Keep collections in house or hand them to an agency?
An agency saves you the work but takes margin and the relationship: contingency fees commonly take a fifth to half of what is recovered, more on old debt, and the customer deals with a stranger. Collecting in house keeps both, if the process is disciplined. Most small books split by age: early arrears in house, silent ones handed over.
Murphy, Editorial team4 October 20266 min read
How much does a collection agency charge?
The fee structure is simple and the arithmetic is not. Contingency means no recovery, no fee, which feels safe; it also means the agency keeps a large share of exactly the money you were most likely to see. Shares commonly run from around a fifth of recoveries on fresh, well-documented consumer debt to half or more on old or small balances; flat-fee models exist for early, light-touch outreach. Run the arithmetic on one account. A 900 euro balance at a 35 percent fee returns you 585 euros, and that is before you count the customer.
The number to compare is the net: what the agency returns on your accounts, after its share, against what your own sequence collects on the same accounts. Age decides that comparison more than anything the agency does.
What do you give up with the account?
The relationship, first. The customer who hears from an agency has stopped being your customer in their own mind, whatever the contract says, and a business whose model depends on repeat customers should price that loss into the fee. Control of tone, second: the agency's incentives reward recovery this quarter, not your brand next year. And the information, third: the conversations that explain why an account went bad happen where you no longer hear them.
The first month an account goes quiet is worth more than any fee you will ever negotiate.
What does keeping it in house actually take?
No department, but four things: a fixed reminder sequence that goes out without anyone having to decide to send it, someone who owns the overdue list each week, a record of every contact and every promise, and the discipline to propose plans rather than demand totals. In-house collection tends to fail where chasing is squeezed in between other work, and to succeed where it is a routine.
Automation has moved this line in recent years, because the systematic, polite, every-account-every-time work that used to need headcount is the work software does well. AI collections platforms are built on that premise, as an alternative to an agency that leaves the customer with you, which puts in-house collection within reach of books far too small ever to have staffed it.
Where do most small books land?
On a split, by age and by state of the relationship.
| Account | Who handles it | Why |
|---|---|---|
| Current to thirty days late | In house | The relationship is warm and a reminder usually suffices. |
| Thirty to ninety days | In house, with plans | The conversation window: this is where instalment plans are agreed. |
| Past ninety days and silent | Agency or legal | Outside pressure you cannot apply yourself, worth the fee once your sequence has run. Larger lenders often sell these as non-performing loan (NPL) portfolios instead. |
| Disputed | Neither, until resolved | Chasing a disputed balance tends to produce a complaint. Resolve the dispute first. |
Common questions
At what age should debt go to an agency?
Once your own sequence has fully run and the account has gone quiet, commonly around ninety days past due. Earlier handovers pay a full fee for money a reminder would likely have collected.
Do agencies collect more than I would?
On old, silent accounts, usually yes: that is their trade. On fresh arrears, a disciplined in-house sequence typically nets more, because the customer still answers you, and no fee comes off the top.
Can I take accounts back from an agency?
Depends on the agreement, so decide before signing: look for recall rights, exclusivity terms and what happens to accounts under an active payment plan if you leave.
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