OFT Investigates Eight Card Issuers Over Penalty Fees

The Office of Fair Trading has confirmed it has made recent inquiry to eight card issuers for details on interest rates and fees triggered by default. The OFT is looking for revenue generated from penalties imposed on cardholders. The investigation came to light in response to a report by a parliamentary committee. In December, Parliament’s Treasury Select Committee ordered issuers to stop overcharging and misleading customers. Barclays 0% balance transfer credit card offer was criticized by the Committee as it requires cardholders to charge 50 pounds per month at a 17.9% rate, that cannot be repaid before the interest-free balance.

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Catuity Annual Revenues Up 68% But Target Impact to Follow

Catuity reported annual revenues of 2003 of nearly $5 million, a 68% increase over the prior year. Over the past five years, the Company’s losses have narrowed from $6.2 million in 1999 to just $595,000 last year. Last year was the first year Catuity earned a significant percentage of its total revenue from license fees. A total of approximately $1.75 million, or 35% of 2003 revenue came from license fees compared to $46,000 in 2002. License revenue in 2003 was primarily from its software installations at VISA USA and Target Corporation. As a result, of the increased revenues and on-going cost control efforts, the Company’s loss in 2003 was reduced to approximately $600,000 from a loss of approximately $2.8 million in 2002. However, in February, Target Corporation advised Catuity that it intends to phase out the use of smart chip technology over the next twelve months. As a result, the Company does not expect to record additional license revenue from the “smart VISA Rewards” platform in 2004 and beyond. Catuity says it hopes to continue to work with both Target and VISA as they each develop their future plans for the use of loyalty software. Catuity is a leading provider of loyalty program management and e-coupon software to merchants, card issuers and processors.

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Diversinet Passport ONE Powers Chinese M-Certs and M-Commerce

Guangdong Electronic Certification Authority and Diversinet have signed a cooperative agreement to work together to stimulate China’s emerging m-commerce and m-certs market. Using Diversinet’s “Passport ONE” security infrastructure software to implement the m-cert system, Guangdong CA will operate the system and issue the m-certs, and the two entities will engage in joint sales and marketing activities to promote m-certs and m-commerce solutions. “Passport ONE” is a standards-based security solution for wired platforms and wireless devices, such as personal computers, smart cards, PDAs and mobile phones. “Passport Certificate Server” allows the deployment of secure applications such as e-mail, messaging, secure ID, and information delivery to any mobile device including Palm, Windows Mobile Pocket PC, Symbian and Blackberry wireless handhelds. The software complies with the Chinese digital certificate standard, which enables it to be the first foreign product that can deliver a viable mobile business solution. China now has more mobile phones than landlines, according to recent data from the China Ministry of Information Industry. Mobile subscribers in China increased by more than 30% in 2003 to 269 million, versus 263 million fixed-line phones. Analysts expect mobile handsets and high-bandwidth wireless networks to pave the way for rapid adoption of data applications and services.

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Automated Reg E Card Dispute Solution Released

TX-based VECTORsgi has released “VECTOR:Resolve-RegE” which addresses the resolution of ATM and debit disputed transactions, covering more than 20 different claim types, including those originating from bank’s proprietary ATMs, national and regional ATM networks, POS debit card claims, and ACH unauthorized and revoked claims. The widespread use of electronic transaction methods has drastically increased payment disputes, and banks are hard pressed to track and monitor the claims before the mandated deadline for chargebacks, re-presentments and requesting sales drafts. Difficulty in managing that workload is a key contributor to incurring losses, which cost the banking industry millions of dollars annually. The solution for banks in the past has been to hire more people to address e-payment disputes. VECTOR:Resolve-RegE will not only help banks meet the Reg E mandated timeframe for dispute settlements, but will also reduce the manual research and monitoring involved. VECTORsgi is a leading provider of financial transaction processing, image exchange, item processing, dispute resolution, and e-commerce solutions to financial institutions around the world since 1977.

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UK’s LINK Interchange Network Deploys Integrated Research’s PROGNOSIS

Sydney-based Integrated Research’s “PROGNOSIS” has been selected to manage the UK’s LINK Interchange Network business-critical transaction management systems. “PROGNOSIS” gives LINK a geographical view of ATM states to diagnose faults and monitor the health of the network. The solution enables LINK to publish any of its information screens to its extranet, so customers can securely access their own accounts and track the performance of their ATM networks in real-time, even drill-down to the various components that make up their service. LINK processes over two billion ATM transactions per year. “PROGNOSIS” is currently in the final stages of deployment at LINK, with a full operational roll-out scheduled this month.

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IDT Calling Card Revenues Up 6% Year-Over-Year

NJ-based IDT Corporation yesterday reported that its IDT Retail Telecom division posted profits of $25.4 million for the quarter ending January 31st, a 21% increase year-over-year. Revenues for the quarter of $329.1 million were flat sequentially and up 7% compared to one-year ago. Calling card revenues increased 6.1% year-over-year, but decreased 2.4% sequentially. About 16% of calling card revenues in the quarter were derived from its international divisions, compared to 13.8% in the prior quarter. For complete details on IDT’s latest performance visit CardData ([www.carddata.com][1]).

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

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AmEx Europe Signs Hotel Commission Processing Contract with Pegasus

American Express Europe has signed a hotel commission processing contract with Pegasus Solutions. AmEx Europe will use Pegasus’ hotel commission processing and reconciliation functions for its travel offices in Africa, Australia, Europe, the Middle East and New Zealand, which includes approximately 1,200 agency locations in about 34 countries. Pegasus monitors and reconciles bookings and commissions from hotels in delivering its commission processing service. Pegasus collects commissions from the hotels, ultimately sending detailed reconciliation reports by hotel brand, along with consolidated commission payments, to American Express in its choice of currency. Dallas-based Pegasus Solutions is a leading provider of hotel reservations-related services and technology.

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MBNA Metrics Stable Despite the Seasonal Contraction

MBNA yesterday reported that its outstandings declined $1.8 billion during February, a seasonal contraction. The “denominator effect” pushed up delinquency while charge-offs dipped slightly. Delinquency increased to 4.46%, from 4.32% in January. However, the ratio is significantly lower than the 4.91% for February 2003. Charge-offs decreased to 4.70%, 6 bps lower than January and 40 bps lower than one-year ago. MBNA’s managed credit loans declined from $103.1 billion in January to $101.3 billion in February. MBNA recently reported that domestic credit card loans for the fourth quarter were up 8% year-over-year to $85.8 billion. For complete details on MBNA’s fourth quarter results visit CardData ([www.carddata.com][1])

MBNA 13-MO SNAPSHOT
Month Outstandings Charge-offs Delinquency
Feb 03 NA 5.10% 4.91%
Mar 03 $92.9 b 5.05% 4.62%
Apr 03 $93.9 b 5.02% 4.49%
May 03 $95.3 b 5.04% 4.36%
Jun 03 $96.4 b 5.01% 4.34%
Jul 03 $96.5 b 4.95% 4.35%
Aug 03 $96.8 b 4.81% 4.38%
Sep 03 $98.7 b 4.70% 4.36%
Oct 03 $98.8 b 4.61% 4.35%
Nov 03 $99.3 b 4.71% 4.44%
Dec 03 $104.2b 4.66% 4.28%
Jan 04 $103.1b 4.76% 4.32%
Feb 04 $101.3b 4.70% 4.46%
Source: CardData (www.carddata.com)

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[1]: http://www.carddata.com
[2]: http://www.cardweb.com/images/m/mbna/13trendline_feb04.jpg

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MBNA Canada Fined for Using Risk-Based Pricing

The Commissioner of the Financial Consumer Agency of Canada has issued to MBNA Canada a penalty of $50,000 for a violation of subsection “11(1) of the Cost of Borrowing (Banks) Regulations.” According to the subsection, any bank that issues credit cards with a fixed rate of interest, and that distributes application forms for credit cards, must specify the regular annual interest rate at the time of the application. The Commissioner determined that credit card application forms indicating a “rate as low as” was in violation of the “Regulations” in that it failed to disclose an annual interest rate. MBNA Canada Bank filed an appeal.

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Credit Union Shared Branching Boosts TX Volume

CO-OP Network’s Service Center Corporation says its shared branching network for credit unions has produced extraordinary results. The financial success of Chessie FCU has spurred six credit unions in the mid-Atlantic region to open SCC outlets in the past year, including February 2004 when Fairfax County FCU launched the first SCC outlet in Virginia. SCC ([www.servicecenters.org][1]), based in Southfield, Mich., developed the nation’s first shared branching network in 1975, allowing multiple credit unions to conduct business in one facility.

[1]: http://www.servicecenters.org

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iGames and Chex Services Deal is Terminated

The acquisition of Equitex’s Chex Services subsidiary by PA-based iGames Entertainment has been terminated. iGames says it terminated the deal as the result of material adverse changes in Chex Services’ business, including the loss of revenues due to the termination of contracts at casinos operated by the Seminole Tribe. iGames also claims breaches by Equitex of representations and warranties in the stock purchase agreement, the failure by Equitex and Chex to perform under the stock purchase agreement and the decision by Equitex’s management that Equitex could not consummate the transaction as originally structured due to adverse federal tax consequences. Equitex says it terminated the stock purchase agreement due to material adverse changes in iGames business and seeks $2 million. In November, iGames Entertainment inked a deal to acquire Chex Services for $63 million. (CF Library 11/13/03)

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Elan Drives ATM/Debit for a Baton Rouge Bank

Elan Financial Services has partnered with First National Banker’s Bank of Baton Rouge to provide terminal driving, authorization and routing for all ATM and debit card transactions. Under this agreement, Elan will provide the terminal driving, authorization and routing for all ATM and debit card transactions, as well as the administrative and support functions such as system and fraud monitoring, client support and settlement. FNBB customers will also have access to Elan credit card programs that can generate revenue and support all application processing and underwriting, marketing, training and support. Elan Financial Services supports more than 7,000 ATMs, 15 million ATM/POS cards, and two million credit cardholders with a complete range of products and services including credit card issuing, ATM and debit card processing, and merchant services. First National Banker’s Bank is a full service correspondent bank that was created by Louisiana community bankers in 1984.

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