Gift Cards Create Vulnerabilities for All

A new study calls for tighter regulation for gift cards due to the money laundering risk associated with the anonymous nature of the product and lack of control. The TowerGroup research also concludes that gift card holders are now subject to serious exposure, not only for dormancy and expiration fees, but faulty process controls which can distort value. The report titled, “Gift Cards: How to Ensure they Don’t become Drift Cards,” says consumers and financial issuers are particularly vulnerable relative to gift cards, because their product design assumes that the buyer will not usually be the end user. Also, the issuers of unbranded closed loop cards are not under the scrutiny of the OCC. The study segments the consumer vulnerabilities into three groups: consumer, merchant and fraud.

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CO-OP & CU Anytime Form a Joint Venture

CA-based CO-OP Network is teaming with NM-based CU Anytime to create CO-OP ATM Services LLC. The new entity is expected to start on April 1st. It will develop a complete package of ATM management services for credit unions ranging from owning an ATM, to managing armored carriers, maintenance capabilities and the processing of image deposits. CU Anytime is a CUSO serving 29 credit unions and 168 ATMs throughout New Mexico and portions of Texas and California. CO-OP Financial Services operates the country’s largest surcharge-free network of credit union ATMs. CO-OP also reported today a single-day processing record on December 23rd with 5.0 million, compared to 4.5 million transactions on Christmas Eve 2005.

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Third Batch of Debit Card Payments Sent

NY-based Constantine Cannon, the lead counsel for the debit card litigation, which resulted in a $3 billion settlement with VISA and MasterCard, reports it mailed out 128,000 checks last week to merchants. Of those, about 29,400 checks were $1,000 or more; 1,790 checks were $10,000 or more; 308 checks were $100,000 or more; and 40 checks were $1 million or more. This is the third round of distribution, the first having occurred in December 2005 and the second in June 2006, involving more than $650 million in claim payments. Constantine Cannon expects that the remaining claim forms involving payments for signature debit and credit card overcharges will be approved and ready for payment before the end of 2007. Also payments for online PIN debit overcharges will be made to all or most qualifying “Class Members” this year.

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CompuCredit Funds 26 Charities

Atlanta-based CompuCredit has contributed $15 million to benefit 26 organizations through its shareholder-directed philanthropic effort, the “2006 CompuCredit Corporation Charitable Designation Program”. Under the Charitable Designation Program, CompuCredit shareholders designate up to three pre-selected charitable organizations to receive a prorated share of CompuCredit’s $15 million 2006 year-end charitable contribution, based on shareholders’ holdings of CompuCredit stock. CompuCredit is a specialty finance company and marketer of branded credit cards and related financial services.

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Metavante Certified for VISA ReadyLink

Metavante has become the first certified and first operational processor supporting reload transactions on VISA’s prepaid load network, “VISA ReadyLink. On Dec. 4, 2006, the card association issued a news release in which it stated the prepaid load network allows consumers to add funds to eligible re-loadable prepaid cards at participating retail locations. According to the announcement, the service has been introduced at more than 1,550 retail locations nationwide including participating Safeway, Carrs, Dominick’s, Genuardi’s, Pak ‘n Save, Pavilions, Randalls, Vons and Tom Thumb stores. Metavante Corporation delivers banking and payments technologies to financial services firms and businesses worldwide.

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Cap One Names its Mascot of the Year

Washington State’s “Butch T. Cougar” has won the coveted title of Capital One’s “Mascot of the Year” during the halftime of the nationally televised “Capital One Bowl.” The highly anticipated announcement was made on air during halftime of the nationally televised Capital One Bowl. Butch bested 11 deeply talented (and oddly-proportioned) All-American mascots to bring glory (and $10,000) to Washington State University. Capital One Financial Corporation (www.capitalone.com) is a financial holding company, with more than 693 locations in New York, New Jersey, Connecticut, Texas and Louisiana that offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients.

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Card Portfolio Premiums Slip 63BPS in 06

After setting a ten-year record in 2005, the average premium above portfolio asset value slipped to 19.8% last year. However, the dollar value of prime general purpose credit card portfolios sold by banks and credit unions more than doubled to $90.3 billion. Additionally, the number of portfolios sold jumped from 70 in 2005 to 83 for last year, according to CA-based card broker R.K. Hammer. (The number of sales do not include about 130 smaller credit union deals.) Hammer also estimated that premiums paid for 2006 ranged from 8.3% to 32.9%, compared to 6.0% to 31.0% for 2005. Therefore, the cost per acquired account ranged from $100 to $1800 last year, compared to $60 to $400 for the prior year. Hammer has been in engaged in the sale of U.S. credit card portfolios and valuations since 1986.

CREDIT CARD PORTFOLIO PREMIUMS
(Bank and Credit Union Issued)
1986: 20.4%
1990: 18.7%
1996: 17.7%
2001: 18.1%
2002: 18.4%
2003: 18.6%
2004: 18.75%
2005: 20.43%
2006: 19.80%
Source: R.K. Hammer

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CMI Index Points to a Slowing 07 Economy

The “Credit Manager’s Index” slipped again for the fifth consecutive month in December, and now stands at its lowest level since April 2003. The latest figures suggest a slowing economy, modest holiday sales, weakness in the labor markets and weak GDP growth. The National Association of Credit Management notes that four of the Index components are now under the 50 level signaling contraction, the most since March of 2002. Furthermore, seven of the 10 components declined in December. On a year-over-year basis, the total “CMI Index”, which is seasonally adjusted, has fallen 3.6 from 58.3 to 54.7 as nine of the 10 components fell, driven mostly by deterioration in the services sector.

Credit Manager’s Index
Jan 06: 57.2
Feb 06: 57.3
Mar 06: 58.1
Apr 06: 57.5
May 06: 54.9
Jun 06: 57.2
Jul 06: 57.6
Aug 06: 57.3
Sep 06: 57.1
Oct 06: 55.3
Nov 06: 55.2
Dec 06: 54.7
Source: National Association of Credit Management

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First Federal Renews & Expands FDC Deal

First Data has renewed its agreement to provide signature debit processing for cardholders of SC-based First Federal and also names the “STAR Network” as First Federal’s primary debit network in the USA. The STAR Network serves more than 5,700 financial institutions across the United States and provides cardholders with account access at approximately 2 million ATM and retail locations. There are more than 140 million cards carrying the STAR logo. First Data Corp.’s STAR Network is a coast-to-coast electronic payments network and an expert in secure, real-time electronic transactions. First Data Corp. (NYSE: FDC) is a leading provider of electronic commerce and payment solutions for businesses worldwide.

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VeriFone Lands Three Hypercom Executives

VeriFone has added three former senior Hypercom executives to its Integrated Systems and Retail Systems management team including Walter Allen, Marty Widmann and Joe Biondi. Walter Allen, formerly general manager for Hypercom’s Multi-lane Retail Business, joins VeriFone as director of business development, reporting to Bud Waller, EVP of Integrated Solutions for VeriFone. Marty Widmann, who was responsible for solution engineering and sales support at Hypercom, assumes the same role at VeriFone, reporting to Jennifer Miles, general manager of Integrated Retail Solutions. Joe Biondi, who was the number one multi-lane retail salesperson for Hypercom the last seven years, joins VeriFone as an account executive responsible for several tier-one retail accounts and strategic partners. VeriFone Holdings, Inc. (“VeriFone”) (NYSE: PAY) is the global leader in secure electronic payment solutions.

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CheckFree Buys Carreker for about $206MM

Atlanta-based CheckFree has inked a deal to acquire Dallas-based Carreker for about $206 million. CheckFree will now expand its presence in payments processing to providing processing and risk management capabilities for ACH, check and cash. Carreker provides payments technology and consulting services for more than 250 clients in the United States, United Kingdom, Ireland, Continental Europe, South America, and Australia. The company recently reported annual revenues of $116.6 million. Together, the combined organization will also serve substantially all of the top 100 U.S. banks.

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GPN and Way Systems Roll-Out Mobile Processing

Atlanta-based Global Payments has rolled-out a mobile processing solution using the WAY Systems “Mobile Transaction MTT 1556 Credit/Debit terminal.” The product combines a traditional POS terminal with a mobile phone. The WAY Systems mobile device accepts both credit and PIN-based debit card transactions, utilizing a network of wireless carriers and connecting to Global Payments through the Cingular “GPRS Wireless Network.” The WAY Systems “MTT 1556” terminal enables mobile merchants to accept payment through a simple card swipe and thus qualify for the interchange rates associated with such transactions, as compared to higher interchange rates often incurred by mobile merchants for transactions involving key entry or manual imprint of the card number. It also features an infrared (wireless) printer.

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