Echeck Processing for Subprime Lenders

Echeck Processing for Subprime Lenders

Echecks are a proven effective way for lenders to collect payments from consumers in the subprime market.  This article discusses the benefits of electronic check processing.

What is the Subprime Market?

Subprime lenders make loans to consumers who may have difficulty keeping up with repayments.  Subprime lenders include payday loan companies, title lenders, loan modification companies, and installment lenders.  Debt collection agencies also work with the subprime market.

Working with sub-prime customers presents special challenges to lenders.  The demographics of the customer base mean that there are higher levels of returns for non-sufficient funds (NSF).  In addition, customers will often revoke a transaction (chargeback) claiming it was unauthorized.

Electronic Check Processing for Lenders

Lenders and collection agencies have long used echecks to collect loan repayments.  And with increased restrictions on using cards to repay loans, electronic check processing is more popular than ever.  

Echecks are particularly effective for loan repayments.  Bank accounts rarely change.  Most Americans have payroll direct deposit. And pay monthly bills automatically from a bank account.  As a result, changing an account is a major inconvenience,

As a result, when you set up electronic checks for loan repayments, recurring billing information seldom changes. Payments continue uninterrupted month after month.  

Echecks Now Replacing ACH Processing for Lenders

The biggest concern for lenders is returned and revoked transactions.

Changes in ACH network has forced many lenders to find an alternative.  ACH processing accounts now need to maintain returns under 15% and revokes under 0.5%.  Due to the demographic of the subprime market, these ratios are very hard to maintain.

As a result, most subprime lenders are moving to echecks that use bank-to-bank data exchange to process transactions.  Echeck technology, based on Check 21, is a fast, safe method to accept electronic check payments.

Echecks are an effective alternative for lenders who want to avoid restrictive ACH rules regarding chargebacks and returns.

Electronic checks are not subject to the same rules as ACH transactions.  Check 21 transactions are governed by check laws, and the Uniform Commercial Code, not ACH regulations.  Giving you far greater flexibility for higher returns and chargebacks.  

Electronic check transactions appear on the borrower’s bank statement in the same place as a paper check transactions.  Making it easier for borrowers to remember what was the payment was for and reducing revoked transactions.  


Echecks are the most effective way to assure repayment of subprime loans. Bank accounts rarely change.  Therefore, recurring payment continue uninterrupted.

Subprime lenders get many returns for non-sufficient funds.  And some borrowers try to revoke transactions to avoid repayment of loan.

Subprime lenders and collection agencies discover an echeck account is the best solution for loan repayments. Convenient for borrowers.  Profitable for you.

Interested in finding out how Check 21 electronic check processing can benefit your business? 

Contact info@NationalACH today.

Debt Collection eCheck Merchant Accounts

Electronic Checks for Collection

Debt collection agencies, credit counseling and repair services, bankruptcy attorneys as well as other industries in working with financially challenged clients find echecks are one of the best payment processing options.

These types of companies establish echeck accounts, using either ACH or Check 21 processing.  The choice of which technology to use is based on the anticipated number chargebacks and returned transactions.

Debt Collection Industry

The US Bureau of Labor Statistics projects that debt collection will experience a 23% growth rate by 2016. Debt collection companies are growing because more consumers are falling behind on their bills.

In addition, new technology makes it profitable for smaller companies to get into the business. And it is a profitiable business, indeed.  According to Smart Money Magazine,  profits generated by debt collection agencies keep as profits on average 25% of the collected debt.

Reasons Debt Collection Classified as High Risk Accounts

Debt collection is considered a high risk merchant account because, obviously, many debtors do not have funds to pay money owed.  When the amount is due, debtors often do not have the money in bank account to cover the payments, creating high return rates.

Further, some debtors know how to “game the system”.  They deny that the payment was authorized and initiate a chargeback of the payment with their bank.

The Fair Debt Collection Practices Act is a federal law which regulates third-party collection agencies and protects consumers from unfair and abusive collection practices. Consumer advocates want to amend the Act in order to provide consumers with even more protections when they are contacted by debt collectors.

Increasingly, law suits are being filed against collection agencies alleging unfair collection processes.  And the Federal Trade Commission reports more complaints are received about debt collectors than any other industry.


Accept checks online. Accept check by phone, mail & fax payments. The more ways debtors can pay you, the more money you can collect.

Most debt collection agencies use Check 21 electronic check processing because there is greater flexibility in terms of chargebacks and returned transactions.

ACH processing requires chargebacks stay under 0.5%.  Check 21 electronic check processors do not have this limitation.  And Check 21 processing allows for higher return rates than ACH accounts.

Debit card processing is also available for debt collectors who processing high volumes of transactions.

Are you interested in payment processing for your debt collection agency?

Contact today