Why Payment Processing for Purchased Debt is Nearly Impossible

Why Payment Processing for Purchased Debt is Nearly Impossible

We’ve blogged frequently about the difficulty we have in finding payment processing solutions for debt collection merchants, especially recently.

Sometimes we’ll get a pre-application from a collection agency merchant who buys debt for pennies on the dollar, and is looking to collect on it. We unfortunately have to break it to him: Of all the banking partners with whom we work, none of them will offer payment processing for purchased debt.

The wild, wild west days of debt collection are over, and here’s why.

The difficulty that is debt collection

About our recent obsession with debt collection as the subject of our blogs the last six months: It is a subject that has constantly been the focus of the government, media and payments professionals. And the news is not good – for merchants, that is.

Attempting to collect on purchased debt has a pattern: A merchant purchases old debt from, for example, a string of medical offices, who weren’t able to collect after countless attempts (There is a reason collecting was unsuccessful).

  1. Foremost, the debt collection merchant needs to prove that the debt exists, which takes time and effort.
  2. Perhaps the statute of limitations on debt has expired in that state and the merchant cannot collect.
  3. If the merchant can prove the debtor still owes, it is a common practice to mark it up with fees and to be overly aggressive in collecting. In the current Consumer Finance Protection Bureau climate, such tactics are deeply frowned-upon.
  4. Speaking of The Bureau, it has a fixed eye on certain industries: Payday lenders, debt collections and consolidation businesses among them. The climate is not what it was 10 years ago.

Most banks don’t want the headache

Banks just won’t have it anymore: The behavior issues, nor the risk in debtors not paying.

“When merchants were buying debt at a discounted rate, they were doubling the amount and tacking on fees,” said Instabill Sales Manager Wendy Jacques. “Collections is a much different industry than it was 10 years ago, even five years ago.”

What we can do for debt collection merchants

Although we cannot furnish merchants with payment processing for purchased debt, we can process for existing and established debt collection businesses under the following criteria:

  • A minimum six months of payment processing history
  • $100,000 in revenue per month
  • We offer an offshore, aggregate merchant account with a shared billing descriptor

Should your business fit our description, we can help you. Speak directly with a merchant account manager at 1-800-318-2713 or click the live chat option below to get started.

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