The pricing of debt collection agencies is opaque and complex for many customers. There are debt collection agencies that advertise attractive offers like ‘no cure, no pay’ and free collection cases, but there are also many examples of collection service providers offering their clients to ‘sell’ their collection portfolio. Enough reason to outline how traditional collection agencies operate and the new approach Payt chooses.
In the collection market, it is common for the collection agency to pocket the collection costs [1], which may be charged on top of the claim to the debtor. In free collection cases, the collection costs are the source of income for the collection agency, while in ‘no cure, no pay’ cases, you may be charged a fee upon a successful claim. This fee can amount to about 15% of the claim. In that case, the collection agency will generally pocket a total amount of 30% of the claim (approximately 15% in collection costs and 15% that you pay as a fee). Unfortunately, it is also the case that many collection agencies have fine print in the contracts, which often results in unexpected costs, such as research fees.
For customers with large numbers of collection cases, different rules often apply. In recent years, they have increasingly made specific agreements with a collection agency, whereby if a claim is collected, they receive a portion of the collected collection costs.
At Payt, we have chosen not to join the common practice. Payt opts to offer its debtor management services for a fixed amount per collection process of €19.95. At first glance, this may seem strange, but as a Payt customer, you are allowed to keep the collection costs charged to the debtor entirely yourself. Since these collection costs are at least €40 and quickly increase with larger claims, this means that with Payt debtor management software, you are almost always much more cost-effective. Whether you have a few or many collection cases.
Example Suppose you have transferred 10 unpaid claims averaging €500 to your collection agency. Based on an offer of free collection cases, 7 of these are still paid. With traditional collection agencies, these collection cases are indeed free, but the collection agency in that case pockets 7 times 15% of €500. In this case, €525.
With Payt, you receive this full €525 and pay 10 times €19.95. In total, you keep €525 minus €199.50, which is €325.50 with Payt. A nice financial advantage. With its approach, Payt offers all its customers the opportunity to collect not just a part, but the full collection costs, which is not available even for customers with large numbers of collection cases at traditional collection agencies.
[1] For a good explanation, see www.consuwijzer.nl/thema/incassokosten
However, the financial advantage is just one aspect; Payt’s choice to grant the collection costs to its customers has several other equally important benefits. We will elaborate on this in the follow-up article “How Payt helps you maintain your customer relationship”.
