A debt collection agency tends to be worth it for a debt that's undisputed, that you've stopped expecting to collect yourself, and that's owed by a customer you don't plan to keep. Most agencies charge commission only on what they recover, at a rate that usually rises with the age of the debt and falls as the balance gets bigger. Collecting business invoices doesn't need FCA authorisation, so judge an agency on its terms and track record.
In this article
The short version
- Agencies usually charge commission only on what they recover, rising with the age of the debt.
- One UK agency publishes rates from 5% to 25% for debts in England and Wales.
- Instructing an agency keeps the debt yours; selling it transfers ownership and ends VAT bad debt relief.
- Collecting business invoices doesn't need FCA authorisation.
- An agency suits undisputed debts from customers you don't plan to keep.
What an agency charges
On a standard instruction you hand the agency a debt you still own, and it chases on your behalf for a percentage of whatever it collects. If it collects nothing, you usually pay nothing. Published rates vary widely: one UK agency quotes commission from 5% to 25% for debts in England and Wales, with a £1,000 minimum instruction and a handling fee on smaller debts.
The rate tends to depend on how old the debt is, how big it is, how many debts you send, whether it's owed by a business or a consumer, and how likely it is to be recovered. A three-month-old £8,000 invoice to a solvent company tends to attract a low rate, and a two-year-old £600 debt a much higher one.
You'll also see two other pricing models. Some agencies charge a small fee to open each file plus a lower commission. Others advertise that collection is free to you, because they add their costs to the amount claimed from your customer under the late payment legislation, which lets a business recover reasonable recovery costs above the fixed compensation. Whether a court would treat the full commission as reasonable is a separate question, so read "free" as a description of how the agency charges, and check what happens if your customer pays the invoice but refuses the add-on.
There's no published industry rate card, so two or three quotes on your actual debts will tell you more than any average you read online.
Should you instruct an agency or sell the debt?
These are two different transactions, and your customer experiences them differently.
When you instruct an agency, you're still the creditor. The agency acts for you, you keep the risk that nothing is recovered, and your name stays on the debt, so the agency's tone becomes your tone as far as the customer is concerned.
When you sell or assign the debt, ownership moves. Under the Law of Property Act 1925, a written assignment with written notice to the debtor transfers the debt and the right to collect it, and your customer gets a letter telling them someone else now owns what they owe you. You're paid a price for the debt and step out.
Selling has a tax cost worth knowing first. VAT bad debt relief only applies to a debt that hasn't been sold or factored under a legal assignment, so once you've sold it, you can't reclaim the VAT you paid on the invoice.
What happens to your interest and compensation
On an instruction, your statutory rights stay with you. On a late business invoice that's interest at 8% above the Bank of England base rate, currently 11.75% a year, plus fixed compensation of £40, £70 or £100 depending on the invoice size, and reasonable recovery costs on top where the fixed sum doesn't cover them.
If your contract sets its own late payment interest rate, that rate usually replaces the statutory one, so you or your agency claim one or the other, not both.
When an agency is worth it
Agencies collecting unpaid trade invoices from businesses don't need FCA authorisation, because the regulated debt-collecting activity covers consumer credit and consumer hire debts. So "FCA authorised" isn't a useful filter for a business debt. Ask instead about fees, how they contact your customer, and what they do if the debt needs a court claim. Membership of the Credit Services Association, the trade body, means the agency has signed up to its code of practice.
| Your situation | How it tends to work out |
|---|---|
| A debt of a few hundred pounds | Minimum fees can outweigh what you recover |
| A recent debt, a solvent customer, no dispute | Commission is at its lowest, and a third-party letter sometimes settles it |
| An old debt you've given up on | Recovering part of it may still beat a write-off |
| A debt the customer genuinely disputes | An agency can't resolve a dispute; that needs a conversation or a court claim |
| A customer you believe can't pay | A write-off, with the VAT reclaimed, may suit you better |
| A customer you want to keep | Weigh what an agency letter costs you in goodwill |
Debts that end up with an agency have often been chased by hand, on and off, for months before anyone decides to hand them over. Adfin's collection agents keep sending reminders on every overdue invoice over email, SMS and WhatsApp, from your own email domain, until it's paid or you pause chasing for that customer. So if you do end up weighing an agency, the debt has already had months of regular reminders behind it.
Common questions
How much do debt collection agencies charge in the UK? There's no standard rate. Most charge commission on what they collect. One UK agency publishes rates from 5% on recent, larger debts up to 25% on smaller or older ones.
Can a debt collection agency be free? Some agencies charge you nothing and claim their costs from your customer under the late payment legislation. That depends on the costs being reasonable, so check what happens if your customer refuses to pay them.
Does a debt collection agency need to be FCA authorised? Not to collect business invoice debts. FCA authorisation is needed for debts under consumer credit or consumer hire agreements.
What's the difference between instructing an agency and selling a debt? When you instruct an agency, you still own the debt and pay commission on what's collected. When you sell it, ownership transfers and your customer is told someone else now owns it.
Can I still claim late payment interest if I use an agency? Yes, on an instruction the statutory interest and fixed compensation stay yours to claim. You can't claim statutory interest on top of a contractual interest rate.
When shouldn't I use a debt collection agency? When the customer genuinely disputes the debt, or when it's a customer you want to keep. A dispute needs a conversation or a court, and an agency letter can end the relationship.
Sources
- GOV.UK - Late commercial payments: claim debt recovery costs (accurate as of October 2026) https://www.gov.uk/late-commercial-payments-interest-debt-recovery/claim-debt-recovery-costs
- legislation.gov.uk - Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, article 39F (accurate as of October 2026) https://www.legislation.gov.uk/uksi/2001/544/article/39F
- legislation.gov.uk - Law of Property Act 1925, section 136 (accurate as of October 2026) https://www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/136
- HMRC - Relief from VAT on bad debts (VAT Notice 700/18) (accurate as of October 2026) https://www.gov.uk/guidance/relief-from-vat-on-bad-debts-notice-70018
- Athena Collections - Pricing (accurate as of October 2026) https://www.athenacollections.co.uk/pricing
- Adfin - Credit control (accurate as of October 2026) https://www.adfin.com/credit-control
