Associates First Capital Corp. has emerged from the shadows of Ford Motor Co. to become a force for bank credit card issuers to reckon with.

Savvy purchases of portfolios and cooperation with big-name partners have pushed it into the industry spotlight. While competitors have taken note of its growth, it has come at a price.

Associates has been targeted in class actions and state investigations for alleged credit discrimination. Consumer groups have attacked the company over its pricing methods.

But the Dallas-based finance company plows ahead, steadily snapping up MasterCard, Visa, and private-label card portfolios. Associates is closing in on $7 billion of credit card outstandings, up from $2.5 billion in 1991.

Associates jump-started its credit card business in 1985, offering Visa and MasterCard products to a million customers of Amoco Oil Co. That portfolio is now up to 7.6 million accounts.

Even though cards are a small portion of what Associates does, it has climbed into the ranks of the top 20 issuers.

"We want to be a significant player in the credit card industry," said Joseph N. Scarpinato, executive vice president, credit card operations. "Returns are more important than where we are in the rankings."

Two deals that are expected to close at the end of this quarter underscore Associates' ambitions.

In January, the company agreed to buy J.C. Penney Co.'s Visa and MasterCard accounts, which will add $740 million in receivables and 500,000 accounts.

"After the J.C. Penney acquisition is completed, (acquired portfolios) will account for approximately 40% of our bank card business," said Mr. Scarpinato.

Also last month, Associates agreed to buy a private-label portfolio of 9 million accounts and more than $700 million in receivables from Texaco.

When the Texaco deal becomes final, Associates will vault from 38th to 19th place among issuers of private-label cards, with $821 million outstanding, according to The Nilson Report in Oxnard, Calif.

Despite such high-profile deals, Mr. Scarpinato said making Associates a household name is not a priority. Cards bearing Associates' brand name represent only 35% of its bank card portfolio.

For cobranding and private-label partnerships, "we feel that it is important to carry the partners' name as the lead, and our name becomes secondary," said Mr. Scarpinato. "It's their customers, and their name is more important."

This segment represent 25% of the business. Industry observers speculate that Associates will forge a cobranding relationship with J.C. Penney in the future.

The biggest challenge is "to take Associates to the next level," said Mr. Scarpinato. "We want to build an infrastructure to support a relationship with major companies."

Associates became a driving force in financial services when Ford purchased it from Gulf and Western in 1989 for $3.4 billion.

Ford sold off 20% of the finance company in a public offering last year. For 1996, Associates reported a net income increase of 19%, to $857 million.

In addition to credit cards, Associates does home equity loans, personal loans, and commercial finance.

The card division represents 13% of Associates' total business.

"This is not a company that is dependent on any single unit," said Robert G. Hottensen Jr., analyst at Goldman, Sachs & Co. in New York. "It has a diversification across product lines, geography, and information systems."

"Much of the talent is embedded in the culture, from the top down, " said Robert K. Hammer, chairman and chief executive officer, R.K. Hammer Investment Bankers, Thousand Oaks, Calif.

Mr. Hammer said Associates chairman Keith Hughes had proven himself time and again and it was no surprise that he had retained "exceptionally talented bank card managers" around him.

Mr. Scarpinato, 52, has 20 years experience in the card industry. Before joining Associates, he was president of Fidelity Investment Banking Services for two years.

He was a Chase Manhattan Bank vice president from 1977 to 1981. Then he spent six years as CEO of Beneficial National Bank USA and two more as president and CEO of Primerica Bank in Newark, Del.

During his tenure at Associates, aggressive collection tactics and risk- based pricing have been engines of success.

"Associates only enters into agreements where margins are high and typically does not offer consumers balance transfers and introductory rates," said David Robertson of The Nilson Report.

"Associates has always been a high interest rate product player," the newsletter president added. "It does not go for market share at the expense of profitability."

Like the rest of the industry, Associates faces rising delinquencies. For the last quarter of 1996, accounts more than 60 days past due rose to 4.22% from 4.18% in the previous quarter.

Mr. Scarpinato characterized the trend as "pretty consistent with industry numbers."

But Veribanc, a bank research and analysis firm in Wakefield, Mass., paints a different picture.

Among issuers with more than $100 million of assets, Associates ranked third in "serious delinquencies"-those at least 90 days past due-at 4.66% for the three months ended in September, according to Warren Heller, research director at Veribanc.

The average was 1.88%- and there were only 49 banks above that mark. First National Bank of Marin in San Rafael, Calif., had the highest rate of "serious delinquencies," followed by Mountain West Financial in Sandy, Utah.

After Associates, First Consumers National Bank in Beaver, Ore., and Dillard National Bank in Phoenix rounded out the top five.

"While none of us are pleased in terms of higher delinquency trends," Associates has "coped very well by taking the appropriate action to make sure we get through this difficult period, " said Mr. Scarpinato.

Indeed, the company is a big believer in risk-based pricing. One of the complaints from consumer groups is that Associates regularly reprices accounts as soon as it buys them, to the disadvantage of cardholders.

"Those people who are causing higher expenses should be the ones that pay. We shouldn't be applying those higher interest rates to the customers at large," said Mr. Scarpinato.

But that tactic could backfire as consumers find themselves in deeper debt.

"Everyone deals with a loss situation in their own way," said Mr. Scarpinato. "I cannot speak for the entire industry, but I think you are going to see a general uptake in interest rates."

Associates seems intent on further capitalizing on opportunities in the marketplace for portfolio acquisitions.

"Those files are going to consist of an awful lot of good customers as well as other customers that have higher risk profiles,"said Mr. Scarpinato. "But we have the experience and the expertise to evaluate those portfolios from a standpoint of risk."

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