Waiter Card Processing Fees Challenged

A showdown is brewing over the practice of deducting credit-card processing fees from food servers’ tips. A lawsuit filed in 2002 against TX-based Landry’s Restaurants has now gained class action status. According to the Denver Post, the lawsuit sprang from a DePaul University student that questioned why her managers at Joe’s Crab Shack in Chicago, owned by Landry’s, deducted a fee from her tips. The case has since moved to the U.S. District Court for the Southern District of Texas, where it has been in front of a judge since March 2003. Colorado’s Fox & Robertson and Illinois attorney Steven Greenberger are representing food servers. The attorneys are arguing that the fee deduction is illegal under the “Fair Labor Standards Act.” Some states make it illegal for companies to take a portion of servers’ tips. However, the U.S. Department of Labor has written a fact sheet for employers that says credit-card processing fees can be deducted from servers’ tips.

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Cap One Charge-Offs Drop for the 7th Month

Capital One’s charge-off ratio dropped for the seventh consecutive month, however delinquency slipped upwards for the second straight month. During June, the issuer added $783 million in managed outstandings. Cap One reported that charge-offs dropped to 4.17% for June, compared to 4.40% in May, and 5.57% in November. In June 2003, Cap One’s managed charge-off ratio stood at 6.20%. Delinquency edged up to 3.76% during June, compared to 3.73% for May, and 4.39% for January. Delinquency peaked exactly one-year ago at 4.95%. At the end of the second quarter Cap One had $45.2 billion in U.S. card loans, compared to $45.3 billion in the first quarter. COF’s global managed loan portfolio grew by $1.6 billion to $73.4 billion in 2Q/04. For complete details on Capital One’s monthly metrics and 2Q/04 performance visit CardData ([www.carddata.com][1]).

Capital One 2003-2004
Month Charge-offs Delinquency
Jun 03 6.20% 4.95%
Jul 03 5.75% 4.92%
Aug 03 5.34% 4.74%
Sep 03 5.24% 4.65%
Oct 03 5.30% 4.52%
Nov 03 5.57% 4.46%
Dec 03 5.10% 4.46%
Jan 04 5.00% 4.39%
Feb 04 4.75% 4.14%
Mar 04 4.74% 3.80%
Apr 04 4.70% 3.69%
May 04 4.40% 3.73%
Jun 04 4.17% 3.76%
Source: CardData (www.carddata.com).

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

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TNS Up 13%; First Data Contract Doubtful

VA-based TNS reported that revenue for the second quarter increased 12.6% to $60.9 million from 2Q/03. Revenue from the Financial Services Division increased 19.7% to $6.2 million from second quarter 2003. During the quarter, TNS purchased two groups of assets from the bankrupt U.S. Wireless Data. The Company paid $6.1 million for the assets related to USWD’s Synapse platform and paid $3.7 million for the assets related to USWD’s vending operations. The Synapse assets enable wireless POS terminals to initiate transactions for mobile and other merchants, and the vending assets support cashless transactions at vending machines. The Company indicated it is negotiating a new contract with First Data but it now looks like FDC may not remain a significant domestic POS customer in 2005. For complete details on TNS’ monthly metrics and 2Q/04 performance visit CardData ([www.carddata.com][1]).

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

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CIBC to Drop its AmEx Card in the Fall

CIBC, Canada’s largest VISA issuer, is putting an end to “Entourage,” its co-branded venture with American Express, on October 31. CIBC says that “Entourage” failed to meet financial expectations. The company will instead refocus on its core VISA business. “Entourage” was introduced in January 2002, AmeEx’s first card-partnership in Canada, and made CIBC the first Canadian bank to issue both American Express and VISA. At the time, American Express referred to Canada as a “critically important credit card market” for the company. The venture had also been a milestone for American Express because CIBC was the first bank in either Canada or the U.S. to partner with the company for a co-branded card. Since then, however, MBNA has signed with American Express to offer co-branded cards in both countries, and that agreement awaits the Supreme Court’s decision on whether to uphold two lower courts’ nullification of VISA and MasterCard’s exclusionary rules. Under terms of the agreement between American Express and CIBC, CIBC issued the cards, held the accounts and handled all customer service functions. The company marketed three versions of the “Entourage” card. The “Entourage American Express Card” was Canada’s first smart chip credit card, offering consumers tighter security for online transactions; the “Entourage Platinum American Express” offered exclusive features for consumers; and the “Entourage Business American Express” offered features for the business card holder.

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Global Rewards for Consumers in the Works

Global Vision Holdings and BSP Rewards have signed an agreement to launch “Global Rewards,” a consumer purchases incentive program. BSP currently has enrolled more than 4,000 restaurants and chain restaurants as well as more than 400 merchants in the program. The merchants include department stores (such as Target and Macy’s), office supply stores (such as OfficeMax), drug stores (such as Eckerd), grocery stores, specialty stores, sporting goods stores and travel services providers. Under the terms of the agreement, GVHL will function as the mass-distribution marketer of the program and set up major channel distributors. GVHL is a developer and wholesale marketer of a new generation of prepaid (also known as “Stored-Value”) financial services.

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Thales and iBIZ Make 3D Secure In-House

Thales and iBIZ Software have partnered to launch a joint
product offering to help banks and financial services providers migrate
to the new “3D Secure” standard. Developed by VISA, then co-sponsored by
MasterCard and followed recently by JCB, “3D Secure” helps make the Internet a secure place to trade while also reducing charge-backs and increasing card usage. To date, most of these implementations were made
through outsourced services, at the expense of sharing vital customer
data with third parties and implementing complicated key management
schemes. The partnership between Thales and iBIZ allows financial
institutions to efficiently and cost-effectively implement this
protocol, making it possible for them to choose a more secure and
manageable in-house implementation.

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iBill Funder Mercator Invests into Penthouse

Mercator Advisory Group, which assisted Penthouse International in its acquisition of iBill, has made a $2.75 million private placement in Penthouse. Penthouse is using the net proceeds for investment purposes. Penthouse also issued three-year warrants to Mercator Advisory Group and its designated funds. Mercator Advisory Group, through its designated managed equity funds, specializes in direct equity investments in public companies.

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VASCO Revenues Climb 21% in the Second Quarter

VASCO Data Security International reported that revenues for the second quarter increased 21% to $7.2 million. Net increased 10% to $888,000. During the second quarter VASCO won 115 new customers with 244 year-to-date new customers including 33 new banks and 211 corporate customers. The Company also signed HSBC Brazil to use its “Digipass GO3.” VASCO also launched four new products: “VACMAN Middleware 2.2,” “Digipass 585,” “Digipass 850 Integration Toolkit for PKI” and “Digipass Plug-In for RACF. The Company says the third quarter is normally its weakest quarter due to vacations, but the company has a backlog of firm orders to be shipped in the third quarter of $5.6 million.

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PayPal Transactions Decline; Fees Flat Q-Q

eBay yesterday reported that gross payment volume for its PayPal business leveled off during the second quarter, up less than 1% compared to the prior quarter. In further signs of maturity, the number of quarterly transactions fell for the first time, and transaction fees were flat. One-year ago PayPal’s second quarter volume of $2.8 billion grew 8% sequentially. During the second quarter of this year, PayPal handled $4.35 billion of gross payment volume, a 53% increase over 2Q/03. PayPal produced $161.5 million in transaction fees for 2Q/04, a 59% jump over the year-ago quarter, but only a 0.2% increase over the first quarter of 2004. At the end of the second quarter, PayPal had 50.4 million accounts, compared to 31.1 million one year ago. During the second quarter, PayPal handled 77.2 million payments, a 2% decline over the prior quarter, but up 45% from 2Q/03. PayPal continued to capture 54% of eBay’s total $8.0 billion in total sales volume during the quarter. PayPal’s transaction revenue rate was 3.64%, compared to 3.50% one-year ago. The processing expenses rate for the second quarter was 1.34%, compared to 1.30% for 2Q/03. PayPal’s transaction loss rate came in at 25 basis points compared to 32 basis points one-year ago. For complete details on eBay/PayPal’s Second quarter performance visit CardData ([www.carddata.com][1])

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

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FTC Takes on a Group of Canadian Fraudsters

The FTC has charged a group of Canadian telemarketers with operating a bogus consumer protection service that promises to protect consumers against telemarketing and unauthorized bank activity, then perpetrates that very fraud. The FTC’s complaint against Montreal, Canada-based International Protection Center states that since at least February 2003, the defendants have telemarketed various bogus services, which they claim will protect consumers from fraud by blocking telemarketing calls and preventing unauthorized charges to consumers’ bank accounts. The defendants allegedly target elderly and infirm consumers, often claiming to represent banks or the U.S. government, including the FTC. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them.

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Cards Capture 10% of China’s Retail Purchases

Ireland-based Research and Markets has issued a new report that found that Chinese banks have issued over 140 million credit cards since 1985. R&M says the number of cards issued by Chinese banks has increased by 64% each year. The total sum of transactions has increased by 76% per year, and the number of retailers who accept the cards has grown by 51% per year. The number of card-issuing banks has increased from the initial four state-owned commercial banks to over 20 banks. Meanwhile, the percentage of retail purchases using bankcards also has been on the rise. Last year, it grew to nearly 10% of all retail sales revenue. China launched its first credit card in 1985, the “Great Wall Card.” The “Great Wall Card” became a member of VISA in 1987 and began issuing the first international credit cards in China in 1988.

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