Credit payments are on the rise throughout the world. Many individuals maintain their lifestyle by using credit cards. As of August 2021, the average credit card debt per household in the UK stood at £2,033 while the average total debt per household was £62,813
Businesses also continue to borrow funds to run their operations or finance their strategic projects. The level of business debt in the UK increased during the pandemic. The Bank of England reported that large companies owed £1.224 trillion in March 2021 – an increase of 2% from £1.2 trillion in December 2019. The level of debt increase for SMEs was more than 2 times higher in the same period. Debt for SMES increased by a whopping 25% . It rose from £0.2 trillion to £0.25 trillion between December 2019 and March 2021. (Bank of England, 2021)
As debts increase, the risk of bad debts also rises. Not all people and businesses will pay back the money they owe. However, that does not mean they should not be held accountable. Here is where debt collection agencies come into play. Individuals and businesses approach these entities to recover the money others owe them. In return, they pay these collection agencies a fee for their service, which is usually a percentage of their recovered assets.
Debt collection agencies take the following steps to recover debts from borrowers:
- Call the debtor between 8am and 9pm on their personal or work contact number.
- Send notices of late payment via mail
- Visit the debtor in person
- Contact the debtors family and friends, or even neighbours
Due to the controversial nature of the tactics employed by the collection agencies to make the borrowers pay their debt, this industry is deemed high-risk by merchant account providers, especially banks. However, there are many legitimate businesses that lawfully collect debt for their clients. Collection agencies are regulated in the UK under the Fair Trading Act 1973. All legitimate debt collection agencies are licensed by Financial Conduct Authority (FCA).
If you are a legitimate debt collection agency that has difficulties getting a merchant account, CutPay is here to help!
Types of debt collection merchants accepted by CutPay
- Auto Loans
- Credit Card
- Debt Consolidation
- Financial Services
- Installment Lending
- Memberships / Subscriptions
- Payday Loan
- Personal and Commercial Debt
- Retail Store Credit and Installment Sales
- Returned Checks
- Student Loans
- Tickets and Fines
- Any Business that Collects Payments from Debtors
Why is the debt collection industry considered high-risk?
The controversial nature of the business makes debt collection a high-risk industry for banks and ISOs. Some factors that contribute to this phenomenon are given below:
1. Subscription model
Debtors would mostly ask for a monthly or quarterly payment plan to pay off their dues. Collection agencies would expect the borrower to make payments on time. Most of the times, these debtors would fail to pay since they have already exhausted their financial resources and were unable to pay off their original debt in the first place.
Most debt collection agencies assign a payment plan to borrowers to recover the debt. More often than not, these individuals call the bank and ask for a chargeback against their monthly payment claiming that the transaction was fraudulent. This way they get their money back and also get the collection agencies off their back for the time-being. Such fraudulent chargebacks are known as ‘friendly fraud’.
3. Reputational risk
The unconventional methods employed by collection agencies make these businesses controversial. Some of their practices may be deemed intrusive or inappropriate by borrowers who are being chased by them. Any complaints by these individuals can cause legal and regulatory implications for collection businesses. Most traditional banks do not want to have anything to do with controversy or reputational risk. Therefore, they steer clear of doing business with collection agencies.
Why Choose CutPay?
CutPay specializes in processing payments for collection businesses. We are one of the best merchant service providers for debt collection companies in Europe and the UK.
With our extensive network of various acquiring banks, we can help you diversify the processing of your payments among multiple banks to mitigate risk as well as expand your business globally.
CutPay offers high-risk businesses a host of fraud and chargeback protection features as well as a secure payment gateway that provides debt collection agencies with long-term, reliable payment processing solutions.
|Industry Account Experts
|Fast Account Approval
|Medium/High Risk Accounts
|Relationships with Leading Acquiring Banks
|Large Merchant Case Studies
|E-Commerce and Retail Options
|B2B Vendors Supported
|Multiple Payment Solutions
|Multiple E-Commerce Gateway (Mobile apps or website)
|B2B-Level II/III Data Discounts
|3D Secure Frictionless Checkout
|Level 1 PCI-DSS Merchant Gateway
|Support & Guidance
|International Merchant Accounts
|Gateway Recurring Billing
|E-Commerce Cart Plugins
|Developer API /SDK/ Docs
|POS/Terminals (Virtual or MOTO)
|Dedicated Account Managers
|Superior Customer Service
Ready to Get Started?
So are you a debt collection business that wants to open a high-risk merchant account? Don’t know where to start? Fear not – CutPay is here to solve all your problems!