Latest Changes to Credit Card Processing for Collection Agencies

On April 15, a new protocol was put in place for disputing Visa chargebacks. This means that companies that offer credit card processing for collection agencies and that offer high-risk merchant services must pay more attention. Industries considered to be high risk, such as collection agencies, are labeled so because of the excessively high number of chargebacks they experience.

However, Visa has now put in place a two-pronged approach to the chargeback process: Liability assignment – or allocation, and communication between both parties to find a resolution – or collaboration.

Why Is Visa Making These Changes?

Primarily, the changes have been put in place so that Visa can streamline its chargeback process. It wants to reduce the amount of time that is required to settle a dispute. In the past, disputes lasting 180 days were not uncommon. However, under its new allocation model, Visa aims to cut this amount of time in half, with 30 days as a maximum for dispute response, followed by 30 additional days for the pre-arbitration response, and, finally, 10 more days to obtain the arbitration response from the acquirer.

Visa’s collaboration model is not too far from the previous legacy model. In this model, the issuer acts on the consumer’s behalf to file a dispute with its acquirer who acts on the merchant’s behalf. It is then given 30 days to make a response. After an additional 30 days, the issuer must decide on pre-arbitration and then another 30 days is given for the acquirer to respond. Finally, there are 10 days in which the issuer can bring its dispute to arbitration; then Visa will finally make its ruling.

Another fact to bear in mind is that Visa intends at some future point to reduce the 30-day response window down to just 20 days. Therefore, acting quickly and thoroughly is in the interest of all the parties that are involved.

A Guide to The Allocation Process

  • Determining the dispute’s validity – The Claims Resolution system, which is automated, examines the disputed information and either rejects the claim for a chargeback or decides to go ahead with a dispute. Solely through implementing this step, Visa hopes that the number of chargeback disputes will be reduced by 14 percent.
  • Pre-arbitration – If Visa decides that the dispute will go ahead, the acquirer, who acts on the merchant’s behalf, has 30 days in which to agree to the chargeback or carry on to a dispute via pre-arbitration.
  • Pre-arbitration response – The issuer of the credit card now has 30 days in which to deny or accept the arbitration procedure. If it is accepted, the issuer is acknowledging that the merchant should not be held liable for a chargeback. If the issuer denies the procedure, the acquirer is given a further 10 days in which to decide if it wants to go on to arbitration.
  • Once this time has passed, Visa will finally issue its ruling on the matter.

How Does the Allocation Process Affect Payment Processing Services for High-Risk Merchants?

This new process means that payment processors for high-risk merchants must work in collaboration with the merchant and its acquiring bank partner in order to gather together any supporting information so that the merchant is able to present its case to its best advantage.

BillingTree offers credit card processing for collection agencies, one of the high-risk merchant types that are affected by this new process. By offering helpful advice on the changes, we hope to help collection agencies to reduce their chargebacks and to ensure seamless processing of payments without any hold ups or disputes.