CFPB Released Outline Regarding Debt Collection Industry

Oct 28, 2016

The process of collecting debts can be tricky to newcomers. It is generally unfavorable to startups as well. Traditional banks and many credit processing providers will stay away from you if you do not provide a thorough credit history. Inconsistent revenue streams are also an obstacle hindering the application process for merchant accounts.

CFPB Reveals an Outline

On July 28, 2016, the Consumer Financial Protection Bureau, which is also known as CFPB or Bureau, released an outline of possible regulatory proposals. The outline aims to address debt collection practices by third-party debt collectors under the Fair Debt Collection Practices Act or FDCPA. The FDCPA was enacted in 1977 to eliminate abusive debt collection practices by debt collectors.

The CFPB will address first-party debt collectors and creditors. Currently, these are not covered by the FDCPA. The CFPB’s initiative is raising some concerns regarding how potentially more stringent debt collection standards may impact several areas.

The latter areas include banks’ ability to sell non-performing loans to debt collectors, assumptions regarding banks’ loss given default (LGD) rates and related write-offs, provisioning and capital allocations. The mentioned standards may also impact the ability of several debt buyers, including hedge funds, to acquire defaulted debt.

Debt Collection Industry

Debt collection agents and agencies are classified as high risk because of the unstable nature of the debt collection industry. To open a reliable and secure debt collection merchant account, it is critical to turn to a reputable payment processor like EMB has the resources to get you the account you need.

EMB specializes in the high risk sector and is voted the #1 payment processor in the United States.  EMB boasts an A+ rating with the BBB and can get your collection agency merchant account tailored to your business needs.

More than half a year will be required before the CFPB issues final rules concerning debt collection. So lenders and their third-party service have time to prepare for more stringent regulations. As for banks, they are provided with opportunities to update scenario analysis regarding LGD rates.


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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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