No win – No fee Debt Collection…. too good to be true??
As the old saying goes “if something is too good to be true then it probably is”. You may think you have nothing to lose by using a cheap back street ‘No win – No fee’ debt collection company but you could possibly lose the ‘money’ that you are owed!
Whilst British Business remains in the grip of tight economic conditions, over the past couple of years, there has been a rise in the demand for Debt Collection Companies advertising themselves as operating a ‘No win – No fee’ policy when this clearly is not the case. As this practice continues to grow, so does the misinformation surrounding this ‘no win – no fee’ culture within the Debt Collection Industry.
The position of some is that as they seemingly pay nothing initially, the Debt Collection firm in question will work harder to recover the money and that there is nothing to be lost, only gained. The simple truth of the matter is very different and should be taken very seriously.
The ‘No win – no fee’ term is simply being used by some as a marketing slogan in the Debt Collection Industry to mask over a hidden ‘drip pricing’ structure and quite often companies that advertise themselves as ‘no win – no fee’, require a membership and/or joining fee which straight away, is an immediate contradiction of their key selling point which should give a clear indication of what is to follow.
Often these companies will charge exorbitant commission rates, quite often as high as 50% (even higher in some instances) and will have hidden costs contained within their services. It is also common that these type of companies are fronts for firms of fee earning solicitors who will simply wish to matter to proceed to litigation so they can begin to apply their hourly fees (Average £250 per hour) as well as any other costs incurred therein. There have been instances where a debt has been collected and the actual amount that was owing in recovery fees was nearly 3 times what the actual debt was in the first place
Other ‘No win – no fee’ companies have ties with Debt Management and Insolvency firms looking for free, direct and easy lead generation as once details of a debtor are supplied, they will bombard them with details of ‘how to clear their debts with one easy payment’ which involves the usual bankruptcy, liquidation or IVA/CVA option. This a far more financially lucrative option than actually attempting to collect the debt and will severely prejudice any of your attempts to recover what is owing to you.
With most ‘no win – no fee’ Debt Collection companies, it is simply a numbers game. It is a simple economic fact that a company cannot operate without cash flow so how can a Debt Collection firm work for ‘free’ or deliver the service they promise for ‘free’ without some sort of guarantee. Some Debt Collection firms actually have it written in their Terms & conditions that if they fail to collect then you will be liable for their costs.
No company can operate without cash flow so the question is, what will they actually do to recover your money? They cannot offer you any form of service by means of updating you etc and they will try to charge you where possible. More often than not, it is simply a numbers game. If you have a case with no merit then maybe this is a valid option for you but once again, you may be liable for an invoice in the event that they cannot collect it.
5 Facts to consider
Fact 1: Many Debt Collection Companies that advertise as ‘No Win – No fee’ will still require a joining fee or membership fee as they like to call it.
Fact 2: No Bona fide Debt Collection Company operates any form of ‘Money Back guarantee’ scheme
Fact 3: Some ‘No win – No fee firms’ allegedly have ties to Debt Management & Insolvency Firms which will seriously prejudice the potential of successfully recovering your debt.
Fact 4: The commission rates charged by ‘No win – No fee’ firms will be far higher than other means.
Fact 5: Most ‘No win – No fee’ operate excessive drip pricing structures and minimal transparency in relation to what is actually being done.
As the old saying goes “if something is too good to be true then it probably is”. You may think you have nothing to lose by using a ‘No win – No fee’ debt collection company, you will probably lose more than you thought!