Payment Gateway Processor for Collection Business

Most households are saddled with debt. The monthly income is not enough to pay all the bills and applying for a loan becomes the only option to stretch the budget. Customers pay back religiously but sometimes a medical emergency or job loss might force one to default on a loan. This is where a debt collection agency steps in. It handles the not-so-pleasant-part of recovering loan payments from customers on behalf of the issuing organization. This does not mean that the debt collection business is not a profitable one.

The number of debt collection agencies and debt brokers is on the rise. And, if you are one of them, you very well understand the perks and challenges associated with the job. Whether you operate locally or online, the biggest challenge is getting a collection agency merchant account for your business.

Why Debt collection agencies get denied

The reason is the high risk nature of the industry. Debt collection agencies deal with customers who have already defaulted on their loans. Thus, getting them to make a payment on time is not an easy task. This increases the chances of chargebacks for the business. In case the business is unable to bear the expenses, the credit card processor is stuck with compensating the losses.

To add, a few debt brokers and collection agencies threaten customers with violence during the recovery process. This has earned the industry a bad reputation giving payment processors yet another reason to reject merchant account applications. Credit card processors also expect businesses to provide a thorough, stable credit history when applying for a merchant account; that is a difficult requirement for start-ups and small businesses.

Do you need a merchant account for debt collection

The answer is yes. Most payments towards debt recovery are made using credit cards; they are not cash transactions. A merchant account enables you to process card payments conveniently. As a debt collection agency you will also be dealing with large transactions from multiple clients. Having a merchant account keeps you organised, helping you manage money efficiently. A merchant account provider offers a plethora of services. It makes available multiple payment options and gateways to customers. This allows them to make payments in a form that’s most convenient to them. The biggest advantage of getting a merchant account is risk mitigation. Account providers specializing in high-risk industries understand the intricacies of a debt collection business. They work with banks that are willing to underwrite your business and help tide over the loss in case of a chargeback. They also provide tools that protect your account from chargebacks and frauds. A merchant account can benefit debt collection agencies (recovery of loans on behalf of banks and credit institutions) as well as debt buyers (purchasing charged off debts).

Choosing a Merchant Account Provider

Not every payment processor can give you the best. Here are tips to secure a reliable, safe and affordable merchant account provider. Approach a payment processor experienced in providing merchant accounts to businesses operating in a high-risk industry. Compare the processing fee charged. The rate is influenced by the size of your business, its credit history, the average volume of transactions, average ticket size and the need for a virtual terminal (single/ multiple). When looking around specify the type of debt your company deals in – does it handle charged-off debt or active ones?

Study the different features offered by the merchant account. The best ones process all kinds of credit and debit cards, local and international. Facilities such as the ability to handle large tickets, multiple currency acceptance and no limitations on the volume will work to the advantage of your collection business. A recurring billing option is an invaluable tool. It makes it possible to store credit card information that could be of use for future payments. It also enables collection agencies to automate the payment cycle.

Consider an account with an integrated payment gateway. They should provide credit card, ACH and check processing solutions to collection agencies. A merchant account should be able to handle card present as well as card-not-present transactions. A card-not-present transaction involves settling payments online or over the phone without physically furnishing the card to the merchant. Many offer a virtual terminal system for card-not-present transactions. Review other terms of the contract such as the rolling reserve, holdback period, the length of the contract, the payout schedule.

The type of debt could vary depending on the industry. The region of operation also dictates the rule and regulations of transacting business. Work with a merchant services platform willing to customize payment processing plans to your operation. Payment processors offer the option of off-shore and domestic merchant accounts. The criteria and conditions for each vary from company to company. Time involved in setup is also crucial. Fast application approvals are always a plus point. The payment processor should be able to get your account up and running in no time after furnishing all the necessary documentation. At the end of it, check the security measures and compatibility with shopping carts and gateways. So, take your time shopping for a merchant account provider for debt collection. You don’t want to regret your decision later.