Debt Collection Merchant Accounts – Bespoke Processing

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Last Updated on July 7, 2023 by Corepay

Are you looking for a debt collection agency merchant account? Then, you’ve come to the right place. At Corepay, we understand the complexities of the collections industry and what it takes to grow your business to the next level.

Like any business, collection agencies need reliable payment processing with no surprises. Therefore, debt collectors need to collect payments over the internet, but they also need to collect payments via phone/mail.

The current market size of the debt collection industry is sitting at $13 billion and is growing at a 1% rate. Since debt continues to accrue with the advent of Covid-19/student loans, it is expected that the collections industry will continue to grow at a faster rate.

It is important to note that banks and credit card processors consider debt collection agencies to be high-risk. While you might be regarded as high-risk, this isn’t necessarily a bad thing.

In this article, we will break down everything you need to know about payment processing for debt collectors, as well as why we know we are an excellent fit for your business.

We are proud to offer payment processing for solutions for the following:

By adding electronic payment processing, you are automating collections, which ultimately improves cash flow. You also make it easier and convenient for debtors to pay you continually by offering recurring billing plans.

Applying For Your Debt Collection Merchant Account

Applying for payment processing for debt collection is one of the most vital things businesses can do. At Corepay, we aim to make the application a breeze and ensuring fast approvals within 24-72 hours in most cases.

As a bonus, we also waive all annual applications and set up fees to maintain 100% transparency for our clients.

When applying for payment processing for your debt collection agency, you will need the following:

The more information that you can provide to us, the faster we can get you approved. 

One of the most important things you can do as a collections business is to get your chargebacks under control. This will allow more cash flow to your business as you will be paying far less in processing fees with a good chargeback ratio.

Why Choose Corepay For Your Debt Collection Merchant Account?

With over two decades of high-risk credit card processing experience, we at Corepay are confident that we can provide you hassle-free payment processing that will come with no surprises.

We understand the debt collection industry, the chargeback issues, and what it takes to help grow our client’s revenue by mitigating chargebacks through our partner product CB-ALERT.

On top of saving you money on processing fees, we are also confident that we can provide you with the most innovative credit card processing for the collections industry.

Corepay is proud to offer the following for all of our collection merchant accounts:

Once you are approved for your merchant account, we will ensure you stay approved by helping you achieve a low chargeback ratio, ultimately saving you money.

Why Are Debt Collectors Labeled High-Risk?

Debt collection agencies are labeled high-risk by acquiring banks and credit card processors for various reasons. Amongst the common problems with debt collectors merchant accounts is chargebacks.

Debt collectors can also be viewed negatively by banks as their line of work sometimes gets a bad rep.

The following are the main reasons that debt collectors are considered high-risk:

Missed Payments

Debt collectors often run into the problem of debtor’s missing payments. For this reason, it is hard for banks/processors to know what kind of volumes they will be working with on a month-to-month basis.

Collection agencies can end up having to spend time and resources recovering missed payments that are owed to banks/processors or other creditors as well.

Debt Collection Chargebacks

Chargebacks are often the bane of a merchant’s existence as they look bad for your business and cost you money in fees.

The reason that the collection industry inherits many chargebacks is because of recurring billing.

At Corepay, we specialize in mitigating chargebacks and ensuring all clients maintain the lowest chargeback ratios.

Reputational Risks

Banks and processors usually view collection agencies negatively due to the occasional requirement for aggressive action when collecting payment.

Recurring Billing

Debt collection agencies are often set up to include recurring billing models. What typically happens is that debtors aren’t able to pay the lump sum at once, so they are offered a recurring billing plan. This carries risks as the debtor can forget about the payment or fail to make it. 

The worst-case scenario is that a debtor sets up an automatic payment, forgets they paid it, contests the charge, and requests a chargeback.

How Being Labeled as High-Risk Affects Credit Card Processing for Collection Agencies

Being labeled high-risk means that banks and processing companies are taking a risk on your business. This is not always a bad thing as there are some benefits of high-risk credit card processing. 

For example, high-risk merchants can accept payments globally. There is also an added layer of security for high-risk merchants.

The one downside is that you may have to pay more in fees and have a rolling reserve in case of chargebacks.

Corepay Offers Multiple Payment Methods for Debt Collection Agencies

Having the ability to accept different forms of payment will increase your overall cash flow. The primary electronic payment methods those in debt use are debit cards/credit cards and ACH. 

While credit cards are easy for debtors to use for payment, they are not the best form of payment for collection agencies. Debit cards/ACH offer significant benefits over credit cards when it comes to repayment of debt.

What Underwriters Look For When Reviewing Debt Collection Agencies

Underwriters are typically looking for any signs of risk that your business brings to the table. They are also reviewing processing volume and history.

A giant red flag for processors is a highly high chargeback ratio. While chargebacks are a natural occurrence for specific industries, sometimes high chargeback ratios reflect the business itself.

ACH For Debt Collection Over Credit Cards

The advantage to using ACH is that ACH payments take funds directly from the debtor’s bank accounts. Not only is ACH better for collecting funds, but it also exposes your business to less risk than credit cards.

One significant advantage to using ACH is that bank accounts don’t change as much as a credit/debit card. 

Debt Collection Industry Overview

In 2020, consumer debt reached a total of $14.56 trillion, according to the New York Federal Reserve. Debt climbed up nearly 1.9 trillion from the previous high, which was recorded in 2008. 

Most of the debt comes from four main areas:

What’s startling is that non-housing debt has risen over 51% since 2013.

These numbers show that there is much room for debt collectors to grow as the national debt continues to rise in the coming years.

According to the Bureau of Labor Statistics, between now and 2106, the debt collection industry will grow at a rate of 23% – which is much faster than most other industries. Most of the demand for debt collectors will come from related medical services, government agencies, and mortgage loans.

Choosing The Best Debt Collection Merchant Account

Choosing the best payment processing for the debt collection easy is not always an easy task. When selecting your merchant account provider, the most important thing to keep in mind is making sure that the processor specializes in high-risk businesses. 

Transparency is another thing to look for when browsing payment processing. Specific processors will present convoluted processing statements in which are often loaded with hidden fees.

Fees will vary from processor to processor. Be sure to compare rates when applying with different processing companies. 

Should you choose Corepay for your debt collection processing, you will be choosing expertise, transparency, and superb customer service.

Since collection company payments can vary greatly, you will want to have a firm grasp as to what types of payment your company receives most. This will help you significantly when choosing your provider.

Should you find that your business collects the most payments via phone, you will want to look into MOTO. While these forms of payment can vary, having multiple ways to receive compensation is a necessity. 

When choosing, make sure that the customer service of the processing company is 24/7 and has a good reputation. 

The last thing to keep in mind when choosing payment processing is the services/experience of your processing partner. At Corepay, we offer chargeback solutions to keep your fees at a minimum.

Can You Use Paypal, Stripe, Or Square For Debt Collection Processing?

As debt collection agencies are typically considered high-risk, Paypal, Stripe, and Square are not the right fit. Paypal does not do payment processing for high-risk, as they only do processing for low-risk merchants.

Collection agencies often set up an account with Paypal only to have their account terminated later. When Paypal or other low-risk processors audit your account, they find that you are breaking the contract and consider your business risky. 

What happens then is they put your funds on hold for up to 180 days. You cannot access these funds during this time, which can be highly troubling to those operating on a smaller budget.

The best thing you can do should this happen to you is to reach out to Paypal and let them finish their audit. While waiting for Paypal to complete its audit, it is advised to begin the application process with high-risk processors immediately.

At Corepay, we understand that time is of the essence in this scenario; therefore, we can quickly get you approved and processing payments.

Wrapping Up

Don’t let your payment processing for your debt collection agency take a dive. Should you choose Corepay for your collections merchant account, you can expect bespoke payment processing, fast approvals, and a customer service team that cares about your company.

Fill out an application today and take your payment processing for your debt collection agency to the next level.