Rising Card Delinquency Begins to Lose Steam

The rising pace of credit card delinquency, a precursor of charge-offs,
appears to have lost some of its steam in the first quarter and may
soften further in the second quarter. The sequential increase in
quarterly delinquency (30+ day) among the nation’s top issuers was 15%
in the first quarter, compared to an 18% surge in the fourth quarter.
Among the nation’s top issuers with at least $50 billion in
outstandings, the average delinquency ratio for 1Q/09 was 5.92%,
compared to 5.16% in the fourth quarter and 4.09% for 1Q/08, according
to CardData (www.carddata.com). American Express reported that 30+ day
managed U.S. delinquency edged down to 4.9% in April from 5.1% in March
and 5.3% in February. Capital One reported that 30+ day managed U.S.
delinquency declined to 5.04% in April from 5.08% in March and 5.10% in
February. According to Moody’s “Credit Card Index” the delinquency rate
for all credit card ABS was 6.34% for April compared to 6.40% for March.
According to the latest “Credit Card Index” results from Fitch Ratings
delinquency (60+ days) for “prime” credit card ABS dropped to 4.37% in
April, compared to 4.44% in March. (CF Library 5/15/09; 5/18/09;
5/28/09; 5/29/09;)

Top U.S. Issuers
30+ DAY DELINQUENCY
(minimum $50 billion in outstandings)
1Q/08: 4.09%
2Q/08: 4.00%
3Q/08: 4.36%
4Q/08: 5.16%
1Q/09: 5.92%
Source: CardData (www.carddata.com)

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EUROCOMMERCE EXEC

Effective July 1st, 2009, Dr Rainhardt Freiherr von Leoprechting has
been appointed EuroCommerce President. Dr von Leoprechting comes to the
new position from the German-based Metro Group retailer/wholesaler where
he has been since 1999 and as head of corporate relations since 2004.
Duties in his new role, first and foremost, include strengthening the
understanding commerce plays in society, to correct false impressions
anti-competitive trading practices are king, promote competitiveness of
European companies, meet current sustainable development challenges and
participate in establishing the definition of new strategies on consumer
protection through label use.

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2009 – The Worst Card Sale Market Since the 80s

The run rate for card portfolio sales this year is on pace to be the worst since the 1980’s. Only $4.37 billion in six larger transactions have been done to-date this year. Last year, 35 deals were done during the year, for $55.3 billion. Card industry analyst/investment banker R.K. Hammer reports that the average premium paid for deals has also dropped significantly, to 12.74% this year, compared to 16.57% last year, and 21.40% the year before. The business model upon which most card portfolio buyers based their proforma purchase P/L’s has been decimated. Hammer noted that the dismal results are also driven, in part, by savvy buyers looking at only the best accounts, with some even triaging against buying accounts in certain weaker states. Also, some buyers are focusing inward on retrenching, rebuilding capital, cutting losses, rather than growing their assets.
Additionally, Hammer says uncertainty for the future is the big bogie.

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ABBEY BRANDING

Effective June 15th, Abbey will re-brand its credit cards as Santander. The credit card brand shift is the first phase of a plan announced in May to re-brand Abbey, Alliance & Leicester and Bradford & Bingley savings under the Santander name by the end of 2010. Abbey currently offers two major card products, the “Abbey Zero MasterCard,” featuring no foreign exchange fee and no cash advance fee, plus 0% interest on balance transfers for 12 months and purchases for three months and the “Abbey Credit Card” offering 0% on balance transfers for 15 months, 0% on purchases for three months and an ongoing APR of 15.9%.
All new credit cards will be issued under the Santander name and
replacement cards will be issued under the Santander name as they come
up for renewal. Since 2004, Abbey has been part of the Santander Group, the third largest bank in the world by profit. In 2008, Alliance & Leicester and Bradford & Bingley become part of the Santander Group. Today, Santander has 90 million customers, over 14,000 branches, and 170,000 employees. As a global brand, the flame logo and Santander name is now seen in over 40 countries around the world.

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EC & SEPA

The European Commission has launched its consultation on whether
deadlines should be set for the migration of existing payment products
to Single Euro Payments Area (SEPA) products or not. Inviting input from
all stakeholders by August 3, 2009, the Commission hopes to identify the
need for action, and at what level, for such payment solutions as credit
transfers and direct debits. Questions the consultation hopes to address
is whether it should cover only standards or schemes as well, should it
cover only the interbank space or the bank-to-customer space as well and
should it entail full migration or allow the exclusion of certain
products. Also, the EU wants to determine if an end-date is seen as
needed, should there be one common end-date for SCT and SDD migration or
two separate end-dates, should they be set at national level and/or at
European level and should they be left to self-regulation SEPA was
established to complete an integrated market for electronic payment
services in euros using certain business rules and technical standards,
subsequently allowing consumers, companies, merchants and public
administrations to make payments under the same conditions throughout
Europe using its SEPA credit transfer (SCT), SEPA direct debit (SDD) and
payment cards.

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Two Credit Card Interchange Bills Introduced

Senate Majority Whip Richard Durbin (D-IL) introduced the “Credit Card
Fair Fee Act of 2009” which would require Visa and MasterCard to
negotiate interchange fees and be subject to binding arbitration by a
three-judge panel, if necessary. Introduction of the Durbin bill comes
less than a week after House Judiciary Committee Chairman John Conyers,
(D-MI), introduced “H.R. 2695,” also called the “Credit Card Fair Fee
Act of 2009” that requires Visa and MasterCard banks to negotiate with
merchants, but enforcement of the requirement would be up to the Justice
Department. The National Retail Federation says the new bills are the
next step in the credit card reform process that Congress began last
month. The American Bankers Association says
the legislation inappropriately seeks government intervention to
increase their profits at the expense of consumers and the broader
economy. The ABA noted that from the largest financial institutions to
the smallest community banks, interchange revenue provides compensation
for taking on the extensive infrastructure costs required to support our
card payments system, as well as the risk of non-payment, while
providing an adequate return on investment.

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Bling Nation Receives SAS 70 Audit Report

Bling Nation community bank payments network has received its “Statement
on Auditing Standard (SAS) 70” Type I audit report from Ernst & Young
for its operational control objectives and activities. SAS 70 guidance
allows service organizations to disclose control activities and
processes for customers and auditors in a uniform format while its Type
I audit examined Bling Nation’s operational controls to demonstrate its
adequate implementation of secure customer data storage and transaction
processing. Bling Nation local payment network allows banks to convert
potential on-us debit transactions into actual on-us debit transactions
with secure contactless POS solutions.

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PAYMARK REPORT

According to Paymark, New Zealanders are sticking with debit card use
over credit cards with a 7.8% per annum increase and a 0.4% per annum
increase, respectively, seen in the month of May. Additional findings
show $3.45 billion was spent across the country last month, a 0.8%
decrease since the year ago period, while the number of all payment card
transactions was up 6% for the same term. Declines in credit card use
were most felt at video, fuel and agriculture outlets while the largest
spending decline for the month was seen at service stations by 19%-t
hanks to lower fuel prices- and travel by 14%. Clothing and footwear
retailers, however, experienced moderate growth in May with spending up
8 and 7%, respectively. Paymark processes over 60% of all retail
electronic transactions in New Zealand.

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Heartland Offers Four Card Network Settlement

Heartland Payment Systems credit/debit/prepaid card processing, payroll,
check management and payments solutions making things easier for its
merchants customers with the authorizing/settlement for transactions
through all four major card brands. Heartland has been processing Visa
and MasterCard payments since 1997. Most recently, the card processor
has partnered with Discover and American Express, allowing its customers
funding, statements and customer service directly from Heartland.
Heartland Payment Systems payments processor provides its services to
250,000 business locations nationwide and is the founding supporter of
the public advocacy initiative, the Merchant Bill of Rights, to educate
merchants on fair payment card processing.

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MC CPV

MasterCard has qualified Collis’ MasterCard “Card Personalisation
Validation” (CPV) module on its EMV Personalization Validation Tool
(Collis EMV PVT), strengthening its position to accept card payments
worldwide. In addition to worldwide acceptance, Mastercard
evaluation/qualification for CPV provides Collis testing on its
EMV/PayPass contactless and swipe cards and ensures the tool complies
with test specifications version 2.0, PDS 2008 and PayPass PDS 1.3 for
perso bureaus and MasterCard issuers. This allows the issuers to prepare
for the formal Card Personalisation Validation sessions. Collis
Consulting Services, Test Tools, Test Services and Training Courses in a
range of industries has provided proven testing tools and expert
consultancy to the Payment/EMV, e-Identification and 3G/GSM markets
while MasterCard Worldwide serves consumers and businesses in more than
210 countries and territories.

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