Trouble in North Carolina for Some Collection Agency Merchant Accounts

Jun 23, 2014

This week the North Carolina Collections Association (NCCA) advised all collection agency merchant accounts pursuing debts in North Carolina, to suspend convenience fee charges. On April 11, 2014, a receivables management company agreed to pay a 21,000 civil penalty for collecting unauthorized convenience fees from debtors. This prompted a meeting between the North Carolina Collectors Association, the North Carolina Department of Insurance Commissioner Wayne Goodwin, and representatives of the state’s Attorney General to discuss the legality of convenience fees for consumers who pay by credit card or check by phone.

The Commissioner informed the NCCA that he considered the collection of convenience fees a violation of North Carolina law. This is contrary to NCCA’s previous understanding that convenience fees were legal, as long as, consumers were given an alternative to paying the convenience fee, the fee was reasonable and not a profit for the agency.

Gregg Sheperd, president of the NCCA, sent out an alert to all NCCA members about the new interpretation of convenience fees and demanded that all convenience fee collection be stopped. All collection fee activity that occurs after this warning could result in more civil charges by consumers.

In 2013, the Federal Trade Commission (FTC) reached a settlement with one collection agency after a debt buyer failed to follow federal debt collection laws about convenience fee charges. The FTC charged the debt buyer after the organization failed to notify consumers that they were not obligated to pay immediately over the phone, thus eliminating the convenience fee. The company agreed to pay $799,958 in restitution.

The FTC claimed that the debt buyer violated the Fair Debt Collection Practices Act (FDCPA) and FTC Act by using deception to get consumers to pay over the phone, and by falsely threatening to file lawsuits against consumers if they didn’t pay immediately. The complaint also stated that the agency told consumers that were also required to pay an additional $18.95 for the service, and did not mention options to avoid the fee.

The issue could have been avoided if the debt buyer only mentioned an alternative to over the phone or credit card payment.

Currently, the NCCA is actively searching for a way to reverse the new interpretation of the law, or to change the laws in North Carolina in order to resume convenience fee collection.

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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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