High Risk Merchant Account Collections – What You Need to Know

The Balance is reporting that U.S. consumer debt stands at $4.2. trillion. With over 45.4% of American households carrying an average of $6,270 in credit card debt, many creditors turn to debt collectors to help them retrieve what is owed. Applications for a High-Risk Merchant Accounts for collections agencies have soared due to this huge and profitable industry. To compete in the debt collections marketplace, you need a reliable high-risk merchant account collections service to get you started.

The Reason You Need a High Risk Merchant Account Service

Online payments, including the acceptance of credit cards and debit cards, offer an easy way for collectors to recover debts. The Value Penguin reports that an estimated 70% of America’s population use credit cards. 

Credit and debit card payments offer the debt collections industry a fast and convenient way to process payments. They often accept ach payments and occasionally offer recurring billing options as well. Customers will pay a small amount on a monthly basis and over a period of time until the debt is paid in full. 

However, many financial institutions and acquiring banks do not allow credit card processing or payments for debt collection companies because they consider them high risk businesses.

This is exactly why you need a high-risk merchant collections payment processor. A full service payment solutions provider with the expertise of working in high-risk conditions. 

If high risk merchant services did not provide this service, it would be almost impossible for creditors to recover their money. In addition, many debt collectors would not be in business.

Why Debt Collection Agencies Are Considered High Risk

Debt collectors are seen as high-risk businesses for a number of reasons.  One reason is because of the frequency of chargebacks.

Chargebacks refer to when a person makes a payment with a card and then disputes the charge with the card issuing company by asking for a refund.

Another reason why account recovery agencies are seen as high risk is because many debtors keep on missing payments even after an agreement to pay what they owe has been reached.

The enormous amount of missed payments is a red flag for financial institutions. This is why getting a high-risk merchant account can be difficult.

Other reasons why debt collection companies are considered high risk is because of the unconventional methods some of them use in recovering debts.

Some account recovery agencies are known to harass people at their workplace or hire private investigators to dig into their privacy.

Most banks want no part of the negative perception that comes with the debt recovery industry. And so turn down the chance to offer merchant account services to debt collection businesses.

What You Need Before Getting a Debt Collection Merchant Account

If you want a merchant account for your debt collection business, it is important to find a high risk merchant account collection payment processor that is reliable and affordable.

Before choosing a high-risk merchant account collection payment processor, always consider all options carefully.

Since opening a high risk merchant account is not an easy task. Some payment processors try to exploit the situation by charging sky-high fees. They do this because they know debt collection businesses are desperate for their services.

Choose a high-risk payment provider that is already working with debt collector businesses. They already understand the terrain of this unique business and have made a success out of it. 

This works well to your advantage of finding a way to conveniently accept card payments from people who owe your clients.

Secondly, only do business with a high risk merchant collections service that is accommodating  and values you as a customer. Even if their fees are relatively high, it is likely they will give you discounts down the road after you establish yourself as a repeat customer.

How to Get Your High Risk Merchant Account Approved

High-risk service providers have unique application requirements. They demand plenty of paperwork. The approval time is also longer than with low-risk businesses.

A high-risk merchant account collections provider wants all the information about the financial state of your business. 

Be prepared to produce the following information to speed up your high-risk merchant account application process.

• Personal Address
• Phone Numbers
• Business Address
• Email Address
• 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 Bank Documents

• 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 Financial Documents

• 2 years of Personal or Business Tax Returns
• Complete Financial Statement with Balance Sheet

If your Business has processed Debit and Credit Card payments in the past

• Profit and Loss Statement
• 3 to 6 months of your most recent Credit Card and ACH processing statements

Expert Tips to Get Your Merchant Account Approved

To give your high-risk merchant collections agency a good chance of getting approved, make sure that your chargeback ratio is less than 1%.

Verify all documents and work with your merchant service provider to make sure that all your paperwork is in order and submitted at the right time to the bank.

Resist the temptation to provide false information. This can result in immediate termination and being placed in the Terminated Merchant File. Once that is done, your chances of ever getting approved in the future are almost impossible.

What High Risk Merchant Fees You Should Expect

Once you get approved by a high-risk merchant account collections provider, expect to pay fees on a monthly or yearly basis.

These general fees will include discount rates, per transaction fees, monthly gateway fees and monthly minimum account fees.

You can also be charged additional fees depending on the bank that issues you a high-risk merchant account.