Posted by NationalACH on Jul 18, 2013
payday loans, offshore, ach, high risk

Electronic Checks for Lenders

Payment processing for payday loans is getting more challenging to obtain. Yet, good accounts are still available for both US and offshore payday loan companies

The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency examined banks’ roles in the online lending business and issued new guidelines to banks   As a result fewer banks are willing to accept applications for ACH services for online payday companies.

Online payday loan companies are considered high risk merchants.  However, don’t despair. There are echeck accounts available for payday lenders.

Market Demand for Payday Loans

Whether or not you believe the government should interfere with the payday loan industry, don’t expect online payday loans to go away anytime soon.  Online payday loans provide quick money to borrowers who need cash.  Yes, rates are high.  But demand for loans is dramatically increasing.

By 2016, online payday loans will account for 60% of all payday loans, surpassing loans obtained through storefront or retail operations.  This represents an increase of 35% compared to 2011, where the volume was already a staggering $13 billion.

Payday Loans Go Mainstream

Online payday loans make sense for lenders.  It’s less expensive for loans to be initiated over the internet than through a retail operation.  Therefore, lenders can actually reduce costs to borrowers while increasing profit margins.

Once associated only with the subprime market, payday loans are now going mainstream.  The middle class is now turning to the loans to cover living expenses.

For some middle class borrowers, it is less expensive to take out a loan than to risk excessive bank fees if a check bounces.  Moreover, defaults on payday loans are not reported to credit bureaus.  And, if credit scores are low or no credit history is available, payday loans may be the only source for access to quick cash.

High Risk Echeck Processing for Online Payday Loans

Online payday loan companies use ACH  for in 2 ways.  First, to direct deposit funds to the borrower’s account.  Secondly, to debit payments from the borrower’s account to repay the loan.

However, changes in ACH regulations means that lenders are moving to echeck processing rather than using the ACH network for debiting accounts.  Echeck processing gives lenders far greater flexibility for higher returns and revoked transactions.  


Electronic check processing outside of the ACH network is now the norm for lenders.  With an echeck account, you have more flexibility for revoked and returned transactions.  Making it a better solution for lenders working within subprime markets.

High risk merchants have excellent choices for electronic check processor accounts. Protect your business with echeck processing.

Are you a lender interested in an echeck account?

Contact info@NationalACH today.