When it comes to recovering unpaid debts, businesses and landlords often find themselves weighing the cost of hiring a collection agency against the value of what might be recovered. One model that stands out for its simplicity and appeal is the contingency-only collection agency. This means you only pay if they collect. Sounds ideal, right? Not so fast.
Before you sign an agreement, it’s important to understand the contingency collection pros and cons. While the model offers clear benefits, there are also potential drawbacks depending on your goals, the type of debt, and the agency's approach.
At Advanced Collection Bureau (ACB), we believe transparency leads to better outcomes. Let’s break down the real-world advantages and disadvantages so you can make an informed decision that aligns with your business needs.
The Pros of Contingency-Only Collection Agencies
You Don’t Pay Unless They Deliver
The most obvious benefit is cost savings. With contingency-only agencies like ACB, you owe nothing unless money is recovered. That eliminates upfront costs, flat fees, or monthly retainers. This is particularly appealing to landlords and small businesses who need cash flow but can’t afford to take on more financial risk.
Strong Motivation to Recover
Since the agency only gets paid if they succeed, they have a built-in incentive to work harder for you. Their compensation depends directly on their performance. That alignment between your goals and theirs can translate to faster recovery and more aggressive (yet compliant) pursuit of debtors.
Learn more about how this works in How Contingency-Based Debt Collection Models Benefit Property Managers.
Easier Budgeting
You don’t need to budget for monthly retainers or hourly fees. This makes contingency-based services predictable and manageable, especially for seasonal businesses or property managers who face sporadic delinquency.
Lower Legal Risk
Because contingency agencies absorb the cost of chasing down debt, including credit reporting and skip tracing, you avoid spending money on fruitless efforts. If recovery isn’t possible, you’re not left footing the bill.
The Cons of Contingency-Only Collection Agencies
Higher Fees on Successful Collections
While you avoid upfront costs, contingency rates can range from 20% to 50% depending on the account's age, type, and complexity. That means you could lose a large portion of what’s collected if the case is tough or has aged considerably.
You can explore the cost breakdown more in Are Contingency Fee Collections Worth It?.
Less Control Over Methods
Some contingency agencies may prioritize speed over client sensitivity. This can be risky in tenant relationships or high-value client scenarios. If your brand image is critical, you’ll want a partner like ACB who balances recovery with reputation management.
For example, we never use aggressive or non-compliant tactics. Our communication approach emphasizes respect and transparency, as discussed in Building Stronger Tenant Relationships Through Transparent Debt Recovery.
Not All Debts Accepted
Agencies operating on contingency often reject low-value or hard-to-collect debts. If your portfolio includes smaller balances or accounts over a year old, not every firm will take them. At ACB, we review each case carefully and offer realistic guidance on whether recovery is worth pursuing.
Risk of “Bulk Handling”
Some larger agencies work hundreds of accounts at once, which can lead to delayed follow-ups or missed opportunities. That’s why it’s important to choose a firm that assigns dedicated account managers and keeps you informed every step of the way.
Finding the Right Contingency Partner
A contingency-based model isn’t a one-size-fits-all solution. The key is choosing a firm that offers both results and respect for your business's brand, values, and customers.
At ACB, we combine contingency pricing with full-service support:
- Advanced skip tracing to locate hard-to-find debtors
- Twice-monthly credit bureau reporting
- Legal compliance across all 50 states
- Professional communication that protects your brand
- 100% U.S.-based team with no outsourcing
You can learn how this structure has helped landlords and businesses in How Contingency-Based Debt Recovery Protects Your Cash Flow.
Final Thoughts
Understanding the contingency collection pros and cons is key to selecting the right partner. If you value transparency, legal compliance, and only want to pay when results are delivered, contingency may be the best fit. But not all agencies are created equal. The right firm should offer not just affordability, but also reliability, professionalism, and tailored service.
