Certified Revenue Cycle Representative (CRCR) Practice Exam

What are collection agency fees based on?

1. A percentage of dollars collected

2. Fixed monthly fee

3. Flat rate per account

4. Hourly rate for services

The correct answer is: A percentage of dollars collected

Collection agency fees are typically based on a percentage of the dollars collected. This structure aligns the interests of the collection agency with those of the client, as the agency earns more when they successfully recover more debt. This percentage-based model incentivizes the collection agency to maximize the amount they collect, as their compensation is directly tied to their performance. In contrast, the other options, such as a fixed monthly fee or a flat rate per account, do not create the same incentive for the agency to actively pursue higher collections, as their payment would remain the same regardless of outcome. Similarly, an hourly rate for services does not align with performance measures, making it less common for collection agencies, which are focused on maximizing recovery amounts rather than just billing for time spent on accounts. This performance-based fee structure is why a percentage of dollars collected is the predominant model in the collections industry.