CardFlex Litigation
The I Works scam continues to haunt CardFlex. In December 2010, the FTC charged I Works with scamming consumers out of more than $275 million via deceptive “trial” memberships for bogus government-grant and money-making schemes.
I WORKS
The FTC says the I Works credit card processing deception took in more than $26 million in illegal credit and debit card payments through the Visa and MasterCard payment networks. Three of the defendants have agreed to settle the FTC’s charges.
Heartland Suing Mercury Payment for Unfair Practice
Heartland Payment filed a federal lawsuit against Mercury Payment Systems for false advertising, unfair competition, intentional interference with contractual relations, and intentional interference with prospective economic advantage. The suit alleges that Mercury is illegally competing against Heartland with deceptive trade practices and that Mercury is effectively misleading merchant customers by deceptively hiding its excess profits in the interchange fees charged by credit card networks and their issuing banks, in violation of the Lanham Act.
The suit seeks to stop Mercury’s routine deceptive pricing practices to secure new retail customers and maintain their existing merchants. The suit also seeks to recover full value for each merchant and prospect Mercury has wrongfully taken from Heartland by deceptively falsifying pass-through interchange costs and other illegal methods. Heartland explains that the fees charged by credit and debit card issuers – the issuing banks plus card brands such as Visa and MasterCard – are collectively known as network, or interchange, fees. Interchange fees are set by the card brands, and are typically adjusted twice a year. The complaint also alleges that Mercury imposes significant costs and barriers for changing providers, falsely informs merchants that they are the only processor that supports their point-of-sale card swiping equipment, and falsely represents their company in commercial advertising and promotions as guaranteeing the best rate, among other charges.
Open Solutions Advances DNA Core Banking Platform
Open Solutions integrated enabling technologies for financial service providers has expanded its core platform with twelve financial institutions. This was namely with its “DNAappstore” online marketplace to advance global collaboration and innovation for the financial services industry and “DNAcreator” suite of tools for creating seamlessly integrated core applications. This lets Open Solutions clients, partners and independent third-party developers to build and share applications called DNAapps that extend the functionality of Open’s DNA core platform in new and unlimited ways.
Jack Henry Rebrands Pemco Processing
Jack Henry & Associates integrated technology solutions and data processing services is rebranding Pemco Technologies as JHA Payment Processing Solutions. Having been acquired in October 2009, Pemco Technologies will operate as a division of Jack Henry & Associates. JHA Payment Processing Solutions will continue Pemco Technologies’ operations as a provider of payment processing solutions and outstanding client care and service. The products and services added through this acquisition strategically complement Jack Henry & Associates’ ATM and debit card solutions with proven credit and prepaid card solutions. JHA Payment Processing Solutions has launched an aggressive campaign to systematically communicate the new brand to existing and prospective customers, and to the financial industry at-large.
Restaurant Data Concepts Facing Lawsuits
RI-based POS technology provider Restaurant Data Concepts and NJ-based CC Productions are the target of pending legal action
for possible PCI DSS breaches of its POSitouch technology, installed in more than 20,000
restaurants nationwide. According to the attorneys preparing the lawsuit,the companies allegedly sold and installed POS
systems that contributed to identity thefts at multiple restaurant
locations. At the core of the allegations in the developing lawsuit:
1) POSitouchâs POS system failure: A forensic
audit reveal that POSitouch sold a system that was non-compliant with
PCI-DSS. 2) CC Productionsâ mismanagement: The reseller engaged in
flagrant violations of PCI standards that gave rise to the security
breaches. When companies such as CC Productions engage in the support
and management of a merchantsâ POS application system they need to
ensure that they are not engaging in suspect actions that open up the
ports so that hackers may penetrate the entire system through malware.
While the exact amount of the identify theft losses to banks, the
financial losses to the restaurants, fines, investigatory costs, fines
imposed by the credit card companies and other costs attributed to
fixing the computer systemsâ security breaches are still being tallied,
the lawsuit is seeking compensation to repay the penalties levied by the
credit card companies and the massive costs to track down and repair the
POS system problems. According to the attorneys, damages âcould run well
into seven figures.â
TransFS Card Terminal is Unveiled
Transparent Financial Services has launched the free “TransFS Card Terminal” iPhone app that provides businesses with credit card
acceptance capabilities. “The TransFS Card Terminal” is the first iPhone app of its kind to be free of cost and provide complete freedom of choice in credit card processor selection and offers businesses the ability to introduce or test mobile card acceptance without the fear of wasted cost or unwanted commitments. TransFS Card Terminal provides card acceptance capabilities without the cost of purchasing or leasing terminals. For new merchants and those just beginning to accept credit cards, this offers potential savings of hundreds of dollars per point of sale.
Agent Bank Selection Criteria is Offered
Card industry analyst/investment banker R.K. Hammer has released a selection criteria that card programs can use to select better agent bank card issuing partners. 1. The RFP process must be all-inclusive, that is only one selection process by an outside third party â no additional process taking place simultaneously whereby one or more potential issuing partners is silently “exempt” from the RFP conditions. 2. Fourteen days is enough for any issuing bank to present their written expression of interest or letter of intent. 3. Present the current penetration level of cardholders compared to the universe of total customers in the Offering Memorandum. 4. Hold the issuing card provider to customer service level standards equal to or higher than presently enjoyed. 5. Any card department that “touches” your customers should have contractual service levels to be met, and reported monthly to you. 6. A form of risk/revenue sharing that was first popularized by affiliate and agent banks over 30 years ago is making a comeback: where the issuing bank and their agent bank programs allow some percentage of risk/reward sharing. 7. The extensiveness of monthly data reporting is another important factor which separates Best-in-Class from weaker performers. 8. Ask for two classifications of references: first, at least three agent banks of similar size to your opportunity; and second, three agent banks who have left their program, and the reasons why. Both types of references are needed to get a more complete picture of what doing business with the issuer will be like for you.
FTC/FRB Want Risk-Based Pricing Disclosure
The Federal Trade Commission and the Federal Reserve Board have proposed legislation requiring creditor to inform consumers about “risk based pricing” for credit granting. Risk-based pricing refers to the practice of using a consumer’s credit report, which reflects his or her risk of nonpayment, in setting or adjusting the price and other terms of credit offered or extended to a particular consumer. The proposed rules would apply, with certain exceptions, to all creditors that engage in risk-based pricing. Under these rules, a risk-based pricing notice would generally be provided to the consumer after the terms of credit have been set, but before the consumer becomes contractually obligated on the credit transaction.
Diebold to Restate Financials to 2003
Diebold has completed discussions with the SEC’s Office of the Chief Accountant and has established a revised revenue recognition method from its previous “bill and hold” method of reporting. The company is discontinuing the use of bill and hold as a method of revenue recognition and will change its revenue recognition policy to now recognize revenue upon customer acceptance of products at a customer location. The company’s revised method of recognizing revenue will be adopted immediately and comes after an in-depth analysis and review with its external auditors, the audit committee of the company’s Board of Directors and the OCA.
Pulaski Unloads a New Crop of Super Prime Cards
Consistent with past practices, AR-based Pulaski Bank and Trust Company has unloaded a new batch of super prime credit cardholders outside its local footprint. The issuer received 29,000 applications and increased receivable balances by $10.9 million last year, reaching $58.8 million in outstanding balances as of December 31st. In a deal, which closed last week, Pulaski sold $30.4 million in credit card receivables for a 22.7% premium. During 2007, the portfolio experienced losses of 1.46% of outstanding balances, had an average FICO score of 726, and had loans past due 30 days or more of only 0.82% in the fourth quarter. Since 1997, Pulaski has periodically sold credit card receivables at significant premiums, and replenished balances over time. The Company anticipates no significant change in its current national credit card market origination operations during 2008.
PULASKI PORTFOLIO HISTORICAL
1997 2002 2005 2008
Receivables Sold $18.8mm $34.0mm $34.0mm $30.4mm
Premium 20.0% 18.8% 17.4% 22.7%
Source: Pulaski Bank
Hypercom Revenues Soars 25% in 3Q/07
Hypercom posted a 25% increase in revenue and a 30% increase in gross profit for the third quarter compared to the year-ago quarter. The revenue surge was driven by strong demand for countertop and mobile payment terminals outside the U.S. Revenue for the third quarter was $70.8 million and gross profit was $21.2 million. North American product revenue was lower principally as a result of decreased revenue from one U.S. customer. Service revenues increased in all operating regions, with the largest increase of $4.9 million in the Asia-Pacific region as a result of the acquisition of ACG Group in early 2007. Hypercom recently announced the “Optimum T4200” global countertop platform; the “Optimum M4100 Blade” handheld mobile wireless terminal; and the “PV1310” handheld PIN Pad. For complete details on Hypercom’s third quarter results, visit CardData ([www.carddata.com][1]).
HYPERCOM REVENUE HISTORICAL
3Q/05: $66.5 million
4Q/05: $68.1 million
1Q/06: $61.0 million
2Q/06: $66.1 million
3Q/06: $56.7 million
4Q/06: $64.8 million
1Q/07: $64.8 million
2Q/07: $67.5 million
3Q/07: $70.8 million
Source: CardData (www.carddata.com)
[1]: http://www.carddata.com