Credit

The Bank of Israel has ordered Israel Credit Cards-Cal Ltd. to compensate customers who failed to receive proper information about relatively high interest rates and monthly repayments for credit cards, the country’s central bank says in a statement. The ruling applies primarily to customers who canceled or stopped using “Active” cards within six months of first use. Central bank officials say they issued the order after receiving complaints from the issuer’s customers. The issuer did not provide immediate comment. Active cards carry an average annual interest rate of 14.4%, the central bank says. Other cards typically carry lower rates, the bank says. Customers who failed to contact the issuer to negotiate card-repayment details were “subject to a minimum repayment determined by the company, and the remainder [would] be carried into the coming months at a high interest rate,” the central bank says in a statement. “Furthermore, the rate of interest charged on the credit cards was only brought to the attention of the customers at a later stage and only after they used the card for the first time.” According to the bank, the card company informed its customers about the interest rate only at the time of their first monthly statement and not before they used their cards. The central bank did not say how much customers will be compensated. The issuer must publish more information about interest rates, the amount of monthly repayments and dates of monthly payments, the central bank says.

Merchants processing from 1 million to 6 million MasterCard transactions no longer have to meet a Dec. 31, 2010, deadline to have a third-party security assessor perform an onsite assessment of their payment networks for compliance with Payment Card Industry data security standards unless they want to do so voluntarily, according to a MasterCard spokesperson. This is a reversal from a policy MasterCard contained in an Aug. 17 Site Data Protection program document that would have required such so-called Level 2 merchants to pay for a qualified security assessor to audit their compliance by Dec. 31, 2010. Now MasterCard has moved the compliance deadline to June 30, 2011, and made the onsite assessment optional. Level 2 merchants will be required annually to complete a self-assessment questionnaire and perform quarterly network-security scans of their systems. Merchant employees completing the self-assessments must have completed Payment Card Industry Security Standards Council training and pass the council’s accreditation program, according to a MasterCard Dec. 15 Global Security Bulletin. The Aug. 17 summary of changes to MasterCard’s Site Data Protection program said the earlier change was designed to aid the “consistent application and implementation of [data security-standard] requirements.”

Capitalizing on the gold-investing craze, a U.S. startup this week said it is seeking banks interested in issuing a consumer credit card backed by gold bullion. Boca Raton, Fla.-based Gold Solutions Marketing Inc. says its new Gold Bullion Credit Card would be secured by credit lines tied to cardholders’ gold. Prospective customers with gold may ship their coins or bullion, ensuring it is registered and insured with United Parcel Service, to Gold Solutions Marketing, which would store it as collateral in a secure vault. The company then would provide customers with a line of credit equal to the value of their gold in the vault. The card “could unlock millions of dollars in capital” as credit card issuers tighten credit lines for traditional credit cards, says Jeffrey Silver, Gold Solutions Marketing vice president of marketing and card development. “Gold trading and investing has always been popular, but during the last 24 months it has been a big trend. Our product would enable people to continue investing in gold while using that value as a source of revolving credit,” Silver says. Gold Solutions Marketing has contracted with CardWorks Inc., a credit card services company, to issue Visa or MasterCard credit cards through participating banks. Gold Solutions has not yet announced any banks or an official launch date for the card, but it is gathering the names of interested customers through a Web site. One analyst says a gold bullion-secured credit card sounds more like a marketing gimmick than a new lending strategy. One has to wonder “why a prospective borrower would care if the credit card loan assets are backed by gold or plain old U.S. greenbacks,” says Scott Strumello, an associate at Auriemma Consulting Group. “In the end you can still borrow against (these assets), and the result is the same.”

Monitise PLC, the British mobile banking vendor, says it plans a broader push next year into mobile retailing, initially in the United Kingdom, then across Europe and in the United States.

Banks are scrambling to find new footing as lawmakers and regulators undermine one of the industry's profit foundations: consumer fees.

Financial institutions of all types are facing regulatory changes on a scale not seen in decades. These changes touch upon everything from mortgage lending to soliciting college students for credit cards.

MoneyGram International Inc. said Monday that it is working with Smart Communications Inc., a unit of Philippine Long Distance Telephone Co., to launch a mobile phone money transfer service in the Philippines, reports American Banker. MoneyGram agents in San Diego and Hong Kong are testing the service starting this week. Consumers in those locations can visit agents to send money to people in the Philippines that have a Smart Money account on their mobile phones. MoneyGram, of Minneapolis, separately has more than 7,000 locations in the Philippines and allows users there to receive payments in U.S. dollars. "This partnership gives MoneyGram access to more than 39 million Smart subscribers in the Philippines and extends the benefits of our safe and reliable money transfer services to a new category of consumers," John Hempsey, executive vice president for MoneyGram's Europe, Middle East, Africa and Asia-Pacific regions, said in a press release Monday.

HSBC Merchant Services, a United Kingdom-based subsidiary of Atlanta-based Global Payments Inc., announced today that the BHF-BSSA Group Trade Association will refer its 7,000 small and midsize independent retailers to HSBC for their payment card processing. The British Shops & Stores Association, a 3,300-member group that merged in September with the 3,700-member British Hardware Federation to form the trade group, previously had referred its members to HSBC Merchant Services. The UK-based trade group says on its Web site that merchants using HSBC Merchant Services will get a processing rate of 1.195%. Merchants that switch to HSBC Merchant Services also receive three months of free payment terminal rental, according to the trade group.

Philippines officials expect soon to release a set of implementing rules for the use of alternative electronic devices, such as mobile phones, to pay taxes and to conduct other government transactions, according to an official at the country’s Department of Trade and Industry. The rules would alleviate the need to go to a bank to make such payments. The official, who requested anonymity, says the department is finalizing the guidelines. Under the draft proposal, government agencies that have an e-payment facility could charge clients a fixed fee when using a mobile phone or other alternative-payment channel. “Once established, these rules will guide government agencies on how to accept payments from credit cards, cash cards and mobile wallets …,” the official adds. According to the official, work on these rules began in earnest in October 2008, and the department expects to finish the task in January. “A public hearing was held last week in this regard to take feedback from industry participants,” he says. “The completed set of rules, if passed, will be then issued as an administrative order by the [Department of Trade and Industry] and the Department of Finance.” The rules would take effect during the first quarter. Philippines government agencies already are supporting online transactions, though the final payments are made offline, according to a local news report.

Banks in Sri Lanka will reduce their credit card interest rates, an official from the 15-member Payment Card Industry Association of Sri Lanka says. “This decision has been taken after the Central Bank of Sri Lanka expressed concern last week that card issuers were not bringing down rates even though there was some margin available,” he says. According to the official, interest rates on credit cards have remained between 33% and 48% since December 2008. “The central bank asked for banks to lower rates to between 24% and 36%,” he adds. “Banks will follow this suggestion and bring down rates to a minimum of 24% to maximum of 36% beginning this January.” Sri Lankan banks issue some 1 million credit cards.

Bank Islam Malaysia Bhd will not absorb the planned service tax on credit cards that the government will impose next year, the Kuala Lumpur-based bank announced this week. In a statement, the bank said it already has offered other incentives for its credit card customers and does not see the need to absorb the tax. The Malaysian government announced in its 2010 budget it will impose a 50 ringgits (US$15 or 10 Euros) tax on primary credit cards and a 25 ringgits tax on supplementary credit cards. Previously, one other bank, Malayan Banking Bhd, had announced that it, too, will not absorb this tax. That announcement came during the same week the government announced that new credit and charge card holders next year will have to pay the service tax up front. However, existing cardholders will have to pay the tax on the anniversary date of when they received their cards. A survey from local business daily StarBiza also found that such banks as Citibank and RHB Bank were against absorbing the tax. The survey also found that banks are willing to waive annual fees or allow cardholders to use their reward points to pay for the tax.

American Express Co. has introduced an online invoicing and payment service aimed at small businesses, reports American Banker, a CardLine sister publication. The company's AcceptPay, announced Monday, enables businesses to produce, send and track invoices electronically. Clients can pay with credit and debit cards, checks, electronic debits and other methods. AcceptPay is offered through AmEx's Open unit, which targets small-business clients. AmEx said the service could help users get paid faster and comes at a time when many clients are slower in paying, resulting in cash flow problems at some small businesses. According to AmEx research, 60% of small-business owners have cash flow concerns, and many say that improving collections is an effective method to improve cash flow. Businesses need not have AmEx cards to sign up for the service. There is no setup fee for AcceptPay, and users pay $20 per month. "At a time when every dollar counts, business owners need tools and resources to help them better manage their firms' finances, and that is why we created this innovative payment collection" service, Mary Ann Fitzmaurice Reilly, a senior vice president with AmEx's Open unit, said in a press release.

Australian consumers continue to increasingly embrace debit cards, while credit card activity remains flat. Consumers made 177.2 million debit card transactions in October, up 15.2% from 153.8 million a year earlier, according to the Reserve Bank of Australia. Debit card sales volume increased 12%, to AU$12.1 billion (US$10.6 billion or 7.4 billion euros) from AU$10.8 billion. Credit and charge card holders made 127.3 million transactions in October, up 1.2% from the 125.8 million during the same month last year. Sales volume on those cards fell 1.5%, to AU$19.1 billion from AU$19.4 billion. Consumers in October repaid AU$19.6 billion in card debt, down 1% from AU$19.8 billion a year ago. Australia has at least 14.4 million credit cardholders and 31.2 million debit cardholders, the central bank says.

MasterCard Europe earlier this month said is considering taking legal action against a bill the Hungarian parliament approved Monday that would limit bankcard transaction commissions, report Dow Jones. "The legislation will affect negatively the development of electronic payment solutions in Hungary and also all players of the bankcard market, including cardholders, retailers and banks," MasterCard said in a release Tuesday. The company also questioned the parliament's decision as it came without public consultation or a preliminary study of the impact, it added. The bill limits the interchange fee on debit card transactions at 0.3% of the value paid, capped at 53 cents per transaction. For other bankcard transactions, the limit is 0.8% of the value paid. The bill also limits transaction fees related to point-of-sale terminals to 2% of the transaction value.

Advanta Corp., the small-business credit card lender that has filed for bankruptcy, said in a regulatory filing Monday that defaults fell to 34.36% in November, from 34.99% the previous month.

Relatively few consumers in the United Kingdom own a charge card, but such a product soon could begin to grow in popularity as consumers shift their spending behaviors and issuers alter their card offerings, Auriemma Consulting Group suggests in a report issued this week.

Ever wonder what your friends just bought with their credit card? What they just downloaded from iTunes? If you do, then Twitter believes its has the answer.

NCR Corp. paid $21 million in severance to laid off workers during the first nine months of the year as part of the global realignment of the company’s ATM manufacturing, according to a U.S. Securities and Exchange Commission filing. The Duluth, Ga.-based company terminated approximately 900 workers in the Americas, Europe, Middle East and Africa, Asia Pacific and Japan between Jan. 1 and Sept. 30, according to the filing. The layoffs eliminated redundancies and freed up funds to invest in growth programs such as sales, engineering and market development. NCR expects the layoffs to generate approximately $40 million in annual savings, the company says. NCR, world’s largest ATM manufacturer based on annual shipments, employs 26,000 workers worldwide, but the company has announced plans to cut its workforce by another 5% to 10% to align the size of its staff with sales.

Ingenico S.A. will end 2009 with a better-balanced revenue model of products and services because of several moves the France-based point-of-sale terminal maker made this year, says Gil Luria, an analyst with Wedbush Securities in Los Angeles. In a research report, Luria says the completion of Ingenico's $426 million (292.2 million euros) acquisition of easycash Beteiligungen GmbH, a Germany-based payment processor, alters the balance in revenue between products, such as payment terminals, and services. "The integration of easycash will immediately create a 70/30 balance between products and services," Luria says, while Ingenico will continue to look for more recurring services and software revenue "both organically and through [mergers and acquisitions]." Ingenico will see growth in the United States, Brazil, China and India, Luria forecasts.

A general approach to marketing for independent sales organizations seeking new clients is more likely to fail than would a campaign that targets specific merchant segments, according to one analyst. “A lot of ISOs fail, and they spend a lot of time and a lot of money in marketing that is ineffective,” says Philip J. Philliou, a partner at Philliou Selwanes Partners LLC, a New York-based consulting firm. “Marketing that is generic, purely price-based and scattershot in approach is rarely successful.” Such marketing tactics work to create an overall awareness of a business in a market, notes Philliou. ISOs instead should educate their sales staffs about specific merchant categories, such as health care, and target the categories with tailored marketing campaigns that address each segment’s unique payment needs, he says. “If you are an ISO that understand health care enough to a least connect with a health care provider, they often will recommend you to someone else,” says Philliou.