CardWorks & Spiegel

CardWorks has signed a successor servicer agreement with MBIA Insurance Corporation to service the Spiegel private-label credit card portfolio contained in the “Spiegel Credit Card Master Note Trust.” The “Master Trust” contains four million total accounts, approximately $2 billion in receivables, and includes Spiegel, Eddie Bauer, and Newport News private-label cards. As a result of a “Payout Event,” which was triggered earlier this year, the Spiegel “Master Trust” is now in early amortization. CMS will take over servicing of the accounts from Spiegel’s First Consumers National Bank on June 30th. CardWorks is the parent company of Cardholder Management Services. With the Spiegel private-label portfolio, CardWorks will provide servicing to more than 6 million total accounts.

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VISA Escape!

VISA and Marriott have launched the “VISA Escape!” travel promotion for cardholders planning summer travel outside the USA and Canada. Visa cardholders will receive 20% off the regular package rate when they reserve a Visa Escape! Package for weekend stays, which includes breakfast for two and a room upgrade, subject to availability at the time of check-in.

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Aussie Fight

VISA began its appeal today to the Australian Federal Court over new credit card rules issued by the Reserve Bank of Australia last year that became effective this year. VISA believes the RBA went beyond its legislative powers in calling VISA a “designated payments system” under the “Payments Systems Act.” VISA also says the RBA has inappropriately interfered with its relationships with banks, merchants, and cardholders. VISA says that VisaNet is not a payments system because it does not actually transfer funds, merely facilitating approvals for credit card transactions. Last year, the RBA issued new reforms on the credit card business permitting merchants to recover from cardholders the costs of accepting credit cards. The new standard went into effect January 1st. Also under the new RBA rules, interchange fees will decrease from around 95 basis points to approximately 55-60 basis points by July 1st. VISA and MasterCard argue that the RBA hasn’t complied with its obligations under the “Payment Systems Act,” and that the proposed changes don’t meet the public-interest test required under the act. MasterCard is expected to make its opening statement on Wednesday.

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Sears Portfolio

The first round of bids for the Sears credit card portfolio are expected this week. Among those considered bidders: GE, Citigroup, and HSBC. Sears announced in late March that it is looking to unload its $29.6 billion credit card portfolio. The company says that even though its credit card business generated more than $1.5 billion of operating income last year, and produced more than 60% of total profits, it wants to focus on its core retail business. Sears’ Retail-related businesses delivered $1.2 billion in operating income in 2002. Sears’ Credit-related business includes $17.2 billion in “Sears Card” receivables, as well as $12.4 billion in MasterCard receivables. The company has 25 million active accounts, according to CardData. In the first quarter, net charge-offs rose to 6.11% compared to 5.43% one year ago. Delinquency also increased from 7.31% for 1Q/02 to 7.87% for the first quarter of this year. Sears also reported that its net interest margin dropped from 14.69% to 13.75% and that its yield on all credit cards declined from 18.64% for 1Q/02, to 16.94% for 1Q/03. For complete details on Sears first quarter performance visit CardData ([www.carddata.com][1]).

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

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IN-HOUSE EMV CARDS

Datacard Group and VISA International have teamed to offer turnkey EMV smart card personalization packages to geographic markets outside the USA and to banks that are migrating to “Visa Smart Debit/Credit.” The new solutions are aimed at member banks wanting to control the personalization process in-house. Packaged services include consulting, project management, key management set-up, hardware and software installation, testing, training and ongoing support. Datacard is the first vendor to join the “Visa Smart Breakthrough Turnkey Personalization Program” offering VISA member banks two scalable personalization solutions. One is a high-end solution for members with existing “Datacard” equipment who want to add smart card capabilities; the other is a desktop-based issuance solution for low volume card issuers. Both solutions, built on “GlobalPlatform” standards for investment protection, will allow VISA member banks to upgrade their existing Datacard hardware and software so that they can personalize EMV smart cards. There is a predefined package price for each solution.

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Options MasterCard

Canadian Tire Corporation reported this week that it converted more than 21,000 new “Options MasterCard” accounts from retail cards during the first quarter and that more than 157,000 new accounts were generated through the in-store card acquisition program. Currently, CTC’s Financial Services manages more than 2.5 million “Options MasterCard” accounts, which is 44% higher than a year ago. These accounts make up more than 85% of Canadian Tire’s gross credit charge receivables. Financial Services plans to add at least 600,000 new accounts by the end of 2003 and convert the remaining 230,000 qualifying retail card accounts to the “Options MasterCard.” CTC’s Financial Services business had net credit charge receivables at the end of the first quarter of $1.86 billion, a 36.7% increase over 1Q/02. For complete details on Canadian Tire’s 1Q/03 performance visit CardData

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AEROPLAN DEAL

CIBC has boosted its offer by 24% for the purchase of “Aeroplan” air miles from Air Canada for its “Aerogold VISA” credit card program. However, CIBC also agreed to permit another credit card issuer to participate in the “Aeroplan” loyalty program in Canada. The new contract extension offer came on the day the bankruptcy court was to review bid offers made by several other credit card issuers interested in tying “Aeroplan” miles to their credit card programs. The new CIBC contract offer will also extend the “Aeroplan” relationship to 2013. Additionally, CIBC will hold to its previous commitment to make a $350 million loan to Air Canada as a prepayment for “Aeroplan” miles. Upon the new contract taking effect, CIBC will become an unsecured creditor of Air Canada for this unamortized balance and expects to take a charge of 23 cents a share on an after tax basis in the second quarter. Justice James Farley agreed to support the revised proposal to renew the “Aeroplan” contract between CIBC and Air Canada. Air Canada filed for bankruptcy protection April 1st.

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