Move over, Tax Day! This year, April 15 falls on a Saturday so the IRS moved the tax filing deadline to April 18. What will you do with all that extra time? Don’t worry, Visa’s got you covered.
Visa recently notified its business network that new rules for debt repayment are coming on April 15, 2023. These changes will impact a wide variety of collection agencies and debt buyers, including those seeking payment of pre-charge-off accounts that are 120 days past due. Details are scant but here’s what we know so far:
- Collection agencies must use new Merchant Category Code MCC 7322. Visa introduced this new Merchant Category Code (MCC) for collection agencies in October 2022. On April 15, 2023, use of the code will be mandatory for “collection agencies” which are broadly defined as merchants that collect payments of overdue receivables on behalf of another or collect overdue receivables that they purchased from a third party.
- Collection agencies must provide disclosures before processing a Visa card payment. When collecting debt or overdue receivables on behalf of another, a collection agency must disclose the following to the cardholder before the transaction occurs:
- Name of the original creditor/lender;
- Information to identify the debt such as the original creditor account/reference number; a description of the debt/overdue receivable; or date of the repayment contract; and
- Instructions for the cardholder on how to obtain additional information about the underlying transaction.
- Existing rules will expand to cover “overdue receivables” that don’t meet the definition of “debt.” Current Visa rules for debt repayment:
- Prohibit using a credit card or charge card to repay debt;
- Prohibit the use of debit cards to repay payday loans;
- Require a written agreement from the cardholder before accepting a Visa card payment on a time-barred debt after the statute of limitations has expired;
- Require debt repayment indicators in the Authorization Request and Clearing Record.
See Visa Product and Service Rules (Oct. 15, 2022) at § 5.8.12. Today, these rules apply to “debt” which includes any obligation to repay money in connection with loans; credit card balances; money advanced on goods or services previously purchased; or repayments that include interest. It does not include certain lease payments; interest-free partial payments; late payment fees; or repayment of an overdue obligation that does not include interest and has not been charged-off and transferred to a third party.
The new rules expand coverage to a new category called “overdue receivables” which includes accounts that are 120 calendar days past due; classified as non-collectable; written off and/or sold to a third party; or subject to a court order as a result of bankruptcy or insolvency.