Visa, the global payment giant, has announced significant changes to its debt repayment rules, set to take effect on April 15, 2023. The new regulations are expected to affect payment acceptance for collection agencies, debt buyers, and firms handling accounts 120 days past due, that haven’t reached charge-off status.
Here’s what we know so far.
Visa’s definition of debt.
Money owed by one party (debtor) to another party (creditor). Debt includes, but is not limited to, any of the following:
- The obligation to repay money in connection with loans, credit card
- Money advanced on goods or services previously purchased
- Repayments that include interest (expressly or implicitly)
Under Visa’s rules, debt doesn’t include:
- Certain lease payments
- Interest-free partial payments
- Certain late fees
- Repayment of an overdue obligation that hasn’t been charged-off and transferred to a third-party and doesn’t include interest
Collection agencies will have a new merchant category code.
Visa has introduced a new merchant category code—MCC 7322—for collection agencies, which Visa defines as:
a merchant that collects payments of overdue receivables under contract or that collects overdue receivables that they have purchased from a third party
A merchant category code is a four-digit code used by credit card networks to classify merchants and businesses based on the products and services they provide. The new merchant category code for collection agencies will be mandatory for collection agencies starting April 15, 2023.
Acquirers are expected to notify merchants if their MCC is updated under the new rules.
New mandatory disclosures for accepting Visa for debt-related payments.
In October 2022, Visa updated its product and service rules for debt repayment.
Before accepting payment for debt, merchants should disclose to the consumer:
- The 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
Transaction receipts must include the type of debt repayment, e.g. loan, mortgage, credit card, goods, or services.
Debt repayment is prohibited on Visa cards.
Acquirers, or organizations that facilitate card payments, are now required to ensure their merchants do not accept debt repayment on Visa credit or charge cards.
In addition, Visa prohibits payment on debts that are beyond the statute of limitations unless the cardholder agrees to the amount and the charge.
Impact on HealPay Customers
We’ve been assured by our banking partners that this should only affect merchants that purchase 50% or more of the debt they collect on. The majority of our merchants do not fall under that category and no action will be needed.
Affected HealPay customers can take advantage of our debit-only payment options, which will limit the card types accepted for credit card payments on all HealPay payment products, in compliance with Visa’s new regulations. This allows affected HealPay customers to continue accepting payments via debit cards, while credit card payments are restricted due to the changes in Visa’s rules.
Consumers can also use their bank information to make ACH payments, ensuring smooth payment processing for debt-related transactions.
- Visa Core Rules and Visa Product and Service Rules. https://usa.visa.com/content/dam/VCOM/download/about-visa/visa-rules-public.pdf. Last accessed April 7, 2023.