Consumers Need to Apply for Foreign Exchange Fee Refunds

Alameda County California Superior Court Judge Ronald Sabraw issued a tentative decision yesterday that requires consumers to file a claim to receive refunds of credit card foreign exchange fees charged by VISA and MasterCard. The judge ordered the card associations to enlist their 30 largest member banks to include bill stuffers in regular monthly billing for three consecutive months. The plan to shift the burden of reimbursement to consumers was proposed by the two card associations. However, VISA and MasterCard are confident that Sabraw’s April ruling that they violated California’s unfair competition law, will be overturned on appeal. In April Sabraw ordered VISA, which is headquartered in California, to refund the one percent currency conversion fees to all cardholders in the USA who paid the fees from February 15, 1996 to the present. MasterCard, which is headquartered in New York, was ordered to refund the currency conversion fees to all its California consumers who paid the fees during the same period. (CF Library 4/9/03; 9/11/03)

Details

Card ABS Solid Despite Sub-Prime Early Amortizations

The early amortizations in the sub-prime segment has tarnished the image of credit card asset-backed securities. However, Fitch Ratings says the ABS segment remains strong. Fitch says issuance for credit card ABS remains solid totaling $44.8 billion in the first half of this year, compared to $44.9 billion during the same period in 2002. Top tier issuers continue to enjoy uninterrupted market access at good execution levels, but less frequent issuers and those with portfolios concentrated in the higher-risk, sub-prime segment face much greater challenges, in many cases forced to execute more expensive transactions with more restrictive terms. Fitch’s outlook on the prime credit card ABS segment remains stable and future negative rating activity is expected to be very limited. Despite continued pressure on industry yields and weakening credit quality metrics, excess spread for this segment remains strong. Fitch’s rating outlook on the sub-prime ABS segment remains negative. According to Fitch’s “Sub-Prime Index,” sub-prime charge-offs totaled 18.01% for the June 2003 collection period, compared with 15.13% a year ago and 12.01% in 2001. Positively, late-stage delinquencies (60 days or more) appear to have leveled off in recent months, albeit at high levels.

Details

Delinquency and Charge-Offs Stabilize Among Card Bonds

Charge-offs remained stable, but relatively high at 7.2%, among credit card-backed securities during July. Delinquencies also remained stable at 5.1%, the same level as one year ago. Yields have appeared to have leveled off in the 17% range, and the payment rate has remained consistent and strong in the 15% to 17% range, according to Standard & Poor’s “Credit Card Quality Index.” The average charge-off rate of 7.2% for June and July 2003 follows a three-month period in which charge-off rates averaged 7.5%, the second highest historical charge-off rates experienced by the master trusts followed by S&P. On a comparative basis, the 7.3% average charge-off rate for 2003 (year-to-date through July) is 30 bps higher than the 2002 average of 7.0%. However, overall charge-off rates have been relatively stable since the March 2002 peak of 7.6%, ranging from 6.5% to 7.5%. The 30-plus delinquency levels have remained relatively stable in the 5% to 5.5% range, and are currently at their lowest levels since July 2002. However, the overall delinquency trend in the 60- and 90-plus buckets continues to rise. Both the 60- and 90-plus delinquency buckets reached historical peaks in May 2003, posting delinquency rates of 4.4% and 2.9%, respectively. While each of the delinquency buckets improved modestly in July, the 5.3%, 4.1%, and 2.5% average delinquency rates (for the 30-, 60-, and 90-plus delinquency buckets, respectively) for 2003 (year-to-date through July), compared to 2002 averages of 5.3%, 3.6%, and 2.0%, respectively.

Credit Card-Backed Securities Performance
Month July 2001 July 2002 July 2003
Yield: 19.9% 18.8% 17.8%
Payment rate : 16.3% 16.1% 16.8%
Charge-offs: 6.6% 6.8% 7.2%
Delinquencies : 5.0% 5.1% 5.1%
Source: Standard & Poor’s Credit Card Quality Index

Details

InfiCorp Nails Principal Card Portfolio

Atlanta-based InfiCorp Holdings has acquired Des Moines-based Principal Bank’s $23 million credit card portfolio. Principal, part of the Principal Financial Group, also signed a credit card agent agreement with InfiCorp. The Principal Financial Group has $116.3 billion in assets under management and serves some 13 million customers worldwide. InfiCorp Holdings is a wholly owned subsidiary of First National of Nebraska. The firm has been actively acquiring smaller portfolios, mostly from credit unions. OR-based AssetExchange facilitated the Principal transaction and many of the prior acquisitions.

Details

American Express Launches a Special Starwood Promotion Next Week

American Express announced yesterday it will launch a special promotion September 15th to enable “Starwood Preferred Guest Credit Card” users to earn up to 5,000 bonus “Starpoints.” Under the promotion, cardholders who use their card to spend $100 or more at Starwood properties can earn 500 bonus points and those who spend $1,000 or more can earn 5,000 bonus points. The bonuses are based on cumulative spending, with cardholders earning either 500 or 5,000 bonus “Starpoints.” The special promotion ends November 15th. The “Starwood Preferred Guest Credit Card from American Express” offers one “Starpoint” for every eligible dollar charged for non-Starwood purchases and three “Starpoints” for every eligible dollar charged at participating Starwood hotels.

Details

VISA Check Card Volume Up 16% in 2Q/03

VISA reported yesterday that off-line U.S. debit card volume increased 20% during the first half of this year, even though overall U.S. consumer spending grew by only 4.8% during the same period. For the second quarter VISA’s check card volume was up 16.1% to $111.5 billion, while 2Q/03 credit card volume grew 4.6% to $158.8 billion, compared to one year ago. This means that off-line debit card volume makes up nearly 40% of VISA’s total U.S. dollar, based on second quarter results. VISA noted that during the first six months of 2003, consumers used their VISA check cards to spend $8.9 billion on the Internet, with e-commerce volume in the second quarter growing 7.5% over the first quarter. During the second quarter, U.S. consumers used a “VISA Check Card” to make $74.6 billion in purchases and $36.9 billion in cash advances. VISA processed 2.4 billion total debit card transactions during the second quarter, a 15.8% increase over last year. At mid-year, VISA had 136.6 million off-line debit cards in-force attached to 104.3 million accounts. For more details on VISA’s 2Q/03 results visit CardData ([www.carddata.com][1]).

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

Details

HOLT RENFREW CARD

The first specially designed “Holt Renfrew Card from American Express” was unveiled yesterday in Toronto. Holt Renfrew and American Express announced in early August plans to develop a suite of co-branded credit cards to replace Holt Renfrew’s store credit card. The first card was designed by Italian fashion designer Roberto Cavalli. The card displays a one of a kind silk gown created by Cavalli’, with an estimated value of US$4,000. Cavalli is known for his eclectic and highly original designs. The card includes the new “Holt Renfrew Rewards” program that allows customers to collect one “Holt Renfrew” point for virtually every dollar spent anywhere. Plus, when the card is used at any Holt Renfrew location, cardholders receive 40% more points for every dollar charged.

Details

Splitska Banka Deploys Euronet’s Credit Card Software

Croatia’s third largest bank will implement Euronet’s “Integrated Credit Card” software in conjunction with Euronet’s “Debit Card System” and “Merchant Management System.” Splitska Banka, a member of HVB Group and the leading VISA bank with 300,000 customers, selected the Euronet card and merchant software packages to accommodate a comprehensive electronic funds transfer business with ATM, POS, debit and credit card solutions. Euronet also has HVB partnerships in Germany, Poland and the Czech Republic.

Details

California, VISA and MasterCard to Discuss Foreign Exchange Fee Refunds

VISA and MasterCard are reportedly scheduled to appear in California Superior Court today to detail their plans to refund more than $800 million in foreign currency conversion fees to cardholders. In April, Judge Ronald Sabraw found that VISA and MasterCard violated California’s unfair competition law by failing to adequately disclose the currency conversion fees they have charged to U.S. cardholders. VISA, which is headquartered in California, was ordered to refund the one percent currency conversion fees to all cardholders in the USA who paid the fees from February 15, 1996 to the present. MasterCard, which is headquartered in New York, was ordered to refund the currency conversion fees to all its California consumers who paid the fees during the same period. (CF Library 4/9/03)

Details