Difficulty of getting a merchant account for collections agency


Difficulty of getting a merchant account for a collections agency


Having problems getting a collection agency merchant account?

Reputation matters in business, there’s no two ways about it. A great reputation can allow you take your business to levels you never dreamed possible; a bad one can destroy you before you even open the doors to your store.

Reputation, for better or for worse, also matters when you attempt to secure a merchant account for your company’s credit card processing.  But not your reputation, no matter how pristine and spotless it might be.

No, banks and credit card companies that offer merchant accounts instead look at the reputation of your industry when it comes to review your application, and the sad truth of it is, most normal providers will turn down someone in the collections agency industry without even a second glance.

Why do banks view collection agencies as a risk?

collections-credit-card-processingWhy is that, you might ask? It certainly bears a second look. After all, collection agencies are viewed as the good guys by most businesses because they deliver what we can’t do on our own – hold our customers and partners financially responsible when they either unknowingly or illegally refuse to pay us for the goods and services we have provided for them. And collections credit card processing is an essential part of an agency’s business. People who accrue debt will use credit cards to pay it off or set up automatic payments. Not being able to process those credit cards is the death knell for a collection agency.

Unfortunately, the actions of some collections agencies tarnish the reputation of the ones who do their work honestly and fairly. Tactics such as calling debtors at all hours of the day and night, calling them at their place of employment,  and harassing them in person lead to a publicly-shared opinion that collection agencies are deceitful, underhanded, and troublesome.

What are other factors working against collection agencies?

Other factors that lead to this negative opinion held by merchant account providers are the number of charge backs that a business experiences. As most collection agency owners can tell you, there are plenty of people who promise to make a payment, and then call after the fact to their bank or credit card company and cancel it. Since this involves a lot of cash flow to and from a business, banks get worried that the collection agency won’t have enough money to pay its customers and that repayment will become the bank’s problem.

The charge back factor also leads to the risk of stability for collections agencies. Many have high employee turnover, caused largely by job-related stress. Since many collection agency employees’ salary is tied directly to bonuses, many will leave in a hurry if a more stable opportunity comes along.

What kinds of merchant account providers accept high-risk businesses?

But while some normal providers see only “high risk”, plenty of others see collection agencies as honest companies run by honest people out to provide a service that is clearly needed, especially in the current digital landscape where fraud is rampant and people seem to have endless ways of buying things without every actually being accountable for paying for them.

It is often the smaller merchant account providers who are willing to serve as the waypoint for collections credit card processing, because they themselves have experienced a similar situation – being too small, new, or “untrustworthy” to secure funds or loans from enormous institutions.