Manhattan DA Indicts Western Express Group

The Manhattan District Attorney has indicted seventeen individuals and one corporation on charges related to global trafficking in stolen credit card numbers, cybercrime, and identity theft. The corporation is Western Express International, formerly headquartered in mid-town Manhattan. The 173-count indictment charges that from 2001 through 2007, the defendants participated in a multi-national, internet-based criminal enterprise dedicated to trafficking in stolen credit card numbers and other personal identifiers. The group realized millions in illicit profits from the sale and fraudulent use of this personal data, with some members of the enterprise laundering these profits in a variety of high-tech ways. The indictment says the group created and participated in a computerized marketplace for the global trafficking, enabling the defendants to conduct anonymous transactions, via the Internet and by other means, using sophisticated payment schemes.

Asset Acceptance Beefs-Up Credit Line

Asset Acceptance Capital has entered into an expanded credit agreement containing a $100 million, five year revolving credit facility and a $150 million term loan facility. The Company has satisfied the financing condition with respect to the Company’s modified “Dutch auction” tender offer previously announced. The new $100 million revolving credit facility will be used to supplement cash flows available for the acquisition of purchased receivables, in addition to other general corporate purposes. Furthermore, the new facility includes an accordion loan feature which permits a $25 million credit limit extension, should the Company require additional access to capital to support future operations. The expanded credit agreement also contains a $150 million term loan facility, which the Company will use to fund a previously announced plan to return $150 million to shareholders. JPMorgan Chase Bank acted as the lead lender participating in the expanded credit agreement. Asset Acceptance has provided credit originators, such as credit card issuers, consumer finance companies, retail merchants, utilities and others an alternative in recovering defaulted consumer debt.

Supermarkets Now Distribute the Jack Ca$h Card

San Diego-based Jack in the Box expanded its reloadable “Jack Ca$h” card program last month which is now being distributed by Safeway, Albertsons, Randalls and Tom Thumb stores. Jack in the Box Inc. (NYSE: JBX), based in San Diego, is a restaurant company that operates and franchises Jack in the Box restaurants, one of the nation’s largest hamburger chains, with more than 2,000 restaurants in 17 states. The company also operates a proprietary chain of convenience stores called Quick Stuff, with more than 50 locations, each built adjacent to a full-size Jack in the Box restaurant and including a major-brand fuel station.

CyberSource Intros Payment Data Management

CyberSource has launched a new service enabling eCommerce merchants to process electronic payments without the risk of storing or even handling sensitive account information. With CyberSource’s Payment Data Management, CyberSource, not the merchant, manages sensitive customer information such as credit card numbers and related transaction data. CyberSource handles and stores all payment data on behalf of the merchant in security-certified processing centers that connect directly with the banking network.

FDC Completes Vigo Remittance Deal

First Data has completed the acquisition of Vigo Remittance from Great Hill Partners. Vigo was founded nearly 20 years ago to provide money transfer services to Brazilian consumers living in New York City and Newark, N.J., and has successfully expanded to serve 50 countries worldwide. Vigo operates through more than 4,000 send locations from across the U.S. and more than 48,000 payment locations throughout the world, primarily in the Latin American and Caribbean regions. In 2004, Vigo processed approximately eight million transactions.

Single-Factor Authentication Inadequate

The Federal Financial Institutions Examination Council said yesterday that financial institutions offering Internet-based products and services should have reliable and secure methods to authenticate their customers. The FFIEC says its recent study revealed that single-factor authentication as the only control mechanism is inadequate in the case of high-risk transactions involving access to customer information or the movement of funds to other parties. The FFIEC says banks should implement multifactor authentication, layered security, or other controls reasonably calculated to mitigate those risks. The new guidance replaces the FFIEC’s “Authentication in an Electronic Banking Environment” issued in 2001.

Legislation & Greed May Hinder Prepaid

Government, globalization, and greed are the three major issues facing the prepaid debit card industry. The head of CA-based Card Express, a/k/a CardEx, says the U.S. government is a potential obstacle to the industry, because of legislation, including money transmittal laws and escheatment laws. President/CEO Alan Safahi says the global expansion of prepaid cards will offer tremendous opportunities for financial institutions and processors especially in Third World countries. Safahi cautions that the industry must avoid any perception of gouging customers as it pertains to products like general purpose cards offered to the unbanked or underbanked. CardEx’s technology platform supports nearly 40 prepaid debit card applications.

First Data Acquires Vigo Remittance

First Data has signed a definitive merger agreement to acquire FL-based Vigo Remittance. Vigo was founded nearly 20 years ago to provide money transfer services to Brazilian consumers living in New York City and Newark, New Jersey and has successfully expanded to serve 47 countries. In 2003, Mario Trujillo, in partnership with Great Hill Partners, a Boston-based private equity firm, acquired Vigo and proceeded to improve and grow Vigo’s profitability and business efficiencies. Vigo operates through approximately 3,700 Agent locations from across the U.S. and more than 47,000 payment locations throughout the world, primarily in the Latin American and Caribbean regions. In 2004, Vigo processed approximately 8 million transactions.

PDS Enters the Telecommunications Industry

Texas-based Payment Data Systems has signed a multi-year agreement with NII Communications, its first entry into the telecommunications industry. PDS products include IPS*CSRView, a web based application which allows customer service reps to accept and enter ACH or credit card payments taken from their customer over the telephone, IPS*Re-Debit Express, a process for handling and recovering NSF checks and electronic returns, IPS*Credit Card Gateway, a web-based application which allows for uploading/processing and reporting of batch-loaded recurring credit card payments. The anticipated initial transactional value of the agreement is approximately $12 million per year based on current volumes. Payment Data Systems,Inc.,is an Integrated Payments Solution Provider for the processing and management of electronic payments via the Internet, point of sale, or payments taken by Customer Service Representatives or an Interactive Voice Response (IVR). PDS is the owner of the electronic bill payment portal, providing transmittal of electronic payments to thousands of national billers. NII Communications, Ltd.,is a UNE-P CLEC offering local exchange, long distance and internet access services to small and medium business customers, residential subscribers and private payphone service providers throughout the South and West, representing over 73,000 access lines.

Gift Cards Carry Significant Business Risks

A Los Angeles-based law firm is cautioning issuers in regard to prepaid gift cards. Pillsbury Winthrop says there are significant risks involved both for issuers and redeemers as states endeavor to regulate the fast growing industry. Many of the laws do not differentiate a gift card from other prepaid cards, and it is not clear whether the laws applicable to gift certificates apply to prepaid cards in general. Issuers of cards are also under the scrutiny of the federal government, which has a long roster of regulatory laws and regulations that potentially apply to prepaid cards. Some were implemented to oversee terrorism concerns of money laundering, while others deal with issues such as consumer privacy issues, licensing, and special reporting and booking requirements. Pillsbury Winthrop also notes that the issue of “escheat” obligations is also in question for issuers of prepaid cards. Most states require those businesses selling gift certificates escheat a remaining balance and give the money to the state as unclaimed property. Approximately 15 states don’t make a claim on abandoned card funds and the timing of escheat of those funds varies from state to state.

OCC Clears Sears – Citibank Card Deal

The OCC yesterday approved the acquisition by Citibank USA, of substantially all of the credit card accounts of Sears National Bank. Under current federal banking laws, Sears and Citicorp will be cleared to close their transaction, on or after, October 31st. Sears and Citibank announced their definitive agreement to sell Sears’ domestic private-label and bank credit card portfolio to Citigroup for more than $3 billion in mid-July. Other terms of the deal include payment for approximately $3 billion of Sears’ net invested capital, related to loan loss reserves. Sears also expects to receive approximately $200 million in annual performance payments from Citigroup based on items such as new account and credit sales generation activities. In addition, Sears expects to realize annual savings of more than $200 million as Citigroup will absorb costs associated with Sears’ zero percent financing program. (CF Library 7/16/03)