How New Visa Rules Impact Debt Collectors in April 2023

Visa announced new rules for debt repayment that will go into effect on April 15, 2023. Impacting collection agencies and debt buyers, the changes will also expand the definition of overdue receivables beyond traditional debt. The new rules will ensure that cardholders are provided with necessary information about their transactions and protect issuers from excessive credit risk. We’ll be breaking down the upcoming rules in this short read.

Mandatory Use of New Merchant Category Codes by Collection Agencies

Visa’s new Merchant Category Code (MCC) for Collection Agencies (MCC 7322) will become mandatory on April 15, 2023. The code is meant for merchants who collect overdue receivables under contract or purchase overdue receivables from a third party.

New Collection Agency Rules

Collection agencies must disclose the name of the original creditor or lender, as well as information to identify the transaction such as account or reference number, description of the overdue payment, date of the repayment contract, and clear instructions for the cardholder on how to obtain additional information about the transaction. This information must be provided to the cardholder before the payment is processed.

Overdue Receivable Definition

The new rules will expand the definition of overdue receivables beyond traditional debt. Overdue receivables are defined as money owed by one party to another that is not classified as debt and is either classified by the receivable owner as non-collectible, written off or sold to a third party, subject to a court order due to bankruptcy or insolvency, or 120 days past the payment’s due date.

Overdue Receivable Rules

To protect issuers from excessive credit risk, effective April 15, 2023, an acquirer must ensure that a merchant accepting an overdue receivable transaction meets both of the following criteria: does not use a credit card or charge card, and includes the debt repayment indicator in the authorization request and clearing record. These rules will apply to overdue receivables that fall under the new definition.

Visa’s new rules for debt repayment will ensure that cardholders are provided with necessary information about their transactions and protect issuers from excessive credit risk. Collection agencies will need to comply with the new rules and use the new Merchant Category Code (MCC 7322) to ensure they are following Visa’s guidelines.

If you have any questions about how these guidelines will impact your business, contact Preferred Payments to learn more.