October 11, 2007

New Way to Turn in Leases
Ward's Dealer Business (10/01/2007) P. 42

Chrysler Financial expects to complete the nationwide rollout of its overhauled lease turn-in process by November. The new vehicle turn-in process will include a 20-point billing inspection, in which any excess wear and use charges will be immediately calculated and an odometer statement will be generated to produce final billing. Chrysler will accept payment by credit card to close an account. "The new process ensures a best-in-class lease turn-in experience for Chrysler Financial customers by providing services that make the turn-in process quicker and easier," says Eckart Klumpp, vice president-remarketing for Chrysler Financial. Moreover, customers can turn to the interactive tools available at http://chryslerfinancial.com to prepare for turning in leased vehicles to dealerships. At the Web site, customers will learn more about the "Credit Card Test" to determine what kind of damage is covered at no cost, find inspection reports they can fill out before returning to a dealership, and find contact information for their local dealership Lease Loyalty Coordinators.
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AmeriCredit Car-Loan Losses Ebb as It Eases Off Subprime
Ward's Dealer Business (10/01/2007) P. 43

AmeriCredit has reported a rise in loan origination and net income, successfully deflecting domestic-brand sales declines in California. The lender's president and CEO, Dan Berce, says AmeriCredit is now facing a "ruboff" effect due to greater numbers of foreclosures in home mortgage and subprime non-auto loans posting fiscal year 2007 net income of $360.2 million, up from $306.1 million in 2006. The yearly income takes into account a $6 million gain from the sale of AmeriCredit's investment in online financing firm Dealer Track Holdings. Berce observes that despite decreased domestic-brand sales, the company's new-loan originations rose to a near-record $2.51 billion in its fourth fiscal quarter and to $8.45 billion for the full year. According to Berce, the company's net credit losses fell to the lowest point in its 15-history, "reflecting our shift to increased acceptances of prime and near-prime loans." AmeriCredit's portfolio comprises 15,300 mostly franchise dealers in the United States and Canada and receivables of approximately $16 billion. "Our model has helped us grow in such a market, with our absorption of subprime lenders Bay View Acceptance and Long Beach Acceptance and our decision to raise our portfolio of prime and near-prime loans to about 38 percent of our total portfolio," says Berce.
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Report: African-American Market Untapped by Most Providers
MediaPost Publications (10/08/07) Irwin, Tanya

A new report from Packaged Facts reveals that the African-American market has been neglected by most financial services providers, despite being expected to amass a buying power of $981 billion by 2010. Packaged Facts' study shows that 45 percent of U.S. adult African Americans possessed or utilized credit cards in the fall of 2006, fewer than any other major ethnic or racial group; debit card use among African Americans was also outpaced by the general population's rate of debit card use. These findings open up a considerable opportunity for financial services providers to recruit more African-American cardholders and to convince them to use credit and debit cards more frequently. Study author Luis Clemens recommends that marketers link credit card offers to life insurance coverage or student loans, as those services are valued and used by many African Americans. Personal finance columns published in various print outlets would be another effective way to reach the African-American market, as African Americans regularly assert a need for more information about financial services, and are more likely than other groups to read the business section of the newspaper, says Clemens.
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Debit Cards: The Profitability Challenge
Cards International (10/06/07) P. 14; Conroy, Victoria

The April 2007 Preferred Payments study concludes that debit cards are the preferred payment for POS purchases among U.S. consumers, while McKinsey projects that debit cards will account for 15 percent of total U.S. payments by 2009, earning issuers approximately $21 billion. However, more and more consumers are expecting debit cards to be a free bank account feature, leading issuers to doubt their profitability. In addition, decoupled debit cards issued by non-banks or financial institutions that do not hold the customer's primary or current checking account could make it unnecessary for consumers to stay connected to a specific bank's current account and attached debit card. Issuers are approaching debit card innovation and function augmentation proactively, making rewards and loyalty programs increasingly common. But the goal of such offerings, whether it be higher customer retention, growing deposits, or increased fee revenue, must be clear in the issuer's mind. Whether the expected revenue will compensate for the cost of the rewards program's provision is another factor issuers must be mindful of. To improve debit card profitability, banks must wrestle with the challenge of producing related revenues, particularly current account revenues, and customer segmentation plays a crucial role in that area.
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PCI and Other Breach Laws Under Assault
InfoWorld (10/05/07) Hines, Matt

The Payment Card Industry Data Security Standard was criticized by the National Retail Federation, which released a statement from CIO David Hogan noting that credit card companies typically require retailers to retain card numbers for prolonged periods to satisfy "card company retrieval requests." He said if merchants had the option to stop saving such information, they would reduce their own vulnerability to data breaches and guarantee better customer security. "The bottom line is that it makes more sense for credit card companies to protect their data from thieves by keeping it in a relatively few secure locations than to expect millions of merchants scattered across the nation to lock up their data for them." Some experts say numerous card processors and retailers have a long way to go before they can technologically comply with PCI regulations. Meanwhile, California legislation that requires retailers who experience data breaches to refund any costs incurred by banks and card companies for re-issuing cards to affected customers is awaiting the governor's signature, and merchants are understandably upset. Capitol Hill lobbyists report that the interest in the various data measures currently in committee comes and goes, with one anonymous lobbyist remarking, "It's one of those things where a lot of these bills might get done this session, or maybe they won't get done at all."
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Are Credit-Card Companies Cleaning Up Their Act?
Smart Money (10/07) Todorova, Aleksandra

Due to the increasing number of problems Americans are having with their credit cards, Congress and industry regulators are examining the sector's activities. In 2006, the Government Accountability Office released a study showcasing the growing complexity of credit card rates, disclosures, and fees. Numerous congressional hearings have been conducted in 2007 and several consumer-friendly pieces of legislation have been proposed that, if approved and signed into law, would place limits on rate increases and ban practices such as universal default, which permits creditors to increase a consumer's rate if his credit score falls or if he makes a late payment on a different creditor's account. Most significantly, the Federal Reserve Board, which has the power to set credit card regulations under the Truth in Lending Act, is trying to restructure disclosure rules. The recommended changes include mandating creditors to provide consumers 45 days' notice before altering account terms, such as fees, and prior to implementing penalty interest rates.
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