It is virtually impossible to function in the modern world without a credit card. The ability to make payments online or on credit is something we all need from time to time. But it is easy to mismanage a credit card once you begin using it.
According to the Board of Governors of the Federal Reserve System’s Report on the Economic Well-Being of U.S. Households 2016, the average American household owes $16,425 in credit card debt. This means the US holds an overall national credit card debt of nearly $1 trillion.
The need for companies to help people regain control of their finances is pressing. And many companies are forming to provide those services.
Unfortunately, the debt consolidation industry is one characterized by high levels of credit card chargebacks. This could leave banks and payment processing providers on the hook for potentially thousands of dollars of unpaid debt. For this reason, traditional financial institutions are reluctant to partner with debt consolidation firms.
Merchants offering debt consolidation services who would like to allow their customers to make payments online would do well to partner with a high-risk merchant account provider like SecureGlobalPay. Interested businesses can apply now for a debt consolidation merchant account by filling out SecureGlobalPay’s secure online application form.
SecureGlobalPay offers customized payment solutions that allows customers to make payments online while helping merchants streamline their business. Apply now for a secure online payment processing account complete with chargeback management tools, payment gateways, and fraud filters. Although applications do not guarantee approval, new accounts can be approved within as little as 24 hours.
Applying for a Debt Consolidation Merchant Account
Apply online today for a debt consolidation merchant account. Be prepared to submit the following items to processors and underwriters.
NOTE: Your chargeback ratios must be under 2%
SecureGlobalPay’s online application form provides firms with a quick, streamlined way to apply for a debt consolidation merchant account. Our trained and knowledgeable staff have experience working with new and existing businesses of all sizes, as well as with those who have had applications rejected or accounts terminated by other credit card processors. Merchants with a history of no credit, bad credit, or a history of high chargebacks can apply now and get approved in as little as 24 hours.
The Underwriter’s Role in the Application Process
The underwriter plays an important role in the application process. Processors and partnering banks must be assured that they are dealing with law-abiding, reputable companies. It is the underwriter’s job to assess risk and ensure merchants are complying with all rules and regulations.
A negative bank account balance, unpaid bills and late payments, and a history of high chargeback rates increase a merchant’s risk in the eyes of the underwriter. Successful merchants are those with clearly-displayed privacy and refund policies on all company communications.
Preparing for the underwriter’s review is a critical step in the application process. Nominate someone within the company who has a sound credit history to apply for the account. This increases the chance of acceptance. It is also wise to settle all outstanding debts and have some money in the bank.
Present your business in the best possible light. Assure underwriters and potential partners that you do not pose an excessive or imprudent risk.
Chargebacks and Debt Consolidation Merchants
The debt consolidation business is unfortunately prone to a high volume of chargebacks.
Customers who contract with debt consolidation firms tend to have bad credit and cashflow issues. A lack of money can motivate them to dispute legitimate credit card transactions. This is called ‘friendly fraud’ and can occur when customers make a legitimate credit card purchase and then decide to dispute the transaction because they changed their minds and decided they did want the product or service, or else wanted to get something without paying.
Chargebacks can also happen for legitimate reasons that are avoidable. Customers can sometimes find themselves surprised by misleading or inaccurate pricing when the bill comes due. Other times, they can be dissatisfied by the product or service as received. In such cases, they will attempt to contact the merchant. Failure to provide knowledgeable, courteous customer service at this stage of the transaction process often leads to chargebacks.
One way to avoid this is to practice transparency and effective communication with clients at all stages. Often, debt consolidation services will neglect to send either electronic or paper bills and receipts for their services. This is a missed opportunity to remind the customer of the transaction and the amount likely to appear on their credit card statement.
Debt consolidation services can also prove to be expensive. Sometimes customers may dispute charges to their credit card bill simply as a means of delaying payment in order to hold on to some of their money.
Providing ample customer service can help avoid many of these chargebacks. Unfortunately, smaller businesses often cannot afford to provide the 24-hour customer service needed to keep customers happy. Having a customer service representative available to listen and offer prompt refunds can head off most chargebacks before they occur.
Chargeback ratios contribute to a merchant’s ability to operate a business. Failure to manage chargebacks can lead to a terminated merchant account.
Having a plan to fight chargebacks is crucial to the success of any debt consolidation merchant. Once their chargeback ratio climbs above 2%, merchants are seen as posing an excessive risk to payment processors, banks and traditional financial institutions. Because they can be left on the hook for credit card interest and unpaid debt, these organizations will seek to cancel debt consolidation merchant accounts.
Communication is key to avoiding all of this.
- Ensure your contact information is clearly displayed on your company website and on all company correspondence.
- Ensure your company’s refund and exchange policies are explicit and prominently displayed on your company website.
- Follow up all purchases with bills, receipts and client satisfaction surveys that will keep the transaction in the forefront of the customer’s memory.
- Ensure that you have a customer service plan in place to manage customer disputes, concerns and complaints. Complaints should be handled quickly and with minimal hassle by trained, knowledgeable customer service staff.
Sending out prompt correspondence within 24 hours of a completed transaction is an opportunity to remind customers of your contact information, policies and available customer service. Remember, too, that offering refunds is ultimately less costly in the long run than accruing chargebacks.
Two other strategies some companies use when allowing their customers to make payments online are, requiring e-signature authorizations for transactions and using a recorded phone line verification system. E-signatures are a recognized means of avoiding friendly chargebacks. A recorded phone line verification system also provides an ideal opportunity to gain customer feedback on the transaction and customer service process. Refining the approach of staff toward customers is another important element of communication.
Increasing the Volume Transaction Cap
It is not uncommon for high-risk merchants to be given credit card processing volume caps. This limits the number of credit card transactions they can process in a month. Once the cap figure is reached, they can no longer process any credit card transactions. For online merchants, this effectively means cancelling all business for the remainder of the month.
Merchants who keep their chargeback ratio below 2% can request higher credit card processing volumes caps in as little as three months. For underwriters to consider an increase, merchants must prove that they have paid all bills, maintained low chargeback ratios and managed to accrue savings.
Categories for Educational Seminar Merchant Accounts
The United States and other countries assign four-digit Standard Industrial Classification (SIC) codes to business establishments. The numerical codes are used to identify businesses’ primary purposes.
Debt consolidation and relief services merchants fall into one of these codes:
- 6163: Loan Brokers
- 7322: Adjustment and Collection Agencies
- 8748: Business Consulting Services
- 7389: Business Services, Not Elsewhere Categorized
Visit the United States Department of Labor to view a complete SIC list.
The North American Classification System (NAICS) is a list of six-digit codes used by federal statistical agencies to classify business establishments. These codes are used to gather, analyze, and publish statistical information about similar types of businesses and their impact on the U.S. economy.
Debt consolidation businesses generally use one of these codes:
- 522310: Mortgage and Non-Mortgage Loan Brokers
- 561440: Collections Agencies
- 541618: Other Management Consulting Services
Visit the United States Census Bureau to view the complete NAICS code list.
Merchant Accounts for Debt Consolidation
At SecureGlobalPay, we specialize in providing electronic payment processing services for the debt consolidation industry. Our line of services includes merchant accounts, e-check processing and debit card processing.
Let us find your business the perfect, cost-effective merchant account to get your debt consolidation business off the ground.
- No Application Fees
- Competitive rates
- No VISA/MasterCard Required
- Secure Payment Gateway