Visa is planning on introducing a new Merchant Category Code for debt collection agencies and imposing new rules for entities collecting debts or overdue receivables on behalf of another entity, but it’s still not entirely clear if the new code will be applied retroactively or only new new merchant applications.
A copy of the bulletin can be accessed by clicking here.
Talk began spreading through the accounts receivable management industry like wildfire earlier this week when a post on a payment processor’s website was uncovered and began making the rounds.
The new merchant category code will go into effect on April 15, 2023. It will define collection agencies as merchants that collect payments of overdue receivables under contract or that collect overdue receivables that they have purchased from a third party. It does not appear to apply to first-party collectors or those collecting early out debt.
Visa is defining overdue receivables as money that is not classified as a debt and is one of the following:
- Classified by the receivable owner as non-collectable
- Written off and/or sold to a third party
- Subject to a court order as the result of a bankruptcy or insolvency
- 120 calendar days past the due date for payment
For entities that meet that definition — again it’s not clear whether existing merchants will have to change their code — they will have to disclose certain information prior to the transaction occurring. That information is:
- Name of the original lender or creditor
- Information to identify the transaction such as:
- Account / reference number from the original lender or creditor
- Description of the debt or overdue receivables
- Date of the repayment contract
- Instructions for the cardholder on how to obtain additional information about the underlying transaction