Can a Creditor Garnish a Credit Card Payment Processor?

A judgment creditor looking to collect from a business debtor will often target the business’s incoming revenue. One common approach is garnishing the merchant account where credit card receipts are deposited. But when a creditor cannot reach the merchant account directly, the question arises whether the creditor can instead serve a writ of garnishment on the credit card payment processor that handles the transactions. The short answer is no. A payment processor does not owe money to the merchant and therefore cannot be garnished as a third party holding the debtor’s funds.

Understanding why requires a closer look at how credit card transactions actually flow between the parties involved and where the debtor’s money sits at each stage.

How a Credit Card Transaction Works

A credit card purchase involves several distinct entities, each with a different legal relationship to the merchant. When a customer pays with a credit card, the transaction passes through a chain that includes the issuing bank, the card network, the acquiring bank, and the payment processor.

The issuing bank is the financial institution that issued the credit card to the customer. This is the customer’s bank, and it extends credit to the cardholder for the purchase. Visa, Mastercard, and the other card networks are not banks. They operate the infrastructure that routes transaction data between the issuing bank and the acquiring bank, and they set the rules governing how transactions are authorized, cleared, and settled.

The acquiring bank, also called the merchant bank, is the financial institution that maintains the merchant’s account. This is the entity that actually owes money to the business debtor. After a transaction clears, the acquiring bank receives funds from the issuing bank through the card network and deposits those funds into the merchant’s account, minus processing fees and interchange costs.

The payment processor is the intermediary that handles the technical side of the transaction. It transmits authorization requests, routes data between the merchant’s point-of-sale system and the acquiring bank, and facilitates the clearing and settlement process. The processor performs a service for the acquiring bank and the merchant, but it does not hold or owe funds to the merchant.

Why the Processor Cannot Be Garnished

Florida’s garnishment statute under Chapter 77 allows a judgment creditor to seize property or money that a third party owes to the debtor. The garnishee must be someone who is “indebted” to the judgment debtor or who holds property belonging to the debtor. When the garnishee receives the writ, it must answer the court by disclosing what it owes or holds.

The critical requirement is that the garnishee must owe a debt to the judgment debtor. The acquiring bank owes money to the merchant because it holds funds collected through credit card transactions that belong to the merchant. A writ of garnishment served on the acquiring bank can capture those funds because the bank has a legal obligation to pay the merchant.

The payment processor has no such obligation. The processor does not hold funds belonging to the merchant. It routes data and facilitates the transfer of funds between the issuing bank and the acquiring bank, but the money flows through the processor’s systems without creating a debtor-creditor relationship with the merchant. Because the processor owes nothing to the debtor, a writ of garnishment served on the processor should fail. The processor’s correct answer to the writ would be that it is not indebted to the debtor and does not hold any of the debtor’s property.

Garnishing the Merchant Account Directly

While the payment processor is not a proper garnishment target, the merchant’s acquiring bank is. A creditor who identifies the business debtor’s merchant bank can serve a writ of garnishment on that institution and capture credit card receipts that have been processed but not yet deposited into the debtor’s operating bank account.

This can be an effective collection tool because many businesses receive a significant portion of their revenue through credit card transactions. The writ freezes whatever the acquiring bank owes the merchant at the time the writ is served, which may include pending settlements from recent transactions.

From a creditor’s perspective, garnishing the merchant account is often more productive than garnishing a standard bank account. Business debtors who anticipate collection efforts may move funds out of their operating accounts, but credit card receipts flowing into the merchant account are harder to redirect on short notice. The merchant cannot control when customers pay by card, and the settlement process typically takes one to two business days.

Payment Service Providers Present a Different Question

The traditional credit card processing model involves separate entities for acquiring, processing, and merchant banking. But modern payment service providers like Square, Stripe, and PayPal have blurred these lines by combining multiple functions into a single platform. These companies often act as both the payment processor and the entity holding the merchant’s funds.

When a business uses Square or Stripe, the platform collects the customer’s payment, processes the transaction, and holds the resulting funds in a pooled or sub-account before depositing them into the merchant’s linked bank account. During the period between when the customer pays and when the funds reach the merchant’s bank, the payment service provider is holding money that belongs to the merchant.

This holding relationship is different from a traditional processor’s role. If the payment service provider holds funds belonging to the debtor, it may be subject to garnishment as a third party in possession of the debtor’s property. A creditor who serves a writ of garnishment on a payment service provider may capture funds that the provider is holding before settlement.

The distinction matters for business debtors. A traditional payment processor that merely routes transaction data is not a garnishment target. A payment service provider that holds the merchant’s funds before depositing them may be. The analysis depends on the specific contractual relationship between the merchant and the platform, and whether the platform is holding the debtor’s funds at the time the writ is served.

Discovering the Merchant Account Information

A practical obstacle for creditors is identifying which acquiring bank or payment service provider the debtor uses. Merchant account information is not public, and business debtors are not required to disclose this information voluntarily before a judgment is entered.

After judgment, however, the creditor has several tools available. Florida Rule of Civil Procedure 1.560 authorizes proceedings supplementary, which include the power to compel the debtor to appear for a deposition and disclose all assets, income sources, and financial accounts. The creditor can ask directly which companies process the debtor’s credit card transactions and where the resulting funds are deposited.

The debtor is required to answer these questions truthfully under oath. Failure to appear or provide accurate information can result in contempt sanctions. Some creditors also use subpoenas directed at the major card networks or the debtor’s bank to identify incoming ACH deposits from merchant account processors.

Protecting Business Revenue from Garnishment

From the debtor’s perspective, the vulnerability of a merchant account to garnishment is a significant concern. Unlike personal wages, business credit card receipts are not subject to head of household protections or the statutory limitations that apply to wage garnishments. The full amount in the merchant account can be frozen by the writ.

Business owners who want to reduce this exposure should consider the legal structure of their business. Revenue earned by a properly structured Florida limited liability company or limited partnership receives different treatment under judgment collection law than revenue earned by a sole proprietor. A creditor of an individual member of a multi-member LLC is limited to a charging lien against the member’s distributions and generally cannot garnish the LLC’s operating accounts or merchant accounts directly.

The timing of the garnishment also plays a role. A writ of garnishment captures only what the garnishee owes at the time of service, plus any amounts that become due while the writ remains active. Under § 77.06, the garnishee must answer within 20 days, and the writ dissolves automatically after six months if not extended. Business debtors who receive a garnishment of their merchant account should review the writ for procedural defects and assert any available exemptions within the statutory time limits.