ASDC Settles FTC Charges

American Savings Discount Club and its two principals reached an agreement with the FTC yesterday to establish a redress fund of nearly $3 million after generating nearly $50 million from consumers over a five-year period in an advance-fee loan program. ASDC has agreed to these provisions in order to settle a complaint that the Federal Trade Commission filed jointly with the Attorney General’s Offices of Virginia, Wisconsin, and North Carolina. The complaint alleged that the company pitched a fraudulent advance-fee loan promotion to hundreds of thousands of consumers nationwide.

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Charge-Offs 2Q/02

Charge-offs among the top ten issuers of VISA and MasterCards increased by nearly 22% during the second quarter compared to 2Q/01, driven largely by the rise in sub-prime losses. Providian and Metris/Direct Merchants reported the largest jump in losses, 70% and 38%, respectively. Bank One/First USA and Fleet continued to report decreasing charge-offs over the past twelve months. Discover reported a 26.5% increase in losses for 2Q/02 compared to the second quarter of last year. For 2Q/02, Discover reported a charge-off rate of 6.30%, compared to 6.49% in the previous quarter, and 4.98% one year ago. For American Express, losses slowed from 6.5% in 1Q/02 to 6.2% in the second quarter. During 2Q/01, American Express experienced a charge-off rate of 5.7%. Among the top ten VISA and MasterCard issuers, the average charge-off rate for the second quarter came in at 7.95%, compared to 6.52% one year ago. If Providian and Metris/Direct Merchants are excluded, the average for the top issuers would be 5.87% for 2Q/02 compared to 5.50% for 2Q/01. For complete portfolio details on the top U.S. issuers visit CardData ([www.carddata.com][1]).

TOP TEN VISA/MC ISSUER CHARGE-OFFS
2Q/02 1Q/02 2Q/01 ANN CHNG
1. Citigroup: 6.50% 6.41% 5.51% +17.9%
2. MBNA 5.09% 5.00% 4.82% +5.6%
3. First USA: 5.62% 5.69% 6.09% – 7.7%
4. Chase: 6.42% 5.87% 5.54% +15.9%
5. Cap One: 4.36% 4.00% 3.98% + 9.5%
6. Providian: 17.53% 15.05% 10.29% +70.4%
7. BofA: 5.59% 5.43% 4.94% +13.2%
8. Household: 7.54% 7.17% 6.82% +10.6%
9. Fleet: 5.81% 5.42% 6.31% – 7.9%
10. Dir Merch: 15.00% 13.00% 10.90% +37.6%
AVERAGE: 7.95% 7.30% 6.52% +21.9%
Source: CardData (www.carddata.com)

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

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SCOTIABANK CASH BACK

Starting today, Scotiabank “Classic VISA” credit card customers will receive up to one per cent cash-back on all purchases made with their card. The cash-back feature is being added as a
benefit on all Scotiabank “Classic VISA” cards. The cash back feature is tiered. On the first $1,500 of annual purchase volume, the customer receives 0.25 per cent cash-back; on the second $1,500 of annual purchase volume, the customer receives 0.50 per cent cash-back; and, on all annual purchase volume amounts greater than $3,000, the customer receives one per cent cash-back. The program carries no extra fee. The announcement follows the debut earlier this year of a no annual fee option for the Bank’s “Value VISA” credit card. With an 11.9% interest rate, the no fee “Value VISA” is the only no fee low rate credit card in Canada.

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Zixit Loses Lawsuit

Dallas-based ZixIt, an e-messaging service, lost its lawsuit against VISA after alleging that VISA interfered with prospective business relationships for “ZixCharge,” a payment system for online transactions. ZixIt Corp. is a global provider of secure e-messaging services, providing innovative, cost-effective and easy-to-deploy solutions that ensure the highest levels of security for corporate email and other electronic messages.

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MAESTRO SWITCH

An agreement in principle has been reached between the Switch Card Scheme Board and MasterCard Europe to migrate the Switch debit card brand to Maestro in the UK. Upon completion of the agreement, migration of the brand will begin with immediate effect and will be completed by mid-2007. In the early stages, most cards and shop windows in the UK will carry both the Switch and Maestro logos, and then gradually the Switch brand will be withdrawn. As well as agreeing in principle on the brand migration, the Switch Scheme will also outsource its transaction processing to MasterCard using EPS-Net, the telecommunications and data processing arm for MasterCard and Maestro transactions in Europe. EPS-Net will be responsible for the processing of all inter-member transactions performed domestically in the UK. Switch process 1.3 billion transactions a year and an annual spend of over £45 billion.

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GEMPLUS 2Q/02

Paris-based smart card manufacturer Gemplus reported a second quarter operating loss, before restructuring charges, of US$25.1 million, almost half the losses posted in 2Q/01. The company also confirmed that its interim CEO, Ron Mackintosh, has decided to step down as of August 15th, with no apparent successor named till then. 2Q/02 revenue was up 19% to US$217.9 million, and gross profit was up 34% to US$50.3 million compared to 1Q/02. However, revenue for 2Q/01 was US$261.9 million and gross profit was US$96.3 million, significantly above current quarter levels. Since February, the company has gone through a restructuring that has reduced its operating costs by US$69.6 million annually. The company is seeking to cut $114.2 million from its costs by year-end. Gemplus also noted that it decided to include in its consolidated accounts for the second quarter a provision to cover the risk of possible non-reimbursement of a loan granted to Dr Marc Lassus, former Chairman and a current Board member, in the amount of US$69.5 million.

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OMNIPAY INVESTOR

Dublin-based international payment processor OMNIPAY has a new majority investor. US-based First Data has become the majority interest holder in the company. The majority interest includes a new equity investment FDC has made in OMNIPAY in addition to a prior, indirect investment through FEXCO, a financial services provider which previously served as the majority stakeholder. Last year, First Data announced partnerships with OMNIPAY and FEXCO to develop a multi-currency end-to-end transaction and settlement infrastructure that allows acquirers and merchants to authorize, settle and receive funding for transactions in any of the major world currencies. FEXCO, which will continue to hold a significant minority equity stake in OMNIPAY, also works with First Data subsidiary Western Union to offer Western Union Money Transfer services in Ireland, the United Kingdom, Spain, Malta and Gibraltar. OMNIPAY was established in Dublin in early 2000 by Brian Connolly and Hubert O’Donoghue.

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ScanMaster 2.0

NCR has introduced “ScanMaster 2.0,” an enhanced version of the company’s POS and store-automation software which runs on Microsoft Windows and can be customized to individual store needs, with multiple options and interfaces to a wide choice of additional applications. NCR ScanMaster is certified with NCR RealPOS terminals, including the recently introduced NCR RealPOS 7456, and is available with NCR’s industry-leading NCR RealScan bar code scanners as well as NCR RealPOS printers, displays and electronic payment terminals.

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Hypercom SST

Hypercom announced it has formed a Secure Systems & Transactions Group within the company to address growth opportunities in areas not traditionally associated with the payments market. The new group will integrate Hypercom’s recently developed biometrics, secure identification, age verification, and transaction security products and systems. The effort will be headed up by the company’s chief strategist, George Wallner. In the last three months alone, Hypercom has announced several collaborations that demonstrate the ability of its card payment terminals to go well beyond traditional credit and debit card payments. The company’s Web-enabled “ICE 6000” terminals began displaying images of missing children in a pilot with CVS and the National Center for Missing & Exploited Children. Hypercom’s “ICE 7000CE” terminal was selected to speed processing and reduce costs for millions of medical claims as part of the new Georgia Health Partnership. Hypercom and Identico Systems introduced a photo ID software application for use on the “ICE 7000CE.” In addition, the company’s card payment terminals and/or networking equipment are already supporting non-traditional payment activities ranging from the State of Texas EBT system and the Brazil Health Ministry’s national health card system to the Western Canada Lottery and Taiwan Lottery.

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Zions & Community Banks

After teaming with Concord EFS, the Zions Bank Correspondent Banking division is now gunning for community banks to offer comprehensive electronic merchant card processing, ATM access and driving, and credit card issuance. STAR, the nation’s leading PIN-secured debit network, will provide clients ATM access via STAR and a comprehensive merchant services program for community banks. Zions also provides a credit card featuring the local bank’s name on it allowing community banks to share the revenue with the credit card company.

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