188.8.131.52.3 Compensation for collection agencies and individual collectors
The Consumer Financial Protection Bureau’s 2015 survey of credit card issuers found that contingency fees that allow third-party collection agencies to retain a percentage of what they recover were the most common payment structure.205 Since older debts or debts that other debt collectors have already tried to collect are typically harder to collect, the amount of the contingency fee typically increases based on the age of the debt.206 Other fee structures, such as a fee per account, worked were sometimes used by some third-party agencies collecting credit card debts.207
A report commissioned by the collection industry found that, in 2016, third-party debt collection agencies earned $10.9 billion in commission and fees.208 The table below shows average contingent commission rate for years in which collection industry data is available.
Average Contingent Commission Rate for Third-Party Collectors in Multiple Years209
|Year||Average Contingent Commission Rate|
In addition to contingent collections, collection agencies and attorneys are sometimes retained for a flat rate to send a series of collection letters. As discussed in § 10.4, infra, flat-rating may violate the FDCPA.
The CFPB’s 2016 survey of fifty-eight debt collectors reported that individual collection agents typically earn $10 to $11 per hour when they are new, or $13 to $20 per hour for more experienced collectors.210 Both new and experienced collectors also earn “incentive pay” such as the “25 percent of contingency fees earned in excess of a certain threshold” that was provided as a commission by one respondent.211 A training period of two to four weeks was common for new hires that contact consumers.212 Respondents with 250 or more employees reported that turnover for collectors was between 75 and 100 percent annually.213
205 Consumer Fin. Protection Bur., The Consumer Credit Card Market 245 (Dec. 2015).
208 Ernst & Young, The Impact of Third-Party Debt Collection on the US National and State Economies in 2016, p. 2 (Nov. 2017) (report commissioned by ACA International).
209 Id.; Ernst & Young, The Impact of Third-Party Debt Collection on the US National and State Economies in 2013, p. 3 (July 2014) (report commissioned by ACA International); Ernst & Young, The Impact of Third-Party Debt Collection on the US National and State Economies (Feb. 2012) (report commissioned by ACA International) (in 2010, $10,261 in commission collected / $54,882 in debt recovered * 100 = 18.7 percent average commission); Fed. Trade Comm’n, Collecting Consumer Debts: The Challenge of Change 3 (Feb. 2009), citing ACA Comment 70 (June 6, 2007) (data for 2005 and 1965).
210 Consumer Fin. Protection Bur., Study of third-party debt collection operations 17 (July 2016).