A new law that is set to go into effect in California on July 1st which requires credit card issuers to show certain consumers the impact of making minimum payments may be blocked at the end of this month. A group of major credit card issuers, including Citibank, who had a hand in crafting the legislation last year, have filed a lawsuit in U.S. District Court this month to block the new law. As a result, consumer groups are furious. The new law, AB 865, requires credit card companies to disclose on customer bills the total costs and length of time it will take to retire credit card debt of $1,000, $2,500, and $5,000 if a consumer makes just the minimum payment. Consumers who make the minimum payment for six months will receive this information based on their exact outstanding balance. Credit card companies are also required to maintain a toll-free telephone number to call a “live” customer service representative so that individualized minimum payment information can be obtained. The new disclosure requirement was a compromise proposal signed into law after the financial industry lobbied Governor Gray Davis in 2000 to veto a stronger version of the bill that would have required credit card issuers to send minimum payment warnings to all cardholders. Citigroup drafted the outline of the compromise that eventually watered-down the legislation. Consumers Union says no financial institutions opposed the compromise proposal when it was considered and adopted by the California legislature last year. The card issuers’ lawsuit claims that the new state law is preempted by the National Bank Act and that national banks cannot be required to abide by state laws that impede their business. It also alleges that the California law violates the commerce clause by significantly impeding interstate commerce. The case is scheduled for a hearing on June 28.
FDC’s Global Cash Access and its QuickPlay Infonox subsidiary have inked a deal to deploy Infonox’s Active Payment Platform to enable casino customers to use their ATM cards at the slot machine. The Active Payment Platform has been extended to not only manage the EFT side of transactions but also to operate the entire monitoring and configuring of the transaction system. Key requirements in such a system, including message and data encryption, key management, POS and server configuration and management as well as back-end systems such as dispute resolution, transaction tracking and reporting, reconciliation, and settlement are all handled by the Infonox APP.
Kansas-based Wirca has introduced the first software application that allows consumers to complete mobile-phone-initiated, cashless payments at retail stores and restaurants equipped with Hypercom’s ICE card payment terminals. Wirca’s PocketChange application is running in test markets on Hypercom’s 5500 and ICE 5500/5700Plus terminals. The mobile payment functionality can be added to the Hypercom terminals via a simple software download. The Learning Tree store chain is currently testing PocketChange. Hypercom’s ICE 5500Plus and ICE 5700Plus are high performance, high speed, touch screen card payment terminals that incorporate Hypercom’s new SureLoad clamshell printing technology and ePOS-infocommerce framework.
Discover Card’s parent will change its legal name on Thursday from Morgan Stanley Dean Witter & Co. to Morgan Stanley. The change was approved at a board of directors meeting in New York and will take effect June 20, 2002.
UPS and PayPal have partnered to completely integrate the online payment process with digital shipping tools. This is the first time that UPS has integrated its shipping API into a third party’s branded product. The “PayPal Shipping With UPS” enables customer shipping information to be populated into the shipping label as a one-step process. Any PayPal user may utilize the new feature, enabling sellers to pay shipping charges via a PayPal virtual debit card. UPS bills sellers directly for shipping charges. As a result, sellers do not need to worry about collecting additional money for shipping and buyers are not overcharged. The PayPal service automatically sends payment to the seller at the close of a transaction. Since going public in February, PayPal has formed a number of strategic alliances and is in the process of switching its U.S. credit card processing services from InterCept’s Electronic Payment Exchange to Wells Fargo. PayPal also offers a co-branded MasterCard debit card which is linked to PayPal’s interest earning “Money Market Reserve Fund” which holds funds pending PayPal transactions. (CF Library 12/22/00; 6/13/02)
While Morgan Stanley experienced sharply lower profits from its securities business during the second quarter, its Credit Services division, which includes Discover Card, posted a 15% increase in earnings to $196 million. Although credit card receivables and volume declined in fiscal 2Q/02, higher net interest, cardholder late fee revenues, and lower marketing expenses produced the strong profits. The interest rate spread widened 123 basis points compared to 2Q/01, driven by a decline in credit services cost of funds. Merchant and cardholder fees rose 8% to $552 million as a result of higher cardholder fees, especially late charges, and an increase in the merchant discount rate. The credit card net charge-off rate rose to 6.30%, 132 basis points higher than a year ago, a 26.5% increase. Discover says this is due to continued weakness in the U.S. economy and the adverse impact of the seasoning of cardholder accounts. The over-30 day delinquency rate improved to 5.63%, the lowest level in the last seven quarters. Discover add 200,000 net new accounts during the quarter, but the number of active accounts declined by 400,000 compared to the previous quarter. For complete details on Morgan Stanley/Discover’s second quarter performance visit CardData ([www.carddata.com]).
DISCOVER CARD PORTFOLIO SNAPSHOT
2Q/01* 3Q/01* 4Q/01* 1Q/02* 2Q/02* Y/Y CHNG
Receivables: $50.2b $49.7b $49.3b $49.6b $49.4b -1.6%
Volume: $23.5b $23.3b $22.1b $24.1b $23.5b NC
Accounts: 44.7m 45.4m 45.7m 46.0m 46.2m +3.4%
Actives: 24.3m 24.0m 24.0m 23.8m 23.4m -3.7%
Chargeoffs: 4.98% 5.79% 5.85% 6.49% 6.30% +26.5%
Delinquency: 5.84% 6.31% 6.85% 6.75% 5.63% -3.6%
Yield: 13.34% 13.34% 13.48% 12.63% 12.64% -5.2%
2Q/01 fiscal quarter ended 5/31/01; 3Q/01 fiscal quarter ended 8/31/01;
4Q/01 fiscal quarter ended 11/30/01; 1Q/02 ended 2/28/02; 2Q/02 ended 5/31/02.
Source: CardData (www.carddata.com)
TX-based Dibz has signed Fabiola Da Silva, one of the most prominent in-line skaters in the world, to promote its new Dibz Powered Card for teens. Da Silva will provide exclusive online videos, images, and skating tips for purchase with a Dibz Powered Card. As a major player in the world of action sports, Fabiola Da Silva is a well-known name among young people.
Cleveland-based Datavantage has become a certified VAR for @pos’ POS signature capture and payment terminals in the specialty retail market. Datavantage will sell the full line of @pos signature capture and PIN-based debit products, including PenWare 1500, iPOS 3100, TX.C, and iPOS TC terminals, and its Crossvue receipt and signature storage services. The combined @pos and Datavantage solution offers retailers opportunities to lower payment processing costs and chargebacks while encouraging customer interaction at the point-of-sale.
Paris-based SAGEM intends to purchase the MONETEL Electronic Transactions Business Unit from the Swiss ASCOM Group within the next few months. SAGEM is a world leader in cordless payment terminals. ASCOM MONETEL is one of EuropeÂs leaders in payment terminals, terminals for healthcare applications, and vending machines, as well as security keyboards.The ASCOM MONETEL Electronic Transactions Business Unit registered sales of around Âm 60 in 2001 with a staff of approximately 180 people (R&D engineers and technicians, sales and marketing forces). Production capacities remaining with ASCOM, a manufacturing subcontracting agreement is planned to be signed. The deal is expected to close during the third quarter.
MasterCard International and Datacard Group have signed a multi-year strategic alliance to support the deployment and management of smart card programs by MasterCard members including smart card security consulting services, training and education programs. The multi-year agreement will provide MasterCardâs members with Datacardâs solutions for developing, testing, personalizing and managing smart cards. The solutions are specifically designed to simplify the migration from traditional magnetic stripe cards to smart cards by creating and collecting new smart card data and personalizing the data needed on the chip.
Budapest-based Vodafone Hungary announced the deployment of Euronet ATM Recharge, which enables Vodafone subscribers to purchase prepaid airtime at 371 Euronet-branded ATMs throughout Hungary.
Hungary has more than 5 million mobile phone subscribers with approximately 78% as a prepaid market. Euronet Worldwide provides this service to all three GSM mobile operators in Hungary including Pannon GSM and Westel. Euronet also enables customers of all three mobile operators in Poland including Plus GSM, ERA GSM, and Centertel, to recharge their airtime at Euronet ATMs. Electronic recharge service is also available via POS terminals and directly from the mobile phone. This service is live for mobile operator customers in the Czech Republic, Poland, Croatia, Curacao and Indonesia.
The National Consumers League launched a new Web campaign this morning to fight identity theft thanks to an unrestricted educational grant from Bank of America. The new “Invasion of the ID Snatchers” Web pages present common scenarios of how thieves steal personal information and what they can do with it, tips for consumers on how to avoid ID theft, and information on how to report the crime. It also provides tips for businesses on how to secure the personal information they collect from consumers. NCL says Bank of America found itself a victim of ID fraud earlier this year when consumers received an email from someone pretending to be from the bank.