The FDIC has begun notifying Net 1st MasterCard cardholders that their accounts are being closed. As a result, CO-based Equitex and its FL-based subsidiary, Key Financial Systems, said this morning they will not be able to transfer the portfolio, which holds about $5 million in secured card deposits, to a successor financial institution. However, the companies say that they are in active discussions with a number of current credit card issuers for a potentially new âPay-As-You-Goâ credit card program to be marketed and serviced by Key.
FL-based Net First National Bank was closed March 1st by the OCC with the FDIC named as receiver. The bulk of the assets were taken over by Bank Leumi USA. Net First and Key, issued the “Net 1st MasterCard,” under which consumers receive a credit card with a $500 balance. Cardholders make a $15 monthly payment, of which $8 is applied to the monthly fee and $7 is deposited with the bank as a useable or refundable credit. Atlanta-based Impulse Marketing says more than 500,000 consumers signed up for the sub-prime MasterCard. The OCC said Net First National Bank failed to comply with 19 of the 20 articles in a enforcement action taken 18 months ago. The enforcement action required the bank to stop marketing its âPay-As-You-Goâ or “Net 1st MasterCard” credit card product until it proved the program was in compliance with all applicable federal and state laws, including consumer protection laws. However the OCC said last week that Net First complied only with Article 8 of the consent order which prohibited new written or oral contracts or commitments with third parties to perform services or provide products that directly or indirectly obligated the bank to pay on an annualized basis an amount equal to or exceeding $10,000. (CF Library 3/4/02; 3/5/02)Details