How Much Money Do Debt Collectors Make?

How much money do debt collectors really make?

If you're here then the odds are you've had issues with a collection agency at some time or another. And, like most of us, you've probably wondered how much money debt collectors make. After all, a person would have to be willing to berate and humiliate others for a living--surely the collection agency would have to offer an attractive salary to compensate, right? Not necessarily.

How Much Do Debt Collectors' Make Hourly?

All collection agencies have their own distinct compensation packages, but if you're a debt collector, you're a lot more likely to be paid by the hour than earn a predetermined salary--and the amount you earn will vary by a wide margin. Some debt collectors, for example, earn less than $10 an hour. That's little above minimum wage. You have to admire the irony of someone who knows exactly what its like to hardly make ends meet yet calls your inability to cough up hundreds (or thousands) of dollars nothing but "excuses."

Most debt collectors, however, earn somewhere in the neighborhood of $12-$15 dollars an hour. The job's low pay rate is partially due to the fact that, although the work is soul-crushing for most individuals, you don't need experience or a college degree to do it. You don't even really need much training which is a plus for the agencies because the collection industry has a very high turnover rate.

How Much Commission Do Debt Collectors Make?

Collection agents have the opportunity to advance their pay beyond their hourly wage by earning commissions on the debts they successfully collect. Surprisingly, the commission rate for most debt collectors is abysmal--often less than half a percent. Keep in mind that the collection agency itself is often working on a commission and the lion's share of the collected debt goes to the original creditor.

Let's be generous and say you're a debt collector whose commission rate is half a percent. Your

Debt collectors must often meet strict quotas.

quota for the month is $150,000. If you meet your quota, that leaves you with a take-home commission of $750. For some people, that's an entire month's rent or mortgage payment. It's certainly a healthy incentive for a debt collector to meet or exceed his/her monthly quota. The sad irony here is that, in many cases, debt collectors are clearly underpaid and then offered "incentives" like commission to make up for money they should be receiving anyway just to do their jobs.

The exception to the low-commission rule is the student loan collection industry. Student loan collectors who convince a debtor to make monthly payments over a certain percentage of the loan balance (and this number varies) will often receive either a hefty commission (15% or more) or a cash bonus for each successful deal.

How Much Do Debt Collectors Earn in Bonuses?

Although all collection agencies' policies differ, bonuses are a near universal component of the industry. The top collector for the month/quarter/year will be awarded a substantial bonus. Bonus amounts vary widely, but if a low hourly wage and pitiful commission rate doesn't motivate a debt collector enough, an extra $5-$10k almost certainly will.

I welcome any contributions from actual debt collectors who'd like to discuss their salary and job perks. I am willing to change your name to protect your privacy.

Q&A: Has My Credit Card Debt Been Re-aged?

Hi Lee, 

I've been reading your Collection Agency blog. Thank you so much for doing this- it's been very helpful. 

Seven years ago, I defaulted on my credit cards due to a long period of unemployment.

Much of this debt should have fallen off my credit report in April and the SOL expired in my state in 2011 for some of the debt and 2012 for the rest of it. I stopped making most of my payments in March 2007. The Credit Bureau told me that it depends on when the creditor reports me as delinquent. 

In 2012, I disputed a few instances of re-aged debts with the Credit Bureau, but they told me at the time not to worry about the collection account's difference in reporting dates-- that they knew the original creditor's date of first delinquency, and that the collection agency's date of reporting didn't matter. When I contacted them again this April to ask why the debt hadn't fallen off my report, they claim to need information to make a change to the report. Should I send them the copy of that dispute I made in 2012? I am not sure what to do. I assumed the debt would fall off automatically. In one case, the date of first delinquency is reported as 2009, but that's well over 2 years after I stopped paying.

Equifax said the debt remains for 7 years, but I've read some blogs that say 7.5 years, so I'm confused on this. What is considered the first 'delinquent' date? In California for purposes of the SOL, it is considered the last time you made a payment. Would this be considered the Date of First Delinquency to the Credit Bureau? Or would it have been when the cards were 180 days past due? I know I was reported with a 30 day late in April 2007.

Thanks so much for your advice. 

Beth

Beth,

The credit reporting period works like this: Federal law requires the credit bureaus to remove your delinquent debts after seven years, but the seven-year clock doesn't even start ticking until your debt is 180 days old. The clock for the 180-day period begins ticking on the date of your last payment. The reason it takes 180 days to start the 7-year reporting period is that the 180-day mark is the point where most credit card companies "charge-off" the debt. That doesn't mean the debt is gone, of course, its simply to get the bad debt off that year's books for accounting and tax purposes. 

Of course, during this 180-day period, the debt is probably going to show up as delinquent on your credit report. That means that, although the credit reporting period is technically only seven years, its normal for a debt to hang around on your credit history for 7.5 years before being removed. 

If your debt was 30-days delinquent in April of 2007, that means that the credit reporting countdown didn't begin on the debt until September of 2007. Thus, don't expect the credit bureaus to remove it until September 2014. And they were right to tell you that they know the original delinquency dates--they do. The original creditor's automatic reports to the credit bureaus always contain dates. These dates don't always show up on your credit report, but they're there. The dates you see on your credit report for collection accounts generally reflect the date the collector first received or first reported the debt--not the original date of first delinquency from the original creditor. 

The statute of limitations for lawsuits is a totally different beast from the credit reporting period. The statute of limitations refers to the period of time in which a creditor can sue you for the debt. The statute of limitations for debt is calculated from the date of your last payment, and it doesn't carry the same 180-day "waiting period." The bad news, of course, is that if you make a payment you restart the clock on the statute of limitations and the collector regains the right to sue you. Making a payment does not, however, have any effect on the 7.5 years that a negative item will remain on your credit report. 

Long story short, you don't need to send the credit bureaus anything. Their computer system has the original dates on record and should automatically remove the original creditor's tradeline and the collection account attached to the debt in September. Just to be safe, consider pulling your free credit reports this October to ensure that both negative accounts are gone. 

Best of Luck,

Lee 

Related Posts:

Removing Re-aged Collection Accounts From Your Credit Report 

Credit Reporting Period vs. Statute of Limitations

Can You Reset the Statute of Limitations on a Debt? 

Q&A: Will Private Student Loan Lenders Do a Pay-for-Delete?

Hi Lee,

Someone on one of the forums I read suggested you might have some insight on this.

I have a large package of student loans from grad school (around 80k). Interest rates on the different packages are in the 6-8% range. The loans are held by a private servicing agency that bought them up from the original lender. I am current on all loans at present but there is significant negative payment history in the past 3-4 years.

Due to some fortunate circumstances I am now in a position to pay the loan off in full. However, I am wondering if I should be trying to extract any perks or considerations from the loan servicing agency as a condition of paying in full, e.g. having negative history removed from my credit report. I don't know whether they would be at all motivated to do something like this. 

As an aside, I also noticed that the "full payoff amount" listed on my loan statement is slightly higher (by about 1200, or the equivalent of one monthly payment) than the amount owed. Is that normal? Like a small early payment penalty or something? 

Can send more details if you need them, but would prefer my name / name of the agency not appear on the web. 

Thanks!

--Anonymous 



Anonymous,

I agree that you're in a power position here and definitely think you should milk that for all its worth. As far as your negotiation options are concerned, here are three:


1. Request a Pay-for-Delete 

For those just stepping into the classroom, a pay-for-delete is just what it sounds like: you pay the debt, the lender removes the late payment notations or, in some cases, entire tradeline, from your credit report. Lenders and collectors are a lot less likely to accept pay-for-delete agreements than they were 10 years ago because it violates the contract they have with the credit bureaus. But with an amount this high and you willing to pay in one lump sum, its possible they may just bend the rules for you. And those negative payments may work in your favor toward this goal. 

Ideally, the student loan lender wants you to pay off your loan over the span of the original agreement. Paying it off early infuses the lender with extra cash, but the lender loses out on all the interest that would have accrued if you had continued making your scheduled payment every month until the loan was paid in full. But you have a spotty record of paying this loan, and any collector who can do simple addition knows that makes you a much higher default risk than someone who has never skipped a payment. Financially, its a smarter move for them to accept your offer and remove the lates from your credit report. 

Of course, there is no guarantee this is going to work. If the rep you speak with refuses your pay-for-delete proposition, call back and ask another rep. You can also ask to speak to the supervisor and make him aware of what you want to do, since call center reps often have neither the ability nor the authority to alter consumers' credit records. 

2. The Goodwill Letter

I don't know how many late payments you have Anonymous, but you may be able to have a few removed using the age-old "goodwill letter." A goodwill letter gives you the chance to explain the circumstances around  your late payments and point out that, due to circumstance, those lates aren't truly indicative of your financial risk level. Ask that the lender remove the late payment notations as a gesture of good will and, if it does so, you will follow with your own gesture of goodwill by paying off the loan in one lump sum. Because this isn't a direct pay-for-delete, and because goodwill letters are still fairly effective, option 2 is more likely to work than option 1.

Make sure you send your letter to a CEO, a President or Vice President or head of the credit reporting division. The important thing is that you reach a person who has the power to fix things for you. That's a lot less likely to happen if you send your letter off to the company and it gets opened and read by a peon who doesn't really care one way or the other. Don't trust someone else to send your letter to the top, you need to make sure it gets there. 

I doubt significantly that a lender would be willing to remove more than two or three late payments from your credit report due to a goodwill letter--even though you're paying in full. If you choose this route, take what they offer you. Having a few lates removed is better than none. Just make sure that the lates they choose to delete are the most recent ones, since recent information has a larger impact on your credit scores than older information. 

3. Debt Settlement

Now, I don't even like talking about debt settlement, but it wouldn't be fair of me to not bring it up at this point. You've got a lump of cash and you want to get rid of that student loan. If the company refuses to modify its tradelines in exchange for payment, it may still settle the debt for less than you owe provided you pay the new debt in one lump sum which, clearly, you can do. While this doesn't directly benefit your credit, it leaves you with additional cash with which to pay down other debts. 

A few words of warning: If the lender agrees to settle the student loan, make sure that you request in writing an agreement that the debt will be reported to the credit bureaus as "paid in full," and that the remaining unpaid balance will not be sold to a collection agency. If they report it as a "settled" debt, its just going to make things worse, credit-wise. Plus, you don't want to believe you've put all this behind you only to wake up one morning from a slew of collection calls all demanding that you pay the remaining balance on a student loan you already settled. Tread with caution with this one. 

I'm sorry I couldn't be of more help than this. Also, your payoff amount is higher because you aren't just responsible for the loan's current balance but also any interest that would have accrued if you'd adhered to the original payoff schedule. 

Best of Luck,
Lee 

Related Posts:

Death of the Pay-for-Delete Agreement

Student Loan Collection

Can You Settle With a Federal Student Loan Collection Agency?