Debt Recovery Service Terms and Conditions Agreement

What a good one includes

• Clear definitions of your fee structures, including contingency percentages, flat rates, and how direct payments from debtors to clients are billed.
• A mutual compliance clause ensuring both your agency and the client adhere to the Fair Debt Collection Practices Act and state-specific collection laws.
• A limited power of attorney or explicit authorization clause granting your agency the legal right to negotiate, settle, and receive payments on the creditor’s behalf.
• An indemnification clause protecting your agency if the client provides inaccurate debtor data or accounts that have already been settled or bankrupt.
• Precise rules for how and when a client can recall a debt, including any administrative fees owed to you for work already performed on those accounts.
• Governing law and dispute resolution clauses that dictate where and how legal disagreements between your agency and the client will be settled.

Common mistakes to avoid

• Failing to address direct payments, which allows clients to receive payments directly from the debtor and bypass paying your hard-earned commission.
• Omitting client liability for bad data, leaving your agency vulnerable to lawsuits if a client submits an out-of-statute or already-paid debt for collection.
• Vaguely defining settlement authority, which can lead to major disputes if you negotiate a partial payoff that the client later refuses to honor.
• Neglecting to specify who covers legal fees and court costs when an unpaid account must be escalated to litigation.

Frequently asked questions