Breathe a Sigh of Relief – Tips to Getting a Debt Consolidation Merchant Account
Debt consolidation companies have a very difficult time acquiring a merchant account. 90% of all merchant service companies and credit card processors do not allow collection agencies to get a merchant account on their system.
The average American household owes $16,425 in credit card debt, which is a 10% spike since 2013, according to the Board of Governors of the Federal Reserve System’s Report on the Economic Well-Being of U.S. Households 2016.
Credit card debt not only rose 6% from the previous year, but it reached an average high that had not been seen since the Great Recession. Do the math and it is easy to calculate that Americans owe credit card companies nearly $1 trillion.
As people get buried deeper in debt, they must find ways to dig themselves out. Debt consolidation companies help people get a handle on their finances. As credit card debt climbs, it is inevitable that more companies will surface to offer customers some relief.
Despite the need for these services, high chargebacks within the debt consolidation industry prevent banks from wanting to help them process payments. Traditional financial institutions don’t want to take on the potential financial responsibility that comes with debt consolidation merchant accounts.
To accept credit card transactions, responsible debt consolidation businesses can apply to high-risk merchant account provider, like eMerchantBroker.com (EMB). To apply now for a debt consolidation merchant account, fill out EMB’s quick, online application.
Dedicated to superior customer service, EMB has made high-risk merchant accounts its specialty. EMB offers customized payment solutions that allow merchants to succeed. Applications are approved within 24 to 48 hours. Once approved, EMB can set up merchants with chargeback management tools, payment gateways, and fraud filters.
What’s needed when applying for a debt consolidation merchant account
Apply online today for a debt consolidation merchant account. Merchants can begin by filling out EMB’s simple online application. In addition to the application, merchants will need to submit the following items to processors and underwriters:
- 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)
- A secure, fully-operational website
- Chargeback ratios must be under 2%
EMB cannot guarantee any approvals, but merchants can expect a quick, simple application process. EMB has a long history of working with new and existing businesses of all sizes, merchants that have been rejected or shut down by other credit card processors, as well as those with no credit, bad credit, or a history of high chargebacks. Apply now and get approved in as little as 24 hours.
What underwriters look for during the application process
During the merchant account application process, businesses must prove to processors and underwriters that they are running law-abiding, reputable companies. Underwriters assess risk by looking at many factors, including whether merchants are complying with all rules and regulations.
Some of the factors that determine risk include:
- A merchant’s credit scores
- Credit card processing history
- Bank statements
Underwriters also want to see websites that work properly and display clear privacy and refund policies. A negative bank account balance, unpaid bills and late payments, and a history of high chargeback rates also increase a merchant’s risk.
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 bad credit merchant account.
Now is the time to take care of anything that looks questionable. By making these moves, businesses will show processors and underwriters that they are not taking on any unnecessary risk if they grant them debt consolidation merchant accounts.
Chargebacks stack up quickly for debt consolidation merchants
The nature of the debt consolidation industry and its clients’ backgrounds are some of the main reasons merchants face excessive chargebacks. Customers who need debt relief most likely have bad or poor credit and cash flow issues. A lack of extra money on hand can lead people to take dishonest actions, such as disputing legitimate credit card transactions. This is called friendly fraud and it is a bigger than typical fraud, which is when a purchase is made with a stolen credit card, in this industry. Friendly fraud or chargebacks are when customers make a legitimate credit card purchase and then, decide to dispute the transaction because they changed their minds, decided they did want the product or service, or they want to get something without being on the hook for the charge. Too many friendly fraud incidents equal too many costly chargebacks.
On the other hand, some transaction disputes are valid. Sometimes, merchants provide misleading or inaccurate pricing and information or failed to provide the service as initially explained. But more times than not, customers are displeased with the debt relief services they received. When customers call to complain, they get frustrated if the problem isn’t resolved quickly or they get a business representative who has no customer service skills. The result of an unresolved customer problem is sure to lead to a chargeback.
Since debt consolidation is a service, many merchants don’t find it necessary to send out receipts. That’s a big mistake. When clients don’t receive paper or electronic receipts, they don’t have quick access to a merchant’s contact information. There also is a good chance that clients will review their credit card statements and not recognize the name attached to the purchase or forgot about the debt relief services.
Debt consolidation merchants also are more vulnerable to chargebacks because they tend send recurrent bills. When charges show 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.
Another thing to remember is that debt consolidation is not inexpensive. It likely will be the single largest amount on a statement. Since the charges are significant, a displeased, cash-strapped customer may dispute the charge to hold on to some of their money.
Furthermore, many businesses are small and likely don’t have a well-known reputation. A less-established business often lacks the business sense and customer service needed to keep clients happy. Smaller merchants may not offer 24-hour customer service or present refunds that larger, renowned merchants may give to clients.
Finally, whether won or lost, chargeback ratios contribute to a merchant’s ability to operate a business. Excessive chargebacks can lead to a terminated merchant account and the business’ ability to get another one in the future.
Combat chargebacks these ways
Too many chargebacks will keep a debt relief business more than in the arrears. It could cost a merchant its business. This is why it is crucial that merchants take the necessary steps to prevent chargebacks.
No matter what prompted the dispute, it is up to merchants to keep chargeback ratios below 2%. To avoid disputes that result in chargebacks, merchants must be vigilant. They need to ensure that customers understand the services they purchased, the costs and the terms of service, when they are billed, and how all information will appear on their credit card statements. These are very important because many customers dispute charges because they fail to understand what they are buying or they don’t recognize a purchase when it shows up on their monthly bills.
Even if a merchant does it due diligence to ensure a customer understands these details, there are still going to be some unhappy customers. Therefore, communication is key. Debt consolidation merchants must have solid plans in place to handle dissatisfied customers. Quick refunds and easy accessible customer service are simple ways to change the moods of disgruntled customers. Complaints should be handled quickly with minimal hassle. Having 24-hour phone or online customer service representatives can help merchants avoid chargebacks. Employees should be trained to offer full refunds immediately.
Some other ways to crack down on chargebacks are to send electronic order confirmations, detailed receipts, and customer satisfaction surveys. Receipts and confirmations should include what was ordered, the costs, how and when it will billed, and who to call if there is a problem. These electronic communications, which also should include the way in which the business name will appear on credit card statements, should be sent out within 24 hours of the purchase. Customer service surveys can be beneficial for two reasons. Merchants can find out what’s working and what doesn’t and then, make appropriate changes. If a customer seems displeased with services, the merchant has an opportunity to reach out before the patron contacts his or her credit card company. Surveys also provide another chance to remind customers about the services they purchased.
Getting an authorized e-signature from a customer is another easy way to avoid a chargeback. When customers buy services, sent them documents that outline all of the terms, including the costs and refund policies, and then, require them to provide their electronic signatures. This is the perfect way to avoid friendly chargebacks.
Implementing a recorded phone line verification system is another way to crack down on chargebacks. These systems are the best way to determine whether a sales person is being too aggressive, failing to explain the terms and conditions of the services, or guaranteeing something that the services cannot do. Finding out whether these are factors can help by eliminating problem sales people who are contributing to excessive chargebacks and can better train other staff to prevent disputes.
Integrate customer dispute alerts
A merchant can cut its chargeback ratio by 25% by using a chargeback protection program, like the one offered by EMB. EMB’s elite alert and prevention system can help high-risk merchants, including debt consolidation companies, mitigate two out of 8 chargebacks. This easily drop a 3% chargeback ratio to a 2% ratio.
This system is unique because EMB partnered with Verifi, its new Cardholder Dispute Resolution Network (CDRN) and Ethoca’s alert system. CDRN operates with banks and card issuers, enabling merchants to achieve the greatest rate of chargeback resolutions directly.
Getting dispute alerts can protect companies from losing revenue and their debt consolidation merchant accounts.
How to get an increased credit card processing cap
Due to the nature of these businesses, a lack of processing history, or a poor business history, many debt consolidation merchants are given monthly credit card processing volume caps. This means merchants are capped at the number of credit card transactions they can take each month. Once that monetary cap is reached, the merchant must stop taking credit card payments for purchases. This essentially temporarily shuts down the business for that month.
Merchants that do are successful can request higher credit card processing volumes caps in as little as three months. For underwriters to consider an increase, they must prove that they have paid their bills, have low chargeback ratios, and have saved some money.
Categories for educational seminar merchant accounts
The United States and other countries assign four-digit Standard Industrial Classification (SIC) codes to business establishments. The numerical codes are used to identify businesses’ primary purposes.
Typically, merchants that offer debt consolidation and relief services fall into one of these codes:
- 6163: Loan Brokers
- 7322: Adjustment and Collection Agencies
- 8748: Business Consulting 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 are used to gather, analyze, and publish statistical information about similar types of businesses and the way they impact the U.S. economy.
In general, debt consolidation businesses generally use one of these codes:
- 522310: Mortgage and Non-Mortgage Loan Brokers
- 561440: Collections Agencies
- 541618: Other Management Consulting Services
Visit the United States Census Bureau to view the complete NAICS code list.
Merchant Accounts For Debt Consolidation
At eMerchantBroker.com, we specialize in providing electronic payment processing services for the debt consolidation industry, including merchant accounts, e-check processing and debit card processing. We provide debt consolidation merchant accounts to help debt consolidation. Debt consolidation organizations can depend upon merchant accounts from eMerchantBroker. If your agency needs a merchant account, be sure to contact EMB today.
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