How does No Cure No Pay debt collection work?

"No Cure No Pay" debt collection is a widely used method for entrepreneurs to collect unpaid invoices. But how exactly does it work? And what should you, as an entrepreneur, look out for? The ground rules can vary significantly from one collection agency to another.

In this blog, we explain step-by-step what No Cure No Pay debt collection entails, what the benefits are, and how you can choose the right collection partner.

What is No Cure No Pay debt collection?

With No Cure No Pay debt collection, you only pay fees if the collection agency successfully collects money from an outstanding invoice. In other words, if your customer does not pay, you do not pay any fees for the out-of-court collection process.

The collection agency has invested time, resources, and expertise in the collection process but has not received compensation for it. In this situation, the risk lies entirely with the service provider.

Benefit for entrepreneurs

The great advantage of No Cure No Pay for clients is that it offers the opportunity to engage professional collection services without financial risks. This is particularly attractive for entrepreneurs and companies with limited financial resources. This way, the chance of payment is increased without incurring upfront costs.

When is it truly free of charge?

For almost every collection agency, the outcome is clear in two specific situations:

• The customer pays nothing: You pay nothing either.
• The customer pays the full amount + collection fees: You receive the invoice amount, and the collection agency receives the collection fees.

But what happens if the customer only pays a portion of the total amount? Or only the invoice amount without the collection fees and interest? Rules can differ per collection agency, and it is important that you know exactly which rules apply to you.

Common models for partial payments

The following settlement models are often used by collection service providers in the event of a partial payment:

• Fixed amount per payment: If a customer makes a payment, a fixed amount of collection fees is charged to the client, regardless of the amount paid by the customer.
• Fixed percentage per payment: If a customer makes a payment, a fixed percentage of the paid amount is charged to the client as collection fees.
• No fees for partial payments: If a customer makes a payment, this is passed on in full to the client first. Only once the invoice is paid in full does the collection service provider receive compensation for their services.

Watch out for hidden ground rules

Collection agencies often clearly state on their websites that they offer No Cure No Pay collection. It is clearly mentioned that companies do not have to pay collection fees if nothing is collected from your customer.

However, for most agencies, it is much less clear what happens when a customer makes a partial payment. Transparency regarding the fees charged in those situations is often lacking, buried in the fine print of the agency’s terms and conditions.

When does No Cure No Pay not apply?

Can entrepreneurs simply hand over every invoice to a collection agency without running any risk? No, that would be too easy. After all, the agency must be given a fair chance to collect the invoice, and they deserve compensation for their services.

There are several situations where No Cure No Pay does not apply:

• The invoice is disputed: If a customer disagrees with your invoice—for example, because the product or service is defective—the invoice is considered 'disputed.' In that case, the collection agency will not simply process your invoice. Disputes involve a much more intensive process than standard files, and different conditions usually apply.
• The invoice is withdrawn: Imagine your customer pays only the invoice amount but not the collection fees. The agency will continue pursuing the case because the customer is legally required to pay those extra costs. If you then indicate that you do not want to pursue this, perhaps because you want to safeguard your relationship with the customer, you are essentially withdrawing the invoice. The collection agency is not given a fair chance to be paid for their services. In that case, the agency will charge collection fees to the client.
• Legal proceedings: No Cure No Pay usually applies only to amicable collection (without court intervention). Once legal proceedings are initiated to enforce payment, costs for the client may increase, especially if you have not sought proper advice.
• International debt collection: If your customer is located abroad, the collection process is different. Other laws, ground rules, and customs apply in other countries. Because approaching a customer abroad requires more effort, special rates often apply, and No Cure No Pay is frequently not applicable.

Choose wisely!

No Cure No Pay debt collection offers a low-threshold solution for outstanding invoices. You only pay for success and run little risk as an entrepreneur. Nevertheless, it is crucial to compare the terms and conditions of the collection agency carefully, especially regarding partial payments and exceptional situations. This way, you won't face any surprises and can make an informed decision about engaging a collection agency.

Get started right away with incasso.nl?

Do you have customers who are not paying your invoices? Create a free account at incasso.nl. With the smart app from incasso.nl, you can quickly and easily submit your invoice. Our specialists will then get to work to collect your payment.

At incasso.nl, our ground rules are simple:

• If the customer does not pay, you pay nothing.
• If the customer pays the full amount + collection fees, you receive the invoice amount, and incasso.nl receives the collection fees and interest.
• If the customer makes a partial payment, you pay a fixed commission percentage (between 5-15%).
• If you withdraw an invoice, you pay the collection fees.
• For international collection cases, you pay a case filing fee and a commission on payments according to a pre-communicated scale.
• For legal proceedings, you receive expert advice in advance regarding expected costs and the feasibility of a lawsuit.

Do you have any questions about No Cure No Pay at incasso.nl? Or would you like to discuss your situation without obligation? Feel free to contact one of our debt collection specialists.