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Electronic Payment Panic of 2016

  • Written by T. Steel Rose

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A major player in the collection industry ceased processing credit card payments for several collection agencies in February of this year. This is a recurring problem. In February of 2013 published sources report that based on a review by Visa it became necessary to cease payment processing for collection agencies on the Global Payments platform. Many agencies did not notice the disruption because their payment processor could switch them to another payment platform.

This issue caused concern among affected agencies and payment processors that was still rippling through the industry at the ACA International Annual Convention in San Diego in July. One payment processor expressed caution that any mention of the situation may cause alarm among agencies, explaining that Global Payments is the largest platform that boards agencies.

Payment processing works through several tiers of Independent Sales Organizations (ISOs) and their agents who work with merchants who accept credit card transactions. Payment processors work through high-volume payment platform systems.

“There are a limited number of payment platforms like First Data, Global Payments, GlobalPay and PaymentTech which are high volume systems that merchant accounts are boarded on,” said Sean Fleming, Director of PaymentVision WebServices. “Someone like Global Payments also works with ISOs. If you have a bundled approach with a certain merchant account, it may cause problems because of investing in a technology that has one merchant account. That problem is a ‘single point of failure,’ so redundancy is a good idea.”

The largest volume of credit card business is still brick and mortar. Accepting credit cards online is itself a higher risk transaction when there is always a Card Not Present. Complicating matters is that Visa and MasterCard set the rules. Paying for a charged off debt with a credit card is a prohibited transaction according to the published rules of most merchant payment processors.

“There is high risk associated with any outbound phone call business. Companies are better off with processors who are able to handle the risk because they understand collections,” said Fleming.

This creates a larger problem because the payment processing companies are utilized by agencies to also perform an array of electronic payment services. They process the acceptance of electronic checks, ACH payments, debit cards and credit card payments on early-out (pre-charge-off, 30-90 day old) accounts on behalf of agencies.

Two sources that asked to remain anonymous stated that Global Payments will no longer accept new collection agencies and they did a “purge” to balance their books. Global Payments is still processing some of the “grand-fathered” accounts. The fact that one of the ISOs took it to the extreme and purged all of their Global Payments accounts only affected those merchants that had accounts with that ISO and their agents. They processed for Global Payments and were the ones that basically cleaned house on all collection agencies when they got into a dispute with Global Payments.

It appears that Global Payments told all of their processors to terminate collection agencies with “recover” or “credit” in their descriptor data field. They didn’t tell the processors to eliminate all collection agencies. However the processor fought back and eventually just said, “we will not process for collection agencies anymore.” Global Payments never said that according to our source. There were other processors that processed for Global too. When they were hit with the purge, they didn’t “clean house” and eliminate all collection agencies. They only eliminated the ones that Global Payments told them to terminate.

In light of the Global Payments’ processing dilemma, at least one processor recommends accepting debit cards and getting more than one merchant account.

Processing debit cards is fine as long as you can demonstrate that you are verifying that the card number given is truly a debit card.

Even though the situation has settled back to business as usual, another pre-
caution recommended is to obtain multiple credit card merchant accounts. The second or third merchant account should be with a different platform, for example, First Data, Chase Paymentech or TSYS.