Even thoroughly reputable companies that are properly licensed and bonded, and which adhere to Federal consumer law, can find it difficult to obtain a merchant account for a credit repair or credit counselor business.
They are not alone. When it comes to Risk and Hard to Place Merchants overall, 60 industries are considered high risk by merchant account providers.
The good news is that every company engaged in legitimate business can find a merchant account provider when they know where to look. There is a solution for every business owner.
Credit repair companies provide a vital consumer service
It doesn’t take much to cause turbulence in a person’s credit history and FICO score. Something as simple as a single late payment can reduce a credit score by perhaps 100 points. Factor in that payment history makes up as much as 35 percent of a person’s credit score and it’s easy to see how so many creditworthy individuals can see their score drop.
Credit scores are also super-sensitive to the utilization ratio of consumers. That’s how much of the available credit a person uses up. If a credit card ceiling is $10,000 the most that should be charged to it every month is $3,000.
People with the highest scores have credit utilization ratios of 10 percent or less and clear the balance every month. That’s across all lines of credit, including loans and overdrafts.
These two elements – prompt payments and low utilization – are believed to comprise over 60 percent of an individual’s credit score. That’s aside from issues such as liens or judgements, which have a dramatic effect.
Credit agencies have a high frequency of incorrect data that impacts credit scores. That could be in excess of 70 percent of records. Errors include anything from incorrect spelling of names and addresses to mistakenly filed debt details for the wrong person.
TransUnion, Equifax and Experian are called credit bureaus, consumer reporting companies or credit reporting agencies. They collect personal and financial information about consumers from a wide range of sources called data furnishers, such as banks, debt collection agencies and the courts. Mistakes are inevitable given the vast volume of data involved.
Why is there such high demand for merchant accounts in the credit repair industry?
The bottom line is that the typical American needs a high credit score to live a normal lifestyle. Auto credit, home remodeling loans and mortgages are an essential requirement these days.
With credit scoring being so delicate, it’s easy to see why credit repair services are in high demand, and probably always will be. That means new credit repair providers come into being frequently to meet the demand in the consumer market. It follows that demand for credit repair merchant accounts is strong.
The card payment services market has responded in turn. Specialist credit repair payment processing services have taken the time to fully understand the business. They have tailored their offerings to match how this industry operates and to accept the unique challenges it faces.
Trading conditions and challenges impacting credit repair companies’ merchant accounts
The industry is counter-cyclical, meaning it’s most in demand when the wider economy is struggling. That stands to reason because people encounter financial difficulty when unemployment grows, interest rates get higher and disposable income falls.
By its nature, a significant portion of the credit repair industry’s clientele are under financial strain. That puts stress on payments because it’s too easy to claim a chargeback or to cancel a previously agreed upon monthly service fee.
When demand for the industry’s services peak, the client base for credit repair services is at its weakest with regards to spending power. That challenge means more overhead for the card payment processing services that handle merchant accounts for the credit repair industry.
What services do clients need from credit repair providers?
Licensed and bonded credit repair specialists are highly familiar with the machinations of the consumer finance industry in all its forms. They also know consumer law and how to get things done to relieve the stress and strain that people suffer, and get their lives back on track.
The services that clients require range across any or all of the following:
- Error challenge and removal
- Dispute initiation and mediation
- Credit repair consultation and counselling
- Re-establishing credit worthiness
- Cease and desist actions
- Processing collections
- Settlement negotiation and monitoring
Why is the credit repair industry high risk for merchant account providers?
Acquiring banks and card payment processing companies assess an industry by what can go wrong with customer purchases. For many industries, fraud is top of the list followed by the cost of chargebacks. That adds to the cost of handling their merchant accounts.
The 4 merchant account risks for credit repair businesses don’t actually include fraud at all.
- It’s regulated by the Credit Repair Organizations Act – Any industry that is subject to regulations immediately presents the possibility that a company may breach those regulations. That has legal implications that could include litigation by claimants. Card processing companies could be included in legal action and many prefer to sidestep the risk by not handling that line of business.
- Large ticket value – Credit repair is a specialist skill that sometimes results in large billings. Businesses in any industry that regularly have high sales transaction values are automatically at risk of similarly large chargebacks. That trading profile requires a high risk merchant account.
- Subscription plans – Installment payment plans are another red flag for some card payment processors. Customers sometimes see an item on their credit card statement that they don’t recognize and immediately demand a chargeback. They may also choose that approach the situation as a means of terminating an agreement with the credit repair specialist.
- High chargeback ratios – A client base that is undergoing a degree of financial stress frequently finds it easier to trigger chargebacks against the credit repairs provider rather than pay the bill. Any industry that typically suffers from high chargeback ratios is considered high risk and most payment providers shy away from handling that business.
Start now – get a high risk merchant account for your credit repair business
SecureGlobalPay has invested time in building a network of card payment processors and their sponsoring banks who have obtained authorized access to the MasterCard and Visa networks. Among them are specialist providers with the expertise to cater for regulated industries.
The first step in your goal of obtaining a high risk credit repair merchant account for your company is to engage our expertise. We can then match your application with one or more of the card payment providers we know will look favorably at your requirements.
The next step in card payment processing for credit repair companies
Start today and we will provide you with a status update in 4-5 days. Click here for your online application form. Alternatively, speak with one of our payment processing experts on 1-800-419-1772.
Your action triggers the process that results in a merchant account for credit repair businesses that need to accept card payments over the phone or in person.