The typical collection agency selection process involves requesting proposals from three agencies, comparing fee percentages, and selecting the lowest bidder. This process optimises for the wrong variable and produces predictably poor outcomes.

Fee percentage is the least important variable in collection agency selection. The most important variables — jurisdictional capability, escalation infrastructure, reporting quality, and debtor engagement methodology — are rarely evaluated because most creditors don't know what questions to ask.

What matters more than fees

Jurisdictional capability. A collection agency charging 10% with no enforcement capability in the debtor's jurisdiction will recover less than an agency charging 20% with established local counsel and a documented track record. The fee percentage is meaningless if the agency cannot enforce. The evaluation question: "Name your local counsel in [debtor's jurisdiction], describe the enforcement instruments you would use, and provide a timeline based on comparable recent cases."

Escalation infrastructure. The transition from amicable to legal is where most collection agencies fail. Many agencies are effective at sending demand letters and making phone calls. Few have the infrastructure to file payment orders, obtain pre-judgment attachments, or execute judgments in the debtor's jurisdiction. The evaluation question: "Describe your escalation process. What triggers the transition from amicable to legal? Who makes the decision? What are the typical costs and timelines?"

Reporting quality. A professional agency provides structured reporting on every active case: actions taken, debtor responses, next steps, and timeline. The reporting should be proactive — the agency updates you, rather than requiring you to ask. The evaluation question: "Show me a sample report for an active case." If the agency cannot produce a sample report, their reporting infrastructure is inadequate.

Debtor engagement methodology. The initial debtor engagement determines whether the claim resolves amicably (fast, cheap) or legally (slow, expensive). Professional agencies use jurisdiction-specific specialists who speak the debtor's language, reference local enforcement instruments, and present clear escalation timelines. Generic demand letters produce generic results. The evaluation question: "Who will handle the initial debtor contact? What language will they use? What enforcement instruments will they reference?"

The fee structure analysis

Once the capability evaluation is complete, the fee structure matters — but in context. The three common structures:

Contingency (no cure, no pay): Typical range 5-25%. The creditor pays nothing if recovery fails. This structure creates the strongest alignment of incentives: the agency earns only when you recover. Contingency is the standard for amicable phase recovery.

Fixed fee: The agency charges a flat fee regardless of outcome. This creates misaligned incentives — the agency earns the same whether they recover or not. Fixed fees are appropriate for specific legal filings (payment order applications, court proceedings) where the cost is predictable, but not for amicable recovery.

Hybrid: Small upfront fee plus reduced contingency. This can work well if the upfront component is modest. Be cautious of hybrids where the upfront fee is substantial — this indicates that the agency's revenue model depends on fee income rather than recovery success.

The reference check

The single most reliable indicator of agency quality is the reference check. Ask for references from clients with comparable claim profiles: similar industries, claim sizes, and jurisdictions. Contact these references and ask specific questions: How responsive was the agency? How detailed was their reporting? Did they escalate effectively when amicable efforts failed? Would they use the agency again?

If you're evaluating collection agencies, the framework above provides a structured approach. Brief our team with your portfolio for a comparative assessment — and use it to evaluate any agency, including us.