Obama signs credit card reform bill
President Barack Obama has signed into law the Credit Card
Accountability, Responsibility and Disclosure Act which will limit
fees and contract changes. The new legislation has been enacted
following a lengthy process kickstarted by US politicians who are
eager to present themselves as consumer champions.
The legislation will make credit card companies apply payments to
balances with the highest interest rates first. Increasing a
consumer’s rate on existing balances based on late payments to
another lender, a practice known as universal default, will be
prohibited. The measure requires 45 days’ notice before lenders can
increase a card’s interest rate. It also prohibits retroactive rate
increases on existing balances unless a consumer is 60 days late
with a payment. Companies have to restore the original, lower rate
if a cardholder stays current six months after a late payment.
Banks will have to comply with the new law in nine months.
The law also aims to tighten restrictions on lending to students
and how gift cards are redeemed. It bans fees for paying by phone
or over the Internet, except for live services to make expedited
payments. It also aims to simplify the way terms are disclosed to
Americans pay around $15 billion in penalty fees each year, the
White House said. Nearly 80 percent of US families have a credit
card, and 44 percent of families carry a balance. Obama said the
legislation was aimed at reversing instances in which companies
have taken advantage of credit card customers.
DCS announces contactless personalisation
Dynamic Card Solutions (DCS), a US PIN selection and PIN change
provider for financial institutions, has released a contactless
personalisation platform allowing financial institutions to
personalise mobile devices, fobs and contactless stickers at branch
level for near-field-communications (NFC) payments.
The CardWizard system, utilising the DCS Perso-to-Go platform,
enables branch personnel to securely personalise a contactless card
chip. With no over-the-air (OTA) personalisation required,
Perso-to-Go also supports instant activation, so the personalised
device can be immediately used for contactless point of sale
purchases. With a current installed base of around 5,000 financial
branch locations, DCS’ CardWizard customers can upgrade their
existing card issuance system to support the Perso-to-Go
contactless personalisation platform.
American Express cuts another 4,000 jobs
US payment network American Express is to axe 4,000 jobs or 6
percent of its workforce globally as part of a reengineering
initiative it hopes will save the company approximately $800
million during the rest of 2009.
As well as saving around $175 million from the job cuts alone, the
company expects to remove another $500 million by reducing spending
on marketing and business development, while another $125 million
could be saved as it reduces expenses for consulting and other
professional services, travel, and general overheads.
The cuts come after it removed 7,000 jobs last October in a move to
save it $1.8 billion annually. Kenneth Chenault, chairman and CEO
of American Express, said: “We believe these efforts will put us in
a better position to remain profitable and free up some additional
resources that will be reinvested in the business to make sure we
can take competitive advantage of opportunities as the economy
begins to rebound.”
MoneyGram and AccountNow launch Visa prepaid
Global payment services provider MoneyGram and AccountNow, the
prepaid card marketer, have said they are to launch a new
Visa-branded prepaid card available at various MoneyGram agent
locations starting in June 2009.
The MoneyGram AccountNow prepaid Visa card, which will be accepted
in the Visa ReadyLink, Interlink, and Plus networks, allows
cardholders to load cash at any MoneyGram agent location without
the need for a credit or bank account, and consumers can use the
card everywhere Visa debit is accepted.
Brian Triplett, head of global prepaid products at Visa Inc, said:
“At a time when more consumers are focused on managing their
finances, prepaid products can be a helpful budgeting tool, while
empowering consumers with a better way to make everyday purchases,
pay bills and receive payroll deposits. Prepaid is a key priority
for Visa, and we are excited to work with MoneyGram and AccountNow
to extend access to prepaid products and services to financially
First Data reports drop in revenues
Global payment processor First Data has reported a 2 percent
drop in its first quarter 2009 results. Revenues were $2.1 billion,
down 2 percent year-on-year. Adjusted earnings before interest,
taxes, depreciation and amortisation were $491 million, down 15
First Data’s operating profit for the quarter was $30.4 million,
down 85 percent year-on-year. After paying interest expense on its
debt of $448 million, the company reported a net loss of $231
million for the quarter. Its retail and alliance services business
lines reported revenue of $1.2 billion, up 7 percent. Excluding
debit network fees, segment revenue was down 7 percent apparently
due to weakness in the overall economy and continued currency
fluctuations. Operating profit was $54 million, compared with $83
million in the first quarter of 2008.
“Our revenue base held steady in the quarter as we added new
merchant and bank customers,” said Michael Capellas, chairman and
CEO of First Data. “We will continue to invest in new product
development to fuel long-term growth while driving cost
efficiencies to sustain profitability.”
Capital One US credit card defaults fall in
Capital One, the US card issuer, has reported a drop in credit card
defaults for April. The company said the annualised net
charge-off rate for US credit cards fell to 8.56
percent in April from 9.33 percent in March. In international
operations, including Canada and Britain, the
charge-off rate for all loans rose to 8.91 percent in
April from 8.67 percent in March, while the
delinquency rate rose to 6.43 percent from 6.25 percent.
The news come just after Capital One passed the US bank stress
tests without having to raise any new capital.
The results come after the company, damaged by rising credit card
losses and loan defaults in the last six months, reported a
higher-than-expected first quarter loss. It was the second
quarterly loss for the card issuer.