According to IBISWorld, a global market research firm, there are over 90,000 businesses in the $4 billion credit repair industry.
The majority of these businesses are small partnerships or non-employers. A 2016 report showed that the three largest credit repair firms account for less than 5% of the industry’s revenue. Online credit repair services account for the rest.
While a great many credit repair merchants operate in traditional “brick-and-mortar”-type businesses, an online business is optimal in a global economy. Unfortunately, online merchant accounts of this type are considered high-risk by traditional financial institutions owing to the industry’s high rate of chargebacks.
Fortunately, there is a solution. Reputable credit card repair businesses can apply to SecureGlobalPay, a high-risk merchant account provider. Apply now using SecureGlobalPay’s easy online merchant account application to obtain your credit repair merchant account.
SecureGlobalPay specializes in high-risk merchant accounts, offering clients a variety of fraud filters, payment gateway solutions and chargeback management tools. SecureGlobalPay’s personalized payment solutions and superior customer service allows high-risk businesses to succeed. Apply now and receive an approval within 48-72 hours.
The Credit Repair Industry
Credit repair businesses assist clients whose credit scores have been impacted by bankruptcy or a recent lifestyle change such as a divorce, health issues or unfortunate family tragedies. Credit repair professionals work to improve individual credit scores by finding errors in credit reporting and addressing inaccurate information with reporting organizations.
SecureGlobalPay provides the following services to its approved clients in the credit repair industry:
- Credit repair consultation
- Dispute processing
- Cease and desist collections processing
- Credit re-establishment
- Settlement assistance
SecureGlobalPay has a proven track-record of working with businesses of all different types and sizes across various industries. Our competent professionals provide quality customer services to retail and online companies that have been rejected or terminated by other credit card processors or who have a history of no credit, bad credit, or high chargebacks.
Applying for a credit repair merchant account
Online or retail merchants can apply for a credit repair merchant account today by filling in SecureGlobalPay’s quick online application. Be prepared to provide the following:
- A valid, government-issued photo ID (e.g., driver’s license, state/provincial ID, etc.)
- A bank attestation or void check
- Bank statements (3 months worth)
- Processing statements (3 months worth)
- SSN (Social Security Number) or EIN (Employer Identification Number)
- Please note that your history of chargeback ratios must be under 3%.
E-commerce businesses must have a secure, fully-operational and compliant website.
Application does not guarantee acceptance. But SecureGlobalPay’s streamlined application process allows qualifying merchants to get approved in as little as 48-72 hours.
The application process from the underwriter’s perspective
Underwriters reviewing merchant account applications are concerned with verifying that the applicant in question operates a legitimate, reputable business. Underwriters are alert for any red flags or indication that a credit repair merchant is not following all credit repair rules and regulations.
Underwriters review a merchant’s bank statements, credit scores, credit card processing history and website. A merchant that does not have privacy and refund policies clearly posted risks refusal of their application being processed, as do merchants with unpaid bills, a negative account balance or a history of late payments or high chargeback rates.
Merchants can maximize their chances of approval by satisfying all outstanding bills and debts, ensuring a positive savings account balance and nominating a stakeholder in the business with a robust credit history to be the main principle owner when applying for a merchant account.
Underwriters need to be satisfied that they are not passing along unnecessary risks when approving the application. Merchants that are proactive in their approach and who work to minimize obstacles up front can avoid processing volume caps or higher rolling reserves.
High processing volumes for credit repair merchant accounts
Most small businesses in the credit repair industry that accept online credit card transactions are given a monthly processing volume cap. This limits the dollar volume and number of transactions a merchant can handle per month. Once the cap is reached, the merchant cannot process any more credit card transactions. Merchants in the credit repair industry with limited processing history can expect being capped initially or at least until there is a proven track record of processing history without disputes or chargebacks.
The volume processing cap for credit repair merchants can be increased, appealed and possibly removed within three months pending good history. Businesses with a proven track record of paying bills on time, retaining savings in the bank and maintaining a low chargeback ratios can request processors consider raising their volume processing caps on an ongoing basis.
Chargebacks: the cost to processors
Merchants who follow a flawed business model can amass chargebacks due to customer dissatisfaction, a lack of customer service and poor mitigation plans. Excessive chargebacks can lead a credit card provider to demand a merchant pay back the loss incurred due to disputed or fraudulent transactions.
Credit card processors can face fines from credit card companies like MasterCard or Visa whenever a business they sponsor exceeds a chargeback ratio of 2% or more. These fines can run into the tens of thousands of dollars per merchant, causing credit card companies to terminate merchant accounts immediately to help avoid liability.
When a merchant amasses a chargeback ratio of more than 3%, processors will most likely terminate their accounts unless somewhat justified and the merchant has made arrangements for it to never happen again. This makes it very difficult to obtain future merchant accounts. Terminated accounts (TMF) are a red flag for underwriters considering merchant applications.
Credit repair merchants and chargebacks
The nature of the credit card repair industry renders its merchants vulnerable to chargebacks. Customers of credit card repair merchants tend to have poor credit and little to no money. This modest cash flow can lead customers to behave dishonestly to hold onto their money in a variety of ways, including disputing valid credit card purchases.
Honest customers with legitimate complaints can also initiate chargebacks due to poor communication or customer service on the merchant end. A merchant’s failure to quickly and comprehensively address customer complaints can lead to client dissatisfaction and chargebacks.
Electronic or paper receipts for services facilitate good communication between merchant and client and serve as a reminder of services purchased. This helps avoid client confusion and minimizes the chances that they will not recognize transactions appearing on their credit card statements.
Electronic or paper receipts that include merchant contact information enable quick access to a retailer for consultation regarding transactions.
Because credit repair merchants often send recurrent bills as opposed to monthly statements, clients can be surprised by charges on their credit card statements. This can easily lead to disputes or chargebacks.
Because credit repair services can be costly, a dissatisfied, cash-strapped client can dispute or cancel services as a means to hold onto their capital.
Small credit repair businesses often lack the sort of brand recognition that allows them to remain in the forefront of their client’s minds. Often, smaller merchants cannot offer the level of customer service provided by larger entities that occasionally provide incentives to prevent clients from disputing a transaction should there be a question or concern about the charge.
Excessive chargebacks lead to terminated merchant accounts. Many credit card repair businesses do not recognize chargeback ratios piling up until it is too late. Once a merchant account is terminated, it is very difficult to get another.
The keys to low chargeback ratios
Most chargebacks in the credit repair industry are due to dissatisfied clients. Instances of chargebacks due to fraud or stolen credit cards are rare, but the cause of chargebacks is of little to no concern to processors or credit card companies. All that matters is the ratio remain (>2%).
Chargebacks due to dissatisfaction can be addressed by offering clients full refunds. This is significantly less costly to merchants than a chargeback, which can lead to terminated merchant accounts. Immediately offering clients a full refund and newly paid services increases client satisfaction, removes the chargeback potential of the first transaction and preserves the merchant’s ability to process in the long term.
Clear billing descriptors increase the likelihood of client’s remembering and recognizing transactions for services that appear on credit card statements. Always including merchant contact info in the transaction descriptor can help reduce chargebacks, along with the practice of sending automatic receipts for transactions via e-mail.
Calculating and offsetting chargeback ratios
Chargeback ratios are calculated by dividing the number of total monthly transactions by the number of chargebacks. For example, a merchant who processes 300 transactions per month, 12 of which are chargebacks, would have a chargebacks ratio of 4%. The dollar amount is irrelevant. Processors are concerned solely with ratios.
Maintaining a high volume of transactions helps offset chargebacks. A merchant with several hundred transactions per month is less likely to suffer a high chargeback ratio than a merchant who handles less than 50.
It is not considered advisable to suspend sales for any length of time in an effort to lower chargeback ratios.
Categories for credit repair merchant accounts
Four-digit numeric codes known as Standard Industrial Classification (SIC) codes are common in the United States and many other countries for identifying businesses and their primary purposes.
Merchants that sell products and services in the credit repair industry are classified as follows:
7299: Consumer Credit Counseling Services; Credit Repair Services such as, Credit Counseling
8748: Business Consulting Services
7323: Credit Reporting Services
7389: Business Services, Not Elsewhere Categorized
A complete SIC list is available via the US Department of Labor website.
A similar classification system known as NAICS (the Northern American Classification System) is a list of six-digit codes used by federal statistical agencies to classify business establishments. The classification system aims to gather, analyze, and publish statistical information about similar types of businesses and their impact on the U.S. economy.
Credit repair or credit consulting businesses generally use one of these codes:
541990: Other Professional, Scientific, and Technical Services
561450: Credit Bureaus
541618: Other Management Consulting Services
Visit the United States Census Bureau to view the complete NAICS code list.
Merchant Accounts for Credit Repair Companies
Collecting payments is the most important part of your credit repair business. Whether you are an established credit repair company or a new one with no processing history, SecureGlobalPay can work with you to set up your merchant account today.
SecureGlobalPay specializes in finding the right kind of merchant account for your business. Apply now and receive an approval within as little as 72 hours. If you need high volume or a chargeback/dispute tolerant account, we can find you a perfect fit.
- No Application Fees
- Competitive rates
- No VISA/MasterCard Required
- Multiple Secure Payment Gateway Options
- LOW Rates and Fees
- No extensive credit checks