What is the most important issue about a collection agreement?
The term of the agreement. Everyone in this business knows you’re only as good as last month’s performance. For this reason all vendor contracts can be cancelled, without cause, upon thirty days notice. Most collection agency agreements contain this provision. Yet, many collection agreements contain other provisions, which nullify your right to cancel on thirty days notice. Specifically, collection agency agreements contain buy back or cancellation fee provisions. For example, over the last ten years you have placed $20M in debt with a collection agency. The collection agency is not performing, so you give them thirty days notice of cancellation, and you request return of your debt (the collection files placed). The collection agency then informs you that you must pay them a 10% cancellation fee, or $2,000,000 to get back your own debt. The debt is yours. Never sign a collection agreement that requires you to pay for the return of your property if the agency is not performing.