# Contingency fee — definition

> A contingency fee is a fee payable to the collections firm as an agreed percentage of amounts actually collected, earned only on recovery rather than billed for time.

- Source: https://ottoforfirms.com/glossary/contingency/
- Publisher: Otto — https://ottoforfirms.com
- Updated: 2026-09-01

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**Contingency fee** — A contingency fee is a fee payable to the collections firm as an agreed percentage of amounts actually collected, earned only on recovery rather than billed for time.

Where the firm's client is the creditor, the arrangement is governed by the state analogue of Model Rule 1.5(c), which requires a writing signed by the client stating "the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal; litigation and other expenses to be deducted from the recovery; and whether such expenses are to be deducted before or after the contingent fee is calculated." On conclusion the lawyer must provide a written statement of outcome and, if there is a recovery, the remittance and method of its determination. Collections schedules are typically tiered — a lower rate on pre-legal recovery, higher on post-suit or post-judgment, sometimes higher again on forwarded or secondary placements — and any fee charged to the consumer rather than the client raises a separate FDCPA § 1692f(1) authorization question.

## Primary sources

1. [N.C. R. Prof. Conduct 1.5(c); cf. 15 U.S.C. § 1692f(1)](https://www.ncbar.gov/for-lawyers/ethics/rules-of-professional-conduct/rule-15-fees/)

## See also

- [Net-back](https://ottoforfirms.com/glossary/net-back/)
- [Remittance](https://ottoforfirms.com/glossary/remittance/)
- [Placement](https://ottoforfirms.com/glossary/placement/)

## Where this appears

- [Collection-Master alternatives: what a replacement has to carry](https://ottoforfirms.com/compare/collection-master/)
- [How to model the return on collections software](https://ottoforfirms.com/roi/)

Last reviewed 2026-07-29

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This is an informational reference, not legal advice, and using it creates no attorney-client relationship. Limitations periods turn on facts this page cannot know — which state's law governs, the contract type, when the claim accrued, and whether anything tolled or revived it. Confirm against the primary source and your own counsel before acting.