Landing a collection agency merchant account can be tricky, but we’ve helped open many before (and are ready to get you one too). Read on for an in-depth look at the following:
Table of Contents
- State of the U.S. Debt Collection Industry
- Relevant Laws & Codes
- Struggles Facing a Debt Collection Agency
- Commonly Asked Questions
- Tips for Getting Your Merchant Account Approved
- Additional Debt Collection Industry Information
Although crucial for the overall health of the credit and lending industries, U.S. debt collection agencies often find it difficult to obtain merchant services. This is because traditional financial institutions and payment processors consider debt collection agencies to be “high risk” due to the industry’s above average chargeback ratio, reputation for shady business practices, as well as an increasingly stringent set of government regulations put in place to control them.
We provide tailored payment processing solutions to businesses of all types and sizes. 95.7% of high risk merchant account applications that come to us get approved, and we even specialize in helping out debt collection agencies. We’ll work together with you through the whole process, regardless of whether you’re a seasoned veteran or just getting started.
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If this all sounds promising to you, then keep reading for more about the state of the debt collection industry, the most common challenges and questions, and a load of great tips, resources, and stats to help your agency succeed.
1. State of the U.S. Debt Collection Industry
The US debt collection industry is roughly a $13.5 billion market spread across about 5,600 agencies (IBISWorld, 2024 to 2025). Broader “third-party collections” estimates run higher (near $20 billion) because they count more of the ecosystem, so the number you see depends on scope.
Demand is structural: total US household debt reached $18.8 trillion in early 2026 (New York Fed), and about 4.6% of consumers carried a third-party collection tradeline in 2024. So is the scrutiny: the CFPB logged roughly 207,800 debt-collection complaints in 2024, up from about 110,000 in 2023, and 45% concerned debts consumers say they do not owe (CFPB Consumer Response Annual Report, 2024). That dispute dynamic is exactly why processors treat collections as high-risk, and why staying compliant and keeping disputes low is the whole game.
2. Relevant Laws & Codes
The Fair Debt Collection Practices Act
Collection agencies in the U.S. are subject to the Fair Debt Collection Practices Act (FDCPA), a 1977 consumer protection amendment to the Consumer Credit Protection Act. The FDCPA was designed to protect consumers from abusive, unfair, or deceptive business practices. Note that the FDCPA generally only applies to third-party collectors (as opposed to internal collectors or credit originators), and that it governs personal, family, and household debt, but not business debt.
The FDCPA is overseen jointly by the Consumer Financial Protection Bureau and the Federal Trade Commission. Although the CFPB is the primary governing body responsible for administration and rulemaking related to the FDCPA, both the CFPB and the FTC can enforce the FDCPA.
State regulations
Collection agencies are also subject to state regulations that impose additional mandates beyond the FDCPA, such as requiring agencies to obtain licensing and bonding. State regulations vary widely. Read more about state debt collection laws here.
Consequences of Not Following Them
Government supervision of the debt collection industry is persistent and unforgiving, and the cost to companies that violate the FDCPA and/or state legislation is significant. Case in point: the CFPB ordered Encore Capital Group and Portfolio Recovery Associates to pay up to $42 million and $19 million respectively, plus penalties, for violating consumers’ rights. Of course, in addition to fines, violations can also cost companies their merchant accounts.
Industry Codes (SIC & NAICS)
Most collection agencies fall under the Standard Industrial Classification (SIC) code 7322 (Adjustment and Collection Agencies). Other codes sometimes used are:
- 8748 (Business Consulting Services, Not Elsewhere Classified)
- 7323 (Credit Reporting Services)
- 7389 (Business Services, Not Elsewhere Classified)
They also use the North American Industry Classification System (NAICS) code 561440 (Collection Agencies). Other codes sometimes used are:
- 561450 (Credit Bureaus)
- 541618 (Other Management Consulting Services)
You can browse SIC codes here and NAICS codes here.
Regulation F: The 2021 Rule That Rewrote Debt Collection
The biggest change to debt collection in a generation is the CFPB’s Debt Collection Rule, Regulation F (12 CFR Part 1006), effective November 30, 2021. It is the first major federal rulemaking under the FDCPA since 1977, and it directly shapes how you contact debtors and take payment (CFPB).
- The 7-in-7 call limit. You are presumed to violate the rule if you call about a particular debt more than seven times in seven days, or within seven days after speaking with the consumer about that debt. It is per debt and applies to phone calls only, not email or text.
- Email and text are allowed, with rules. Reg F expressly permits digital contact, but each message needs a reasonable opt-out and safe-harbor procedures to limit third-party disclosure. This is what makes compliant email and text payment-link workflows possible.
- The validation notice and “itemization date.” Early in contact you must provide an itemization of the current debt (interest, fees, payments, credits) measured from a defined itemization date, plus the consumer’s rights and a tear-off dispute form.
- Limited-content messages. A defined voicemail format that is not treated as a “communication,” so it avoids third-party-disclosure liability. It may include only a business name that does not reveal you are a collector, a callback number, a request to reply, and who to contact.
Why this matters for payments: your Reg F consent capture, disclosures, and recordkeeping are exactly the compensating controls acquirers want to see, and they are your strongest defense when a debtor disputes a charge.
The 2025 to 2026 Regulatory Shift Every Agency Should Know
- The CFPB pulled back sharply in 2025. The Bureau halted much of its supervision, enforcement, and rulemaking and cut staff dramatically, shifting oversight toward states and the FTC (CNBC, 2025). Federal pressure eased, but state licensing and enforcement did not.
- The medical-debt credit-reporting rule was vacated. The CFPB’s January 2025 rule barring most medical debt from credit reports was struck down by a federal court on July 11, 2025 (analysis), so medical debt can again appear on credit reports, subject to the bureaus’ voluntary changes and state law.
Net effect: enforcement risk is shifting to the state level, where licensing and bonding requirements are expanding. Keep your state licenses current as part of staying approvable.
3. Struggles Facing a Debt Collection Agency
Debt collection agencies come up against some imposing obstacles in the course of coaxing cash out of debtors. Here are four common struggles you might face, and how to overcome them in order to secure the best merchant services possible.
Problem #1: Inaccurate and/or Incomplete Consumer Information
A staggering 90% of consumers “are concerned about debt collectors using bad or incomplete information to target the wrong people, seek payment on debts already paid, or file lawsuits without the necessary evidence to prove their cases.”
Those consumers are right to be worried — tellingly, the FTC estimated that as little as 6% of portfolios purchased by debt buyers include the documentation necessary for ensuring fair and accurate debt collection. Once portfolios leave the hands of originators, the trail starts getting colder and colder as accounts age, and make their way from one collector to the next.
Solutions:
- Don’t purchase portfolios without the proper accompanying documentation.
- Don’t attempt to collect on debts unless you can verify them. You want to be sure you’re not contacting the wrong people, sending notices to the wrong addresses, or attempting to collect from the deceased.
- Use debt collection software to help identify recoverable accounts, keep costs down, and maximize debt recovery.
Problem #2: Increased State and Federal Regulatory Crackdowns
State and federal supervision of the debt collection industry has tightened dramatically over the past couple decades, and this trend is expected to continue.
States began targeting debt buyers in the late 2000s. Over the years, there have been 29 changes in state regulations, 22 of which likely made it harder to collect on delinquent debt. And if the onslaught of state legislation isn’t enough of a headache, the feds are cracking down now more than ever, too.
The CFPB rolled out debt collection industry supervision for the first time, focusing on companies with “annual receipts of more than $10 million.” Six months later, the U.S. Treasury Department’s Office of the Comptroller of Currency introduced a set of debt collection best practices for banks.
The FTC and CFPB actively enforce debt-collection rules and have permanently banned noncompliant companies and individuals from the industry. That ongoing enforcement is a big reason acquirers scrutinize collection agencies so closely.
Solutions:
- Work with a quality assurance and compliance agency to monitor your internal processes and practices for problems.
- Review the CFPB’s Policy & Compliance page to learn how to be compliant. While you’re at it, you might as well take some time to review the CFPB’s consumer FAQs page, too.
- Provide timely responses to any complaints you receive.
- Be transparent and quick to communicate with your collection agency merchant account provider regarding any negative public perception or government scrutiny.
Problem #3: Chargebacks
Chargebacks can be a crippling problem for any merchant. They’re a clear indication that something fishy is up, so payment processors are likely to close or freeze accounts if they see a chargeback ratio exceeding 1%.
The debt collection industry chargeback ratio is historically high, unfortunately, due to a variety of factors ranging from erroneous debt collection attempts to disputes from debtors who simply don’t want to repay. While some chargebacks you see might be legitimate, others might be fraud or friendly fraud.
Of course, payment processors and their underwriters don’t care about what kind of chargebacks you get, or even why your chargeback ratio is high — all they care about is the ratio itself. Once you enter that danger zone above 1%, you risk having your collection agency merchant account closed or frozen.
You can read more about chargebacks here and chargeback reason codes here.
Solutions:
- Make an effort to provide excellent customer service. Consider offering 24/7 live support.
- Maintain a clear and complete paper trail for all debts you collect.
- Be ready and willing to offer refunds (full or partial) if necessary — this is far better than incurring a chargeback on your account.
- Work with an agency like Motile to secure a payment gateway that provides dispute alerts and helps with chargeback prevention and avoidance.
Problem #4: Application Denials
Given high chargeback ratios as discussed above, plus the abusive practices of unscrupulous and predatory debt collectors, banks and other traditional payment processors are cautious or simply unwilling to provide collection agency merchant services. You’re likely to see an application denied for no reason other than the fact that you’re a high risk merchant.
Solutions:
- You can try working with an aggregator like PayPal or Square, but they might lock you down if they notice suspicious activity. Like traditional banks, aggregators typically don’t like taking on high risk merchants.
- Identify a company that specializes in high risk merchants and collection agency merchant accounts. Find a payment processing solution that can work for your business.
4. Common Questions Debt Collection Agencies Ask
Question #1: Why did my account get closed?
There are several reasons why your collection agency merchant account might have been closed.
One possible situation is that your payment processor’s underwriter changed its policies regarding high risk merchants, and your company fell into a category they’ve determined to be too risky. Many banks and traditional financial institutions simply aren’t willing to underwrite debt collectors in the first place because of the risk, and oftentimes, institutions that were previously willing to underwrite decide to change their policies.
Another possibility is that your chargeback ratio is above 1%, which is a big red flag to most payment processors.
Question #2: How can I get lower rates and a higher processing volume?
High risk merchants like debt collection agencies should expect to face higher than normal rates and caps on processing volume. This is because payment processors are looking to mitigate risk on their end, and the smartest way to do this is to put stricter limitations in place for high risk merchants.
There aren’t any quick and dirty tricks here. To decrease rates and increase the processing volume of your merchant account, you’ll just have to put in the time and effort to show yourself worthy. Payment processors are looking for signs of stability and profitability, so focus on establishing the following financial track record:
- 3-6 months of successful processing
- Steadily growing volume
- Stable account balance with predictable transactions
Question #3: What payment processing options are available?
There are a variety of credit card processing methods, debit card options, and Automated Clearing House (ACH) payment strategies for debt collection agencies. Echeck and check 21 solutions are also available for many businesses.
Question #4: How do I get a collection agency merchant account?
You should start by finding a high risk credit card processor willing to work with you. Then, it’s about being organized, transparent, and flexible. You might not get the perfect rates and volumes immediately, but that’s simply part of working in a high risk industry.
What documents and licenses do I need to open a collection agency merchant account?
Typically your business registration, banking details, owner ID, three to six months of processing statements if you have them, and increasingly proof of the state collection-agency licenses and surety bonds required for the states you collect in. A complete file speeds approval and improves pricing.
Can I accept both credit cards and ACH in one account?
Yes, and most agencies should. ACH is cheaper and better for recurring payment plans, while cards suit one-time payoffs. Running both gives debtors options and spreads your dispute exposure.
What reserve will a processor require, and how does a rolling reserve work?
Most collections accounts carry a reserve as a chargeback buffer. A rolling reserve holds a percentage of each batch for a set period, then releases it on a schedule. The exact percentage and hold depend on your risk profile and usually step down as you build clean history.
How do I keep my account safe under Visa’s VAMP dispute rules?
Keep disputes well below the 1.5% merchant threshold with clear billing descriptors, recorded consent, Reg F itemization records, and clean recurring-payment disclosures. ACH for payment plans also reduces card-dispute exposure.
Can a debt buyer get a merchant account, or only third-party agencies?
Both can, but underwriting differs. Debt buyers holding charged-off paper are viewed as higher risk than first-party or BPO servicers, so expect closer scrutiny of licensing, sourcing, and compliance.
My account was terminated or I’m on the MATCH/TMF list. Can I still get approved?
Often, yes, case by case. Bring your termination letter, dispute summary, current licenses, and proof of the fixes you have made.
5. Tips For Getting Your Collection Agency Merchant Account Approved
Tip #1: Don’t Be Dishonest
Make it your primary business goal to abide by all federal and state regulations — not just because you have to, but because people deserve to be treated fairly and professionally.
If the debt collection industry wants to continue thriving and providing a necessary service in this era of increasing government regulation and heavier public scrutiny, then it’s going to come down to individual agencies making the conscious decision to be honest.
As a debt collection agency, you should avoid the following prohibited behavior at all costs:
- Harassment — threats, obscenity and profanity, repeated and annoying phone use
- False statements — inaccurate debt amounts, impersonation, claims about legal action
- Unfair practices — illegal collection or attempted collection of interest on top of debt, early deposits of post-dated checks, illegal seizure or attempted seizure of property
Here are more specific examples of things to avoid at all costs, courtesy of the Center for Responsible Lending’s aforementioned report:
- Relying on defective, inaccurate, and/or insufficient proof of debt
- Robo-signing
- Collecting on time-barred debts (beyond the statute of limitations)
- Collecting on zombie debt
- Providing improper or “sewer” service
- Setting default judgment traps
Tip #2: Establish a Stable Track Record
As mentioned above, in order to land a collection agency merchant account, it’s crucial to be able to show payment processors that you’re good for your money. You’ll want to line up 3-6 months of successful payment processing with a stable balance, predictable transactions, and growing volume. It’s also important to keep your chargeback ratio under 1%.
Tip #3: Join a Trade Association
A trade association membership can give debt collection agencies valuable resources and guidance on best practices and compliance. It can also provide a boost in terms of consumer trust and public opinion. Here are a couple major associations to consider:
ACA International
ACA International is a leading trade association for the credit and collection industry that “establishes ethical standards, produces a wide variety of products, services and publications, and articulates the value of the credit and collection industry to businesses, policymakers and consumers.” It was founded in 1939 and represents 230,000+ employees. There are numerous benefits to joining ACA International that can help your business succeed.
RMA International
Formerly DBA International, RMA International is a nonprofit trade association that was founded in 1997. It represents 550+ companies “that support the purchase, sale, and collection of performing and nonperforming receivables on the secondary market.” Check out the benefits you get from becoming an RMA International member.
Tip #4: Don’t Get Too Attached to One Payment Processor
High risk merchants like debt collection agencies should be prepared for some flip-flopping when it comes to payment processors. Even the best relationship can take a turn for the worse without notice.
So, whatever service provider you end up using, it’s wise to have a backup plan in case the winds of fortune change. Save some time by working with a Motile agent who can set you up with the best merchant accounts for debt collection agencies.
What a Collection Agency Merchant Account Costs (Reserves Explained)
Most competitor pages say “competitive rates” and move on. The honest version: collections pricing is usually interchange-plus (the networks’ cost plus a fixed markup), with a monthly fee, a gateway fee, and PCI, priced above standard retail because of dispute risk. A specific rate quoted before an underwriter sees your license, history, and chargebacks is a guess.
Most collections accounts also carry a reserve, a buffer the processor holds against future chargebacks and refunds. There are three common types, and knowing them helps you negotiate:
- Rolling reserve: a percentage of each batch held for a set period (often several months), then released on a rolling schedule.
- Capped / upfront reserve: a fixed target amount built up or paid in, then held.
- No reserve, tighter monitoring: possible for lower-risk profiles with strong history.
The percentage and hold period are set by your risk profile, not a fixed industry number, and they typically step down as you build clean, compliant processing history (reserve mechanics).
Cards vs ACH for Collections: Which Rail to Use
For collections, the payment rail is a strategic choice, not an afterthought.
- ACH / bank debit is far cheaper per transaction, ideal for recurring payment plans on charged-off balances, and carries lower “friendly fraud” exposure because returns run through NACHA rather than the card dispute system. The tradeoff: NACHA authorization rules (WEB debits need specific consent and account validation) and NACHA return-rate thresholds that function like the card world’s chargeback limits.
- Cards are convenient for one-time settlements and consumer choice, but carry Visa VAMP and chargeback exposure and cost more.
Many agencies run both in one account: ACH for payment plans, cards for one-off payoffs.
Staying Under Visa’s Dispute Threshold (VAMP)
Visa replaced its older dispute programs with a single monitoring program (VAMP) that combines fraud and disputes into one ratio. Visa tightened the merchant “excessive” threshold to 1.5% (down from 2.2%), effective April 1, 2026 (Merchant Risk Council). Thresholds have been revised more than once, so treat 1.5% as a ceiling to stay well below.
Collections attract disputes for specific reasons: an unrecognized biller descriptor, arguments over the amount or validity of the debt, and the adversarial nature of the relationship. Your compensating controls:
- A clear, recognizable billing descriptor so debtors know who charged them.
- Recorded consent and right-party-contact logs.
- Reg F itemization records to prove the amount.
- Clear pre-payment disclosures on any recurring plan.
The Collections Risk-Tier Rubric: Where Does Your Agency Sit?
Underwriters do not see “a collection agency.” They see a risk profile. Use this to self-assess before you apply.
| Factor | Lower risk | Higher risk |
|---|---|---|
| Business model | First-party / BPO servicing for a creditor | Debt buyer holding charged-off paper |
| Licensing | Current state licenses and surety bonds, NMLS filings where required | Missing or lapsed licenses |
| Compliance | Documented Reg F workflows, recorded consent | Ad hoc process, no consent records |
| Dispute history | Low, documented, under threshold | Elevated or unknown |
| Processing history | Prior clean statements | Prior termination, on MATCH/TMF |
| Payment mix | ACH-led plans with clear authorization | Card-heavy with weak descriptors |
Every row you can move left lowers your rate, your reserve, and your odds of a decline.
Terminated or on the MATCH / TMF List? Here Is the Recovery Path
If a prior processor dropped you or you were placed on the MATCH/TMF blacklist, you still have options. High-risk underwriting is case by case. Bring your termination notice, a dispute summary, proof of current licensing, and evidence of the compliance fixes you have made (Reg F workflows, better descriptors, consent capture). A specialist can often place an agency that a mainstream processor would auto-decline.
6. Additional Debt Collection Industry Resources and Information
Fair Debt Collection Practices Act
Full text of the FDCPA published by the Federal Trade Commission.
Policy & Compliance — The Consumer Financial Protection Bureau
Policies, guidance, compliance information, and related resources about U.S. federal consumer financial laws.
Debt Collection Agencies — U.S. Market Research Report
report on the industry from IBISWorld, a leading market research firm.
ACA Whitepaper Review of Debt Collection Complaints
ACA International whitepaper that analyzes a database of recent CFPB debt collection complaints, and suggests that the number of consumer complaints is relatively low compared to past figures.
The State of Lending in America & its Impact on U.S. Households
report by the Center for Responsible Lending with a comprehensive overview of debt collection and debt buying, predatory industry practices, state and federal legislation, U.S. household impact, and policy recommendations. A comprehensive, informative resource.
ACA International — Compliance Control Center
Trade association resource page with up-to-date information, alerts, articles, how-to guides, FAQs, training, and a whole lot more for agencies both large and small.
RMA International — Educational Programs
Trade association resource page with online learning and webinars for receivables compliance certification and continued professional education.
Debt collection laws by state
Insight into the debt laws in every U.S. state, curated by the Nolo Network – a massive online library of consumer-friendly legal information.
