Why is it so hard to get approved for a debt collection merchant account in the first place?
Debt collection is a huge and necessary industry. When consumers don't make their payments or 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. That third-party company is a debt collection agency.
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.
Debt Collection means high risk for banks that provide payment processing.
This is primarily due to the nature of the business and the amount of regulation surrounding it. This business’s entire revenue is dependent on the debtor making their payments. 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.
This industry is also often viewed as morally ambiguous. There have been instances in the past that involved less than scrupulous practices. This has led to greater regulation surrounding how they are allowed to conduct business. Noth 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 heavily regulated by card brands. Acquiring banks must follow card brand rules 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.
They 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. MasterCard will not allow the use of its card to pay a debt that it has 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.
More rules and regulations mean greater potential for legal issues. All things banks don't want to be involved in. Processing for these types of businesses means there is 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. They realize that if they file a chargeback on their payment, it could eliminate or at least delay a payment.
Banks are becoming increasingly more risk-averse. All of these factors increase the risk that an acquiring bank takes on when boarding a collection agency merchant account. And that makes getting approved for a debt collection merchant account much more of a challenge.
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.
Accept payments from debtors with a transparent and affordable high-risk debt collection merchant account.
We can offer debt collection agencies customized payment solutions. 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.
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. Debit cards have to be replaced when they expire or if they are lost or stolen. This requires an update on 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.
And there’s no worry the 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.
Find a high-risk merchant service provider with the experience to serve your business successfully.
If you seek out merchant services from a provider who specializes in placing high-risk businesses, you’ll find that you can get a reliable collection agency merchant account.
When reviewing your application, the underwriting team will look to make sure you're operating your business 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 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.
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.