A unit of Equifax Inc., a leading credit reporting agency, is planning to announce today that it has signed a three-year contract to provide a bankruptcy notification service to MasterCard International and Visa U.S.A. member banks.

The program, to begin in September, is seen as a significant enhancement of the Issuers Clearinghouse Service, which the card associations jointly set up

in 1988 to combat fraud in credit card applications.

Bankruptcy fraud, including card applications from people who have filed for bankruptcy protection, is believed to cost the credit card industry more than $1 billion a year.

In addition to ferreting out applicants who have filed with a bankruptcy court, the Equifax service is designed to speed notification to card issuers when a cardholder files for protection.

Atlanta-based Equifax Financial Information Services will take bankruptcy court data gathered for Visa and MasterCard by other vendors, and match it against information in account files and applications. Bankruptcy notifications will then automatically go to MasterCard and Visa issuers via the Issuers Clearinghouse Service.

Equifax officials said they beat out TRW Information Services of Orange, Calif., and Trans Union Corp. of Chicago to win the contract.

Focus on Prevention

Brian G. Olsen, vice president of member profitability at MasterCard, estimated that as many as 35% of bankruptcy filings may, be fraudulent or abusive. Card issuers prefer to focus on bankruptcy prevention, because the debt-collection process on card accounts is costly and time-consuming.

Once the new system is up and running, issuers will receive notification of bankruptcy filings by cardholders within 72 hours, said Jeffrey Dodge, senior vice president of Equifax.

Currently, it can take weeks for such word to reach a card issuer, and errors in court documents often prevent lenders from ever learning of a filing, he said.

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