The High Cost of Debit-Only: A Guide to Maximizing Revenue for Collection Agencies (MCC 7322)

TL;DR Summary

• The Problem: Mainstream payment processors are forcing collection agencies (MCC 7322) into restrictive “debit-only” models to avoid their own risk.
• The Impact: This directly damages your bottom line by lowering collection rates, increasing agent workload, and creating a poor consumer experience. You are leaving money on the table.
• The Solution: Don’t settle. Partner with a payment specialist like Payscout that provides the tools to safely accept all payment types (Credit, Debit, HSA/FSA, ACH). Plus, choosing a provider that is also a certified Minority Business Enterprise (MBE) helps you meet supplier diversity goals for your clients.
• The Takeaway: Full payment flexibility is non-negotiable for maximizing revenue, ensuring compliance, and running a competitive, modern collection agency.

Executive Summary: The Debit-Only Trap

• The Problem: Mainstream payment processors are de-risking their portfolios by restricting collection agencies (MCC 7322) to debit card and ACH payments only. This is done to avoid chargebacks and perceived reputational risk.
• The Financial Impact: This isn’t a minor inconvenience; it’s a direct blow to your recovery rates. By refusing a consumer’s preferred payment method (credit cards), you actively increase payment abandonment and reduce the average payment amount, leaving significant money on the table.
• The Solution: Partnering with a payment specialist is non-negotiable. A true partner provides a full suite of payment options (Credit, Debit, HSA/FSA, ACH) backed by sophisticated risk and chargeback mitigation tools designed specifically for the collections industry.
• The Strategic Advantage: Choosing a provider like Payscout—a certified Minority Business Enterprise (MBE)—not only solves your processing problem but also helps your agency meet critical supplier diversity mandates, turning a necessary expense into a competitive advantage.

Why Your Payment Processor is Limiting Your Agency’s Potential

In the highly regulated world of debt collection, success hinges on efficiency, compliance, and consumer experience. However, a damaging trend is quietly eroding the profitability of countless agencies: the forced adoption of debit-only payment processing. Many standard processors, seeing the “high-risk” classification of MCC 7322 (Debt Collection Agencies), are stripping away credit card acceptance. For them, it’s a simple risk-management decision. For you, it’s a strategic catastrophe. This comprehensive guide breaks down why this is happening, quantifies the true cost to your agency, and provides a clear roadmap for selecting a payment partner that fuels growth instead of throttling it.

Quantifying the Damage: The True Cost of a Debit-Only Model

Settling for a debit-only processor has measurable, negative impacts on your agency’s core key performance indicators (KPIs).

1. Drastically Reduced Recovery Rates *

This is the most critical impact. Today’s consumers not only expect payment flexibility, but they rely on it to manage their finances.

• Consumer Payment Behavior is Clear: According to the Federal Reserve’s 2024 Diary of Consumer Payment Choice, while debit is common for small, everyday purchases, credit cards are the preferred instrument for higher-value transactions. When faced with a significant payment for a debt, many consumers will default to a credit card to manage their cash flow.
• Payment Abandonment: When you tell a consumer you don’t accept their preferred card, you introduce friction. They may promise to call back with a debit card but often don’t. That’s a lost collection.
• Smaller Payments: A consumer ready to resolve a $750 debt with a credit card might only have $200 available in their checking account. You’re forced to accept a fraction of what you could have collected.

2. Increased Operational Drag and Agent Workload

A debit-only policy sabotages your team’s efficiency. A simple one-call resolution turns into a multi-step, time-consuming process.

• Longer Call Times: Agents waste valuable minutes explaining payment restrictions.
• Endless Call-Backs: Your team is now responsible for chasing down consumers who need to “find their debit card” or “wait until payday.”
• Higher Administrative Burden: Increased manual processing for checks or money orders slows down your cash flow and adds operational overhead.

3. Poor Consumer Experience and Heightened Compliance Risk

The Consumer Financial Protection Bureau (CFPB) and regulations like the FDCPA emphasize a consumer-first approach. While refusing credit cards isn’t an explicit violation, creating unnecessary barriers for a consumer actively trying to pay a debt is a bad look. A frictionless payment process signals that your agency is modern and resolution-focused. A restrictive one can increase complaints, damage your reputation, and attract unwanted regulatory scrutiny.

The “Why”: A Look Inside the Mind of a Mainstream Processor

To solve the problem, you have to understand its source. Generic processors force you into a debit-only box for a few simple reasons:

1. High Chargeback Ratios: The collections industry inherently has a higher rate of disputes. For a standard processor, this is a financial and administrative headache they’d rather avoid.
2. Reputational Risk: Mainstream sponsor banks often view MCC 7322 as a reputational liability and simply refuse to underwrite credit card processing for the eligible business that most collection agencies handle.
3. Lack of Specialization: Properly managing risk for collections requires expertise and technology that generic processors haven’t invested in. It’s cheaper for them to ban credit cards than to build the necessary infrastructure.

The Solution: What to Demand from a Payment Partner

A true payment partner doesn’t run from risk—they manage it. They provide tools that empower you to accept all payment types safely and efficiently. Your Non-Negotiable Checklist for a Payment Processor:

• Full Payment Suite: Unrestricted acceptance of all major credit cards (Visa, Mastercard, Amex, Discover), debit cards, HSA/FSA cards and ACH/eCheck.
• Advanced Chargeback Mitigation: Proactive tools like chargeback alerts and prevention services that stop disputes before they become costly chargebacks.
• Deep Industry Expertise: A partner who understands the nuances of the FDCPA, Regulation F, and state-specific laws, acting as a compliance asset.
• Seamless Software Integration: A payment gateway that integrates flawlessly with your collection management software for streamlined agent workflows and online payment portals.

The Payscout Advantage: Purpose-Driven Partnership

Beyond the technical requirements, the right partnership can deliver strategic value. As a certified Minority Business Enterprise (MBE), Payscout offers a unique advantage. By partnering with us, your organization can meet its supplier diversity goals, strengthening corporate social responsibility initiatives and potentially unlocking new opportunities with clients who value a diverse supply chain.

Conclusion: Stop Leaving Money on the Table

The debit-only model is a compromise you can’t afford to make. It’s a shortcut taken by processors who don’t understand or are unwilling to serve the complexities of the debt collection industry. Maximizing your ROI, ensuring a positive consumer experience, and maintaining a compliant, efficient operation requires full payment flexibility. Ready to unlock your agency’s full potential? Contact a Payscout specialist today to learn how our tailored solutions for MCC 7322 can help you increase recovery rates and streamline operations. *”Federal Reserve data shows that consumers consistently use credit cards for higher-value payments, with the average credit transaction being more than twice the size of the average debit transaction. By not accepting credit cards, you are statistically likely forcing your consumers into smaller payment amounts.“