Class Act

The merchants’ counsel said Monday it is ready to give notice to the class members and proceed to trial in its debit card lawsuit. Constantine & Partners also said most of the key legal issues have already been decided against VISA and MasterCard in the U.S. Goverment’s antitrust case, which was won by the Government last year. Constantine & Partners says under the legal principle of collateral estoppel, the decisions in the already-decided U.S. case will likely be applied in the merchants’ case. The class-action lawsuit, filed by Wal-Mart, The Limited, Sears Roebuck, Safeway, Circuit City, three trade associations — the National Retail Federation, the International Mass Retail Association and the Food Marketing Institute — and 13 other large and small retailers, charges VISA and MasterCard with violating U.S. antitrust law by attempting to monopolize the debit card market and forcing merchants to accept off line debit cards, which carry a much higher transaction fee than online PIN debit transactions. The class action is expected to cover upwards of four million merchants. Constantine & Partners expects the trial to begin early next year.

(off-line or signature-based debit cards)

Dollar Volume 2001 2000 1999 1998 1997
VISA $324.0b $239.3b $183.8b $134.7b $ 93.7b
MasterCard $ 96.7b $ 62.6b $ 48.2b $ 35.1b $ 16.8b
TOTAL $420.7b $301.8b $232.0b $169.8b $ 110.5b
Source: CardData (


FIC & HNC Merger

Fair, Isaac and HNC Software confirmed this morning they have received a request for additional information from the U.S. DOJ relating to their proposed merger. The companies said they intend to respond promptly and noted that a second request extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 during which the DOJ is permitted to review a transaction. However, the companies continue to anticipate the merger will close in the third calendar quarter. On April 29, Fair, Isaac and HNC Software announced plans to merge in a deal valued at $810 million. Under the tax-free merger agreement, HNC stockholders will end up owning approximately 35% of the total outstanding capital stock of the merged company. The merged company will operate under the Fair, Isaac name and Tom Grudnowski will remain the CEO. (CF Library 4/29/02)


Credit Pace

Revolving credit for this year continues to reach new highs, but growing at half the pace of 2001. During April, revolving credit, 90% of which is credit card debt, topped $711 billion, According to figures released Friday afternoon by the Federal Reserve, revolving consumer credit is growing at an annual rate of 7% compared to 14.2% for April 2001. On an actual dollar basis, Americans added $4.2 billion to revolving credit in April 2002 compared to $9.4 billion one year ago. At the end of April 2002, American consumers were $1.698 trillion in debt, exclusive of home mortgages.

Apr 02 Mar 02 Feb 02 Jan 02 Dec 01 Nov 01 Oct01
GRWTH: 7.0% 4.1 2.2 1.8 -9.7 12.7 -7.1
$OWED: $711.5b 707.3 705.0 702.4 692.4 698.0 686.4

Sep01 Aug 01 Jul 01 Jun 01 May 01 Apr01 Mar01
GRWTH: 0.6% -2.2 -3.7 2.1 4.5 14.2 11.9
$OWED: $692.7 693.5b 698.1 700.3 699.0 697.6 688.2

Source: Federal Reserve; revised figures as of 06/07/02;
For complete historical data visit CardData (



Mosaic Software launched PostCard, a complete debit card management and issuer services system. PostCard integrates with the Postilion Realtime Framework to enable processors to service any number of issuers, each with potentially very different requirements. With PostCard, operators on card issuers’ premises can define new cards, update existing cards and delete existing cards. The product also runs a card production staging process on a regular basis, allowing files to be built for the production of payment cards. The files can be used by the PostCard owner or by an independent card production company for the encoding of magnetic-stripe cards or personalization of EMV smart cards.


Personalized Rewards

Diners Club has introduced the Personalized Rewards program for cardholders with more than 100,000 points, about 20% of its portfolio. Diners Club also offers the flexible option to redeem points for more than just airline miles. Issued in more than 200 countries and 54 local currencies, Diners Club serves more than 8 million Cardmembers worldwide who, in 2001, charged more than $31 billion.


Consumer Pulse

A recent survey released by Cambridge Credit Counseling Corporation found that 79% of consumers say that if the new bankruptcy law were enacted, they would be less likely to file for bankruptcy if they were in a position to do so. Cambridge representatives also asked callers for the primary reason that they found it necessary to get help with their debts now. Of the 1598 people who answered, 27% said they were frustrated with high bank rates and fees, while 25% said their income has been reduced from a lower salary, less overtime or layoff.


Memorable Moments

MasterCard International has teamed up with Major League Baseball to create the “Memorable Moments” program which includes a sweepstakes that gets underway July 9th. It is the largest and most comprehensive sports marketing program that major league baseball has ever done. Consumers using their MasterCard card from July 9th through September 20th, will automatically be entered to win a once-in-a-lifetime opportunity to participate in the “Memorable Moments” celebration at the 2002 World Series. The program also gives fans the opportunity to vote on baseball’s “most memorable moment” via in-stadium balloting and on The “Memorable Moments” program will build on MasterCard “Priceless” ad campaign. The “Memorable Moments” program will be unveiled to a national television audience during the All-Star Game Pre-Game Show on FOX July 9th. Barry Bonds will be the lead spokesman. To date, more than 150 members and 350,000 merchant locations have signed on to take part in the integrated marketing program supporting “Memorable Moments. MasterCard has been the Official Card of Major League Baseball since 1997.


NextCard Bidding

The FDIC has received bids from four firms for NextCard’s $1.9 billion bank credit card portfolio. The defunct issuer’s credit card-backed securities were also downgraded Friday as the 90+ day delinquency rate within the collateral pool hit 4.37%. The FDIC is now in the process of establishing a final bid proposal for the four finalists. The NextCard portfolio consists of $1.2 billion in securitized receivables and approximately $700 million in bank owned receivables, according to CardData ([][1]). Standard & Poor’s Friday revised its CreditWatch status on all classes issued by NextCard Credit Card Master Note Trust’s asset-backed notes series 2000-1 and series 2001-1 to CreditWatch with negative implications from CreditWatch with developing implications. S&P says it is concerned about the deteriorating excess spread rate and the rising delinquency. S&P says the probability of both NextCard series breaching their respective base rate triggers during the next few months is likely, especially if the FDIC fails to complete the sale of the trust receivables in the near term. The OCC closed NextBank on Feb. 7th and the FDIC was appointed the receiver. NextCard tried to find an acquisition partner after regulators determined last year that the bank was undercapitalized. The OCC said NextBank was classifying some delinquent accounts sold into a securitization trust as fraud losses, although the delinquencies were actually attributable to credit quality problems. These assets were being repurchased by the bank at par, a practice that constituted sale of assets with recourse. The OCC also found significant accounting adjustments and the need for additional loan loss reserves which resulted in the bank being undercapitalized. In January, NextCard notified the OCC that it was not possible to prepare and submit a “Capital Restoration Plan,” and said liquidation of the bank’s assets would not raise enough money to retire, in-full, the bank’s existing and anticipated liabilities. (CF Library 2/8/02; 2/11/02; 3/14/02)



New Client Service Model

First Data said Friday it is implementing a new client service model for its credit card segment next month. Two new service components, Client Advocate Teams and Topical Teams, have been created. Both build on First Data’s Response Center, which is, and will continue to be, client’s first point of contact for resolving inquiries and issues. Client Advocate Teams will typically be comprised of two to five First Data service experts who will handle financials, relationship management, consulting/product sales, and virtual service team management (issue escalation, SIA monitoring, invoice reconciliation, SE&A tracking, etc.). There are six Topical Teams: Cardholder Communications, Risk & Collection, Data Delivery/Implementation & Testing, Core/URM, Development, and Latin America. First Data Topical Team members have been selected based on their knowledge, expertise and skills in handling client issues related to these areas. The end result of these changes will be increased client access to more knowledgeable First Data personnel, more in-depth training opportunities for First Data staff, and a Client Development Team that will be able to provide better service.


Best Buy GlobalSTORE

Best Buy has selected Fujitsu’s GlobalSTORE software for its POS applications, and has begun implementing the software in more than 1,300 Musicland Group stores, including Sam Goody, Media Play, Suncoast, and On Cue. The GlobalSTORE rollout began in April and will be completed in late 2003. The software will support 7,000 POS terminals. Best Buy has been a Fujitsu customer since 1997.