H.R. 5546 Draws Fire From Both Sides

Demonstrating adamant support for the H.R. 5546 the “Credit Card Fair Fee Act,” aiming to reduce card interchange fees, representatives of the National Association of Convenience Stores and the Merchants Payments Coalition contributed to the House Judiciary Committee Hearing for the Antitrust Task Force. The bill is being rallied as a means of ending card industry price fixing, high card interchange fees and Visa/MasterCard’s immense profit from the fees. Statistics from the MPC show over 60% U.S. convenience stores paid $7.6 billion to the credit card industry compared with a total pre-tax profit of $3.4 billion while the average family paid nearly $400 in interchange fees for 2007. Meanwhile, the American Bankers Association, Mastercard and the Electronic Payments Coalition urged Congress to oppose H.R. 5546 as an intervening price control that will eventually result in less competition, fewer consumer choices and reduced affordable payment card options. In place of a free market balance, the bill would impose price controls thanks to politically-appointed bureaucrats whom determine the rates and fees. This in turn would limit interchange revenue to electronic payments products/services, such as rewards programs, force issuers to limit credit and raise payment card fees. The global electronic payments system connects over 16,600 banks and credit unions to more than 29 million merchant locations for the acceptance of 1.9 billion cards.

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Debit Cards Represent 46% of V/MC U.S. GDV

Visa and MasterCard debit cards added 120 basis points to its share of the two network’s U.S. payment card gross dollar volume last year. For the fourth quarter, V/MC debit card GDV rose 13.7% and V/MC credit card GDV increased 8.4%, compared to 4Q/06. Overall, V/MC payment card GDV was up 10.8% in 4Q/07 compared to the prior year quarter, according to CardData ([www.carddata.com][1]). In the fourth quarter V/MC U.S. GDV was $782 billion with debit cards comprising 45.8%. In the fourth quarter of 2006, debit cards made up 44.6% of the $706 billion total. For complete details on the latest payment card network results visit CardData ([www.carddata.com][2]).

VISA/MASTERCARD GDV
($ billions)
Credit Debit
4Q/06: $391 $315
1Q/07: $362 $316
2Q/07: $397 $340
3Q/07: $404 $341
4Q/07: $424 $358
Source: CardData (www.carddata.com)

[1]: http://www.carddata.com
[2]: http://www.carddata.com

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Choice Hotels Offers a Gas Card Promotion

Choice Hotels is offering a $50 gas gift card for Choice Privileges members that book three stays between June 1 and August 14. After each third qualifying stay at any Comfort Inn, Comfort Suites, Quality, Sleep Inn, Clarion, or Cambria Suites, Choice Privileges members will receive enough bonus points on top of the points from their three stays to reach 16,000 points, which can be redeemed any time for a $50 gas card or other rewards. Consumers can earn the points for a $50 gas card an unlimited number of times during the promotion without having to register.

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FTC Settles Lawsuit with OR Processors

The marketers of a debit and credit card processing services operation have agreed to judgments of more than $26 million to settle FTC charges that they deceived small businesses throughout the country. OR-based Merchant Processing, Direct Merchant Processing, Vequity Financial Group, and PPI Services are also banned from marketing card processing goods or services for sale or lease. The FTC says the defendants’ operation falsely promised that it would save merchants hundreds to thousands of dollars a year in processing fees by offering lower rates than the merchants’ current credit card processing service. The defendants also falsely represented that they would buy out merchants’ equipment leases if the merchants accepted the offer, failed to disclose fees, and concealed pages of fine print until after merchants had signed contracts.

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Debt Settlement Reports Record Settlements

AZ-based Debt Settlement USA has negotiated 739 settlements totaling $4,323,000 for consumers during April. According to the Federal Reserve’s March consumer credit report, credit card debt increased 6.7% and non-revolving debt, such as loans for cars, boats and education, increased 4.6% during the first quarter of 2008. Total consumer credit outstanding in the U.S. at the end of March was $2.558 trillion. Currently, charge-off and delinquency rates are rising and bankruptcy filings increased by 38% from 2006 to 2007, according to Standard & Poor’s Credit Card Quality Indexes.

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Citi Adds More Weight to its Diamond Cards

Citi has introduces its enhanced “Diamond Preferred” suite of cards to provide privileges and benefits for no annual fee. In addition to standard Citi card security benefits, such features included with the “Diamond Preferred” suite include concierge service, exclusive money-saving discounts, a free annual account summary, access to guaranteed dining reservations, golf tee times and VIP access to various events. Additionally, cardholders are rewarded 6,000 bonus “ThankYou Points” after making $100 in purchases within the first 3 months of membership and are given access to an introductory promotion offering 5 “ThankYou Points” for every $1 spent during the first 12 months and 1 point for every $1 spent thereafter. Citi provides financial products and services to 200 million customers in more than 100 countries.

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First Data Revenues Climb 16% in 1Q/08

First Data reported first quarter consolidated revenues of $2.13 billion, a 16% increase as EBITDA rose 8% to $586 million, over 1Q/07. Effective January 1st, FDC revised its segment reporting structure into Merchant Services, Financial Services, International, Prepaid Services and Integrated Payment Systems. Merchant Services generated revenues of $926 million, a 10% gain over the prior year quarter. Financial Services revenue inched up by 1% to $706 million. International revenues rose 23% to $445 million. International revenue growth on a constant currency basis, excluding acquisitions and divestitures, was 5%, negatively impacted by price compression and lost contracts primarily in its Western European and Asia Pacific businesses. Prepaid Services was flat at $46 million. Integrated Payment Systems soared 139% to $45 million, compared to the year ago quarter. On April 28th FDC reached an agreement to acquire prepaid card specialist InComm for $980 million, plus contingent future payments of up to $250 million over a three year performance period. The acquisition is expected to close in the second half of this year. For complete details on First Data’s first quarter performance visit CardData ([www.carddata.com][1]) (CF Library 4/28/08)

[1]: http://www.carddata.com

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LifeLock Sued; Puts Google Exec on Board

Identity protector LifeLock has had a third class action lawsuit filed in West Virginia alleging false and misleading information. The lawsuits contend that LifeLock and its multi-million-dollar advertising campaign provided false and misleading information about the limited level of identity protection the company provides, and failed to warn them about the potential adverse impact the company’s services could have on their credit profiles. The complaints also allege that the CEO has himself been a victim of identity theft by multiple offenders while a customer of LifeLock’s services. The West Virginia action seeks to recover the money subscribers have paid to LifeLock and to prohibit the company from continuing to promote its services through a deceptive marketing campaign. Marks & Klein plans to file similar actions on behalf of consumers in other states. Founded in 2005, LifeLock presently has approximately 1 million subscribers across the United States. LifeLock has also selected George Reyes,currently with Google, to serve on its board of directors. In his role with Google, Reyes helped negotiate the organization’s innovative IPO. An experienced leader, Reyes’ business acumen has come from financial posts with ONI Systems and Sun Microsystems. Reyes is also currently a director of Symantec Corporation. Reyes earned his MBA from Santa Clara University and his bachelor’s degree in accounting from the University of South Florida.

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MEI’s Bill Acceptors Win an Award

PA-based MEI’s bill acceptors have won the top awards at the “KioskCom Excellence Awards.” School-Link Technologies received the KioskCom Excellence Award for “Best Food Service Deployment” for its prepayment kiosk for K-12 school cafeterias which operates like a “reverse ATM” accepting dollar bills and coins, which are immediately credited the student’s account. Precision Dynamics Corporation’s PDC Smart Kiosk won the “Best Travel/Hospitality Deployment” category. The freestanding kiosk lets guests load money onto their RFID wristband using cash, credit or debit to pay for food, promotions, memorabilia and such. MEI holds the world’s largest installed base of unattended payment systems, handling over 2 billion transactions per week in more than 100 countries.

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TJX and MasterCard Complete Settlement

The TJX Companies have completed the settlement to MasterCard of $24 million in alternative recovery payments in response to 2007’s card data breaches. Financial institutions representing 99.5% of the affected MasterCard accounts accepted the alternative recovery offer. Each accepting issuer released and indemnified TJX and its acquiring banks with respect to any claims of such issuers, their affiliated issuers and their sponsored issuers as MasterCard issuers with respect to the intrusions, including any claims in the putative financial institution class actions in federal and state courts. TJX operates 857 T.J. Maxx, 786 Marshalls, 295 HomeGoods, and 130 A.J. Wright stores, as well as 34 Bob’s Stores in the U.S. (CF Library 4/3/08)

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