High Risk Merchant Account Collections – How to Get Approved
High risk merchant account collections payment processing solutions are in great demand. Many creditors require a high risk merchant account for debt consolidation to help them retrieve what is owed. Learn what it takes to get a high risk debt collection merchant account approved and processing payments quickly!
The Balance is reporting that U.S. consumer debt stands at $4.3 trillion. With over 45.4% of American households carrying an average of $6,270 in credit card debt, this has become a huge and profitable industry.
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Who Needs a High Risk Merchant Account for Debt Collections?
A high risk merchant account for debt collections is designed for debt collectors that are considered high risk by banks and payment processors. This includes debt collection agencies prone to mischievous practices, chargebacks, and legal issues. As the industry allows creditors to pay for a debt owed with a credit card, they require unique services geared toward high risk merchant account debt collections.
Collection agencies need to collection agency merchant services to accept credit card payments, which is one of the primary electronic payment methods for settling outstanding debts. This facet alone makes debt collection merchants extremely high risk.
Why are Debt Collections Merchant Accounts Considered High Risk?
Debt collections merchant accounts are considered high risk primarily, due to the fact that they allow existing debtors to get into more debt when paying off their balances with a credit card. However, debt collection merchants are not the only ones who need a high risk payment processor. Many industries that accept payments online also fall under this merchant category.
Some high risk businesses include online gambling, adult entertainment, tobacco sales, alcohol sales, and pharmaceutical sales. These industries are prone to fraud, legal issues and chargebacks, making it difficult to obtain a traditional merchant account.
If you own a business in a high risk industry, it is important to understand the risks associated with accepting customer payments. By providing multiple payment methods, including accepting debit card payments, you can help protect your business from chargebacks and legal issues.
Additionally, high risk merchant accounts come with higher processing fees than traditional merchant accounts, but they offer added security and protection.
Overall, if you operate a business in a high risk industry such as debt collection, it is highly recommended to obtain a high risk merchant account debt collection to protect your business.
What is the Debt Collection Industry all About?
The debt collection industry, also known as (DCB) or debt collection business, refers to collecting payments from customers after they have defaulted on their repayment obligations. A debt collection merchant account is often used to allow debtors to make recurring payments or pay the debt in full. Collection agency businesses allow customers to make ACH payments via their checking accounts if needed.
Debt purchasers or debt buyers are also considered high risk debt collectors. These merchants require specialized banking relationships that understand their business models. Most standard merchant service providers avoid offering payment solutions to this business vertical.
Why are High Risk Merchant Account Collections Needed?
High risk merchant account collections are designed to cater to the unique needs of high risk merchants, providing them with secure payment processing solutions tailored to their specific business requirements. High risk merchant account collections are an essential component of modern-day payment processing, providing a lifeline to businesses that fall under the high risk category.
What is High risk Merchant Account Debt Collections Payment Processing?
High risk merchant account debt collections payment processing helps provide additional repayment options for debt collectors, as the acceptance of credit cards and debit cards are the most popular forms of payment. Value Penguin reports that an estimated 70% of America’s population pays with credit cards.
Alternate forms of payment processing have also emerged, like e-Check for high risk business, ACH and Bitcoin, that help facilitate the acquiring needs of these debt collection agencies. Having as many payment processing options for debt consolidation as possible makes it easier for customers to pay back their outstanding debts.
Debt consolidation merchant accounts offer debt collectors the opportunity to provide convenient solutions like monthly recurring payment options. Recurring billing options via a payment gateway allow credit card processing customers to pay a small monthly amount over time until the debt is paid in full.
However, many financial institutions and acquiring banks do not provide payment processing solutions for debt collection merchant accounts or allow credit card processing or payments for debt collection agencies because they are considered high risk business types.
What is a High Risk Merchant Account for Debt Collection?
A high risk merchant account for debt collection is unique in that it allows for the repayment of debt owed by potentially getting into more debt. This is one of the main reasons the payment processing industry is saturated with disputes and high chargeback ratios.
Chargebacks refer to when a person makes a payment with a card and then disputes the charge with the card-issuing banks by asking for a refund. Understanding chargebacks is crucial to running your high risk business.
Another reason a collection agency merchant account for debt collection is seen as high risk is that debtors keep missing payments even though a contract has been signed and an agreement is in place. The enormous number of missed payments and disputes is a red flag for financial institutions. This is why acquiring payment processing solutions for a high risk merchant account for debt collection can be difficult.
Debt Collections Merchant Accounts are Risky Business
Debt collections merchant accounts are considered high risk by credit card processing companies due to the unconventional methods some of them use in recovering debts within the collections industry.
Some debt consolidation and debt recovery agencies are known to harass people at their workplaces or even hire private investigators to dig into their privacy and do not adhere to the fair debt collection practices needed to run these businesses. Most banking partners want no part of the negative perception or reputational hazards associated with collection agencies and the debt recovery industry and decline the chance to offer debt collection merchant accounts to debt collection businesses.
Can Debt Collection Agencies Dispute Chargebacks?
As a merchant, it can be frustrating to receive a chargeback from a customer. However, it’s important to know that there are steps you can take to dispute the chargeback and recover the lost funds.
Using proper fraud detection tools and chargeback mitigation services offered by payment gateways for high risk business is a must. Additionally, debt collection companies must work with experienced professionals that can offer suggestions on how to dispute chargebacks.
It is important to note that there are significant benefits in working with specialized banks offering merchant accounts to high risk industries which also helps reduce chargebacks.
How Do You Conduct Business with a Collection Agency Merchant Account?
A collection agency merchant account is used like any other merchant account. However, it also allows merchants to accept online payments for a previous debt owed. Collection agency owners can mitigate this risk by obtaining a debt collections merchant account.
How Does a Merchant Account for Debt Collections Work?
A merchant account for debt collections is specifically designed to cater to the needs of debt collection businesses. These accounts are equipped with specialized features that enable merchants to manage high risk transactions effectively. For instance, they offer chargeback protection, fraud detection and prevention, and risk management tools that help identify and mitigate potential losses.
Working with a Specialized High Risk Payment Provider
Merchants need to work with a high risk payment provider that specializes in high risk industries. These processors have the necessary experience and expertise to mitigate the risks associated with debt collections. They also have partnerships with acquiring banks willing to work with a collections business to help them start accepting payments.
By working with a specialized high risk payment provider, merchants can effectively manage high risk transactions and grow their business.
Approval of a Debt Collections Merchant Account
For the application approval of a debt collections merchant account, it is extremely important to find a high risk merchant account payment processor that is reliable and familiar with your particular debt collection agency business model. They already understand the terrain of this unique business and have made a success out of it. Secondly, only do business with debt collection agency payment providers with multiple options to place your business. High risk merchant collections MID’s are very hard to come by. Ensure your provider has multiple credit card processing acquiring relationships for collection agency merchant accounts and can submit your application to multiple providers at once for the best chance of approval.
How to Get Debt Consolidation Merchant Accounts Approved Fast
Getting debt recovery merchant accounts approved promptly is never an easy task. High risk service providers have unique debt collection agency application requirements and will demand plenty of paperwork. The approval time is also longer than with low-risk businesses. Make sure you have all your ducks in a row.
If your business has processed debit or credit card payments in the past, you must provide at least 3 months of debt collection agency credit card processing statements.
Be prepared to produce the following information to speed up your debt consolidation merchant accounts application process
- Personal Address
- Phone Number(s)
- Business Address
- Email Address
- Social Security Number
- Tax Identification Number
- Passport or Driver’s License
For Business Documents
- Copy of Articles of Incorporation
- Copy of Business License
- IRS Form SS-4 to verify your EIN or Employer Identification Number
For Collection Agency Merchant Account Bank Documents
- Voided Check or Bank Letter showing Business Name, Business Address, Account Number as well as Routing Number
- Letter from Bank showing the current state of Account
- 3 months of your Most Recent Bank Account Statements
For Collection Agency Merchant Account Financial Documents
- 2 years of Personal or Business Tax Returns
- Complete Financial Statement with Balance Sheet
- Profit and Loss Statement
- 3 to 6 months of your most recent processing statements and ACH processing statements
What are the Fees for High Risk Debt Collection Merchant Accounts?
The fees associated with Debt collection merchant accounts typically fall between 2% & 3% above interchange due to the nature of the business.
Merchant accounts for debt collection services can be challenging, and the fees associated with them can be higher than those for businesses in low-risk industries. High risk merchant account providers must charge higher fees to compensate for the increased risk involved in processing payments for high risk businesses.
The fees for high risk debt collection merchant accounts depend on several factors, including the payment processing volume, the type of payment gateway used, and the level of risk involved with the business.
Once a long-term relationship has been established, these fees can be re-negotiated based on previous processing history and chargeback percentages.
In Conclusion – SecureGlobalPay
SecureGlobalPay with is over 25 years of experience assisting merchants is ready to assist you with high risk merchant account collections payment processing needs.
