Prime Charge-Offs Hit a 12-Month High

Charge-offs, among “prime” credit card-backed securities, continued its upward path in January hitting a new twelve month high. This is the third consecutive month of increase even though bankruptcy filings are still running about 68% lower than 2005. However, the 60+ day delinquency ratio dipped by two basis points in January after edging up for four straight months. According to FitchRatings, “prime” charge-offs for January were 4.31% compared to 4.21% in the prior month and 6.88% for January 2006. The “prime” 60-plus day delinquency index for January was 2.57%, compared to 2.59% in December. Fitch also reported that “sub-prime” 60+ day late payments decreased slightly to 5.60%. “Sub-Prime” charge-offs increased 67 bps to 9.90%. Fitch says the recent increases in sub-prime charge-offs can be attributed to a delinquency bubble caused by changes made to the minimum payment calculation per OCC guidance.

ABS PRIME CHARGE-OFFS HISTORICAL
Jan 06: 6.88%
Feb 06: 3.29%
Mar 06: 3.10%
Apr 06: 3.19%
May 06: 3.58%
Jun 06: 3.58%
Jul 06: 3.44%
Aug 06: 3.94%
Sep 06: 3.88%
Oct 06: 3.78%
Nov 06: 3.88%
Dec 06: 4.21%
Jan 07: 4.31%
Source: FitchRatings

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Final Settlement in the CAMCO Case Reached

The FTC has agreed to settle charges against CAMCO’s defendant Joshua Rausch for threatening and harassing consumers to get them to pay old, unenforceable debts. Under the settlement, Rausch is prohibited from engaging in debt collection activities or assisting others engaged in debt collection activities. Rausch was among several individual and corporate defendants, including Capital Acquisitions and Management Corp. (CAMCO), charged with violations of the Federal Trade Commission Act and the Fair Debt Collection Practices Act. CAMCO, which was permanently closed by the court-appointed receiver in December 2004, was a “debt buyer” – a company that buys old debts well past the statute of limitations and attempts to collect them.

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TNB Acquires 3 More CU Card Portfolios

TNB Card Services has announced the purchase of credit card programs from TX-based 1st University CU with more than 3,500 members and assets of $13.5 million, Denver-based White Crown FCU, a $45 million credit union with 9,200 members and NM-based High Plains FCU, a $37 million, 8,000-plus member credit union. TNB Card Services provides electronic payments processing and manages more than 1.6 million cards.

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Paymetric Releases XiPay v3

Paymetric announced the latest release of its payment processing engine “XiPay 3”. “XiPay 3” uses updated encryption techniques based on the latest Advanced Encryption Standard (AES) algorithms to make card information unreadable as it is processed and stored in XiPay. Key management and rotation capabilities provide the functionality required by VISA and Payment Card Industry (PCI) standards for protection of cardholder data. Paymetric provides software applications that manage and protect payment card transactions in complex payment environments.

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FTC Settles its First Gift Card Case

Kmart has agreed to settle FTC charges that it engaged in deceptive practices in advertising and selling its gift card. As part of the settlement, Kmart will implement a refund program and publicize it on its Web site. This is the FTC’s first law enforcement action involving gift cards. According to the FTC’s complaint, Kmart promoted the card as equivalent to cash but failed to disclose that fees are assessed after two years of non-use and misrepresented that the card would never expire. Kmart has agreed to disclose the fees prominently in future advertising and on the front of the gift card. As of May 1, 2006, Kmart stopped charging a dormancy fee on all Kmart gift cards.

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SMS Corp Acquires Columbia Card Systems

Los Angeles-based Smart SMS Corp has purchased Columbia Card Systems International and anticipates issuing at least ten million plus VISA debit accounts in the next three years. Columbia Card Systems is a master licenser of the VISA Brand, sponsoring VISA debit card programs for major brands and many affinity groups in the United States as well as its own brand Columbia Card. Smart SMS is a mobile entertainment marketing and distribution company that specializes in market branding via text and MMS for television shows, celebrities, musicians, entertainers, athletes, and major brands, as well as fund raising programs.

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Online Banking to Hit Some Speed Bumps

A research report by Celent concludes that the pace of household online banking adoption will lessen. While best of breed banks have attracted upwards of 50% of households, the remaining 40% of banked households won’t necessarily be as easy. Celent also says most of the banking industry has moved from product-centric to relationship-centric pricing, and that personal financial management capabilities have continued to play a more primary role within online banking. To work well, these services must be tightly integrated within both bill payment and online banking applications and core processors. Additionally, Celent says that expedited payments involving good funds models will surface more frequently and provide speed of payment at a competitive price and that new Web 2.0 technologies will begin to have a significant impact on future online banking applications.

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Comdata’s New Paperless Fuel Tax Service

TN-based Comdata has acquired MN-based Inter-Tax, a provider of paperless fuel tax services. The customer benefits will include fuel tax service with best-in-class automated fuel tax reporting, proprietary trip-based technology for carriers to manage out-of-route travel, toll costs, off-road refunds with fleet performance benchmarking based on the industry’s most comprehensive operational database, and complete web-based, DOT compliant log management system, which allows carriers to replace all driver logs with scanned images, completely audited and available online within 48 hours of receipt. The Inter-Tax customer base will benefit from access to Comdata’s suite of solutions including temporary permitting, pilot car procurement, licensing, paper based fuel tax, driver log auditing, driver retention, document retention and drug and alcohol testing solutions. Comdata provides electronic payment solutions ranging from credit and debit cards, gift and loyalty cards, fleet, fuel, payroll, purchasing and T&E. Inter-Tax processes more than 300 fleets and 100,000 vehicles each month.

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Diebold Imaging Solutions Cost-Effective

OH-based Diebold has introduced its “ImageWay” distributed capture solution set, enabling financial institutions to quickly implement a cost effective imaging model that minimizes the need for infrastructure investments. Complementary solutions under the “ImageWay” name include payment processing, document imaging and archiving, and compliance monitoring services. A recent report from Dove Consulting estimates that check volumes will decrease by 10 percent between 2000 and 2010 due to card usage. As a result of this declining check volume and the Federal Reserve Bank’s decision to move away from paper check processing, financial institutions are experiencing increased per item operating costs associated with check processing. Diebold reported revenue of $2.9 billion in 2006.

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First Data Expands CUP Card Acceptance

First Data and China UnionPay have inked an alliance to expand the acceptance of “CUP” cards. FDC will provide Chinese visitors to Australia access to its “Cashcard” ATM network. “CUP” cardholders now have access to more than 5,800 “Cashcard” ATMs across Australia. In addition, the companies have reached an agreement to expand their relationship to promote the acceptance of CUP cards in other markets outside China. Together, First Data and CUP will promote the acceptance of CUP cards in certain global markets at ATM locations and merchant point-of-sale locations using First Data systems. First Data will also provide transaction routing and payment processing services. At the end of 2006, 1.175 billion Chinese bankcards have been accepted via the “CUP” network. Also, 189 member institutions have issued “CUP” cards and 520,000 merchants accept the cards.

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QuikTrip to Launch its Own Debit Card

CA-based Tempo Payments and OK-based gas retailer QuikTrip Corporation have introduced a company-branded debit card that will provide customers with lower-priced gas at the pump. QuikTrip will begin a phased roll-out of a debit card that can be used at 200,000 other retail outlets nationwide that accept payments via Tempo, including Wal-Mart, Sam’s Club and CVS. QuikTrip is a marketer of motor fuel and convenience store merchandise. Tempo provides all card-accepting merchants with a low fee per transaction that is significantly less expensive than traditional credit and debit cards.

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