AGENCY RESULT COMPARISONS
Every creditor establishes criteria to determine accounts to be considered for placement. Even though in-house submittal procedures may be uniform and consistent, different agencies will never obtain the same results. Fee rate comparisons amongst agencies are insignificant because the Recovery Ratio has the most effect upon the NET Proceeds.
The following chart provides a scenario of what is “netted” at the Bottom Line. For this illustration Competitor #1 charged a fee of 10% and the fee for Competitor #2 was 16%. When using the Collection Fee Rate of 10% for Competitor #1 as the base for comparison, the fee for Competitor #2 is 60% higher. Note that the 3% higher Recovery Ratio (43% vs. 40%) created a larger Bottom Line NET in light of the higher Collection Fee charged.
| Competitor #1 |
Competitor #2 |
|
| Amount Placed |
$100,000 |
$100,000 |
| Amount Collected |
$40,000 (40%* Recovery Ratio) |
$43,000 (43% *Recovery Ratio) |
| Collection Fees |
$4,000 (10% Fee) |
$6,880 (16% Fee) |
| Bottom Line NET |
$36,000 |
$36,120 |
*Recovery Ratio ($ collected/ $ placed) is the dominant factor affecting the Bottom Line NET.
It is important when selecting an agency to understand how the Recovery Ratio and the Fee rate work in combination to affect the Bottom Line NET. Williams & Williams, Inc. guarantees a much higher Recovery Ratio difference than the 3% illustrated above (on timely placed accounts our Recovery Ratios average between 85% and 93%).
The chart below reflects a 1% difference in the Collection Fee Rate and a 45% difference in the Recovery Ratio. The Bottom Line NET difference of an additional $37,750.00 is significant.
| Competitor |
Williams & Williams, Inc. |
|
| Amount Placed |
$100,000 |
$100,000 |
| Amount Collected |
$40,000 (40%) |
$85,000 (85%) |
| Collection Fees |
$ 6,000 (15%) |
$13,250 (16%) |
| Bottom Line NET |
$34,000 |
$71,750 |
CONCLUSION: The Recovery Ratio and not the Agency’s Collection Fee Rate is the predominant factor to consider when evaluating a collection agency. Between 70% and 90% of the Amount Collected comprises the NET. The average agency fee rate differential is 10% or less and thus its effect upon the NET is minimal.