Online Retailer Settles Card Security Charges

An online apparel retailer has agreed to settle FTC charges that it failed to safeguard consumers’ sensitive information including credit card numbers. The order against Life is good, Inc. and Life is good Retail, Inc. bars deceptive claims about privacy and security policies and requires that the companies implement a comprehensive information-security program and obtain audits by an independent third-party security professional every other year for 20 years. Specifically, the FTC charged that the company unnecessarily risked credit card information by storing it indefinitely in clear, readable text on its network, and by storing credit security card codes; failed to assess adequately the vulnerability of its Web site and corporate computer network to commonly known and reasonably foreseeable attacks, such as SQL injection attacks; failed to implement simple, free or low-cost, and readily available security defenses to SQL and similar attacks; failed to use readily available security measures to monitor and control connections from the network to the Internet; and failed to employ reasonable measures to detect unauthorized access to credit card information.

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PBS & SEPA

PBS has announced its collaboration as a service
provider of 117 Denmark banks to jointly develop the SEPA “Direct
debit solution”. With this development, PBS aims to protect the
prestige of its payments infrastructures with investment in payment and
information systems. The organization will provide the
aforementioned banks with additional services, including surveillance
facilities and interactive information.

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Ruth’s Chris Implements Table-Side Payments

TX-based National Bankcard Systems has partnered with Verifone and Ruth’s Chris Steakhouse to provide a tableside payment system in order to reduce card fraud. The terminal being used is the wireless “Verifone VX 670”. The processing speed is nearly instantaneous and several terminals can be used through a single system and advanced reporting is available for consolidation and reconciliation. In a recent study, it was found that over 60% of all credit card data loss involved restaurants and according to the Federal Trade Commission, there were about 250,000 cases of identity theft in the US in 2006.

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BofA Card Profit Drops 50% as Losses Mount

Bank of America reported that its Card Services division had Q4 revenue of $6.6 billion, an increase of 3% compared to the fourth quarter of last year, but net income slid 50% to $574 million. Managed U.S. consumer and business credit card loans at the end of the fourth quarter increased 8% year-on-year to $163.2 billion. Fourth quarter U.S. Card Services charge-offs were 5.08%, compared to 4.86% in the prior quarter and 4.57% one-year ago. The managed 30+ day delinquency rose to 5.74%, compared to 5.44% in the third quarter and 5.49% for 4Q/06. Purchase volume for U.S. consumer and business cards was $64.8 billion for 4Q/07 compared to $61.4 billion for 3Q/07 and $60.1 billion for 4Q/06. For the full year Card Services managed net revenue grew 4% to $25.53 billion due to growth in cash advance fees and interchange income while net income of $3.71 billion was down 35% as credit costs rose. BofA also reported that debit card purchase volume for full year 2007 increased 12% to $189.4 billion. “Keep the Change,” BofA’s savings program that combines debit cards and deposit products, had about 3 million enrollments during the year. For complete details on Bank of America’s 4Q/07 performance, visit CardData ([www.carddata.com][1]).

BOFA EOP CARD LOAN HISTORICAL
(U.S Consumer & Business Cards)
4Q/06: $150.7 billion
1Q/07: $146.0 billion
2Q/07: $150.2 billion
3Q/07: $154.7 billion
4Q/07: $163.2 billion
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

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Credit Card Penalty Fees Top $18B in 2007

U.S. credit card issuers generated an estimated $30 billion in cardholders fees last year, about 6% higher than 2006. Merchants paid about $33 billion in interchange related fees. More the half, or $18 billion, of the cardholder fees were penalty fees such as over-limit fees, late payment fees or returned check fees. Late fees accounted for the lion’s share of penalty fees, making up about 70% of the $18 billion figure. According to research by credit card expert R.K. Hammer, cash advance fees accounted for $8 billion of the total fees charged. Near $3 billion of annual fees were charged and card issuers generated $700 million in fees related to enhancements or special perks. U.S. cardholders also paid at least $97 billion in interest charges last year, according to Hammer.

PENALTY FEES HISTORICAL
2003: $11.7 billion
2004: $14.8 billion
2005: $16.4 billion
2006: $17.1 billion
2007: $18.1 billion
Source: R.K. Hammer

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GPN CEO Named Best CEO in America Again

Global Payment’s Chairman, President and CEO has again been named by Institutional Investor as among “The Best CEOs in America.” Institutional Investor surveyed 900 portfolio managers, analysts and other investment professionals at 425 institutions to name the best U.S. CEOs in the sectors in which they invest. The respondents provided their first, second and third choices and the votes were then weighted with first place votes counting the most. Global Payments is a provider of electronic transaction processing services for consumers, merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies, multi-national corporations and gaming establishments.

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Fair Isaac to Offer a Risk Management Suite

Fair Isaac is planning to release a new forward-looking decision tool kit for lenders by summer. The new “Fair Isaac Risk Management Suite” will provide deeper insight into the future debt sensitivity and default risk of individuals, as well as a more precise understanding of default risk across entire loan portfolios. The suite includes the latest “FICO 08 Score” plus a new “Credit Capacity Index” score, “Portfolio Stress Testing” analytics, and educational modules known as “Fair Isaac Insights.” “FICO 08 Score” enhances the predictive power of the “FICO” score by examining originations and new accounts; borrowers who pose higher risk; and borrowers with thin or young credit bureau files. The “Credit Capacity Index” gives insight on the degree to which consumers are able to handle future, incremental debt. “Portfolio Stress Testing” applies macro-economic forecasts against a credit portfolio.

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M&I Bank Signs NYCE for Exclusive PIN Debit

M&I Marshall & Ilsley Bank has renewed its NYCE Network participation as part of a relationship expansion which designates NYCE as the bank’s exclusive provider of retail PIN debit access and the ATM network of choice for domestic transactions. NYCE Payments Network, LLC, is a leading U.S. debit card payments network and a division of Metavante. Wisconsin-based M&I Bank also has banking offices in Arizona, Florida, Illinois, Kansas, Minnesota, Missouri and Nevada. This diverse geographical footprint translates into more than 966,000 cards and 485 ATMs participating in the NYCE Network.

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CardFlash Looks Back to July 2007

Discover Financial Services begins trading on the New York Stock Exchange as an independent company. First Data reports that Michael Capellas will become CEO after Kohlberg Kravis Roberts completes its acquisition of the Company. eBay’s PayPal sign deals with Southwest Airlines, Northwest Airlines, UATP, Devix, CardinalCommerce, and Alienware. Verizon Merchant Services, “Payments Powered by Chase Paymentech” is launched, targeting small and medium-sized businesses. VeriFone signs an agreement to be the preferred vendor of integrated payment solutions to the largest licensed leasing association in New York City, the Committee for Taxi Safety with 3,000 member taxis. Dallas-based PAYjr introduces the “PAYjr VISA Buxx Card” for teens, allowing them to upload pictures for the design of their card. DE-based Bancorp signs a deal to acquire SD-based BankFirst’s “Stored Value Solutions” business for $60.6 million. GE Money launches the “Earth Rewards Platinum MasterCard.” Coinstar inks an agreement to acquire GroupEx Financial Corporation in a deal valued at approximately $50 to $60 million. GE Money signs a credit card renewal and expansion agreement with Gap Inc. MasterCard and Major League Baseball launch a Website featuring FOX Sports broadcaster Joe Buck.

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PAYMENT CHINA 2008

The 2nd annual “Payment China 2008” will be held in mid-April of
this year in Beijing, China. With payment services accounting for over
40% of total bank revenue, IT and diversification is increasing
competition in the market, for which “Payment China 2008” provides
a forum where industry leaders can share ideas and receive guidance.
Representatives from financial institutions around the world are scheduled
to speak, provide guidance and ideas on issues regarding the country-wide
payment, clearing and settlement infrastructures, payment services, the
Asian payment industry, the upcoming Olympics, transfer services and
risk prevention.

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GE Money Profits Slow to 7% Year-on-Year

GE reported that revenues for its GE Money unit grew 22% in the fourth quarter to $6.6 billion. Profits grew by 7% to $957 million, compared to one-year ago, but down from the prior quarter’s year-on-year growth rate of 13%. In December GE indicated it was looking to sell or form a partnership for some of its GE Money services including its U.S. private-label credit-card business. Overall, GE is reviewing between $30 billion and $50 billion in financial assets to sell or share. The Company cites a slowing U.S. consumer and a challenging housing market as reasons to reevaluate its financial services business. GE Money’s credit card business contributes about 16% of its $4 billion+ annual net income. During the quarter, GE Money and the National Tour Association established a five-year extension of the GE Money Travel Finance Program available through NTA’s more than 600 tour operators globally; established a relationship with FL-based decoupled ACH debit card provider National Payment Card to link National Payment Card’s ACH-based alternate payment system with the GE Motor Club; extended its consumer financing agreement with FL-based City Furniture; renewed its consumer financing agreement with Thomasville Furniture; and signed a multi-year agreement with Wood-Mizer for revolving and installment financing. For complete details on GE’s fourth quarter performance, visit CardData ([www.carddata.com][1]). (CF Library 10/24/06; 10/25/06; 12/4/06; 12/13/06; 12/15/06)

GE MONEY TRACK RECORD
Income Revenues
4Q/06: $898 million $5375 million
1Q/07: $851 million $5807 million
2Q/07: $952 million $6145 million
3Q/07: $942 million $6207 million
4Q/07: $957 million $6578 million
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com

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