SAN DIEGO - Bank Plus Corp. in Los Angeles announced Wednesday that it has a definitive agreement to sell its money-losing MMG Direct Inc. subprime credit card portfolio to an unnamed international financial services company.
The buyer of the $78.4 million portfolio is also to acquire a credit card processing center in Beaverton, Ore. Bank Plus, the parent of Fidelity Federal Bank, estimates the loss on the sale of the center and other transaction costs to total about $4 million.
The buyer will also service Bank Plus' $77 million American Direct Credit Inc. card portfolio and has a one-year option to buy the second portfolio. Together, the two portfolios accounted for 92% of Bank Plus' credit card assets.
The $2.4 billion-asset thrift company's foray into the credit card business was fraught with losses as well as lawsuits from disgruntled credit card holders. In 1998, the company lost $56 million in its card business, and in 1999 the division lost $24.9 million. Additionally, Bank Plus was hit with about 100 consumer lawsuits in Alabama and another 60 in Mississippi which claimed that third-party sales representatives of an affinity credit card program, the now defunct American Direct Credit Inc. of Boise, Idaho, made misrepresentations about the card.
"We have executed definitive agreements for all of the Alabama lawsuits," said Neil L. Osborne, a Bank Plus spokesman, adding that the company is settling the lawsuits for $4 million. The Office of Thrift Supervision "has approved nearly all of the agreements, and we expect their non-objection of the remaining agreements soon."
Bank Plus has been trying to sell the subprime credit card portfolio since late 1998 and talked to more than two dozen potential buyers before making a deal. Mr. Osborne said the sale of MMG will substantially reduce its losses.
"This sale represents nearly half of the total portfolio, so we certainly view it as a positive step," he said.
To improve its capital position, Bank Plus is also unloading some branches. This year it sold three of its Fidelity branches in Big Bear, Blue Jay, and Fullerton, Calif., which together had about $172 million in deposits, to Jackson Federal Bank of San Bernardino, Calif.