Aussie Fee Fight

VISA and MasterCard argued in The Federal Court of Australia last week that it may take up to six weeks to present their case against the Reserve Bank of Australia over new credit card laws pertaining to merchant fees. The Court has set a trial date of May 5th but will hold related hearings on November 18 and April 18, according to The RAM Report ([www.ramreport.com][1]). The card associations argue that the Reserve Bank of Australia hasn’t complied with its obligations under the Payment Systems Act, and that the proposed changes don’t meet the public-interest test required under the act. In August, the Reserve Bank of Australia released its final reforms on credit card programs which include dropping average interchange fees by 40% and lifting the restriction imposed by credit card programs which prevent merchants from recovering from cardholders the costs of accepting credit cards. Under the new RBA rules, interchange fees will decrease from around 95 basis points to approximately 55-60 basis points by July 1, 2003. The Reserve Bank’s standard on merchant pricing will come into force on January 1, 2003. The RBA also announced an end to restrictions imposed by credit card networks which limit the entry of new competitors. Specialist credit card institutions authorized and supervised by the Australian Prudential Regulation Authority will now be eligible to apply to participate in credit card programs. All the reform measures will apply to the credit card networks operated in Australia by Bankcard, MasterCard and VISA, which were formally designated by the Reserve Bank as payment systems subject to its regulation under the Payment Systems (Regulation) Act 1998. American Express and Diners Club have each indicated to the Reserve Bank that they will remove their restrictions on merchant pricing.

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

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People’s 3Q/02

People’s Bank reported that managed net charge-offs for credit cards have decreased every quarter since September 30, 2001 and managed delinquencies have been declining since June 30, 2001. From the peak level in the third quarter of 2001, managed net charge-offs improved $22.3 million, or 34%, and were $7.9 million, or 15%, lower than the second quarter of 2002. Managed delinquencies declined $3.5 million, or 3%, from the second quarter of 2002. The net charge-off rate declined by 92 basis points from the second quarter of 2002 to 5.99% for the third quarter. Managed third quarter credit card receivables totaled $2.0 billion, a decline of $18 million from the second quarter. Delinquencies as a percentage of quarter-end managed loans for the credit card services segment were 3.41%, compared to 3.56% for 2Q/02 and 4.19% for 3Q/01. For complete details on People’s third quarter performance visit CardData ([www.carddata.com][1]).

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

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Sears 3Q/02

The Sears “Gold MasterCard” topped $10 billion in outstandings during the third quarter. More than 28 million consumers now carry the Sears bank credit card compared to 17 million on year ago. Outstandings for the Sears retail credit card declined to $18.5 billion compared to $23.2 billion one year ago. Overall, Sears’ Credit and Financial Products unit had operating income of $284 million, down 28% compared to the prior year. Revenues for the division increased 4% from a year ago to $1.4 billion, due primarily to higher average receivable balance growth. The net charge-off rate for the quarter decreased to 5.55% from 5.62% last year, reflecting increased charge-offs offset by the effect of receivables growth. Year-over-year delinquencies declined 17 basis points from 7.41% to 7.24%. The domestic allowance for uncollectible accounts of $1.6 billion is 5.57% of ending credit receivables, compared with 5.10% at the end of last quarter. For complete details on Sears’ third quarter performance visit CardData ([www.carddata.com][1]).

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

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MBNA 3Q/02

The suspense over MBNA’s third quarter earnings report ended yesterday without much fanfare. Due to the new FFIEC guidance, MBNA took a $167.2 million after-tax charge, pushing down profits. Third quarter net income came in at $398.0 million, a 16.8% decline from 3Q/01. For the first time, MBNA crossed the $100 billion milestone in outstandings, a $2.8 billion increase over the second quarter. During the third quarter MBNA signed up 86 new affinity and co-branded agreements, and renewed more than 250. MBNA added 4.3 million new cardholders and 3.5 million new accounts during the third quarter. Managed charge-offs for the third quarter were 4.84% compared to 5.09% in the second quarter. Delinquency (30+ days) stood at 4.79% for 3Q/02, compared to 4.90% one year ago. Volume was $41.7 billion, a 16% gain over last year. MBNA’s net interest margin has been shrinking this year, hitting 7.66% for the third quarter, despite a re-pricing campaign launched this summer. For complete details on MBNA’s third quarter performance visit CardData ([www.carddata.com][1]).

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

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Bank One Branding

Bank One is officially burying the First USA brand name with a new ad campaign that starts tomorrow. The campaign will start with a series of 30-second television commercials scheduled to begin airing during Game One of the World Series. Bank One will spend $25 million in the fourth quarter alone to nationally advertise the array of credit card options now available from Bank One. The ads, which feature actual customers rather than actors, highlight the wide range of reward and affinity cards available through partnerships with 1,200 corporate brands, institutions and non-profit organizations. New York advertising agency The Gardner-Nelson Project developed the campaign.

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