OCC – Bankers Need to Rethink Consumer Debt

Acting Comptroller of the Currency Julie Williams yesterday urged bankers to alter the way they think about consumer credit. She said the focus today for lenders is not so much on consumer loans being repaid, but on the loan as a perpetual earning asset. In other words, it’s not repayment of the amount of the debt that is the focus, but rather the income the credit relationship generates through periodic payments on the loan, associated fees and cross-selling opportunities. As a result, Williams said, American households are more highly leveraged than ever. Millions of Americans faithfully make minimum payments each month and make little progress in reducing their total debt. She said the practices associated with the new philosophy of retail lending have introduced risk elements not previously present in the banking system.

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AmeriDebt Shuts Down; Transfers DMPs

The FTC yesterday announced a settlement with AmeriDebt which includes shutting down its debt management operations and transferring all existing DMPs to a third party. The order requires the Company to file a plan of liquidation with the bankruptcy court. In addition, the order contains a judgment of $170 million. The settlement does not include the FTC’s case against AmeriDebt principals Andris and Pamela Pukke and its DebtWorks affiliate. In November 2003, the FTC charged that MD-based AmeriDebt was misrepresented as a nonprofit credit counseling organization, funneling profits to affiliated for-profit entities, including DebtWorks and Pukke. In June 2004, AmeriDebt filed for bankruptcy protection. The FTC says the firm deceived consumers into paying at least $170 million in hidden fees. (CF Library 11/20/03; 6/8/04)

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GPN Q Revenues Near $200MM; Income Up 31%

Atlanta-based Global Payments reported that first calendar quarter revenues increased 20.2% to $195.5 million. Net income for the quarter ending February 28th soared 30.9% to $21.6 million. Revenues for the quarter included $14.5 million from the Company’s recent acquisitions of MUZO and Europhil. GPN says the revenue growth was primarily driven by higher than anticipated growth from Central and Eastern European operations and from its consumer money transfer channel. The company raised its annual revenue guidance for fiscal 2005 to $774-$781 million. The just-ended quarter is GPN’s third fiscal quarter. Global Payments acquired Madrid-based Europhil, a group of European electronic money transfer firms, in January. For complete details on Global Payments latest results, visit CardData ([www.carddata.com][1]). (CF Library 1/4/05)

GPN HISTORICAL
PERIOD REVENUES NET INCOME
1Q/04: $162.6mm $16.5mm
2Q/04: $181.8mm $18.0mm
3Q/04: $192.6mm $24.2mm
4Q/04: $188.5mm $16.8mm
1Q/05: $195.5mm $21.6mm
Source: CardData (www.carddata.com)

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

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WildCard Systems Deploys BladeLogic Solution

Massachusettes-based BladeLogic,Inc. announced that WildCard Systems has deployed BladeLogic Operations Manager(TM) to drive higher operating efficiency in its data centers by reducing operating costs, improving response to customers and enhancing security. BladeLogic is a provider of data center automation software. Florida-based WildCard Systems provides turnkey host-based prepaid cards and custom stored-value products for consumer and commercial applications.

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Chase Tweaks Cardholder Fees in April

Chase is implementing several changes to cardholder agreements beginning with the April billing cycle. The late fee will be $15 if the balance is below $250, and $39 if the balance is $250 or more. But if the default rate is in effect, then the $39 late fee applies regardless of the balance. The previous late fee was $35. Like other top issuers, Chase is raising its foreign currency conversion fee from 2% to 3% as VISA and MasterCard drop their 1% fee, according to CardWatch ([www.cardwatch.com][1]). Chase also says in cases where the transaction is reversed the fee may apply again. Additionally, Chase is dropping JAMS as an arbitration option. Starting in August, minimum payments will include any billed late fees and overlimit fees if the sum of 1% of the new balance plus the current billed finance charges plus the late or overlimit fees is more than $10 or 2% of the new balance.

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

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Navy FCU Cuts Costs with the PAR3 System

Seattle-based PAR3 Communications announced the Navy FCU has expanded the use of its notification solution, delivered through a partnership with TSYS. In addition to reducing costs by quickly identifying suspicious card use, the credit union now uses the hosted solution to collect past due card payments by automating “conversations’ with customers. PAR3 Communications, Inc. interactive communication solution is a blend of advanced multi-channel applications built upon enterprise software.

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Hypercom Names an Interim CFO

Arizona-based Hypercom Corporation announced the appointment of Grant Lyon to the position of Interim Chief Financial Officer. Mr. Lyon replaces John Smolak, Executive Vice President, Chief Financial and Administrative Officer. Lyon is founder and President of Odyssey Capital. Hypercom provides card payment terminals, networks, and server solutions of electronic payments in more than 100 countries.

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Card Mail Volume and Response Set Records

Response rates to direct mail credit card offers slipped to a new low last year as the volume of solicitations climbed to a new high. For 2004, Americans received 5.23 billion credit offers in the mail as the response rate hit 0.4%. The percentage of U.S. households receiving an offer each month in 2004 remained relatively flat at 71% compared to 69% in 2003. According to Synovate’s “Mail Monitor,” household penetration peaked at 79% in 2001 when issuers extended their offerings to less credit-worthy or sub-prime households. The research firm says the high level of clutter has caused response rates to drop to the all-time low from 0.6% in 2003.

CARD MAIL HISTORICAL
YEAR OFFERS RESPONSE
1998: 3.44b 1.2%
1999: 2.54b 1.0%
2000: 3.54b 0.6%
2001: 5.01b 0.6%
2002: 4.89b 0.5%
2003: 4.29b 0.6%
2004: 5.23b 0.4%
Source: Synovate’s Mail Monitor

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Perry Wins the Latest MC Charity Challenge

Kenny Perry was the CRESTOR Charity Challenge winner for his first-place standing in final round of the PGA’s Bay Hill Invitational, presented by MasterCard. For Perry’s performance, CRESTOR manufacturer AstraZeneca and the Bay Hill Invitational will donate $50,000 to the Arnold Palmer Hospital in Orlando. In addition, $50,000 will be donated to the health care charity of Perry’s choice. The CRESTOR(R) Charity Challenge is a season-long competition that recognizes and rewards the tournament leader entering the final round at 35 PGA TOUR events. AstraZeneca will donate $3.5 million to designated health and PGA TOUR charities. AstraZeneca is a $9.6 billion healthcare business.

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Online Banking Usage Explodes in 2004

A new report, “The U.S. Online Retail Banking Market”, published by Packaged Facts, reveals that online banking and bill paying provide convenience and control for one third of adults banking by computer and electronic payments exceeded check payments in 2003. However, while 61.8% of U.S. households use computers, 87.6% of those households are accessing the Internet, which limits online banking. The growth of online banking acceptance is hindered by factors such as consumer’s apprehension regarding online financial transactions. Packaged Facts, a division of MarketResearch.com, publishes research reports on a wide range of consumer industries.

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EFT/POS JAN 05

After peaking at A$7.7 billion in December, debit card EFT/POS volume made its seasonal plunge to A$6.2 billion in January. However, January’s volume was up nearly 9% over the prior year. Over the past five years debit card volume more than doubled. During January, Australians used debit cards for A$4.9 billion in purchases with 78 million transactions. Total EFT/POS transactions were 92.0 million for January according to the Reserve Bank of Australia. Over the past twelve months, Australians have used debit cards for A$74.4 billion in purchases and cash transactions. There are 25.1 million debit card accounts in the country at the end of January, compared to 24.4 million one year ago.

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