Credit Rating Cut for Citi’s SD Card Bank

Moody’s Investors Service has cut its rating for Citibank (South Dakota) NA. The credit card issuing bank’s financial strength rating was dropped to “C-” from “B.” The bank’s long-term deposit and senior debt ratings were cut to “Aa3” from “Aa1.” The short-term rating was affirmed at “Prime-1.” Moody’s says the financial strength rating was cut because Citi SD earnings are wholly dependent on U.S. credit cards. With economic conditions deteriorating, the bank is exposed to a potentially severe consumer-led economic downturn in the U.S., which makes the company susceptible to significant asset quality and earnings volatility through higher net charge-off and provisioning levels. Moody’s also noted that potential regulatory actions that restrict interest-rate pricing on credit cards could also affect Citibank’s revenue. Meanwhile,
Fitch Rating this week released its latest “U.S. Credit Card ABS Issuance Trust Updates” for the American Express, Bank of America, Capital One, Chase, Citibank, Discover, and Washington Mutual. The latest editions have been enhanced to include Available ‘AAA’ Issuance Capacity for each trust and an issuer peer comparison sheet.

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2009? – 8% Charge-Offs and 5% Delinquency

With the unemployment rate expected to hit 7.6% by next summer and possibly topping 8.0% by year-end 2009, delinquency rates may rise 25% and charge-offs by 31% over the next twelve months. During the third quarter credit card delinquency (60+ days) stood at 3.6% as charge-offs averaged 5.4%, according to CardData. It is expected that unemployment will come in at 6.9% for the fourth quarter which models to a delinquency rate of 3.9% and a charge-off rate of 5.9%. The first quarter historically carries artificially high delinquency and charge-off ratios following the holiday volume pay down. Nevertheless, the two metrics will likely follow a significant upward trend throughout 2009. With a projected 8.5% unemployment rate by year-end 2009 delinquency would model to 4.9% and charge-offs to 7.6%. Some analysts beleive charge-offs could hit 8% in 2009. The big unknown is what impact a second quarter auto industry bankruptcy may have on unemployment figures. It is not unreasonable for unemployment to top 10% in that scenario pushing credit card charge-offs above 8%.

U.S. CREDIT CARD METRICS
(Past, Present & Future)
Unemployment Delinquency Charge-Offs
4Q/06: 4.6% 2.6% 4.1%
1Q/07: 4.5% 2.7% 3.9%
2Q/07: 4.6% 2.6% 3.7%
3Q/07: 4.7% 2.7% 4.0%
4Q/07: 4.9% 3.0% 4.1%
1Q/08: 5.0% 3.0% 4.5%
2Q/08: 5.7% 3.3% 5.3%
3Q/08: 6.5% 3.6% 5.4%
4Q/08: 6.9% 3.9% 5.9%
1Q/09: 7.4% 4.2% 6.3%
2Q/09: 7.6% 4.4% 6.7%
3Q/09: 8.1% 4.6% 7.1%
4Q/09: 8.5% 4.9% 7.6%
Source: CardData (www.carddata.com)

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Free FICO on Bank Statements Gets Traction

Fair Isaac reports that more than one million consumers now have access through their banks and credit unions to a free FICO score every month on their online statement. Also the Company has compiled practical guidelines to help consumers
manage their FICO scores in a volatile economy. They include making payments on time, keep credit card balances low,
open new credit cards or loans only when necessary, get free annual credit reports from each national credit
reporting agency through www.AnnualCreditReport.com, know the current FICO score,
ask banks about getting your FICO score free every month and
contact lenders to arrange for a payment plan that is manageable should there be financial hardships.

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Federal Reserve Updates its ID Theft Booklet

The Federal Reserve System has revised the “You Have the Power to Stop Identity Theft”
brochure. The updated brochure focuses primarily on Internet “phishing” by
describing how phishing works, offering ways to protect against identity
theft, and detailing steps to follow for victims of identity theft.
The brochure is available to download from the websites
of the Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Office of the Comptroller of the Currency,
National Credit Union Administration, and Office of Thrift Supervision.

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Half of U.S. Cardholders Report Rate Hikes

In the wake of the credit crunch issuers have taken a proactive stance
to mitigate risk with higher interest rates, lower credit limits and
closing inactive accounts. An informal online CardTrak.com poll this
month found that more than 53% of cardholders report their interest
rates have increased this year, while 37% say their credit limit has
been lowered. Surprisingly, nearly 29% report that their credit limit
has been increased. About 23% report having a credit card account
closed; 26% say that some fees have been raised and 16% indicate new
fees have been added this year. Nearly 13% report changes in the rewards
program attached to a payment card. The CardTrak homepage poll drew
about 1,000 responses during the December period. Also, this week
Bankrate released the findings of a national poll which found that 40%
of consumers say they would not be upset if their credit lines
disappeared. In fact, of the respondents who have credit cards, nearly
one-third say they will probably charge less in 2009. A much smaller
group (only 5%) responded that they would be devastated with the loss of
access to their credit cards.

Have any of these actions been taken by your credit card provider this
year?

* Credit Card Account Closed (22.5%)
* Credit Limit Lowered (36.9%)
* Credit Limit Increased (28.7%)
* Interest Rate Increased (53.5%)
* Interest Rate Lowered (12.8%)
* Some Fees Raised (26.1%)
* Some Fees Reduced (2.6%)
* New Fees Added (16.1%)
* Rewards Program Changed (12.9%)
* Other Changes Raising Costs (9.1%)

Source: CardTrak.com

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Uno’s and CashStar Intro Virtual Gift Cards

Uno’s Chicago Grill and partner CashStar are offering virtual gift cards.
The gift cards are available via the chain’s website at
www.unos.com and are powered by CashStar, the interactive gift card and incentives company.
Consumers order them the same way they order a plastic gift card, only
the virtual gift card is delivered via an email with a link to activate the gift.
Available in denominations of $25 or $50, there are nine unique designs to choose
from, and each card can be personalized with a message or holiday greeting. Uno also
offers plastic gift cards via its website and its restaurants. Both the Uno
plastic and virtual gift cards have no expiration date.

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ALIBABA & NICE

NICE Systems announced that B2B e-commerce provider Alibaba.com placed an initial order for
NICE SmartCenter solutions for two of its VoIP contact centers.
NICE SmartCenter will provide Alibaba.com contact center supervisors
with precision quality management to ensure customer satisfaction and
foster customer loyalty. It will enable supervisors to proactively
evaluate and improve the quality of service provided to customers
calling about Alibaba.com’s services and for technical support. By
targeting key calls as well as correlating them with agent screen
activity, supervisors will be able to more accurately identify how agent
behaviors are impacting quality of service, and develop programs for
performance improvement where needed. NICE’s solutions address the needs of the enterprise
and security markets, enabling organizations to operate in an insightful
and proactive manner, and take immediate action to improve business and
operational performance and ensure safety and security. NICE has over
24,000 customers in more than 135 countries.

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ClairMail Web System Optimized for iPhone

Mobile payment platform provider ClairMail has released an upgrade of the
ClairMail System that includes an iPhone mobile web solution. The iPhone solution includes the comprehensive mobile
banking and payments functionality found in ClairMail’s traditional mobile web
offering — account management, fund transfers, bill payments and ATM/branch locators
presented on the iPhone’s rich user interface. ClairMail’s highly secure mobile web solution adjusts its
user interface based on the capability of the mobile device all from the same mobile web URL.
ClairMail is the first and only solution provider capable of delivering 2-way
mobile banking and payments functionality on all mobile phones across
all three user interface options. The ClairMail System seamlessly
and securely integrates with a bank’s systems of record and provides bank customers
with a comprehensive suite of 2-way mobile banking and payment services and
incorporates a powerful Event Engine that can easily handle the
potential transaction volumes from banks of any size and deliver real-time, 2-way Actionable Alerts.

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TSYS EXECUTIVE

TSYS has appointed Bulent Senver to serve as Business Development Director.
Senver brings more than 25 years experience and extensive knowledge
of the Turkish banking and card payments industry. He has worked with
more than 20 Turkish and foreign banks in an advisory role as a
management consultant and as a senior executive in the bank environment,
a position in which he was named ‘Banker of the Year’ by the Turkish
Press Institution. TSYS, which grew its international operations 33 percent in 2007,
confirmed its intent to participate in the Turkish marketplace with its
unique value proposition, TS Prime, an efficient server-based issuing
and acquiring card management platform adopted by more than 100
financial institutions worldwide. TSYS supports more than 300 clients in 75 countries and has been a
leader in the global payments industry for more than 25 years. Its
market presence extends to 18 offices supported by more than 8,000
personnel.

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Americans Ready to Go Without Credit Cards

A new survey has found that 40% of consumers say they would not be upset if their credit lines disappeared. Furthermore, 32% say they will probably charge less in 2009. The Bankrate poll also found that
72% emphatically disagree that credit card companies are entitled to change the terms of your account at any time for any reason, and 71% strongly believe that credit card companies should be more closely regulated. About 67% say they strongly disagree that taxpayers should bail out consumers who find themselves in a big financial bind due to credit card debt. Interestingly, only 6% of Americans report their line of credit was decreased. While nearly one-third say they will probably charge less next year, only 1% plan to charge more and 15% say they don’t plan on using credit cards at all in 2009. When asked to pick the single biggest reason they use credit cards, 40% say it is more convenient than paying with cash, and 19% say they use them to finance emergency expenses.

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HORIZONPLUS PAYROLL CARD

Benefit and payroll provider Peopledge has introduced the “HorizonPlus
Prepaid MasterCard “payroll card program
The program is optional for employees and they can choose to have some,
or all, of their payroll posted electronically to their personal MasterCard
card. The process is simple and secure – funds are transferred to the
card via the standard direct credit process or by file transfer to a
secure web
browser. Once funds are loaded, the employees receive a customized
update and have immediate access to them no matter where they may be on
payday. It can be used to withdraw cash at any ATM that displays the
Cirrus Acceptance Mark.

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Gift Cards Voted as the Most Practical

The results of a new Visa survey indicate that 80% of shoppers on a
budget feel a gift card is the most practical gift to give this holiday.
Of those surveyed, 73% indicated that is was ‘very important’ to give a
gift that
their recipients will find useful and 82% consider it appropriate to
give a gift
card that can be used for purchases anywhere, compared to only 45% of
respondents who felt it
appropriate to give a check as a gift.

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