FAQs

Debt collection agencies typically do not have a minimum invoice value for pursuing a debtor, leaving the decision down to the creditor.

While some agencies may charge a handling fee for debts below a certain amount, factors beyond cost, such as principles and reputation play a role in deciding whether or not to chase a small debt. Additionally, the nature of the debtor, whether a one-time buyer or a regular customer, influences the decision.

Redwood Collections, for instance, handles debts of any size but charges a fixed £50 handling fee for debts under £500.

Read more in our blog: https://www.redwoodcollections.com/blog/what-is-the-smallest-debt-a-collection-agency-can-chase

Providing the debtor is a business, you're legally entitled to recover reasonable debt collection costs by adding them to the value of the outstanding debt. The amount you can charge ranges depending on the sum of the debt.

You are entitled to charge an amount over and above one of these fixed sums if you can prove that it doesn't cover the reasonable costs of recovering the debt.

You can also charge the debtor interest on the outstanding debt. The interest rate you can levy is fixed at 8% above the Bank of England base rate.

The other way it’s possible to recover your costs is if you have a recoverable clause in your terms and conditions. If you are unsure whether you have this, a reputable agency will be able to advise you and offer a service to update this for you so that you are protected in the future.

Debt collection costs vary based on your preferences. Opting for a commission-only approach with a 'no collection, no commission' guarantee ensures affordability without upfront fees, increasing the chances of recovering the majority of the debt.

The flexibility to avoid long-term contracts and access additional services like legal advice and insolvency proceedings adds value to the overall cost-effectiveness.

Recoverable debt collection costs can vary depending on the debt's value and can be passed on to the debtor.

The interest you can charge on the outstanding debt is currently fixed at 8% above the Bank of England base rate.

Compared to legal professionals, debt collection agencies often offer a more cost-effective solution, for example, our 15% commission rate.

Find out more in our blog: https://www.redwoodcollections.com/blog/how-much-does-debt-collection-cost