Bad credit is increasingly common in today’s marketplace. The prevalence of bad credit is part of the reason there are so many credit repair companies. IBIS World reports that there are more than 90,000 credit repair businesses operating in the U.S., creating a four billion dollar industry.
What may surprise you, is that despite the huge number of businesses in the industry operating in the U.S. today, the industry itself is often identified as high risk when it comes to merchant services, like credit card processing.
What Does It Mean to Be a High Risk Merchant?
High risk merchants are often identified solely based on the industries they serve, like credit repair services, though there are other factors that could cause a business to be identified as high risk, such as:
- Excessive number of chargebacks
- Poor credit of business owner
- Being a new business
- Having a previously closed merchant account
Once identified as a high risk merchant, you face greater risks of being turned down by merchant services providers, the potential for higher fees, substantial cash reserve requirements, and limitations on the number of transactions you can process in a month.
Why are Credit Repair Businesses Considered High Risk?
There are many things that factors into a merchant service provider’s decision to identify a specific business or industry as high risk. Some of the factors below may contribute greatly to a payment processor’s reluctance to get involved with credit repair businesses:
- You provide high-ticket services, usually $100 or more and you offer many services on recurring billing plans. Both factors make your business susceptible to what is considered “friendly fraud” and increase your chargeback risks.
- Often accept payments via gateways, often online or via phone, rather than in person, increasing actual fraud risks.
- You deal with people who are often cash-strapped and may be dishonest, looking for ways to hold onto their funds by disputing valid credit card transactions.
For many high risk merchant account providers, it is all about the numbers. Your risks are higher, making your fees, service charges, cash reserve requirements, and transaction limitations, larger still.
Types of Businesses in the Credit Repair Industry
These are the types of businesses in the credit repair industry that may be identified as high risk merchants:
- Cease and desist collections processing businesses
- Credit re-establishment businesses
- Credit repair consultation businesses
- Settlement assistance firms
Each of these industries faces greater risks for chargebacks and disputes (whether valid or otherwise) which leaves some merchant services providers reluctant to do business with you. Fortunately, there are options available to you in the form of high risk credit card processing. If you take your time and find the best processors, you can actually come out ahead of things in the end.
What to Look for When Choosing a Payment Processor for Your Credit Repair Business
Since most merchant services providers consider credit repair businesses to be high risk merchants, it is best to go in with the assumption that you will be listed as a high risk merchant and work from there.
Look for companies that have specific programs designed to address the unique and specific needs of credit repair services, especially a system for confirming customer authorizations for current and future charges as well as to confirm the identity of purchasers. This one thing is of critical importance when dealing with finances and something as sensitive as credit repair services. It will protect your interests as well as the interests of the payment processor and may help to reduce your risks of chargebacks and disputes.
Zenti Services understands your unique needs as a credit repair business. We offer a flexible range of services to meet your business needs as well as transparent, easy to understand pricing, so you never need to question your bills and fees each month. Contact us today to learn more about the month-to-month payment processing services we have to offer and how we can help you grow your business with no long-term commitments.