Creditrust Corp., which buys delinquent credit card accounts from banks and tries to collect the debts, plans to issue credit cards of its own through a bank it has agreed to buy.
Creditrust says it will pay $2.3 million in cash for the banking subsidiary of United Companies Financial Corp., the subprime mortgage lender. United Cos. filed Chapter 11 in March and has been selling noncore businesses to raise money to pay creditors.
Baltimore-based Creditrust said it will move the bank, United Credit Card Bank NA, from Baton Rouge, La., to Delaware and will rename it Creditrust National Bank.
The deal is awaiting regulatory and bankruptcy court approval.
United Cos. formed the bank in 1997 so it could offer MasterCard credit cards to home equity loan customers. A few months ago, 95% of the card portfolio-which had $8 million in receivables-was sold to Key Bank and Trust, a subprime credit card issuer in Havre de Grace, Md. Once the deal closes, Creditrust will get the rest.
Key Bank and Trust, which also issues credit cards for Creditrust, was the matchmaker between Creditrust and United Credit Card Bank, said Joseph K. Rensin, the chairman and chief executive officer of Creditrust.
Creditrust has hired Thomas J. Juranich, the president of Key Bank and Trust's credit card operations, to be president of Creditrust National Bank.
After the deal closes, Creditrust's agent bank relationship with Key Bank and Trust would "wind down," Mr. Rensin said.