Collections Index Retreats in June

A monthly collections industry index decreased by 12% in June driven by double-digit sequential declines in smaller account balances and single-digit declines in larger balance accounts under $3,000. On a year over year basis, the Index fell 6.0%, well below the 7.3% in the last month. The SunTrust Robinson Humphrey “Settlement-in-Full Index” reports its metric dropped to 72.9% in June, compared to 83.0% in May. Settlements/payments under $500 decreased 13.5% year-over-year in June as settlements/payments between $500 and $1,000 decreased 8.3%; settlements/payments between $1,000 and $3,000 decreased 9.9%; and settlements/payments from $3,000 to $7,000 were up by 12.9%. The “SIFI” is a proprietary monthly research tool that measures the success of collections agencies in collecting bad debts that they have purchased. The data are based on five agencies including Arrow Financial Services, Oliphant Financial Corporation, Phoenix Credit Solutions, and Zenith Acquisition.

SIFI COMPOSITE
(not seasonally adjusted)
May 06: 77.3%
Jan 07: 77.1%
Feb 07: 81.5%
Mar 07: 72.5%
Apr 07: 74.5%
May 07: 83.0%
Jun 07: 72.9%
Source: SunTrust Robinson Humphrey

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CALLCREDIT 2.0

Callcredit and Fair Issac Corporation have launched “CallScore 2.0”
for credit risk scoring. Combining Fair Isaac’s multiple scorecard
technology and analytical capabilities with Callcredit’s data diversity,
“CallScore 2.0” will be an on-demand service to be delivered in
real-time. In doing so, the scoring model applies analytical techniques
of Fair Isaac’s FICO scoring and data sets to maximize risk prediction
accuracy. The credit risk scoring solution also segments the market
according to the quantity and quality of data returned on individuals.
Fair Issac supports business decisions in over 80 countries.

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HPS Offers 3-Year Payroll Pricing Guarantee

Heartland Payment Systems has introduced a new three-year pricing commitment for payroll customers. This model is designed to eliminate unstable pricing and add-on charges commonly associated with outsourced payroll processing practice. The pricing structure is based on a model developed by Heartland for its payment business, which has grown organically from $500 million to over $50 billion in ten years. Following this example, the company expects to reach a 25 percent operating margin for its payroll business. Heartland Payment Systems, delivers credit/debit/prepaid card processing, payroll and payment solutions to more than 150,000 small and mid-sized businesses nationwide.

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PAYEX & EDB

PayEx Solutions has signed a 3 year agreement with EDB for IT
operating services in Norway and Sweden. The agreement is worth
NOK 15 million and stipulates that PayEx will use EDB as a provider
of card payments over the Internet and in retail stores. With this
development, the companies also signed a 5-year framework agreement
for the development of new products and services. This development
of an operating environment will comply with the international security
standards for card transactions, including that of PCI-DSS (Payment
Card Industry Data Security Standard), and will play an important
role in PayEx’s future market situation.

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Virgin Launches Jazzed-Up Prepaid Card

Virgin Money has introduced a new prepaid MasterCard in the UK that offers a competitive rate for money transfers plus a package of discounts on various Virgin products. The new “Pay As You Go” card charges a flat 3.5% fee for foreign remittances and can be topped up with money at Post Offices, “PayPoint” outlets across the country and online at Virgin Money’s Website. The new card also offers 10% off at Virgin Megastores; 10% off Virgin Holidays; 10% off Virgin Wines; 75% off Virgin Active’s joining fee; and 10% off Virgin Car, Home, Pet and Annual Travel insurance. The card has an initial card application fee GBP 9.95. Free loading is available at the Post Office and Online. However, a 2.75% load fee applies at “PayPoint” and there is a 2.5% credit card load fee. The card is issued on behalf of PrePay Technologies by Clydesdale Bank and is promoted by Virgin Money.

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PREPAID VIRGIN CARD

Virgin Money has introduced a new prepaid MasterCard that offers a competitive rate for money transfers plus a package of discounts on various Virgin products. The new “Pay As You Go” card charges a flat 3.5% fee for foreign remittances and can be topped up with money at Post Offices, “PayPoint” outlets across the country and online at Virgin Money’s Website. The new card also offers 10% off at Virgin Megastores; 10% off Virgin Holidays; 10% off Virgin Wines; 75% off Virgin Active’s joining fee; and 10% off Virgin Car, Home, Pet and Annual Travel insurance. The card has an initial card application fee GBP 9.95. Free loading is available at the Post Office and Online. However, a 2.75% load fee applies at “PayPoint” and there is a 2.5% credit card load fee.
The card is issued on behalf of PrePay Technologies by Clydesdale Bank and is promoted by Virgin Money.

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ABS Payment Rates and Yield Retreat

Monthly payment rates, the amount that cardholders pay on their credit card debt, dipped sharply in May after soaring in April to its highest level in more than a year. Among credit card-backed securities, the MPR dropped to 19.58% in May after climbing to 21.09% in the prior month. However, the MPR has remained fairly stable in the first and second quarters and remains consistent with historical levels. According to FitchRatings, the gross yield decreased to 18.23% in May from 19.23% in April but was 62 basis points above year-ago levels. Volatility in gross yield in first-quarter has mimicked that of first-quarter 2006. However, yield in 2007 remains slightly elevated compared with that of first-quarter 2006. Fitch notes that it expects the credit environment to become less favorable for credit card performance as bankruptcy filings continue to rise and delinquencies and charge-offs normalize from recent lows toward their historical average of 6.0% for prime trusts.

ABS METRICS
YIELD MPR
May 06: 17.61% 19.14%
Jun 06: 17.97% 21.00%
Jul 06: 17.63% 20.71%
Aug 06: 17.86% 20.24%
Sep 06: 17.96% 21.06%
Oct 06: 17.58% 19.30%
Nov 06: 17.96% 19.82%
Dec 06: 17.78% 19.32%
Jan 07: 18.28% 19.27%
Feb 07: 17.70% 20.80%
Mar 07: 18.21% 18.76%
Apr 07: 19.23% 21.09%
May 07: 18.23% 19.58%
Source: FitchRatings

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CUSO PSCU Renews FDC Processing Contract

First Data has extended a long-term contract with PSCU Financial Services Under the agreement, First Data will provide an extensive suite of credit and debit products to PSCU Financial Services and its member-owners, including debit and credit processing, ATM driving, fraud prevention services, plastics and statement production, data analytics and PIN-secured debit access via the STAR Network. First Data has provided credit and debit card processing for PSCU since 1989. As a cooperative, PSCU Financial Services supports 1,100 financial institutions and is owned by 500+ member credit unions representing over 11 million cardholder account. First Data is a provider of electronic commerce and payment solutions for businesses worldwide.

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MAY ABS

Delinquency for credit card-backed bonds in the U.K. edged down in May after hitting a new peak April. The delinquency ratio (60-180 days) dropped 20 basis points to 3.9% in May compared to the prior month. According to FitchRatings, charge-offs for May were relatively stable, registering a modest improvement of 10 basis points, closing at 7.2%. The “Fitch Monthly Payment Rate Index” recovered from its lowest value in the past year last month, increasing 230 basis points to 18.30%. Fitch says this is likely to be the result of May benefiting from a slightly longer day count compared to April, which had fewer calendar days and more bank holidays. The U.K.’s “Monetary Policy Committee” raised interest rates by 25 basis points to 5.75% in its meeting on July 5th. This latest move takes interest rates to their highest level since February 2001.

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