High-Risk Merchant Account Collections – How to Get Approved

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, many creditors are in need of a high-risk merchant account for debt collection merchant services to help them retrieve what is owed. Due to this huge and profitable industry, high-risk merchant account collections payment processing solutions are in great demand. Learn what it takes to get a debt collection merchant account approved and processing!

The Reason You Need a Debt Collection Merchant Account

Debt collectors require debt collection merchant accounts to help provide additional repayment options for their debtors 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. However, alternate forms of payment acceptance 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 options as possible makes it easier for customers to pay back their outstanding debts. 

Debt collections merchant accounts offer debt collectors the opportunity to provide convenient solutions like monthly recurring payment options. Recurring billing options allow customers to 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 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 industry is saturated with disputes and very 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.

Another reason why merchant accounts for debt collection are seen as high risk is because debtors keep missing payments even though a contract has been signed and an agreement is in place.

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

Additional Reasons Why Collections Merchant Services are Considered High-Risk

Another reason why collections merchant services are considered high-risk is due to the unconventional methods some of them use in recovering debts.

Some debt recovery agencies are known to harass people at their workplaces or even hire private investigators to dig into their privacy.

Most acquiring 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.

Acquiring a Collection Agency Merchant Account

To acquire a debt collection agency merchant account, it is extremely important to find a high-risk merchant account payment processor that is both reliable, and also familiar with your particular business model. They already understand the terrain of this unique business and have made a success out of it. 

Secondly, only do business with payment providers that have multiple options to place your business. High-risk merchant collections MID’s are very hard to come by. Make sure your provider has multiple acquiring relationships and is able to submit your application to multiple providers at once for the best chance of approval.

How to Get a Debt Collection Merchant Account Approved

Getting debt collection merchant account approved for a collections merchant account is never an easy task. High-risk service providers have unique 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 will need to provide at least 3 months of credit card processing statements.

Be prepared to produce the following information to speed up your merchant account collection agency application process.

• Personal Address
• Phone Numbers
• 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 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 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 Credit Card and ACH processing statements

Expert Tips on Fast Approval

If you are already accepting payments for collection agency merchant services and are interested in increasing your approved volume thresholds, make sure that your disputes and chargeback are managed properly, and your ratios are low.

Always 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.

Collections Merchant Processing – What Fees You Should Expect

Once you get approved by a high-risk merchant account collections provider, expect to initially pay higher fees on your collections merchant processing account, at least until you have a proven track record of being able to properly manage your account and chargeback ratios.

SecureGlobalPay proudly assists high-risk merchants, including those in need of high-risk merchant account collections services.