By Stephen Price
As you may or may not be aware a major player in the collection industry is no longer processing for some 2200+ collection agencies. This has caused many good companies to suddenly lose their credit card processing privileges.
So why is this happening?
The short answer is because credit card rules state that you cannot replace a debt with a debt. Meaning you cannot use a credit card to pay towards written-off or purchased debt. Unless you are collecting on early-out (pre-charge-off 30-90 day old accounts), you should not have the ability to process credit cards at all. Many in the collection industry have forgotten this and now “expect” to get a credit card merchant account. This “forget-fullness” is the source of the issue and why some 2200+ agencies have been scrambling to get a new merchant account. Collection agencies have been specifically targeted because either they have been found to be collecting on written-off or purchased debt, their SIC Code shows that they are in the Collections Industry, or they simply have the word “Collection” in their name.
So why all of the sudden?
It seems that Global Payments (a major credit card platform) has been specifically targeted by Visa. Without going into details, almost all of the 2200+ collection agencies were on the Global Payments platform. This sends a strong message to beware of Global Payments if you are doing collections with them today.
1. Get Into Compliance
If you are collecting on Charged-Off, Written-Off or Purchased Debt of any kind, you should not be processing credit card transactions at all. No ifs, ands or buts here. It is a matter of time before you lose your credit card processing privileges.
2. Start Accepting Debit Cards Only
If you are collecting on Charged-Off, Written-Off or Purchased Debt of any kind, start accepting *only* Debit Cards that are connected to a consumer’s bank account. Processing Debit Cards is fine as long as you can demonstrate that you are verifying that the card number given is truly a Debit Card. If you do not have a Debit Card verification process in-house then you will inevitably be processing credit cards even though the consumer/debtor is telling you that it is a Debit Card. Your credit card merchant account provider will see that you are processing credit cards (even if you do not realize it) and again you will inevitably lose your credit card privileges. You must have a process in place to determine and verify that a card number given is truly a Debit Card.
3. Get a Second or Even a Third Merchant Account
We find that our customers do not realize that that they can have multiple credit card merchant accounts. When we setup accounts we always try to get the client to get a second and even a third credit card merchant account. The second or third merchant account should be with a different platform, (for example, First Data, Chase Paymentec, TSYS).
4. If You Have a Merchant Account and it is Going Through the Global Payments Platform, Start looking for a New Provider.
If your agency is using a merchant account that is part of the Global Payments platform, you should think about getting a backup merchant account as soon as possible so you are not another casualty.
We are interested to hear about anyone else’s experiences here. Please tell us your “horror story”…