Can Debt Collection Costs be Added to the Debt?

Can Debt Collection Costs be Added to the Debt?

So, now that you are familiar with the different types of charging structures that Debt Collection Agencies usually use as described in our article No Collection, No Commission -Versus- No Win, No Feethe big question is can debt collection costs legally be added to the debt? If so, how?

These are both great questions!

In this article, we'll break this down for you and by the time you're done reading this, not only will you have a clear sense of how the process works and how and when costs are applied, but you'll finally be on that path to not only getting your debt recovered -- but also be well informed! Let's dive in.


So, just to be upfront and to clarify...

  • No Collection, No Commission
  • No Contracts to Sign
  • No Upfront Payments
  • No Monthly or Annual fees
  • Commission Rate Agreed Upfront
  • Commission Rates From 5% (Lowest Industry Standards)
  • No Additional Costs Unless Approved By You

The answer to this question depends on whether your debtor is B2B (Business to Business) or B2C (Business to Consumer) so we will answer these separately.

B2B (Business to Business)

When your debtor is a business then debt collection costs can be added to the debt either contractually, e.g. by way of your signed contract or your terms of business (Terms and Conditions) or by enforcing your statutory rights in accordance with Late Payment legislation, in particular the Late Payment of Commercial Debts (Interest) Act 1998.

If you haven’t got terms of business or a signed contract, you can rely on Late Payment legislation or alternatively, you can rely on your terms of business should you have an appropriate clause. Either way, debt collections costs can be added to the debt in B2B matters.

B2C (Business to Consumer)

Whilst you can add debt collection costs to the debt when a debt is B2B, the rules are slightly different when it comes to B2C. Debt collection costs are not legally enforceable unless you have a specific clause in your contract or terms of business (Terms and Conditions). Therefore, you may ask for these costs to be paid but there is no obligation for the debtor to pay them and if they refuse to pay then you cannot threaten legal action to recover the debt collection costs.

If you haven’t got a clause already then, we recommend you insert one as soon as possible.

If you have got a clause in your contract or terms of business (Terms and Conditions) then you can legally add debt collection costs to the debt.

After all said, this doesn’t necessarily mean that a debtor will pay the debt collection costs, and it may be that you will need to issue legal proceedings to recover them. Depending on the value of the debt collection costs, it may not be cost effective to issue legal proceedings and therefore you will need to consider this before taking further action. Our FREE Ultimate Guide to Debt Collection offers some more tips which you may find useful.

Can Interest be added to the debt? We will cover this in a separate article which you can find here.

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