Certified Revenue Cycle Representative (CRCR) Practice Exam

What is the basis for collection agency fees?

1. A flat fee for service

2. A percentage of dollars collected

3. A fixed monthly charge

4. A fee per account

The correct answer is: A percentage of dollars collected

The basis for collection agency fees is primarily a percentage of dollars collected. This method aligns the interests of the collection agency with those of the creditor since the agency is incentivized to recover as much as possible; they earn a commission based on the success of their collection efforts. This arrangement can lead to a more aggressive and effective approach to collections, as the agency stands to benefit directly from the amounts they are able to recover. Other fee structures, like a flat fee for service, may not provide the same level of motivation for the agency, as they would not earn additional revenue for recovering larger debts. Fixed monthly charges or fees per account also do not directly incentivize the collection agency to maximize recovery amounts since their income would remain static regardless of the amount collected. Thus, the percentage-based structure is the most effective and commonly used approach in the industry.