Posted by NationalACH on Feb 11, 2015
ACH merchant account

Lenders Need Good Payment Processing to Succeed

Loans provided by payday and installment loan lenders are used by millions of people in the US. Individuals who live from paycheck to paycheck get these loans when they run out of cash a few days before their next paycheck.

Borrowers who apply for loans are required to provide bank account information. The bank account is used by online lenders to deposit the funds after loan approval. And the same account is to repay the loan.

E checks are the most common method used to debit the bank accounts. ACH credits are used to direct deposit loans to borrows' bank accounts. 

The payday loan industry has been targeted by government agencies who claim deceptive and predatory lending practices. Most online lenders are moving to “installment loan” models rather offering payday loans specifically. Still, even lenders offering installment loans are experiencing significant challenges obtaining accounts with banks and processors.

Diversify ACH Processing to Mitigate Risk

Banks are wary about processing for lenders and processing. Fewer banks are willing to risk supplying account to the industry. Which leads to a classic economic supply and demand scenario for lenders seeking payment processing accounts.

There is little doubt that the online lenders provide a desirable and needed service to millions of Americans. And payment processing accounts are vital to the success of online lenders.

Obtaining accounts at favorable rates is an on-going project for most lenders. Lenders have experienced first-hand the risks associated with relying on a single bank or processor. The majority of lenders now want to establish multiple accounts to mitigate risk.

Government Interference Impacts Online Lenders

Government agencies have cracked down on the online lending industry through the implementation of Operation Chokepoint.  Although there have been some movement to stop the government interference, banks are still reluctant to process for the industry.

State laws regarding payday loans vary greatly. Some states prohibit payday lending while others do not. Designed to crack down on unscrupulous online payday loan lenders, a number of legal payday lenders have been unfairly punished as well.

Online lenders find it challenging to obtain or maintain depository accounts with banks, even when they have been customers of the banks for years. Fewer banks are willing to establish electronic check, ACH and card processing accounts for online lenders, severely impacting the business operations of lenders.


Access to cost-effective and reliable payment processing accounts is vital the success of online lenders.  Yet, banks are increasingly wary about working with the industry.

The prudent stratgy for success is to diversdify payment processing accounts. Given today's environment, it's too risky to rely on a single processor.  

Payment processing accounts are readily available for lenders. You can establish ACH and electronic check processing quickly and easily. 

Are you a lender interested in diversifying payment processing to mitigate risk?

Contact today