Consumers who saw their credit ratings take a hit during the global pandemic (in some cases, faultlessly) are fed up and are seeking professional advice from credit repair companies now more than at any other time in history.  Still, due to the very nature of the credit repair business, these companies are finding that financial institutions are unwilling to offer the required merchant accounts that are necessary for payment processing.  Why?  Because, as an industry, the credit repair business is “high risk.”

Don’t misunderstand.  A high-risk merchant, like a credit repair business, is absolutely eligible for a payment processing solution, and securing a merchant account is achievable, with the right specialized payment processing service.

It is simply the industry environment itself that makes specialized payment processing a requirement in the first place.

One very resourceful option with extensive experience securing payment processing solutions for high-risk merchants is DirectPayNet Inc.  Merchant account providers like DirectPayNet specialize in working with high-risk merchants and they can provide credit repair businesses with the vital resources to not only sustain but grow their businesses.

Before we put the cart too far before the horse, let’s back up a bit first.

Look.  Not even credit scores were safe from the pandemic as consumers impacted by unemployment were suddenly confronted with keeping up with monthly bills, such as a mortgage and Mastercard / Visa payments.

The CARES Act that was passed in March of 2020 came with guidelines intended to protect the credit scores of strapped consumers who suddenly found themselves unable to make monthly loan and credit card payments.  In that aspect, the CARES act failed miserably and, unsurprisingly, the Consumer Federal Protection Bureau (CFPB) released a report stating that credit report inaccuracies more than doubled during the pandemic, yielding clear evidence that there is a huge chasm between the laws introduced to protect consumer credit reports and how services actually reported suspended payments to credit bureaus.

Credit Repair Services Seeing Unprecedented Levels of Demand!

In a recent survey, more than 70% of Gen Z participants said that having greater financial literacy would have helped them manage their finances better amid the coronavirus pandemic.

Now, consumers are rolling up their sleeves and taking matters (and their bank statements) into their own hands, and working with credit repair businesses to rebuild their credit.  That means 2021 can be a very good year for businesses offering:

– Credit Repair
– Credit Education
– Credit Improvement
– Credit Counseling

Never has the need for credit repair information been so prevalent in the consumer market and established businesses and startups alike who are offering any of the above services are poised to see significant growth in 2021 due to a wild increase in consumer demand.

You would think this is the perfect win-win relationship for all parties involved, but credit repair companies still need that specialized payment processing solution to provide their “very much in demand” credit repair services.  So what is it about the credit repair industry that makes financial institutions so nervous?

What Makes Credit Repair a High-Risk Industry?

While very admirable in their aspirations to contribute to society and to the economy by “educating” consumers on debt management and helping them elevate their credit scores, these same businesses are themselves considered high-risk merchants by financial institutions, and finding a services provider that is willing to set them up with a merchant account presents a challenge.

PCI (Payment Card Industry) standards exist for a reason.  There is no arguing that, but credit repair businesses often don’t understand the process of financial underwriters and experience such an inordinate amount of difficulty finding any kind of payment solution that even launching a credit repair business can prove to be difficult.

A business model can fall in the category of “high risk” for a variety of reasons, but it is essentially based on two things:

–          The business operates within a high-risk industry, like firearms or e-cigarettes

–          Certain industries are known for having a processing history that is rife with  excessive chargeback ratios, so chargeback protection is a concern

Don’t be alarmed if this is surprising.  Many new companies don’t even realize that they’re high risk until they go shopping for a credit card processing service.

When a Low-Risk Business Becomes a High-Risk Merchant.  Follow This Advice.

But, why would offering financial education or credit repair services to consumers with poor credit who want good credit raise a red flag?

At first glance, credit repair companies certainly don’t seem to be up to anything suspicious.

After all, these companies are helping people understand how they can erase bad credit and raise their credit score.  Further, the confidence that comes from a solid credit score is good for the company, the consumer, and the economy.

All that these merchants require to operate as a business is an underwriter or financial institution that will provide them with a payment gateway to offer online payments to their clients.  So, give me one good reason why a credit repair company with the best of intentions should need a high-risk merchant account provider?

Fair enough.  We’ll give you two reasons.

First, new businesses always tend to flock to the first credit card processors that come to mind: PayPal, Stripe, or Square.  Those companies just don’t have that zone of comfort with merchants offering credit repair services to the market because their clients often have problems being cash-strapped right out of the gate.

In other words, cash-strapped consumers make payment processors very nervous.  The three companies mentioned above have genuine, perhaps even justifiable, concerns with how they’ll mitigate the risk of a (likely) excessive amount of chargebacks that credit repair companies may experience with their particular type of clients.

Second, though maybe not as problematic as the first, is that certain credit repair businesses not only must deal with high chargeback ratios but are also required to operate under strict scrutiny by regulatory agencies.

A Payment Gateway for High-Risk Merchants

It’s important for merchants that are offering financial education resources and credit repair assistance to understand that there are options for establishing a merchant account as a high-risk merchant – It is not a deal killer if a credit repair business is labeled high-risk.

Not being able to secure a merchant account, quite literally, can be a deal killer.

Automated Clearing House (ACH) / eChecks / MOTO

For credit repair companies and financial education businesses experiencing difficulty securing a merchant account, Automated Clearing House (ACH) or eCheck processing is another fantastic and commonly utilized solution.  This includes merchants that are in the credit repair and financial education business.

ACH processing can be a particularly appealing method of consumer payment for credit repair companies as the ACH process seems to tilt toward consumers who may not have the credit or prefer non-credit payment methods.  It is also worth noting that companies that offer ACH, in addition to credit cards, can increase their sales by as much as 7% just by offering the option.

Mail Order Telephone Order or MOTO options also may be worth considering.  MOTO allows businesses that operate remotely to process debit and credit card payments from their customers, via telephone, letter, or email requests.

FAQ Friday: How Can I Avoid Getting Ripped Off by Merchant Account Fees

DirectPayNet Offers Solutions in Securing Credit Repair Merchant Accounts

DirectPayNet is a company with extensive experience guiding high-risk merchants with a high volume of transactions through the process of obtaining solid payment processing services.

One key advantage of working with DirectPayNet in securing a merchant account and/or ACH payment processing service is that the company has higher built-in risk tolerances making them the payment processor of choice for businesses that are deemed a bit too spicy for PayPal, Stripe, or Square.

DirectPayNet has successfully worked with industry-leading credit repair and financial education companies and has a clear understanding of what is required for these types of high-risk companies.  The merchant account application process is very simple and their pricing structure is exceptional.

DirectPayNet has been a key resource for many reputable, high-risk businesses that have successfully obtained a viable payment processing solution.

2021 is expected to be a banner year for small businesses that are offering credit repair solutions.  Don’t Wait!  Today is the day to connect with the e-commerce professionals at DirectPayNet to take advantage of their merchant account services and set up the payment processing services that your company will need to prosper in 2021.