Credit

The Reserve Bank of India wants credit card issuers to improve their treatment of cardholders, according to a notice the financial institution released. The notice calls on issuers to stop sending credit cards to customers unless requested, offer clear information about card interest rates, release the main reason for a rejected card application and refrain from delaying to send card statements to customers. The circular contains recommendations. The bank released the suggestions after studying banks' credit card operations and reviewing complaints from credit cardholders, a Reserve Bank spokesperson tells CardLine Global.

Tesco PLC, a supermarket chain based in the United Kingdom, said Monday it will assume full ownership of its financial-services arm by buying the 50% stake owned by the Royal Bank of Scotland. Tesco Personal Finance Group Ltd. offers credit cards, insurance and related products, and it operates a network of about 2,700 ATMs, according to a statement from Tesco. The company will spend £950 million (US$1.9 billion or 1.2 billion euros) for the stake from Royal Bank of Scotland. The bank and supermarket chain created the financial-services arm in 1997 as a joint venture. Tesco expects the arm to generate an estimated pretax profit of £240 million this year, up 16.5% from £206 million last year. The supermarket chain says assuming full ownership will enable the company to "to extend its financial-services business from a collection of popular financial products to that of a full-service retail bank offering more choice, innovation and value to customers, and better returns to shareholders," according to the statement. Tesco claims to have 6.9% of the UK credit card market.

NCR Corp., the world's largest ATM manufacturer based on 2007 shipments, today reported net income of $44 million for second quarter ended June 30, down 55% from $98 million for the same three-month period last year. The Dayton, Ohio-based company reported revenue of $1.3 billion, up 8.3% from $1.2 billion. "NCR's strong second-quarter results were broad-based geographically and speak to continued solid demand for self-service solutions," Bill Nuti, NCR president and CEO, said in a statement. Second-quarter income from continuing operations was $45 million, down 11.8% compared with $51 million for the same three-month period last year. NCR attributed the lower income from continuing operations to a nonrecurring $32 million after-tax charge related to arecent organizational realignment. Revenue in the Americas, which include North America, South America, Central America, Mexico and Canada, grew 11%, to $578 million, Nuti told analysts during a conference call. Revenue from Europe, the Middle East and Africa was up 16%, to $513 million, and revenue from Asia-Pacific was $241 million, up 10%. "All in all, NCR had a very good quarter," Gil Luria, an analyst with Los Angeles-based Wedbush Morgan Securities Inc., tells CardLine sister publication ATM&Debit News. "NCR's worldwide ATM business grew 13% on a constant basis, which does not include a 6% benefit from currency translations." Luria, however, was most impressed by NCR's ATM sales in the United States. "U.S. ATM sales are growing because national banks, including JPMorgan Chase & Co. and Wells Fargo & Co., are upgrading their ATM networks with bulk-check, bulk-cash deposit and envelope-free ATMs," he says. NCR did not provide specific data on U.S. sales. Second-quarter net income last year included earnings from Teradata, which NCR spun off to NCR shareholders in the third quarter. Analysts did not consider the decline in net income meaningful. In midday trading today, NCR stock was selling at $27.10 per share, up 0.63% from yesterday's $26.92 closing price.

Fifth Third Bancorp plans to ask the full 3RD U.S. Court of Appeals in Philadelphia to review a recent ruling by a three-judge panel from the court that would open the door for card issuers to seek damages from third-party processors for costs of merchant-data breaches. Pennsylvania State Employees Credit Union and Sovereign Bank both filed suit against BJ's Wholesale Club Inc. and Fifth Third seeking reimbursement for the costs of reissuing cards compromised in a data beach at BJ's in 2004. Fifth Third was the merchant acquirer for the Natick, Mass.-based chain when the breach occurred. The issuers charge Fifth Third was responsible for BJ's failure to comply with Visa USA operating rules that bar merchants from retaining credit card data after completing transactions. A Massachusetts District Court dismissed the issuers' suit against Fifth Third, but July 16 the appeals-court panel unanimously reversed the ruling and sent the case back to the district court. Fifth Third's lawyers immediately petitioned the appeals court for a review of the July 16 ruling. If accepted, all nine judges of the appeals court would review the panel's ruling. Last week, the court granted Fifth Third an extension, until Aug. 15, to file a petition for the review.

Mandatory reporting of merchant credit and debit card transactions to the Internal Revenue Service could prove time consuming and costly for acquirers and the independent sales organizations, according to Paul Martaus, president of the Mountain Home, Ark.-based consulting firm Martaus & Associates Inc. A provision of the Housing and Economic Recovery Act of 2008 would require merchant acquirers to provide annual reports listing the name, address, taxpayer identification number, and the gross amount of credit and debit card transactions for each merchant customers to the IRS (CardLine, 7/28). Acquirers and ISOs likely would have to absorb the costs ofh collecting and securely storing merchants' information, Martaus says. Depending on how the IRS handles the provision, "there is a very strong likelihood that the ISOs themselves are going to have to go to every merchant location in the country they have clients in and reprogram all the terminals," says Martaus. In the past, acquirers and ISOs have not collected some information the IRS would require under the provision, such as taxpayer identification numbers. Consumers, though, may ultimately pay for the change. "Acquirers and ISOs will have to absorb the cost of this," but they will pass those costs to merchants, who will increase prices for consumers, Martaus says.

Two law firms voluntarily withdrew a class-action lawsuit filed against TRM Corp., the nation's second-largest ATM independent sales organization, three months after taking the legal action. A U.S. District Court in Portland, Ore., where TRM is based, dismissed the case without prejudice, meaning the law firms could refile the legal action in the future. The law firms¬–Coughlin Stoia Geller Rudman & Robbins LLP and Stoll Stoll Berne Lokting & Shlachter PC–dropped the lawsuit on behalf of plaintiff, Lawrence F. Hardtke, who filed the lawsuit May 23. The law firms charged in their complaint that former TRM executive officers violated federal securities laws by issuing misleading statements concerning TRM's financial condition. Richard Stern, TRM president and CEO, referred calls from ATM&Debit News, a CardLine sister publication, to Mike Dolan, the company's chief financial officer. Dolan did not return a call for comment by CardLine's deadline. A spokesperson for one of the law firms provided ATM&Debit News with a copy of the dismissal, but he referred questions to the other law firm, which did not return calls.

Earnings for business credit card issuer Advanta Corp. declined 83.1% in the second quarter ended June 30, to $4 million from $23.7 million in the same period last year. The company attributed the decrease to a massive increase in provisions for credit losses, which rose 157%, to $30.3 million from $11.8 million in the second quarter of 2007. Advanta reported a net credit loss rate of 8.38% of managed receivables, a 30-day delinquency rate of 5.67% and a 90-day delinquency rate of 2.81%. "We take no comfort from it, but our losses and delinquencies are below the average of other small-business issuers," Dennis Alter, Advanta chairman and CEO, said this morning during a conference call with securities analysts. Operating expenses during the quarter increased 19%, to $81.6 million from $68.6 million a year earlier. Net interest income from its Business Cards segment increased slightly, to $25.5 million from $25.4 million. "The quarter's results are obviously not what we would like to see," Alter said. "All of us at the company are focused on returning to robust earnings and returns for our shareholders." Advanta added an estimated 26,000 customers during the quarter, and cardholder transaction volume during the quarter totaled $3.5 billion, of which almost 90% related to merchandise sales activity. Last week, Advanta said it expects to incur $6 million to $6.5 million in expenses for severance and other costs related to the outsourcing of jobs. The issuer in May said that with profits from small-business credit card issuance down sharply because of credit woes, it would join the ranks of its larger competitors in shipping some jobs overseas to India. It will use Genpact, a former General Electric Co. subsidiary that is now its own publicly traded company, in shipping jobs offshore. Operations affected most by the job cuts include information technology, customer service, collections, and accounting and finance. Advanta expects the move to save $15 million annually, beginning in 2010.

RocketBux Inc. has signed an agreement with Thanks Again LLC to enable consumers to register for Thanks Again products and receive promotions using mobile phones, RocketBux says. The phones of consumers who register their credit cards with Thanks Again will receive images of coupons with bar codes that merchants can scan at the point of sale, the company says. Consumers can begin to use mobile phones to register their credit cards with Thanks Again, which is based in Tyrone, Ga., and receive coupons starting Sept. 1, Walt Granville, RocketBux vice president of sales, tells CardLine. RocketBux and Thanks Again plan to place ads in the Continental Airlines Inc. in-flight magazine to promote the initiative to members of the OnePass frequent-flyer program, Granville says. In October, RocketBux plans to promote the service to members of US Airways Inc.'s frequent-flyer program, Granville says. Bend, Ore.-based RocketBux operates a dedicated Web site that mobile-phone users can use to register their cards, Granville says. Once consumers register, they can begin to receive discount coupons on their mobile phones based on what they purchase with their credit cards, Granville says. Consumers do not need to pay to register, and merchants pay fees to have their businesses included in the promotions, he says.

Seventy-three percent of respondents surveyed as part of Visa Inc.'s 2008 U.S. International Travel Outlook study cited credit and debit cards as their preferred payment method while traveling. Western Wats conducted the telephone interviews with 1,000 adult credit or debit cardholders in May. Cash was second-highest preference, cited by 18% of respondents, followed by 7% who preferred using travelers' checks. Visa cardholders spent $2.9 billion in Canada and 1.8 billion in Mexico in 2007, according to the study.

Heartland Payment Systems today announced a partnership with Identification Systems Group to deliver Heartland's campus card services to an expanded network of colleges and universities.

Moneris Solutions Inc. today announced it is acquiring Alabama National BanCorp.'s merchant-payment business in an agreement that expands the payment processor's presence in the Southeast. Moneris, whose U.S. headquarters is in Schaumburg, Ill., will service 103 Alabama National banking centers in the Southeast and the bank holding company's established merchant-processing portfolio, according to Moneris. Additionally, Moneris will handle all credit card processing sales-and-servicing functions. The companies did not disclose the financial details of the transaction. The companies did not state when they expect the deal to close. The acquisition increases Moneris' portfolio size, bank network and brand presence in the Southeast, the company says. "Moneris has very aggressive growth plans," Greg Cohen, president of Moneris U.S., said in a statement. A Moneris representative was unavailable to comment by CardLine deadline. http://www.cardforum.com http://www.sourcemedia.com

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Palmeston North, a city in New Zealand, will install 189 parking meters this year that enable drivers to use credit cards and text messages to pay for parking, a city official tells CardLine Global. The meters, supplied by New Zealand-based Cash Handling Solutions, enable parkers to enter credit card information into the machines. A parker also can send a text message to a number displayed on the meter, with the parking fee charged to a mobile-phone bill, Sandi Morris, a transportation planner for Palmeston, tells CardLine Global. The city hopes to establish a system that will enable parkers to pay with funds transfers. The city decided to upgrade its meters after the vendor of Palmeston's coin-operated machines folded. Some larger cities in New Zealand already use similar meters.

Merchant acquirers would have to report their retailers' credit and debit card transactions to the Internal Revenue Service as part of a provision of the Housing and Economic Recovery Act of 2008. The Senate on Saturday passed the bill, which the House passed last week. The bill awaits President Bush's signature to become law. "Acquirers will need to give the IRS a complete record of retailers' credit card and debit card activity so the IRS can learn more about unreported sales," says Paul Martaus, president of Mountain Home, Ark.-based consulting firm Martaus & Associates. Acquirers and the independent sales organizations with which they work would need to collect and securely store merchants' information, adds Martaus. Under the provision, a merchant acquirer annually would have to submit the name, address, taxpayer identification number, and the gross amount of credit and debit card transactions for each of its merchant customers. The reporting would begin after Dec. 31, 2010, according to the legislation. The provision could create "serious problems" for the acquiring industry, says Carla Balakgie, CEO of the Washington, D.C.-based Electronic Transactions Association.

Metavante Technologies Inc., a Milwaukee-based payments and banking-services company, today reported net income of $36.9 million for the second quarter ended June 30, down 13.9% from $42.9 million for the same period year. Revenues rose 7.4%, to $424.8 million from $395.7 million. Revenue from its Payment Solutions Group grew by 8.4%, to $260.6 million from $240.4 million, while revenue from Metavante's Financial Solutions Group serving banks grew by 5.7%, to $164.2 million from $155.4 million. The Payment Solutions Group includes credit, debit and prepaid debit card management services, and the NYCE electronic funds transfer network and the Financial Solutions Group provides technology and business services to banks. Metavante contends that comparisons with last year's quarterly results are not meaningful because the company adopted a different capital structure after its spin-off from Marshall & Ilsley Corp. in November. During a conference call with analysts, Frank R. Martire, Metavante president and CEO, said the company expects to experience continued growth during the second half of the year, barring major changes in the economic environment and in consumer confidence. "We are carefully monitoring banks' capital-budget plans with critical projects and those spending decisions in this difficult environment," he said.

Americans' household finances are eroding fast, a result of rising debt and falling home prices, and consumers increasingly are turning to their credit cards as a short-term fix, according to new research from Moody's Economy.com, a division of Moody's Analytics. Consumers are behind schedule in payments or have walked away from nearly $800 billion in household debt of all types, including credit cards, mortgages and car loans, says Mark Zandi, Moody's Economy.com chief economist and one of the nation's chief analysts of economic trends. Zandi contends household-credit quality arguably never has been worse. Sinking credit quality ripples far beyond consumers, affecting credit card companies and other financial firms that consequently see more accounts become delinquent, he says. Moody's Investor Service reported that the credit card charge-off rate, which measures credit card accounts that are considered uncollectible as an annual percentage of all outstanding loans, reached 6.27% in April, the highest level since December 2005. The Federal Reserve's latest monthly Consumer Credit Survey, the G.19 report, shows consumer credit outstanding, which includes revolving and nonrevolving credit, rose at a seasonally adjusted annual rate of 3.6% in May to $2.57 trillion. Credit card borrowing rebounded in May after dropping in April for the first time since May 2005, according to that report, which states that revolving credit (98% of which involves credit card debt) rose to $961.8 billion in May, up slightly from $956.2 billion the previous month.

Independent sales organizations interested in hiring merchant-level salespeople should create a single, straightforward plan to present all candidates, Matt Clyne, senior vice president of McLean, Va.-based Sage Payment Solutions, said last week during the Midwest Acquirers Association Conference in St. Louis. "ISOs have to be able to sell comp plans to merchant-level salespeople because there are lots of ISOs looking for agents," he said. Smaller organizations creating their first compensation plans should partner with a consultant to develop the plans, added Curt Hensley, president and CEO of Phoenix-based CSH Consulting Inc. "Spending money upfront to define a plan is good for a young ISO," he said.

Dover Corp. expects to sell financially troubled off-premise ATM manufacturer Triton Systems of Delaware Inc. before the end of the year, Paul Goldberg, Dover treasurer and director of investor relations, tells ATM&Debit News, a CardLine sister publication. Dover, a New York-based $7.4 billion company with a large manufacturing portfolio, said Wednesday it is close to selling Triton to an undisclosed buyer. Robert Livingston, Dover president and chief operating officer, says the company has "a viable buyer currently in place that [will] allow us to move the process forward." Goldberg said, "There are several interested parties." When ATM&Debit News pointed out the discrepancy between his statement and Livingston's, Goldberg declined to say more. Dover is selling Triton because it is not a core product to Dover's business, and Triton does not control the market share Dover expects from its companies. "If you know our company, they are either No.1 or No 2 in their markets," Goldberg says. "We did not feel we could become one of the bigger players in the [ATM] market." Triton is one of the nation's largest off-premise manufacturers. In 2006, the Long Beach, Miss.-based company shipped 12,300 ATMs, placing it fourth behind NCR Corp., Diebold Inc. and Tranax Technologies Inc. Triton's 2006 shipments, however, were down 16.4% from 14,782 shipments in 2005. Triton has not disclosed how many ATMs it shipped last year.

Small-business owners' confidence in the economy rebounded in July after sinking to its lowest level in June, as concerns about cash flow eased, according to a monthly survey by Discover Financial Services. In July, 33% of 1,000 small-business owners surveyed said they had experienced cash-flow issues during the previous 90 days, down from 42% who said so in June, according to the Discover Small Business Watch. The Watch is a monthly index measuring the relative economic confidence of U.S. small-business owners, which is calculated by assigning values to responses to six consistent questions. The base value was established at 100 based on surveys conducted in August 2006 when the Watch began. In July the Watch jumped to 84.6, up 12.8 points from 71.8 in June, the lowest level since its inception. The Watch hit its highest level in March 2007 at 117.7. Among the survey respondents in July, 17% said they believe the U.S. economy is getting better, an increase from 9% who thought so in June, while 17% rated the economy as good or excellent, an increase of 12% from June. Moreover, 42% of small-business owners surveyed said the real-estate downturn has had a negative effect on their business, while 47% say it has not negatively affected them. Looking ahead, 43% of small-business owners said that if obtaining credit becomes more difficult, it will have a negative effect on their business, up from 35% who said so in August. Rasmussen Reports LLC conducted the survey.