What Happens When Your Merchant Account Gets Dropped?

This is something that every business owner dreads, but it happens all the time. Imagine getting a notification from your bank saying they can’t process your business’s payment transactions anymore, effective immediately. They’ve deemed your business “high-risk” and no longer wish to do business with you.

While this might be true of industries like online gambling or multi-level marketing, it’s certainly not true of Accounts Receivable Management. Unfortunately, banks seem to lump collection agencies into the “high-risk” merchant account category, and we’ve seen businesses take a significant hit because of it.

What Happens?

We’ve seen this happen several times, and it can happen for a variety of reasons. However, once this is decided, the large financial services corporations that run your payment processing can immediately drop or freeze your merchant account. The following reasons are typically why a provider might suspend/drop you.

  • Too many chargebacks
  • Too many “forced” transactions
  • Incorrect use of your Merchant Account
  • Simply being in the collection industry, with a mislabeled merchant account category

So, what happens next?

Well, simply put, you can’t process payment card and ACH transactions anymore. It goes without saying that this can cripple your business, even if you’re only down for a short period of time.

How Can You Avoid This?

If you’re looking to avoid this precarious situation, you’re not alone. That’s why it pays to have a dedicated high-risk merchant account or a payment processor that is industry-specific to the ARM business, with multiple banking relationships to keep you processing. Options like might be cheaper, but they can leave your business high and dry when the going gets tough.

What is a Dedicated High-Risk Merchant Account?

Big-name payment providers can work with so many different industries because they often use the same Merchant Identification Number (MID) for multiple businesses, aggregating these accounts under one MID.

Let’s say your collection agency deals primarily with collecting healthcare payments. A provider could incorrectly use the same MID for your business as a hospital. Should it be discovered that you do healthcare collections, they could quickly drop your business to mitigate their risk.

For those of you who are not familiar, the Merchant Identification Number (MID) is a unique number used to identify your business for credit card payment processing. This works for companies like online retail stores and restaurants, but it lacks the industry-specific compliance you need if you’re in the ARM industry.

Conversely, a dedicated high-risk merchant account has its own merchant ID. The critical difference between an aggregate account and a dedicated account is that the merchant does not share a high-risk merchant account with several other companies. Aggregate high-risk accounts, like ones established through Shopify, use one merchant account for an entire portfolio.

The fact is that a business has far less control over an aggregate high-risk merchant account with Shopify than they do with a dedicated high-risk merchant account. With a dedicated high-risk merchant account, transactions between the merchant and the customer are deposited directly into the collection agency’s bank account.

How BillingTree Can Help

By partnering with a payment provider that specializes in high-risk accounts, the security of your business is assured. BillingTree started as a payment provider exclusively for ARM nearly 20 years ago. No other company has the same level of industry-experience.

Without the looming risk of unexpected account closures, it’s easy to focus on helping your clients better their financial situation by paying off their debts and increasing their credit score.

Dedicated payment providers understand the nature of collections and how it benefits both the business and the individual. Indisputably valuable companies like hospitals need collection agencies to maintain their revenue stream. Having a provider that values your industry and maintains the latest compliance areas is the best way to protect yourself from unexpected merchant account closures.


While aggregate account businesses like Shopify might seem like the way to go, you need to choose what’s best for your specific industry, and that means a dedicated high-risk merchant account with banking redundancy.

When it comes to ARM, no one is better suited to support you than BillingTree.

Back to the blog