Collection agency or attorney letter? Do the math first.

NYC DCWP LICENSING · NY CPLR § 5004

What each one actually is.

A collection agency is a business that pursues debts on behalf of creditors, typically for a contingency fee: a percentage of whatever it collects, with nothing owed if it collects nothing. Its tools are letters, phone calls, emails, credit reporting in some cases, and persistence. It is not a law firm and cannot sue in your name.

An attorney demand letter is a formal written demand on law-firm letterhead, signed by a lawyer licensed in New York, stating the claim, the amount with interest, a deadline, and the consequence of ignoring it. It is one document, sent once, for a flat fee. The lawyer who signs it is the same person who can file the complaint. For most B2B receivables in New York, that last fact is the whole difference.

Cost: contingency percentage vs. flat fee.

Agency contingency rates on commercial accounts commonly range from around 25% for fresh, large balances to 50% for old or small ones. On a $30,000 invoice at 35%, the agency keeps $10,500. On a $6,000 invoice at 50%, it keeps $3,000. You pay nothing up front, and nothing if the debtor never pays, which is the genuine appeal.

An attorney demand letter is a fixed, known fee paid once, regardless of the balance. On the $30,000 invoice, recovering in full after a letter means you keep essentially all of it. On a very small balance, the letter's fee may be a meaningful fraction of what is owed, and that is the honest limit of the model: below a certain size, neither a lawyer nor a lawsuit makes economic sense, and an agency's no-recovery-no-fee structure is the rational choice.

Rough rule: the larger and cleaner the receivable, the more a contingency costs you and the better a flat-fee letter looks. We publish our letters as flat-fee for exactly this reason; you can run the numbers before you commit.

Who can sue: only one of them.

A collection agency cannot file a lawsuit for you. If its calls and letters fail, the file either comes back to you or gets forwarded to a law firm, often one the agency has an arrangement with, and often with the agency's percentage still attached to the eventual recovery. The debtor's accounts-payable department knows this. An agency letter threatens consequences the agency cannot itself deliver.

An attorney letter comes from the person who can deliver them. When a debtor's controller forwards a law-firm letter to the company's own lawyer, the advice they get back is usually about litigation cost, not about whether to take the letter seriously. That is the credibility gap, and it is why sophisticated debtors who ignore agencies for months frequently pay within weeks of a lawyer's letter. It also preserves the relationship better: one formal letter reads as a business handling its affairs; a campaign of agency calls reads as a relationship that is over.

Licensing and regulation in New York.

Collection agencies that pursue debts from New York City debtors must be licensed by the New York City Department of Consumer and Worker Protection, and the city and state impose rules on how collectors communicate, what they may say, and what they must disclose. Much of that framework was written with consumer debtors in mind, but licensing applies to agencies operating in the city regardless, and a reputable agency will show you its license number without being asked. If it will not, walk away.

Attorneys are regulated by the courts and the state's attorney disciplinary system. A lawyer who misstates a claim in a demand letter answers for it professionally. That regulatory weight is part of why a law-firm letter carries more force: the recipient knows it was not generated by a script.

Head-to-head.

• Fee. Agency: percentage of recovery, often 25% to 50%. Attorney letter: flat fee, fixed up front.
• Up-front risk. Agency: none. Attorney letter: the flat fee, whether or not the debtor pays.
• Can file suit. Agency: no. Attorney: yes.
• Credibility with a debtor's lawyer or CFO. Agency: low to moderate. Attorney letter: high.
• Relationship damage. Agency: significant; repeated calls and, sometimes, credit reporting. Attorney letter: contained; one formal document.
• Builds the legal record. Agency: not designed to. Attorney letter: yes; a restated account, an invitation to object, and computed interest strengthen an account stated claim.
• Best for. Agency: many small balances, consumer debtors, files nobody will ever sue on. Attorney letter: individual B2B receivables large enough that a lawsuit is a credible next step.

When a collection agency is the right call.

We send demand letters and we will still tell you an agency is sometimes the better tool:

• Volume. If you have forty delinquent accounts averaging $900, you need a process, not forty letters. An agency's systems and contingency structure fit that.
• Tiny balances. Below the level where anyone would ever file, the threat of suit is hollow. A no-recovery-no-fee collector loses nothing by trying.
• Consumer debtors. Individuals who owe your business money come with protections and practical collection limits that agencies handle as a specialty. (Though if the debtor is an individual who can pay, a lawyer's letter still often works faster.)
• Unknown whereabouts. Some agencies are good at skip-tracing a debtor who has moved. A lawyer can do this too, but it is not what a flat-fee letter is for.

When the attorney letter wins.

• One business owes you a meaningful sum. The contingency on a single $20,000 to $100,000 receivable dwarfs any flat fee.
• The debtor is solvent and organized. A company with a controller and outside counsel responds to litigation risk, not to call volume.
• You want the customer back. A single formal letter is something you can both move past. Months of agency calls are not.
• There is a personal guarantee. An attorney letter to the guarantor, citing the guarantee, changes the owner's personal calculus. See personal guarantees on unpaid invoices.
• The clock is a concern. Handing a file to an agency for six months of calls burns time you may need. See statute of limitations for unpaid invoices.

What a demand letter does here.

For a commercial receivable, our letter identifies the debtor entity precisely, states breach of contract and account stated, computes principal plus 9% statutory interest under CPLR § 5004 (or the contractual rate, if valid), sets a deadline, and names the court we will use if it passes. It goes by mail and email. It is one page that a CFO cannot file under “vendor noise.” If it is ignored, you have lost a flat fee and gained a stronger record; the next step is the commercial claims part for modest sums or a Civil or Supreme Court action for larger ones, with the choice laid out in demand letter vs. small claims.

If your receivable is small, old, or owed by a company that has clearly collapsed, we will say so and point you to an agency or to writing it off. Selling a letter into a file that cannot pay helps nobody. For the full picture of New York commercial collections, start at the hub.