Credit

A phone call to the wrong individual may have helped put the kabosh on a credit card scam in Wisconsin. A Wisconsin Bankers Association employee received a phone call two weeks ago from someone promising to lower his credit card rate to 6.99% if he would supply personal information, according to Eric Skrum, an association spokesperson. When the employee asked for basic information, such as who was making the offer, the scammer hung up, Skrum says. So the association issued a press release Monday warning consumers not to release personal information, such as account or Social Security numbers, to unknown callers. If someone calls with an offer, consumers should call back only after obtaining the company's phone number from an independent source, the release states. The association does not know how many other consumers received the calls or whether anyone has been victimized by the scam, Skrum says.

Thirty-seven million consumers have no credit scores but would fall into the prime credit category if credit agencies assessed the individuals' loan risk, Mark Greene, CEO of Fair Isaac Corp., said yesterday at SourceMedia's third annual Underbanked Financial Services Forum in Miami. The company's research suggests 41 million "subprime" consumers live in the United States, as do 50 million underbanked consumers. But those groups overlap only to the extent that some 12 million consumers are subprime and underbanked, Greene said. "I am concerned that many of your colleagues still believe the subprime and underbanked credit markets are the same," Greene told the audience, noting lenders lose a large business opportunity by failing to offer such consumers credit. Lenders that want to reach those consumers can find alternative ways to create credit scores, he said. Fair Isaac and other companies, such as Pay Rent Build Credit Inc., offer alternative credit scores based on payment histories for rent, utilities and other household bills, Greene said. Lenders also may want to create their own systems to produce alternative credit scores, he said. Companies that want to lend to consumers with little or no credit history should start with small loans to minimize risk. They also should become the first in their area to offer loans to those consumers, if possible, and they should be prepared to make modifications based on what does and does not work, Greene said. Some lenders may want to consider providing financing for nontraditional purchases such as for furniture and other consumer needs. SourceMedia publishes CardLine.

Employee training and automated processes ranked high on a list of best practices for commercial cards that Visa Inc. released today. "Leading companies not only provide commercial card training to their employees but also require cardholders to pass a test to ensure the highest level of compliance," the commercial card study says. "Study participants that implemented mandatory training and testing requirements established a minimum passing score of between 80% and 100%." In other best practices, a $7.5 billion manufacturing company saved more than $350,000 in one year by requiring purchasing card use for transactions of less than $1,500 that do not require a purchase order. Automating a business's process for obtaining goods and services, from procurement to payment, is one of the 60 recommendations of the study. Automation should extend to reporting and spend analysis tools, Visa says. Not surprisingly, Visa also recommends businesses encourage reluctant suppliers to accept card payments. Deloitte Consulting conducted the study in 2007 on behalf of Visa Commercial Solutions. Research included 90 interviews with more than 60 large- and medium-sized companies throughout the world.

Total System Services Inc., known as TSYS, Wednesday expanded its presence in the Mexican card market by signing a multiyear payments-processing agreement with Globalcard S.A. Financial. Terms of the deal were not disclosed. Globalcard issues Visa and private-label credit cards to unbanked Mexicans. Globalcard launched its consumer card portfolio in April, a TSYS spokesperson says. Globalcard eventually may offer debit and prepaid cards, the spokesperson tells CardLine. Under the agreement, TSYS will provide account-processing, risk-management, portfolio-management and reporting services. TSYS now processes for eight Mexican financial institutions, including banks and credit card companies.

NetSpend Corp. will develop a prepaid debit card for QC Financial under an agreement announced Monday.

Fiserv Inc. is working to offer its walk-in bill-payment service in branches of banks that are trying to reach the underbanked, a large and potentially lucrative market.

The Treasury Department hopes that encouraging the unbanked to receive their Social Security benefits on a prepaid card will save $42 million a year, despite several fees.

MIAMI — Wal-Mart Stores Inc. has sold more than 1 million of its prepaid MoneyCards, and customers have loaded more than $1 billion on to them, since they were introduced nearly a year ago, said Jane Thompson, the president of the retailer's financial services business.

United Kingdom-based credit card issuer Barclaycard has launched an ad campaign designed to run on mobile phones before other media, a company spokesperson tells CardLine Global. Barclaycard calls the campaign the first by a major advertiser to start with mobile phones and in a statement says the shift reflects "the new ways in which our target audience are consuming media." The ads attempt to sell neither cards nor card services, however, but instead "gadget insurance" for mobile phones and related devices. Barclaycard intends to run the ads through the third quarter, the spokesperson says. Barclaycard designed the campaign for customers of UK mobile network operator O2.

Financial authorities in India reportedly will require payment card companies such as MasterCard Worldwide and Visa Inc. to provide regular financial reports of suspicious international transactions. The Indian government wants to reduce money laundering, according to press reports. Government and payments officials were unavailable for immediate comment. India's government recently amended the existing Prevention of Money Laundering Act, adding casinos, card issuers and funds-transfer companies to the law, which is designed to help prevent illegal foreign currency from circulating in the country. The original law, enacted about three years ago, previously applied only to banks.

CompuCredit Corp., an Atlanta-based credit card company, and two banks with which it has third-party card program arrangements, today are the subject of charges and a lawsuit filed, respectively, by the Federal Deposit Insurance Corporation and Federal Trade Commission. The FDIC is seeking consumer restitution it estimates will exceed $200 million. FDIC issued its enforcement actions against CompuCredit and two FDIC-supervised banks – First Bank of Delaware, which is based in Wilmington, Del., and First Bank & Trust, which is based in Brookings, S.D.– for allegedly marketing subprime credit cards in violation of the Federal Trade Commission Act. If FDIC's enforcement charges are upheld, the court would require the companies to provide credits for restitution for fees and charges arising from the deceptive marketing practices, FDIC board member Thomas J. Curry said at a news conference today. The FDIC also seeks civil penalties of $6.2 million against CompuCredit, and $431,000 against First Bank of Delaware and First Bank & Trust. Curry said supervised banks "must be highly vigilant about their third-party arrangements, especially in the subprime arena." When they are not, he said, it can lead to predatory lending practices and violations of federal consumer laws. FDIC and FTC each allege CompuCredit's card solicitations to subprime consumers failed to disclose significant upfront fees and misrepresented the initial available credit. For example, cards with an advertised $300 credit limit actually had $185 "in inadequately disclosed fees, leaving them with as little as $115 in available credit," Lydia Parnes, director of the FTC's Bureau of Consumer Protection, said at the news conference. The FTC complaint also cites violations of the Fair Debt Collection Practices Act stemming from allegations of abusive debt collection practices by CompuCredit's collection agency subsidiary, Jefferson Capital Systems LLC. FTC alleges that Jefferson misrepresented a debt collection program as a credit card offer and used such tactics as an egregious number of calls per day to debtors. The FDIC settled with a third bank, Columbus Bank and Trust, which is based in Columbus, Ga., and also was involved with CompuCredit's cards, for $7.5 million in consumer restitution and cooperation in the FDIC's action against CompuCredit, according to Curry. CompuCredit issued a statement saying the federal agencies' claims "are untrue and without merit," and the company "intends to vigorously contest these unsupported allegations."

Discover Financial Services is seeking $6 billion in damages in its antitrust lawsuit against Visa Inc. and MasterCard Worldwide, according to documents unsealed yesterday in U.S. District Court for the Southern District of New York. Discover filed the lawsuit in October 2004, shortly after the U.S. Supreme Court let stand a lower-court ruling in an antitrust case won by the U.S. Department of Justice that forced Visa and MasterCard to allow their member banks to issue credit cards on rival networks. Discover and AmEx alleged in separate lawsuits that Visa's and MasterCard's exclusionary rules hampered their ability to grow over many years. Last year, AmEx reached a $2.25 billion settlement with Visa in its lawsuit, which is similar to Discover's (CardLine, 11/7/07). MasterCard, which has not settled with either AmEx or Discover, said in a statement yesterday that Discover's damages claim is baseless. It contends that after MasterCard withdrew restrictions preventing its member banks from offering cards from rival networks, Discover has not experienced any significant increase in its overall percentage of credit card volume from third-party issuance. Visa earmarked $650 million for settling its Discover lawsuit in a $3 billion fund it established to settle future lawsuits after its record-setting initial public offering in March. "AmEx's settlement of more than $2 billion was considered pretty hefty, so I doubt we would see an amount as high as $6 billion in Discover's case," Eva Weber, an analyst with Boston-based Aite Group, tells CardLine. She expects Visa to settle its case with Discover as soon as possible. "It would seem that Visa would want to resolve this sooner rather than later, so the company can move forward," Weber says.

Business Payment Systems LLC, a New York-based independent sales organization, faces paying $2.5 million to settle claims over alleged unsolicited faxes the company sent to plaintiffs in a class-action lawsuit, according to a settlement claims form the King County Superior Court in Washington state released Monday. In 2006, Kavu Inc., a Seattle-based clothing retailer, filed suit against Business Payment Systems, claiming the company violated the Telephone Consumer Protection Act of 1991 by allegedly sending unsolicited faxes to the merchant, court records show. In response to the 2006 complaint, Business Payment Systems denied any wrongdoing and said it neither knowingly nor willfully violated the act, which the ISO repeated in the claims form. Mike Berman, chief operating officer of Outside Ventures LLC, parent of Business Payment Systems, says the settlement should have little impact on the company. "The program [of sending faxes] has long been stopped," Berman tells CardLine sister publication ISO&Agent Weekly. The claims form says each class member could receive up to $1,500 in compensation. The court will hold a June 23 hearing to decide whether to approve the settlement. If the court approves the settlement, in exchange for receiving payment class members will release Business Payment Systems and its subsidiaries from all liability associated with the case.

Consumers will be able to cash checks at Diebold Inc. ATMs that use Valid Systems' check-cashing software, the two companies announced Monday at SourceMedia's third annual Underbanked Financial Services Forum in Miami. Diebold plans to offer the check-cashing services with its Opteva line of ATMs, Margaret Bost, Diebold director of financial industry marketing, tells CardLine. The Opteva ATMs create an image of a consumer's check, verify the user's identity and the check's validity using Valid Systems' software, and pay the consumer the check amount minus a fee, Bost says. Deployers can set the ATM so check-cashers do not need a debit or credit card to use them, she says. Valid Systems already provides software to such banks as Minneapolis-based U.S. Bancorp and Cleveland-based KeyBank that enables them to offer check-cashing services through tellers, John Templer Jr., the Fort Worth, Texas-based company's CEO, tells CardLine. Consumers must register with a bank by providing identifying information such as a driver's license, fingerprint and Social Security number, he says. Consumers do not need to provide all the information each time they cash a check, so the bank can decide which information it wants customers to use to identify themselves at ATMs, Bost says. The software then examines each transaction to ensure it complies with the Bank Secrecy Act, Office of Foreign Asset Control and Patriot Act regulations, Templer says. It also processes the check's bank-routing and account numbers to ensure the document is legitimate, he says. SourceMedia publishes CardLine.

The U.S. Environmental Protection Agency has renewed its contract with JPMorgan Chase & Co. to provide its travel and fleet charge card services, the bank announced today. The contract is part of the General Service Administration's SmartPay2 contract. Chase expects the EPA's annual travel and fleet card volume to exceed $80 million on nearly 20,000 cards. Chase also has contracts with the U.S. Department of Commerce (CardLine, 5/5), NASA (CardLine, 3/24), the Department of the Interior and the Department of Transportation (CardLine, 2/11). The first SmartPay program, which began in 1998 and expires in November, is the largest government charge card contract in the world according to the GSA, its SmartPay issuers and industry analysts. SmartPay handled more than $27 billion in sales and more than 91 million transactions in 2007.

Springbok Services Inc. has signed an agreement with Visa Inc. to offer Visa-branded prepaid card programs.

Moody's: Dichotomy in Card Delinquency Trends May be Due to Tough Collection Environment

Daniel R. Perlin, an equity analyst at Wachovia Corp., has raised his price target range for Visa Inc. shares Friday to $95 to $100 from his previous range of $85 to $90.

Consumer credit outstanding rose at a seasonally adjusted annual rate of 4.25% during April, aided by a 6.5% increase in borrowing on non-revolving accounts, consisting primarily of closed-end loans for items such as mobile homes, tuition and vacations. Revolving credit – primarily credit card spending – increased only 0.4% during April, compared with 7.4% growth in March.

Home Depot Inc. reports holders of its private-label credit card are more frequently paying late and defaulting as credit scores weaken across the board.