficial. 

Can your collection efforts hurt your online reputation?

The answer depends on how the company collecting debt for you behaves. If the firm uses overly aggressive tactics or tries to scare and shame people into paying past debt that could harm your reputation, particularly online. Studies have shown dissatisfied customers are more likely to complain on social media and online review sites than those who aren't. You may think it doesn't matter because the customer in question didn't pay anyway, but if you get a lot of negative comments online it can have a big impact on your business. The best way to avoid that is to select a collection agency that is empathetic, shares its collection tactics with you, and has a strong reputation in the marketplace.

Community Expert Insight

As part of our research, we reached out to small business owners to learn why they use collection agencies, which ones they use, and what they like or don't like about them.  Across the board, we heard the tactics collection agencies employ to recover debt matter than everything else, including price.

Siva Mahesh, CEO of Dreamshala, a personal finance blog for freelancers, acknowledged that while rates matter, it shouldn't be the only reason to choose a collection agency.

"You ultimately want to maximize your financial recovery, not find the cheapest agency," Mahesh told business.com. "It might be worth it to go with an agency that's more expensive if they have a better success rate."

That sentiment was shared by Jim Pendergast, senior vice president of altLINE Sobanco, a specialty lending group. He said the collection agency's approach to recovering debt has to be aboveboard. AltLine Sobanco will only work with collection agencies that have a stable operating history and a reputation that is in line with the alternative lender.

"Some people opt for a hard-knocks collector, hoping to flush out the debtor's money, but in my experience, this doesn't get good results," said Pendergast.  "In the long run, collections is about customer service and results; the agency is doing the job right when they're polite and dependable."

For Jerry Han, chief marketing executive at PrizeRebel, the collection agency's approach to collecting debt is a big consideration when choosing an agency.

"When a collection agent disregards a customer's dignity for the sake of collection, it damages the company's reputation. When this happens, companies lose the long-term decision of a customer to stay with a company," said Han.

PrizeRebel uses Prestige Services for its collection needs. The service is fast and delivers what Han calls "humane collection results," Prestige offers affordable commission rates, which he said is 5% to 10% cheaper than its rivals.

Our Methodology

To determine the best collection agencies for small businesses in 2021, we spent dozens of hours researching the top services. Below is an explanation of our selection process.

We began our search by looking at reputable online sources, such as review and business websites. We conducted our own research, focusing on the different services available for business owners, the prices and fees, and the success rates. We examined more than 30 collection agencies in all. (See our full list of collection agencies below.)

We further narrowed the list based on different use cases and the criteria we set. As part of our research, we reviewed each agency's website, compared services and prices, and read user reviews. We contacted the agencies' customer service and sales teams to gauge the quality of service and obtain more information than was accessible online.

After our early research, we whittled our list down to 17 candidates for our best picks:  Alexander Miller & Associates; American Profit Recovery; Aspen National Collections; BYL Collections; Debt Recovery Resources; IC System; Kearns, Brinen & Monaghan Inc.; Martini, Hughes & Grossman; PSI Prestige Services Inc.; Revenue Assurance Partners LLC; Rocket Receivables; Summit Account Resolution; The Kaplan Group; TrueAccord; TSI; Verliance Inc.; and Your Collection Solution.

We based our final decisions on these factors:

  • Rates and contracts
  • Skip-tracing services
  • Litigation services 
  • Online features 
  • Locations services available
  • Industries served
  • Customer service
  • Better Business Bureau ratings and accreditations
  • Customer reviews and complaints

What to Expect in 2021

Last year, the collection agency industry underwent consolidation as some companies merged and others went out of business. However, the COVID-19 pandemic struck, and everything changed.

Like every other business, collection agencies were forced to shut down or shift to remote workforces, making it more difficult to collect debt. Add a population of out-of-work Americans to the mix, and collection agencies faced new rules and guidelines.

In the spring, federal and state governments began questioning how much work collection agencies should do to collect payments during a pandemic. At the federal level, Ohio Sen. Sherrod Brown introduced an amendment to the Fair Debt Collection Practices Act to provide consumers some relief from collection agencies during major disasters, such as the current pandemic. If passed, the bill would limit what collection agencies can do to collect payments.

Some states are taking matters into their own hands. Massachusetts banned debt collectors from making collection calls, filing new collection lawsuits, garnishing wages or properties, and repossessing vehicles for three months or until the emergency is over. In Illinois, the Department of Financial and Professional Regulation is urging collection agencies to work with consumers to create payment schedules or eliminate collection for 60 days.

May 2021: The U.S. House of Representatives recently passed the Comprehensive Debt Collection Improvement Act, which places new restrictions on how debt collectors can recover money for their clients. The bill limits the ability of debt collectors to contact debtors via email, text message and social media without first receiving permission from the individual. The bill also calls for the CFPB to increase penalties for companies that run afoul of the rules. The legislation still needs to be approved by the Senate. With oversight of the debt collection industry increasing, it is even more important for small business owners to carefully select a debt collection agency.

February 2021: The Consumer Financial Protection Bureau (CFPB), under President Joe Biden, is investigating Venmo, the digital payment app owned by PayPal. In a regulatory filing, PayPal disclosed the CFPB sent the payments company a "Civil Investigative Demand" concerning Venmo's "unauthorized funds transfers and collections practices, and related matters." PayPal stated it is cooperating with the CFPB. This case will be a close one to watch to see the stance the new administration takes on debt collection practices.

January 2021: Business owners working with collection agencies in California will soon have added protection from debt collectors who use unscrupulous practices to recover debt. In the fall of 2020, the California legislature enacted the Debt Collection Licensing Act, which requires debt collectors to be licensed in the state. Debt collectors have until the end of 2021 to apply for a license from the California Department of Financial Protection and Innovation.

The Debt Collection Licensing Act also gives consumers and business owners access to a website, where they can check if a company is licensed, if it has faced any enforcement actions, and whether its license was ever suspended or revoked. It will be interesting to see how this plays out in California and if other states quickly follow suit.

Donna Fuscaldo
business.com Staff
Donna Fuscaldo is a senior finance writer at business.com and has more than two decades of experience writing about business borrowing, funding, and investing for publications including the Wall Street Journal, Dow Jones Newswires, Bankrate, Investopedia, Motley Fool, and Foxbusiness.com. Most recently she was a senior contributor at Forbes covering the intersection of money and technology before joining business.com. Donna has carved out a name for herself in the finance and small business markets, writing hundreds of business articles offering advice, insightful analysis, and groundbreaking coverage. Her areas of focus at business.com include business loans, accounting, and retirement benefits.

Other Services Considered

Rozlin Financial Group Inc. collects past-due payments for various industries, including dental and medical offices, hospitals, schools, landlords, utilities, retailers, professional services, and credit card, auto loan and mortgage companies. The company uses phone, mail, email and online chat to speak with debtors. It is accredited by the Better Business Bureau and has an A+ rating.
Image Credit: AndreyPopov / Getty Images
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