Md. Bad-Debt Buyer Offers Secured Visa Cards

Creditrust Corp., which buys delinquent credit card debt from banks, has begun offering credit cards of its own.

A new subsidiary, Creditrust Card Services, has teamed up with Key Bank and Trust of Havre de Grace, Md., to issue secured Visa cards.

Key Bank and Trust, formerly Key Federal Savings Bank and no relation to KeyCorp of Cleveland, is a pioneer in the secured card business, having issued such cards for more than a decade.

Creditrust is looking for prospects among its 1.5 million customers- whose card accounts are more than 180 days past due-and plans to solicit new customers from lists of people banks have turned down for credit cards. "This is a clear example of a company being able to capitalize on its extensive data base," said John B. Keefe, an analyst at Keefe, Baker Watts.

Baltimore-based Creditrust's principal business is collections. It recently began an incentive program, asking some customers to transfer their delinquent balances to an unsecured MasterCard from Key Bank. New credit becomes available as the previous debt is paid down.

The Key Bank Visa does not require a balance transfer. Because the card is secured by a deposit, Creditrust bears virtually no credit risk, said NationsBanc Montgomery Securities analyst Stephen G. Moyer.

The program was begun three months ago, and "response rates have been fairly high," Mr. Moyer said.

To head the new card services unit, Creditrust has hired Scott J. Nelson, formerly of Automatic Data Processing Inc., the leading payroll processor.

Mr. Nelson, Creditrust's president of credit cards, once was vice president of card member operations at First USA, now a Bank One Corp. subsidiary.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER