Posted by admin on Aug 08, 2012


Debt Collection Merchant Accounts

Debt collection agencies need merchant accounts to accept credit and debit card payments from borrowers.

More than 30 million Americans have debt with collection agencies   The New York Federal Reserve reports that the share of Americans' debt that is more than 30 days past has doubled since the end of 2006.

Obviously, debt collection is a big industry.  And getting bigger as the US economy continues its downward spiral.

Collection merchant accounts are considered high risk for banks. There are obvious reasons for this.

Using a credit card to pay for debts is accumulates more debt for the card holder.  Consumers who are in debt are often unable to pay bills.  Therefore, when the card statement includes a payment to a debt collection agency, consumers can attempt to chargeback the transaction, claiming it was not authorized.

Chargebacks create contingent liabilities for banks.  Consumers can chargeback transactions for up to 6 months after the payment was made.  This is a big window of potential liabilities for banks.

Increased chargebacks liabilities place collection agencies in high risk processing categories for merchant accounts.

This does not mean that collection agencies cannot get payment processing accounts.  They certainly can.  But there are fewer choices for accounts than for non-high risk merchants.

The banking crisis and changing banking regulations are making financial institutions more cautious about approving high risk merchants.  Fewer banks are willing to underwrite debt collection accounts.

For collection agencies, the choice of acquiring banks is narrowing.  Following the basic economic principles of supply and demand, banks that do offer collection merchant accounts can demand premium rates for the accounts.

But, credit card processing is only one part of a debt collection merchant account.  The use of debit cards now surpasses credit cards in America.  Many borrowers that do not have credit cards have debit cards.

Debt collectors need a way to accept debit card payments.  Merchant accounts give collection agencies a way to accept debit cards as well as credit cards.

Collection agencies often find it wise to establish more than one merchant account to diversify processing.  Having more than one merchant account gives debt collectors access to higher processing volumes.  And reduces the risk of depending upon a single bank, safeguarding business operations.

Having multiple merchant accounts will become even more crucial in the coming months and years. The Consumer Financial Protection Bureau (CFPB).id pushing hard for supervisory authority over large debt collectors.  Which is sure to impact the industry further. is a leader in establishing merchant accounts for the debt collection industry.  Contact us today at