First Data Corp. has reported a snag in the unwinding of its processing agreement with Bank One Corp.
The Denver processor said Tuesday that they have been arguing about how much the Chicago banking company would pay for its services after their contract expires next June.
Bank One announced in March that it would move processing for its 53 million credit card accounts in-house. It also said TSYS of Columbus, Ga., would do its processing during a transition period.
At the time, First Data chairman Charles T. Fote said the contract had not paid enough.
On Tuesday his company said Bank One had asked it to keep providing services until September 2005 at the current contract rates - and that it had refused. According to their agreement, the parties must go to binding arbitration, First Data said. It gave that update in an amendment to its second-quarter filing with the Securities and Exchange Commission.
On Wednesday a First Data spokeswoman said Bank One's new system may not be ready in time. "Due to the complex nature of the portfolio they requested an extension," she said.
Bank One would not discuss the matter.
Christopher Penny, an analyst with Friedman, Billings, Ramsey Group Inc., downplayed the dispute's significance to First Data. His estimates assume the contract expires next June, he said, and have not counted on an extra 15 months.
First Data was processing 315 million card accounts at midyear. Friedman Billings expects it to be handling 341 million at yearend and 355 million by the end of next year.
"If I were First Data, I'd want to use all the capital that's tied up to support Bank One elsewhere as soon as possible," Mr. Penny said Wednesday. First Data is probably adopting an attitude of " 'If you want us to do it, we'll do it. If you don't, we won't,' " he said.
First Data cannot afford to be a "back-up generator" in case Bank One's conversion gets bumpy, he said. "The fixed costs are too high."
In a separate SEC filing Tuesday, First Data gave an update on its plan to buy Concord EFS of Memphis. The companies have been working since mid-June to compile information for the Justice Department and Federal Trade Commission, the filing said.
First Data said that it expects to submit the information by early September and be able to certify that it is in "substantial compliance" with the requests. Once the government accepts that certification it will have 30 days, under the Hart-Scott-Rodino Act, to take action on the deal.
First Data said it would appeal any order prohibiting or delaying the merger.
