There are several reasons a business is considered high risk.

Not all debt collection companies are appropriately compliant. Lack of compliance as well as bending the rules by certain debt collection companies have caused the industry to be considered high-risk by banks & ISOs. The debt collection industry is also plagued with consumer complaints and a majority of those complaints are not made in good faith. This can lead to a high chargeback rate for your collection agency.

Unfortunately, there just seems to be a lot more concern by the banks when it comes to the number of chargebacks. Since the typical debt collection client already has a history of defaulting, this makes them notorious for calling the issuing bank and initiating a chargeback. Just like almost all industries that are considered high risk by the banks, you should have a great chargeback mitigation program in place in order to keep that rate low. Too many chargebacks can result in higher merchant account fees and even account suspension.

The banks and independent sales organizations (ISO’s) give a little more leeway to high-risk industries such as debt collection compared to more traditional industries. For instance, traditional industries are allowed up to 1% chargeback ratios without causing concern to the banks or ISOs. The high-risk industries are typically allowed higher chargeback ratios depending on the particular bank or ISO without causing them concern. Good news, though! This is at least 1 advantage to being considered a high-risk industry.