Background

Visa is introducing a new merchant category code and rules for collection agencies. New rules are also being introduced for the repayment of overdue receivables, and existing debt repayment rules will be updated. 

Resolution

Mandatory Use of New Merchant Category Codes by Collection Agencies

Visa introduced the new Merchant Category Code (MCC) 7322 - Collection Agencies in October 2022. A collection agency is defined as a merchant that collects payments of overdue receivables under contract or that collects overdue receivables that they have purchased from a third party. MCC 7322 became available with the October 2022 Enhancements release, and use of the new MCC will be mandatory effective April 15, 2023, for merchants operating in this sector. 

New Collection Agency Rules

Effective April 15, 2023, entities collecting the debt(s) or overdue receivables on behalf of another entity must disclose the following to the cardholder before the transaction occurs:

• 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
• Instructions for the cardholder on how to obtain additional information about the underlying transaction

Overdue Receivable Definition

An overdue receivable is defined as money owed by one party (the debtor) to another (the creditor) that is not classified as debt and is one of the following:

• Classified by the receivable owner as non-collectible
• Written off and/or sold to a third party
• Subject to a court order as the result of a bankruptcy or insolvency
• 120 calendar days past the due date for payment

Overdue Receiveable Rules

To protect issuers from excessive credit risk and provide cardholder transparency, effective April 15, 2023, an acquirer must ensure that a merchant accepting an overdue receivable transaction meets both of the following:

• Does not use a credit card or charge card*
• Includes the debt repayment indicator in the authorization request and clearing record

*Note that there is an existing exception for the Europe Region (United Kingdom).