Best Merchant Accounts for Debt Collection Agencies in 2024

Are you planning to start a debt collection agency? While it’s a great business idea, a debt collection business falls into the high-risk industry category. That’s why choosing merchant accounts for debt collectors can be a bit challenging. If you are also searching for the best payment processor for your business, you have come to the right place. We are going to help you pick the best merchant account for your debt collection business in 2024. Stick around.

Overview of Debt Collection Agency

As the name suggests, a debt collection agency helps creditors recover their dues from debtors who have failed to pay the debts owed. The debts can be utility bills, loans, credit card balances, and other forms of outstanding payments. They work on behalf of the creditors.

Now, a debt collector has a few crucial responsibilities, like informing the debtors about the outstanding payments, verifying the authenticity of the creditor’s claim regarding a specific debt, and negotiating the deal with the debtor to come up with the best payment plan that works for the debtor and creditor.

The negotiation can include either a payment plan that allows debtors time to repay the money in installments or cutting the loan in half or less (if the debtor is declared bankrupt). If the debtor fails to pay the loan, the debt collection agency can take the matter to the court to process legal action against the debtor.

Based on the court’s order, the agency might seize the debtor’s assets to recover the creditor’s money or they might implement wage garnishment (using a part of the debtor’s monthly income to repay their debt). They can also report the debt amount and debtors’ history of loan repayments to the credit bureaus. This can affect their credit score, which further impacts their ability to secure a loan in the future.

Is Debt Collection Agency Considered High Risk?

Debt collection agencies are seen as high-risk businesses, because of the risk involved and the increased chargeback ratio. However, not every company that collects debt is classified as high-risk. The assessment procedure varies significantly for each payment processor. Here are a few reasons why a debt collection agency is perceived as high-risk.

Bad Reputation: Many debt collectors use fair and ethical practices to collect debts, but that isn’t the case for everyone. Some debt collectors have set a bad example by using unfair and illegal ways to collect dues from the debtors. Harassment, intimidation, and seizing debtor’s assets illegally are a few bad practices that set a bad reputation for the entire community.

So, whether you are planning to start a debt collection business from the ground up or you already have an established business that you want to expand internationally, you will face difficulty building trust with your customers.

Compliance Issues: Like other high-risk businesses, debt collection agencies are heavily regulated. Debt collectors based in the United States must follow the Fair Debt Collection Practices Act (FDCPA) to meet the legal requirements for their business operations. The state regulations for these agencies can also vary from state to state. Failure to comply with these regulations can result in legal actions against these agencies.

Merchant service providers are often reluctant to work with debt collectors because of the legal risk involved. The payment processors are sometimes dragged into legal matters if the debt collection agency uses illegitimate practices to conduct business.

Financial Risk: Debt collectors work with people who are financially struggling. Creditors hire them when they are unable to recover the outstanding payments from customers. This makes their job financially complex. Besides, a debt collection agency doesn’t have a fixed source of income or regular clients unless we are talking about a well-established and reputable company. Startups usually face a lot of challenges when searching for merchant service providers.

Let’s get to the best merchant account list for debt collection agencies in 2024.

Merchant Accounts for Debt Collectors: Our Top Picks

PaymentCloud

Pros

• Multiple payment options for in-person and online transactions
• Advanced fraud detection and chargeback prevention tools
• Stellar customer support service
• Supports all kinds of businesses, including startups and established debt collectors
• High approval rate
• PCI compliance
• Easy setup and quick onboarding

Cons

• The website is a little tricky to navigate
• They haven’t disclosed pricing policy

With a 98% approval rate, PaymentCloud is our best choice for high-risk businesses that have been rejected by other merchant service providers. The company offers end-to-end encryption and reliable processing services, for all sizes and natures of businesses.

It’s a great choice for debt collection agencies that have just commenced operation or the established ones that have been in the business for years. The company has equipped its POS solution and credit card processing terminals with fraud detection, as well as, chargeback prevention tools. These top-notch security tools keep your system safe from unauthorized access while preventing attackers from using stolen credit cards.

PaymentCloud offers stellar customer service, mitigating the risk of chargeback and ensuring customer satisfaction at every stage of credit card processing. The best part is that PaymentCloud helps businesses become PCI-compliant within three months of subscription, and it does it for free.

The company’s support service is great. They have a dedicated team of professionals who are available to assist clients throughout the setup and installation stage. These support representatives are also available for your assistance throughout the contract term (as long as you have a merchant account with PaymentCloud).

Overall, PaymentCloud is a reputable, easy-to-use, and reliable choice for debt collection agencies. They have an intuitive user interface and a responsive team that makes navigation easier. The only downside is the lack of contract details and payment information. You need to contact the team to get a custom quote for your business.

Durango Merchant Services

Pros

• Excellent choice for merchants with a high chargeback ratio or no credit history
• Payment terminals and other hardware equipment available for sale on their website
• Anti-fraud programs to mitigate the fraud risk
• Merchant accounts available for national and international businesses
• A dedicated account manager for your assistance
• Integrates with third-party shopping carts and payment solutions
• Supports cryptocurrency processing

Cons

• Pricing information isn’t disclosed

Durango has gained popularity in the credit card processing industry for its ability to provide merchant services to high-risk businesses. You can get a merchant account with Durango even with a history of repetitive chargeback incidents or a poor credit score, so long as you meet their eligibility requirements.

The company works with merchants who are on the MATCH list, which means debt collection agencies can count on Durango Merchant Services for credit card processing. In addition, they offer an advanced fraud detection program, which screens each transaction carefully before processing.

The secure and thorough screening mitigates the risk of chargeback requests. They are equipped with EMV 3D secure 2.0, Fraud Scrubbing, and other security tools to detect and prevent fraud.

Like PaymentCloud, Durango has not disclosed its pricing plans for merchants. Perhaps, it quotes a price based on the merchant’s risk level, business type, chargeback ratio, and other factors. You can reach out to their support representative to know their payment plans and processing fees. They offer payment terminals and a full-fledged POS system for direct sale on their website. This gives you a glimpse of what you’ll pay for the hardware.

Soar Payments

Pros

• Supports a wide range of payment options, including e-checks and ACH transfers
• Integrates with different shopping cart solutions and payment gateways
• Advanced chargeback management and fraud prevention services
• Works with most high-risk businesses
• Easy to work with
• High approval rate and easy application
• Instant online quote system
• Excellent customer support

Cons

• Soar doesn’t offer services to international businesses
• Prices aren’t disclosed on its official website

Soar Payments is another reputable name in the credit card processing industry. The company serves businesses of all risk levels, especially high-risk businesses, including debt collectors. They have an easy approval process and a high acceptance rate. Plus, they give a customized quote to all merchants based on certain parameters, like your risk level. You can fill out the application form online and get a custom quote right away.

Like other payment processors on our list, Soar Payments has a robust chargeback management and fraud prevention program in place. They have partnered with anti-fraud companies that facilitate anti-fraud tools for chargeback management. These tools are used to send email alerts for chargeback requests, illegitimate chargebacks, and other kinds of fraud. Soar’s hardware includes a PAX A920 terminal that has a built-in printer, a touchscreen interface, and NFC-enabled payment options.

The company also offers credit card terminals, but they haven’t disclosed the prices of its hardware. Debt collectors who accept payment through their eCommerce sites have a choice between Authorize.net and USAePay for secure online transactions. Soar has also partnered with other payment gateways for fast and secure payments.

Soar Payments does not offer a merchant account to businesses based outside the US. Moreover, it hasn’t disclosed the pricing plans on the website. The company charges a whopping $495 early termination fee, but that’s usually waived after the initial contract term is up.

Host Merchant Services

Pros

• Transparent pricing policy
• Zero early termination fee and no contract
• Stellar customer support service
• Multiple payment processing options
• A great reputation in the industry
• Fraud detection tools

Cons

• It can be expensive for startups and small debt-collection agencies
• Not available outside the US

Another great merchant service provider for debt collection agencies, both startups and established organizations, is Host Merchant. They offer a vast range of point-of-sale units and card readers designed to accept various forms of payments in person and online. This makes it flexible for debt collection agencies to process different forms of payments. The company has implemented different pricing models for different operators. They also offer a custom pricing structure for large-to-mid-sized companies with varying risk levels.

The no contract and zero early termination fee are the best parts of Host Merchant. Moreover, they have disclosed the pricing plans to make their payment policy as transparent as possible. The rates on their website are for businesses processing transactions worth $10,000+  monthly, but there is no specific limit for monthly transaction volume.

They offer an interchange-plus plan with a processing fee of 0.50% + 10 cents per transaction. Note that it’s a starting fee for small startups with low transaction volume. For eCommerce, Host charges 0.35% + 10 cents per transaction. Depending on your business size and processing volume, they might negotiate the deal to offer you a discounted processing rate. They also charge a fixed chargeback fee of $15 per incident.

Host Merchant offers 24/7 customer support service with a live chat feature and responsive staff. You can contact them during or outside business hours and get a quick response. They offer support through phone, email, live chat service, and support tickets. They also have an extensive knowledge base and help center. You can check out their blogs and social media to learn more about their operations and how their system works.

Why Do Debt Collectors Need a Merchant Account?

As mentioned above, debt collectors fall into the high-risk category because of the nature of their operations. Since they collect dues from customers, there’s a likelihood of disputes, and unethical behavior that may result in legal issues, customer dissatisfaction, and a bad reputation in the market.

To mitigate these risks and ensure smooth operations, a debt collection agency must work with a reputable, high-risk payment processor who can help facilitate credit card payments. You don’t just need a payment processor for conducting financial transactions, but a robust POS system that integrates with your existing software apps and offers robust security tools for fraud detection and chargeback prevention

. It’s important to look for a merchant service provider who offers personalized services that cater to your business requirements. Here’s how it can benefit your business.

• Best Protection: A high-risk merchant account facilitates secure transactions. Usually, payment processors implement tokenization, encryption, and other latest security tools to detect and prevent fraud. With the right merchant service provider, you can rest assured that your customer’s data is in safe hands and that all your credit card and contactless payments are processed securely.
• Manage Chargeback: Chargeback is one of the common issues with high-risk businesses, including debt collectors. To minimize the risk of chargeback, you need a dedicated POS system equipped with chargeback protection and prevention tools.
• Multiple Payment Options: The right merchant account service provider offers multiple payment options, including credit/debit cards, ACH transfers, digital wallets, and other forms of payment.

Simply put, a merchant account is a must for all debt collection agencies that plan on operating online and offline. Whether you have an eCommerce store where you accept credit card payments or a brick-and-mortar office where you have a retail POS system and a virtual terminal for keyed-in, tap, and swipe transactions, a merchant account is necessary to process all payments securely and effortlessly.

How to Get Started?

Research these top merchant service providers, review their pricing plans, and evaluate their selection criteria to select the best. Ask about the documentation required for the registration. You can find this information on the company’s website. You can also reach out to their support representative to discuss documentation requirements. Fill out the application form on their website and attach the documents, including address proof, financial statements, identification, and licenses.

Most merchant service providers on this list have not disclosed their pricing policy. You will need to send the application to get a customized quote. They will evaluate your documents, assess your risk level, and consider other factors before quoting a processing fee.

The next step is reviewing the agreement. Some payment processors lock you into a fixed-length contract, which often comes with an early cancellation fee. See how the payment processor works and whether they charge a month-to-month fee or have a fixed 2-3-year contract. While you are at it, check if the company has any other terms and conditions.

Check if the hardware and software integrate with your existing solutions. For instance, the payment gateway that your merchant service provider offers should be compatible with your eCommerce platform. There you go! Each payment processor takes some time to evaluate your profile and approve your application. Wait for 24-48 hours for the payment processor to respond.

Bottom Line

Choosing the right merchant service provider can seem overwhelming, especially if you are a high-risk business. That said, there are payment processors who have a stellar reputation in the credit card processing industry. A few important things to consider when choosing the right payment processor are the payment options available, hardware, customer service, processing fee, dashboard, and so on.

Of all the merchant service providers mentioned above, PaymentCloud and Host Merchant Services are the most reputable names in the industry. They have the best fraud detection and chargeback protection programs, plus stellar customer service that helps you navigate the setup and configuration part effortlessly.