A collection cost is the cost incurred to collect

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

that is owed, a process called debt collection. This could include expenditures for hiring a collection agency. Some contracts and regulations prescribe

liquidated damages Liquidated damages, also referred to as liquidated and ascertained damages (LADs), are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach (e.g., late ...

for collection costs. When collection costs occur, the debtor has pay off debt to get the collector out of collection cost.

References

{{Finance-stub Debt collection