The Ins and Outs of Getting a Credit Repair Merchant Account

In today's market bad credit is common, so there are many credit repair companies that have entered the marketplace. Our specialized merchant account services extend to high risk merchant accounts for credit repair companies.

Michael Hollis Director of Sales

The credit repair industry is a $4 billion industry with more than 90,000 credit repair businesses, according to a January 2017 report by market research company, IBISWorld.In 2016, many of these were small partnerships or non-employers. In fact, the report showed that the three-largest firms in this industry were expected to each make less than 5% of industry’s revenue. Online credit repair services were expected to account for the rest.Though many online credit repair merchants have proven that they can efficiently operate outside a bricks-and-mortar structure, high chargebacks within this industry prevent banks from wanting to help them process payments. Traditional financial institutions don’t want to take on the risk that comes with high-risk credit repair merchant accounts.To accept credit card transactions, reputable credit repair businesses can apply to high-risk merchant account provider, eMerchantBroker.com (EMB). To apply now for a credit repair merchant account, fill out EMB’s quick, online application.Dedicated to quality customer service, EMB specializes in high-risk merchant accounts. EMB offers personalized payment solutions that allow retail and online merchants to succeed. Applications are approved in 24 to 48 hours. Once approved, EMB can set up chargeback management tools, payment gateway, and fraud filters.

Businesses Within the Credit Repair Industry

The credit repair industry aims to improve individuals credit scores by finding errors in credit reporting and disputing inaccurate information with the appropriate organizations. Clients who most often purchase these services are those who have credit problems related to a bankruptcy or a recent lifestyle change, such as divorce.

EMB offers merchant accounts to many types of retail and online businesses in the credit report sector industry. The credit repair merchants accepted offer the following services:

  • Cease and desist collections processing
  • Credit re-establishment
  • Credit repair consultation
  • Dispute processing
  • Settlement assistance

In addition, EMB has a long history of working with new and existing businesses of all sizes, merchants rejected or terminated by other credit card processors, as well as retail and online companies with no credit, bad credit, or high chargebacks.

Requirements when applying for a credit repair merchant account

An online or retail business can apply online for a credit repair merchant account today. Merchants can begin by filling out EMB’s quick online application. To apply, merchants will need to submit the following items to processors and underwriters along with their applications:

  • A valid, government-issued ID, such as a driver’s license
  • A bank letter or a pre-printed voided check
  • 3 months of the most recent bank statements
  • 3 months of the most recent processing statements, if applicable
  • A SSN (Social Security Number) or EIN (Employer Identification Number)
  • Chargeback ratios must be under 2%

Also, all online merchants must maintain secure, fully-operational websites.

Though EMB cannot guarantee any approvals, it does promise a fast, streamlined application process. Apply today and get approved in as little as 24 hours.

What underwriters look for during the application process

During the merchant account application process, processors and underwriters want to see that credit repair merchants are running legitimate, reputable businesses. Underwriters assess risk by looking for any red flags, including whether they are following all credit repair rules and regulations.

Risk is determined by looking at a merchant’s credit scores, credit card processing history, bank statements, and its website. If a site doesn’t have solid privacy and refund policies posted, the factors will negatively impact their applications. The risk increases to a credit card processor when a merchant has a negative bank account balance, unpaid bills and late payments, and a history of high chargeback rates.

The best way to prepare for an underwriter’s review is for a merchant to satisfy outstanding bills and debts, have a substantial sum of money in the bank, and have a stakeholder in the business with the best credit history apply for the merchant account. Anything that looks or seems questionable should be handled before it gets in the hands of an underwriter.

Ultimately, merchants need to show processors and underwriters that they are not taking any unnecessary risks when they approve a credit repair merchant account. Proactive merchants are likely to get approved for accounts without limitations, such as lower rolling reserve or caps on higher processing volume.

How to get high processing volumes for credit repair merchant accounts

Every business wants to bring in sales of a $100,000 per month or more. However, since many credit repair businesses are small or new, many are given a monthly credit card processing volume cap. This means merchants are only permitted to handle a certain number of credit card transactions per month. Once that cap is reached, the merchant cannot take any more credit cards purchases, essentially closing the business. Merchants in this industry often end up with a cap of no more than $50,000.

Successful merchants don’t get stuck with this cap forever. Credit repair merchants that need higher volume ceilings can request new caps in as few as three months. Businesses that prove themselves by paying their bills, have low chargeback ratios, and have some cash in the bank can ask a processor to consider raising their caps.

Why processors care about chargebacks

Excessive chargebacks indicate to processors that a merchant has a flawed business model. Customer dissatisfaction, a lack of customer service, and a lack of mitigation plans lead to chargebacks, which are when a credit card provider demands a merchant pay the loss of a disputed or fraudulent transaction.

The main reason credit card processors have little tolerance for merchants with high chargeback rates because they get hit with financial penalties. Processors face potential fines from credit card companies, like MasterCard or Visa, whenever a business exceeds a 2% chargeback ratio. Processors can be charged fines that total thousands of dollars for each merchant. Businesses with excessive chargebacks become too expensive for credit card processors, and the result are terminated merchant accounts.

Credit card processors terminate high-risk merchant accounts for those with chargeback ratios of more than 3%. The bigger problem for merchants is once a processor shuts them down, it is very difficult for them to get approved for a second merchant account. A past terminated account is one of the factors that works against a credit repair business when applying for a merchant account.

 Why credit repair merchants are susceptible to chargebacks

Credit repair merchants are vulnerable to chargebacks mostly due to the industry and its clients. Customers who need credit repair businesses have bad credit, so it is likely they have little money or none. A modest cash flow can cause people to make dishonest moves to hold on to their money, even if it means disputing valid credit card transactions.

Also, there are plenty of clients who have legitimate transaction complaints but don’t know how to handle them. Those who do call to complain often get frustrated and hang up if the call or problem isn’t handled quickly or they get a business representative who has no customer service skills. An unhappy client is sure to result in a costly chargeback.

A lack of electronic or paper receipts is another issue that results in a chargeback. When clients don’t have receipts, they don’t have quick access to a retailer’s contact information. There also is a good chance that clients forget they purchased credit repair services when they review their credit card statements.

Instead of monthly invoices, credit repair merchants often send recurrent bills for their services. When the charge shows up on statements, it can take a client by surprise. It can lead to customers forgetting about the services and then, disputing the transaction because they no longer wanted or needed the services.

Credit repair services are not cheap. Since the charges are often significant, a dissatisfied, cash-strapped client may look at cutting these services as a simple way to hang onto extra money.

As already mentioned, most credit repair businesses are small and likely don’t have a well-known reputation or a strong brand name. A less-established business often lacks the business sense and customer service needed to keep clients happy. Smaller may not offer 24-hour customer service or present refunds and incentives that larger, more-established merchants may give to clients to prevent them from disputing a credit card transaction.

Many credit repair businesses don’t realize that their chargeback ratios, whether they are won or lost, contribute to their ability to operate a business until it is too late. Excessive chargebacks can lead to a terminated merchant account and the business’ ability to get another.

Keeping chargeback ratios down

Unlike many other industries, there isn’t too much fraud and stolen credit cards in the credit repair sector. Most of the time, chargebacks are the result of dissatisfied clients. The cause of chargebacks is never a concern for processors or credit card companies. The only thing they care about is chargeback ratios higher than 2%.

The best way to keep chargebacks low is to offer clients full refunds. A refund is much more cost-effective than a chargeback. When a dissatisfied customer contacts a merchant, the customer service representative should immediately offer a full refund instead of explaining the charge and the terms of the transaction. After a refund and receipt are issued and received by the client, the merchant should then try to provide a new paid service. Taking this action removes the chargeback potential of the first transaction and gives the merchant’s ability to process in the long term.

Since excessive chargebacks are due to customers not remembering or recognizing transactions on their credit card statements, merchants are encouraged to use clear billing descriptors. The merchant’s name and contact number should be included in the descriptor. Transparency and open communicating also can reduce chargebacks. It is a good idea to send an automatic email receipt once a transaction is complete.

Chargeback mitigation programs, like the one EMB offers, are good ways to keep chargeback ratios down. EMB has created an elite alert and prevention system for high-risk merchants, including credit repair businesses, by partnering with Verifi and its new Cardholder Dispute Resolution Network (CDRN) and Ethoca’s alert system, that makes it easier to fight chargebacks.

CDRN operates with banks and card issuers, enabling merchants to resolve credit card transaction disputes. This system allows merchants to achieve the greatest rate of chargeback resolutions while being directly involved in the process. Up to 25% off a merchant’s chargeback ratio can be trimmed by using an alert system.

By actively pursuing chargebacks, credit repair companies protect themselves from losing revenue and keep their merchant accounts in good standing.

Calculating and offsetting chargeback ratios

A credit repair merchant’s chargeback ratio is calculated by the number of transactions divided by the number of monthly transactions. For example, a merchant with 300 transactions and 12 chargebacks in a month would have a 4% chargeback. The dollar amount of a chargeback doesn’t matter.

Maintaining high transaction counts also helps. Merchants that have a large volume of transactions can more easily offset a few chargebacks. So, a merchant with several hundred transactions per month is better off than one that handles less than 50 purchases per month.

It is important to note that is would not be prudent to stop sales for extended periods of time when a business’ transaction volume is low and the chargeback ratio is high.

 Categories for credit repair merchant accounts

The United States and other countries, including the United Kingdom, assign four-digit numerical codes, known as Standard Industrial Classification (SIC) codes, to business establishments. The codes are used to identify businesses’ primary purposes.

Typically, merchants that sell products and services related to the credit repair industry fall into one of these codes:

  • 7299: Consumer Credit Counseling Services; Credit Repair Services such as, Credit Counseling
  • 8748: Business Consulting Services
  • 7323: Credit Reporting Services
  • 7389: Business Services, Not Elsewhere Categorized

Visit the United States Department of Labor to view a complete SIC list.

The Northern American Classification System, NAICS, is a list of six-digit codes used by federal statistical agencies to classify business establishments. The codes aim to gather, analyze, and publish statistical information about similar types of businesses and their impacts on the U.S. economy.

In general, credit repair or credit consulting businesses generally use one of these codes:

  • 541990: Other Professional, Scientific, and Technical Services
  • 561450: Credit Bureaus
  • 541618: Other Management Consulting Services

 Visit the United States Census Bureau to view the complete NAICS code list.

Credit Repair

  • Do you need a merchant account for your credit repair company?
  • We offer a credit-friendly application process that will help you get back on your feet.
  • We even deal with start up credit repair companies with no processing history.
  • Domestic Account – 48 Hour Funding.

Contact eMerchantBroker for Credit Repair

Michael Hollis Director of Sales