What is a contingency fee? When you agree to pay a contingency fee to your attorney, you only need to pay if the attorney collects on your debt. Payment for your attorney is “contingent upon” you receiving at least some of the monies owed to you. This differs from non-contingent fees, which attorneys typically calculate based on the number of hours they work on your case. These hourly fees can make more experienced attorneys a costly option.
How complex and risky a case is factors into the contingency fee percentage. Contingency fee percentages can range from 15% for a straightforward case to about 33.3% for a more complex case. Creditors who shop around for a debt collection attorney with the lowest contingency fee usually do not end up with the most money in their pockets. You get what you pay for when it comes to attorneys. That extra 5% contingency fee might be the difference between collecting and not (and 70% of a sum is better than 80% of nothing). When determining whether or not a fee is fair, there are many factors to consider such as the amount of labor and time required on your case, the difficulty of your case, the firm’s reputation or success rate, and the average fee charged by other firms in the area.
There are a few drawbacks to contingency fee agreements. Sometimes, especially for straightforward cases, the attorney will end up with a bigger cut than if you paid by the hour. Also, contingency fees are set in stone in the agreement. This means your attorney can take their hefty percentage whether they take one week to collect or one year. Another drawback is that if your case is not super promising, attorneys will be less willing to take your case, even if it is still possible to collect on.
Benefits of a Contingency Fee
Contingency fee agreements are still the best options for creditors looking to collect on their debts. Some benefits of these fee arrangements include.
- There is a better return on investment (ROI) to collect bad debt. Clients will be less likely to throw good money after bad debt that they would not have been able to collect on.
- There is no upfront cost, so you don’t have to pay a fee that you can’t afford.
- Your attorney will be more likely to work harder on your behalf. You can expect them to do everything in their power to collect your debt because they are highly motivated to get paid.
- Contingency fees allow more people to have access to experienced debt collection attorneys.
- There are no costs for losses, so creditors do not have to worry about paying an attorney’s fee when they have not collected
Creditors looking for favorable fee agreements will be happy to learn that New York permits contingency fee debt collection. If you have a debt collection matter you need assistance with, contact Frank, Frank, Goldstein and Nager to learn more about your options.