Strong Card Debt

After a very sharp rise in revolving credit in February, American consumers slowed down slightly in March. The rise in credit card debt during 2001 has been mostly attributed to an increase in the number of revolving cardholders produced by a slowing economy. During March, American consumers added $6.6 billion to revolving credit balances, according to preliminary figures released yesterday afternoon by the Federal Reserve. Last year American consumers racked up $7.0 billion during the same period.The FRB calculates that revolving credit is now growing at an annual pace of 11.7% compared to 13.8% for March 2000. The March figures are a sharp contrast to the 19.6% annual growth rate experienced in February, during which period American consumers racked up $10.9 billion in revolving credit. Since the first of this year, American consumers have piled on $24.4 billion in revolving credit. Total U.S. revolving consumer credit now stands at $687.8 billion which includes $666 billion in credit card debt. Overall, consumer credit is growing at a 4.7% rate. At the end of March, American consumers were $1.569 trillion in debt, exclusive of home mortgages.

REVOLVING CREDIT HISTORICAL
($billions)

Mar01 Feb01 Jan01 Dec00 Nov00 Oct00 Sep00
%GRWTH: 11.7% 19.6 11.6 5.0 10.9 4.7 7.8
$OWED: $687.8 681.2 670.3 663.4 660.6 654.8 649.3

Aug00 Jul00 Jun00 May00 Apr00 Mar00 Feb00
%GRWTH: 12.6% 6.7 11.2 12.7 13.5 13.8 9.4
$OWED: $645.1 638.2 634.7 628.9 622.5 615.5 608.5

Source: Federal Reserve; revised figures as of 05/07/01;
For complete historical data visit http://www.carddata.com/

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ComDot Cards

The Israeli firm ComSense, announced this morning it has begun shipping the production version of its ‘ComDot’-powered reader-free Internet cards. The self-powered ISO card is able to authenticate users at any telephone or connected PC, using sound, eliminating the need for a card reader or other specialized hardware. Customers include online service providers, credit card issuers, and retailers. ComSense also announced field trials of the new card with iMetrikus, Nippon Shinpan Company, Sofmap, and Marubeni Information Systems.

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SurePay Investment

eONE Global, LP, a leading innovator in identifying and developing emerging payment technologies for Internet and wireless applications, and VeriSign, Inc., the leading provider of Internet trust services, announced that Anil Pereira, senior vice president and group general manager of VeriSign’s Enterprise & Service Provider division, has been named to the SurePay board of directors and that VeriSign has invested $20 million in eONE Global and its SurePay business.

The SurePay business of eONE Global provides a patent-pending online payment solution for enterprises and e-marketplaces and their members seeking to conduct secure payment transactions online. VeriSign and eONE Global on April 5 announced a strategic partnership to co-market each other’s products and services and co-develop emerging payment options.

‘We’re very pleased to have someone with Anil’s level of experience and background join the SurePay board of directors,’ said Garen Staglin, president and CEO of eONE Global. ‘This further enhances our alliance with VeriSign to co-market and develop services to simplify the complex integration of payment solutions for our customers.’

Through their alliance, SurePay and VeriSign will jointly enhance SurePay’s business-to-business services by offering and co-marketing a best of breed service via SurePay’s patent-pending complete payment solution to businesses. Additionally, SurePay will market VeriSign’s managed payment gateway as SurePay’s premier business-to-consumer payment gateway offering to First Data financial institution clients. eONE Global is a joint venture between First Data, the e-commerce and payment services leader, and iFormation Group, a company that partners with market leaders to create and develop new online businesses.

‘As e-commerce continues to grow, the need for an end-to-end payment and trade management solution for enterprises is mission-critical,’ said Anil Pereira, senior vice president and group general manager of VeriSign’s Enterprise & Service Provider division. ‘By leveraging the combined strengths of VeriSign and SurePay, our customers will be able to deploy a broader range of high-value e-commerce applications to drive greater cost-effectiveness in their online initiatives.’

Mr. Pereira leads four of VeriSign’s key business lines, including Enterprise Authentication Services, International Affiliate Services, Wireless Services and Corporate Domain Name Management Services. He is part of the management team that successfully completed VeriSign’s IPO in January 1998 and has been instrumental in forging strategic alliances with a broad range of strategic partners, including AOL/Netscape, Dun & Bradstreet, Netegrity, eONE Global/SurePay and VISA.

Prior to joining VeriSign, Mr. Pereira spent seven years at American Express Company in New York in a variety of marketing positions, most recently as Vice President of Affinity Card Marketing. From 1987 to 1989 he was a management consultant with Andersen Consulting. He holds a B.Mgt from the University of Lethbridge and an MBA in strategy and finance from the Wharton School of the University of Pennsylvania.

About eONE Global

As the leading source for accelerating payment innovation, eONE Global, LP ([www.eoneglobal.com][1]) identifies, develops, and operates emerging payment systems and related Internet and wireless technologies spanning the business, government and consumer markets. Its operating companies include SurePay, LP ([www.surepay.com][2]), which provides end-to-end payment and security products for companies and consumers buying and selling over the Internet, as well as govONE Solutions, LP ([www.govONEsolutions.com][3]), which enables businesses and consumers to make government payments electronically. eONE Global is owned by global e-commerce and payment services leader First Data Corp. (NYSE: FDC) and iFormation Group, a company created by The Boston Consulting Group, General Atlantic Partners, LLC and The Goldman Sachs Group.

About SurePay

SurePay, LP provides complete, end-to-end payment, trust and security products and services for Internet B2B, B2C and Mobile Commerce markets on a global scale. Leveraging the leadership position of its founder, First Data, in payments processing, SurePay develops and delivers trusted, secure payment solutions for businesses and consumers buying and selling on the Internet. SurePay is a central operating company within the eONE Global network of payment companies and technologies. Headquartered in Melville, NY, SurePay has access to the powerful transaction processing and distribution resources of First Data Corporation throughout the world. For more information visit [www.surepay.com][4].

About VeriSign

VeriSign, Inc. (NASDAQ: VRSN) is the leading provider of trusted infrastructure services to Web sites, enterprises, electronic commerce service providers and individuals. The company’s domain name, digital certificate and payment services provide the critical Web identity, authentication and transaction infrastructure that online businesses require to conduct secure e-commerce and communications. VeriSign’s services are available through its Web site ([www.verisign.com][5]) or through its direct sales force and reseller partners around the world.

About First Data

Atlanta-based First Data Corp. (NYSE: FDC) powers the global economy. Serving nearly 2.5 million merchant locations, more than 1,400 card issuers and millions of consumers, First Data makes it easier, faster and more secure for people and businesses to buy goods and services, using virtually any form of payment: credit, debit, stored-value card or check at the point-of-sale, over the Internet or by money transfer. For more information, please visit the company’s Web site at [www.firstdata.com][6].

About iFormation Group

iFormation Group is a company created by The Boston Consulting Group, General Atlantic Partners and Goldman Sachs to carve new ventures out of traditional companies in partnership with the Global 2000. iFormation teams with industry leaders to acquire, develop and build new Internet and technology ventures that leverage the corporate partners’ legacy assets. For more information, please visit the company’s Web site at [www.iformationgroup.com][7]

[1]: http://www.eoneglobal.com/
[2]: http://www.surepay.com/
[3]: http://www.govonesolutions.com/
[4]: http://www.surepay.com/
[5]: http://www.verisign.com/
[6]: http://www.firstdata.com/
[7]: http://www.iformationgroup.com/

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Zany Chase

Chase Merchant Services announced Monday that Zany Brainy, Inc., a specialty retailer of high quality toys, games, books and multimedia products, has signed a three-year agreement for merchant processing services. The company’s chain of stores conducts more than 4.2 million bankcard transactions a year, totaling more than $300 million in bankcard volume. Zany operates 188 stores in 34 states. across the country. In November CMS signed Frontier Airlines and Triarc Restaurant Group. During February, CMS signed deals with Peachtree Software and Intuit’s ‘QuickBooks’. Chase Merchant Services processes over 2.5 billion transactions a year and more than $175 billion in annual credit and debit card sales volume at the point of sale and over the Internet. (CF Library 11/1/00; 2/6/01; 2/14/01)

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CellCards Sale

CT-based American Payment Systems has acquired a majority share of CellCards, a marketer of prepaid phone card products in check cashing locations nationwide. Owned by a group of check cashing retailers, CellCards has a national distribution network of about 2000 locations. The company sells prepaid cellular phones and air time for major carriers including AT&T, CellularOne, Cingular Wireless, PrimeCo, Voice Stream and Verizon. APS specializes in providing in-person bill payment services and has a network of over 6,000 retail locations, including supermarkets, pharmacies, convenience stores, and check cashing outlets. APS says its acquisition in the prepaid telephone industry supports the company’s overall strategy of becoming a distribution network for financial services and related products used by “unbanked” and “underbanked” households.

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Liberty Direct Settles

Continuing to caution consumers about the dangers of “credit card protection” fraud, the Federal Trade Commission Monday announced a court settlement with Liberty Direct, Inc. and individual defendants Paul L. Wiggs and David C. Furnia, the company’s two principals, for a variety of alleged activities related to the telemarketing sale of such “services.” The FTC’s complaint against Liberty Direct, Wiggs and Furnia was filed as part of the FTC’s September 1999 credit card loss protection law enforcement sweep.

Through the final judgment and order for permanent injunction announced today, the defendants will be banned from selling credit card loss protection, will have to post a $1 million bond before engaging in telemarketing activities and will be prohibited from engaging in several other deceptive activities, including making misrepresentations in violation of the Commission’s Telemarketing Sales Rule (“TSR”). While the settlement does not require consumer redress (due to the defendants’ poor financial condition), Liberty Direct has already refunded approximately $2 million to defrauded consumers, including $1.5 million through credit card charge-backs.

According to the Commission, Liberty Direct began selling credit card loss “protection” services through third-party telemarketers in January 1998 and continued doing so until February 1999. During this time, the company used telemarketing scripts to promote its service, typically priced at $199, by falsely representing to consumers that the defendants were affiliated with the consumers’ credit card issuer; that consumers would be held liable for all unauthorized charges made against their accounts; and that consumers owed money to the defendants. The complaint also alleges that, in violation of the TSR, the defendants failed to promptly disclose that the purpose of their call was to sell a product or service.

Under the terms of the final order, the defendants are banned from participating in or benefitting from a business that sells credit card loss protection services. A $1 million bond must be posted before the defendants engage in telemarketing. In addition, the order contains relief specific to the complaint, including prohibitions on misrepresenting: 1) that the defendants are affiliated with consumers’ credit card issuers or third parties; 2) that consumers can be held liable for unauthorized credit card charges over $50; or 3) that consumers have purchased goods or services from the defendants. Other relief includes prohibitions on consummating a sale for any credit related product or service over the telephone; violating the Commission’s TSR; misrepresenting that consumers have been pre-approved for (or are likely to obtain) an extension of credit; and misrepresenting material facts about any goods or services.

The defendants are also permanently enjoined from distributing its customer lists, except as authorized by court order, and are required to meet specific conditions if they want to tape sales calls.

Lastly, the order includes provisions requiring the defendants to keep records, monitor their sales practices and those of their employees and agents, authorizing the Commission to access company records and providing other means by which their compliance with the order’s terms can be verified. In addition, if the defendants are found to have misrepresented their financial situation, the order will allow the FTC to seek the full payment for all consumer damage incurred.

The Commission vote to authorize staff to file the complaint and stipulated final judgment was 5-0, with Commissioners Orson Swindle and Thomas B. Leary dissenting to Part III.F of the order, which requires the defendants to obtain consumers’ written authorization on a specified form before debiting their credit card or checking account for any product or service.

Commissioner Swindle concluded that the provision is “over-broad and unnecessary to prevent deception and may have unintended negative effects on legitimate activities.” He stated that the authorization form duplicates information that consumers already receive in the course of a transaction (for example, cost information on credit card slips), and contains some disclosures that pertain solely to credit-related products or services. He also explained that the use of an authorization form with “warning” written across the top might deter legitimate sales, since consumers may reasonably decide to purchase elsewhere. He noted that the requirement “effectively bars the defendants from engaging in any future telemarketing,” and stated that if the Commission intended to ban future telemarketing, the order should clearly state that fact. Commissioner Swindle stated that he believes “there are clearer, more narrowly tailored ways of protecting consumers and ensuring that the defendants comply with the law.”

Commissioner Leary stated that he generally agreed with Commissioner Swindle’s concerns and was “particularly concerned about the impact of this provision on a face-to-face transaction because it would require the defendants to present a form with specified disclosures to consumers and obtain written consent prior to any transaction that involves a credit or debit charge.”

He said the provision is “not necessary to ensure that consumers have consented to face-to-face transactions…” and may “deter consumers from buying at all; and it may also deter potential employers from hiring these defendants, even as over-the-counter sales people, in any business that involves potential credit or debit card transactions.” He concluded, “The conduct charged in the complaint fully justifies the injunctive relief otherwise contained in the order, but this particular provision goes too far.”

The complaint and stipulated final judgment were filed in the United States District Court for the District of Arizona on April 5, 2001 and signed by the court on April 20, 2001.

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Sears MasterCard

AZ-based Sears National Bank indicated this weekend it has converted 12 million of Sears’ 60 million retail cardholders to the ‘Sears Gold MasterCard’. At year end 2000, Sears had approximately 9 million cardholders for its bank credit card program, according to CardData. Sears launched the co-branded bank credit card one year ago, targeting inactive and non-revolving cardholders. Sears has been plagued by declining credit revenue due to lower average balances on the private-label Sears cards. At the end of 2000, there were approximately $1.4 billion in Sears/MasterCard receivables. At the end of the first quarter 2001, Sears had U.S. total managed card receivables of $25.7 billion compared to $25.5 billion for 1Q/00. Sears/MasterCard receivables are estimated at $1.8 billion as of March 31. While average and ending managed credit card receivable balances were slightly higher than last year, overall portfolio yield declined. Portfolio yield for 1Q/01 was 19.13% compared to 20.29% one year ago. The net charge-off rate for the managed portfolio declined to 5.07% from 5.69% a year ago. Delinquency, at the end of 1Q stood at 7.50% compared to 7.56% for 4Q and 7.20% for 1Q/00.

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People’s Goes S2

S2 Systems, a global provider of integrated e-business solutions for the banking and financial services market, announced that People’s Bank will deploy the company’s leading-edge OpeN/2 solutions for high-volume card activity management and transaction processing. People’s Bank is the largest independent bank in Connecticut and one of the nation’s leading international credit card issuers.

People’s Bank implementation will include OpeN/2:ATM-IN-A-BOX and OpeN/2:CAMS (Card Activity Management). ATM-IN-A-BOX is a flexible and reliable transaction engine capable of handling high volumes and supporting diverse applications; CAMS is a multiple institution, multiple account system that handles all aspects of card activity management. Bundled together, S2’s solution enables People’s Bank to strengthen its competitive advantage by enabling increased customer loyalty, revenue growth and extended service offerings.

“S2’s progressive transaction processing and card activity management solutions are designed to help card-issuers achieve sustainable growth and profit margins in today’s fiercely competitive market,” said Jeff Chick, S2 Systems vice president and general manager, the Americas. “People’s Bank is a long-standing S2 customer, and we look forward to helping this leading institution with its new e-business initiatives.”

“It’s important to have the right technology for our organization,” said Kate Gloss, People’s Bank VP of Corporate Services. “And it is equally important to work with a technology partner who has the domain knowledge and experience to serve our immediate as well as future needs. Our relationship with S2, and its strong heritage in the banking and financial services industries, strongly influenced our decision to deploy the company’s ATM-IN-A-BOX and CAMS product solutions.”

In the financial services industry, ATMs and cards play an increasingly powerful role by enabling banks and other card-issuers to favorably balance fee income against the escalating cost of support services and customer acquisition. ATMs fuel a broad array of value-added services, while an assorted range of debit, credit, customer loyalty, stored-value, and reward cards combine to satisfy customer needs and drive down costs for the financial institution.

About People’s Bank

People’s Bank is a diversified financial services company providing commercial, consumer, insurance and investment services. Founded in 1842, it is the largest independent bank in Connecticut with managed assets of $14 billion, 146 branches and 220 ATMs. People’s is a leader in commercial banking, residential lending, insurance sales and supermarket banking. An international credit card issuer, it ranks 16th nationally as an issuer of MasterCard and Visa cards. People’s subsidiaries offer brokerage services, asset management, equipment financing and leasing, and insurance services.

About S2 Systems

S2 Systems, Inc. is a leading global provider of e-business solutions for the banking, financial services, retail and travel and hospitality industries. For more than 15 years, some of the world’s largest organizations have relied on S2 products to drive their high-volume e-commerce transactions. Today, our leading technology enables business worldwide to implement Web-based initiatives that improve operational efficiency, enhance customer service and generate new revenue streams. S2 Systems has 350 banking customers worldwide including six of the world’s top banks. Headquartered in Plano, Texas, S2 Systems has offices in Atlanta, London, Paris, Maarssen, Stockholm, Dubai, Riyadh, Hong Kong, Beijing, Melbourne and Sydney. For more information about S2 Systems, visit its Web site at [www.s2systems.com][1].

[1]: http://www.s2systems.com

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APR Chargeoffs

Chargeoffs, among bank credit card issuers, continued their march upward in April. For the March collection, ending in mid-April, chargeoffs hit 4.83% according to CardData, the highest level since February of last year but well below 1999 and 1998 levels.

Apr 01: 4.83% Apr 00: 4.81% Apr 99: 5.27% Apr 98: 5.51%
Mar 01: 4.74% Mar 00: 4.86% Mar 99: 5.32% Mar 98: 5.54%
Feb 01: 4.70% Feb 00: 4.94% Feb 99: 5.37% Feb 98: 5.61%
Jan 01: 4.65% Jan 00: 4.97% Jan 99: 5.46% Jan 98: 5.66%
Source: CardData (www.carddata.com)

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Sungold & SafeSpending

Sungold Entertainment Corp. announces that an agreement has been completed for the acquisition of the entire world wide right, title and interest to the internet payment system technology of SafeSpending Services Inc. The internet payment system business is a growing multi billion dollar market.

The acquisition agreement with SafeSpending includes all copyrights, trademarks, source codes and SafeSpendings’ intellectual property. Under the terms of the agreement Sungold has agreed to pay a 7.5 percent royalty of net revenue relating to the technology and 330,000 common shares in the capital of Sungold Entertainment Corp. upon Sungold or it’s subsidiary Horsepower Broadcasting Network Inc. receiving $1,000,000 in net revenue from the sale or license of the technology. The SafeSpending internet payment system is a pre-paid spending system that uses cards with a unique PIN number which can be used to make purchases online from merchants or individuals.

A survey by Odyssey Online found that 83 percent of respondents said that payment security concerns prevented them from shopping online. The alternatives to credit and debit cards being offered as more secure alternatives, such as Smart Cards, fail to address consumer concerns about privacy.

SafeSpending has developed a system which allows consumers to pre- purchase spending cards of a certain value that will enable the consumer to purchase online without divulging any personal, confidential information as would be necessary if one used a credit card or any other traceable transaction service.

The pre-paid cards will be of a certain value (e.g. the cards value will come in $25.00, $50.00, $75.00 and $100.00 increments), allowing the consumer to choose which card best suits their purchasing needs. The cards will be available behind the counter at most major retailers. Online merchants can be assured of almost immediate payment, and pay a smaller fee to the Company for use of the SafeSpending payment system than they would usually pay to a credit card company. Merchants accepting prepaid spending cards would be immune from fraud. Music and media outlets, looking for ways to tap into the vast teen market online, may find prepaid spending cards a solution to their current marketing dilemma. Individuals selling on auction sites could receive payment from bidders by providing SafeSpending with an account number. Conversely, auction sites are looking for solutions to the fraud for which their sites are becoming infamous. Online gamblers can monitor their wagering by using age restricted SafeSpending cards instead of credit cards.

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