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Debt Collection Merchant Services

by Kimberly Baylies on September 28, 2021

Debt collection agencies can now accept card payments Debt collection is a huge and necessary industry. When consumers default on a loan, the original creditor may not have the resources to continue trying to collect the debt. In these cases, it may be in their best interest to turn it over to a third-party agency to handle the collection process.  Debt collection agencies provide a welcome safeguard for businesses that can't afford to continue to shoulder overdue debt. These companies need to be able to accept payments if they have any hope of recouping costs. But it can often be difficult to find a bank that will provide them with debt collection merchant services.

Why is it so hard to get approved for a debt collection merchant account in the first place?

A debt collection agency is in the business of trying to recover funds from a past-due debt or an account that has gone into default. In order to recover these funds, the debt collection agency must be able to accept payments from debtors. But that can actually be a difficult thing to accomplish for these types of businesses. The credit card and payments industry considers debt collection a very high-risk business. And that can make it pretty difficult to get debt collection merchant services to accept payments.

This is primarily due to the nature of the business and the amount of regulation surrounding it. The business’s entire revenue is dependent on the debtor making their payments. But people who have been turned over to debt collection have already demonstrated they have a hard time paying off their debt. They may want to make good on a payment, but money is tight.

The debt collection industry is also often viewed as morally ambiguous. There have been many instances in the past where companies engaged in less than scrupulous practices. This has led to greater regulation surrounding how they are allowed to conduct business. Not only are debt collectors regulated by governmental agencies such as the FDCPA and CFPB, but they're also regulated by the card brands.

In addition, the payment transaction industry is also heavily regulated by card brands. Acquiring banks must follow rules set by the card brands for submitting transactions to the payment system. Submitting a transaction that is illegal or brand-damaging is strictly prohibited by Visa, MasterCard, and American Express.Debt collectors need to accept payments through an experienced merchant service provider.

Card brands also attempt to regulate whether their credit card can be used to pay for a debt that has gone to collections. Each card brand has its own set of rules and the verbiage is somewhat ambiguous.

For example, MasterCard will not allow the use of its card to pay a debt that it has been written off or “deemed uncollectable”. These are usually the exact types of debt that collection agencies acquire and are trying to collect on.  Visa also has similar wording in their rules. For American Express, debt collection agencies are considered a prohibited merchant type.

Debt Collection means high risk for banks that provide payment processing.

More rules and regulations mean greater potential for legal issues. All things banks don't want to be involved in. Processing payments for debt collection means there's a high risk of violating either the law or card brand rules.

This industry is also plagued with a very high incidence of chargebacks. Payments that are made online or over the phone are easy for consumers to dispute. People have figured out that if they file a chargeback on their payment, it could eliminate or at least delay a payment.

All of these factors increase the risk that an acquiring bank takes on when boarding a collection agency merchant account. And these days, banks and financial institutions are becoming increasingly more risk-averse. 

With these businesses, the risk is often greater than the reward. Over the years, many banks have added debt collection agencies to the growing list of prohibited merchant types. And that makes getting approved for a debt collection merchant account much more of a challenge.

However, that doesn't mean that acquiring merchant services is completely out of reach for debt collection agencies. It just means that they need a processor that is prepared to take on the risk and equipped to provide merchant services to the industry. Debt collection agencies can find reliable payment processing with an experienced high risk merchant account provider.

Debt collection agencies have more payment options than ever before.

Mark more debts paid in full with recurring billing for debt collection.

Now collection agencies can accept payments from debtors with a transparent and affordable debt collection merchant account.

When your livelihood relies on your customer being able to make a payment, you must be able to accept that payment. And it must be in a manner that is most convenient for your customer. Or you just might not get that payment at all.

We specialize in high-risk payment processing and have been helping high-risk businesses for 20 years. Because of that experience, we're able to offer debt collection agencies customized payment solutions.

Through your high-risk merchant account, you can accept debit cards, ACH payments, and eChecks. You can accept payments online, by phone, and via mobile devices. This creates both convenience and flexibility for the debtor, so they’re more likely to pay you. You'll also be able to set people up with recurring billing. This makes it easier for debtors to make their payments on time on a regular basis.

Accepting payments through ACH and eCheck are very reliable ways to collect payments consistently. When debit cards expire or get lost or stolen, they have to be replaced.  This requires the cardholder to update the payment information. This can be pretty hard to get from the debtor.

But people rarely change bank accounts. People open an account with a bank and they become very loyal to their bank. They will often have a direct deposit for their wages set up with this account. Many people pay their household bills with online bill pay through their bank. This makes accepting payments through ACH or eCheck a stable process over time.

With both ACH and eChecks, there's no way to file a chargeback on the payment. Once they payment is made, there's no going back. And there’s no worry the e-check won't clear. With Instant Account Verification (IAV), the legitimacy of checks and eChecks is verified before you accept the payment.

These payment methods are also the most affordable way to accept payments for collection agencies. ACH payments are processed through the network governed by the National Automated Clearing House Association (NACHA). Banks process Echeck transactions using bank-to-bank clearing technology. Both avenues are more affordable because you're not subject to Interchange fees and other bank and card brand fees like you are with credit card processing.

We are also fully integrated to allow collection agencies to accept Bitcoin payments. With Bitcoin payments, you get paid instantly. And just like ACH and eChecks, there's no chance of a chargeback.

With Bitcoin payments, you're in control. You can have your payments converted instantly into the currency of your choice, avoiding market volatility. Or, keep a portion of your payments in Bitcoin, or have it converted to a stable coin of your choice. Accepting Bitcoin is also a great way to reduce your payment processing costs since bitcoin transactions cost considerably less than traditional high-risk payment processing. And all transactions are easily integrated with QuickBooks for accurate accounting.

A high-risk MSP with the experience to serve your business successfully.

When you seek out merchant services from a provider who specializes in placing high-risk businesses, you’ll find you can get a reliable collection agency merchant account.

We have the experience to vet your business to make sure we place it with the proper solution. This way we both know that your payment solution is both reliable and the best fit for your business.

When reviewing your application, the underwriting team will look to make sure you're business is operating in a regulation-compliant manner. Underwriters scrutinize these applications more thoroughly than other businesses. They want to be sure you are properly licensed and that you are complying with the Fair Debt Collection Practices Act.

We understand how this process works and we know what the processor's underwriters want. Our in-house underwriters will review your application and supporting documents prior to submission. This way we can address anything that might be seen as a red-flag before the full underwriting team sees it.

At Bankcard International Group, the success of our clients is our highest priority. We have decades of experience working with high-risk and hard-to-place businesses. And over that time period, we’ve created the strong banking relationships needed to bring reliable solutions to our clients. Because of this, we have become a leader in transparent and dependable high-risk merchant services.


Topics: High Risk Merchant Account, eCommerce, Debt Collection Agencies