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A debt collection agreement is the agreement between an entrepreneur and a debt collection agency, whereby the entrepreneur hands over claims and the debt collection agency collects them on his behalf. It gives the debt collection agency a clear mandate and regulates the commission (the costs) — for example, a fixed amount, a percentage, or a no-cure-no-pay formula. For a debt collection agency, this is the foundation of the agreements and of its right to commission.
A company often carries out part of the debt collection process internally. If that is unsuccessful, it engages a debt collection agency, with whom it enters into a collection agreement. We explain what this entails.
What is a debt collection agreement?
A debt collection agreement is concluded between an entrepreneur and a debt collection agency and is necessary when the entrepreneur hands over claims that the agency collects on their behalf. For the debt collection agency, a concrete mandate is important; for the entrepreneur, clarity regarding the costs (the commission). You record these agreements in the debt collection agreement.
What is in it?
In addition to standard agreements (such as duration and subject matter), the agreement contains a great deal of customization:
- Obligations of the collection agency — how the collection procedure is conducted, which services and actions are performed, and that it reports at appropriate times.
- Obligations of the entrepreneur — usually cooperation and the provision of information, plus the payment of commission. This is often offset against the amounts collected, possibly using a no-cure-no-pay formula.
The commission can be calculated in various ways: a base amount, a percentage of the claim, or a subscription formula.
Why do I need a collection agreement?
As a debt collection agency, you require a clear mandate from the entrepreneur. You have your own working methods, procedures, and a specific way of reporting and calculating commission. Therefore, a tailor-made debt collection agreement is necessary: it forms the backbone of the arrangements and safeguards your right to commission.
Frequently Asked Questions
When do I need a collection agreement?
As soon as an entrepreneur hands over claims to a collection agency, the agreement grants the collection agency a mandate and regulates the commission and working method.
How is the commission calculated?
In various ways: a base fee, a percentage of the claim, or a subscription. The commission is often offset against the collected amounts, possibly on a no cure no pay basis.
What is no cure no pay in debt collection?
A formula whereby the entrepreneur only pays (in full) when payment is actually collected. You define the precise details in the collection agreement.
Have a debt collection agreement (and more) drafted
The legal experts at MKB Juristen draft a customized debt collection agreement, plus other collection documents such as demand letters, payment arrangements, and letters to interrupt the limitation period. View our debt collection services or schedule a free intake consultation .
