September 13, 2007

GMAC Getting New Facilities From Citi
American Banker (09/12/07)

GMAC is scheduled to receive up to $21.4 billion in asset-backed funding facilities from Citigroup. A securities filing Tuesday revealed that the facilities will supplant a $10 billion facility with Citi from August 2006. GMAC will have access to $14.4 billion in funding after the facilities are enacted, and possibly another $7 billion if specific criteria are fulfilled.
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Toyota Opens Its Own Banking Unit
Moscow Times (09/11/07) Smolchenko, Anna

Toyota has established a new banking services division in Russia, making Toyota the first overseas car company to deploy its own financial operations there. "Russia is a really young market for automotive finance. That's why we think there's an opportunity for further growth," explains Olaf Neitzsch, head of Toyota Kreditbank's representative office. In Russia, overseas car companies have traditionally worked with local banks to finance sales rather than worked independently. Toyota intends to offer consumer loans to facilitate sales of Toyota and Lexus models and anticipates that the new division will boost sales in Russia. Gennady Belyukin, CEO of Toyota Bank's Moscow branch, says prior to the bank, the company sold between 30 percent and 40 percent of its cars on credit, but hopes the new bank will expand that figure. Toyota sold roughly 72,000 Toyota units and 6,946 Lexus units in the first half of 2007, and plans to offer an interest rate of 9 percent for euro and dollar loans and 11 percent for ruble credits.
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Credit Card Issuers Try to Stay Clear of Turmoil
Associated Press (09/11/07)

Although credit card issuers have generally escaped the wave of defaults that mortgage lenders have been suffering, they are exercising more caution about who they lend to and under what terms. According to Curtis Arnold, founder of CardRatings.com, one card issuer has reduced the introductory period for which it offers 0 percent interest from "six months" to "up to six months." Meanwhile, other card issuers are doing away with 0 percent offers altogether, opting instead to go with teaser rates as high as 5.9 percent. Card issuers are also taking a closer look at people with credit problems before approving them for a card.
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Potential Seen in Small-Business Cobranding Pacts
American Banker (09/07/07) Jalili, H. Michael

Card issuers are increasingly cobranding with merchants in an effort to tap into the small-business card market. According to a study conducted by First Annapolis Consulting of Linthicum, Md., the number of small-business cobranded cards from top issuers marketed on the Web has doubled since 2003 to 22 products. The strategy appears to be working for card issuers. Frank Martien, a partner at First Annapolis Consulting, noted that issuers that offer a large number of cobranded products typically outpace others in volume. For example, JPMorgan Chase offers the most cobranded small-business products, and has the third-largest small-business card volume. The company's volume in the small-business card market has grown 48 percent a year since 2003.
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Viewpoint: Finding a Tipping Point for Payroll Cards
American Banker (09/07/07) P. 11; Loria, Patricia; Philliou, Philip

Although payroll cards can be beneficial for employers and unbanked employees alike, adoption of payroll cards is still low. The roughly 11,000 neighborhood financial centers in the U.S. still cash more than 180 million checks a year with a face value of more than $55 billion. Payroll checks comprise 80 to 90 percent of that volume. In addition, the American Payroll Association reports that just 3 percent of its 22,000 members are currently using payroll cards. According to the authors of this article, adoption of payroll cards remains low because unbanked consumers are often better served by local check cashers than banks in terms of location, friendliness, language, and hours. In addition, many unbanked consumers do not understand payroll cards, they wrote. The authors noted that payroll cards will begin to takeoff when issuers conduct consumer outreach campaigns to create awareness and acceptance of payroll cards as an alternative to check cashers.
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Multiple Line Cards: Innovation or Hybrid Return?
Prepaid Trends (09/06/07) Vol. 2, No. 18, P. 1; Shermach, Kelly

Salt Lake City-based Galileo Processing has introduced a new card aimed at unbanked and underbanked consumers. The card, called UltraVX, combines a branded prepaid Visa card with a secured deposit account and a secured credit line issued by Storm Lake, Iowa-based MetaBank. The cards will be issued on a credit bank identification number (BIN), rather than a debit BIN, to allow consumer account activity to be reported to the credit bureaus. That feature is expected to appeal to underbanked consumers looking to improve their credit scores or build credit histories from scratch. Galileo says its new card will raise the bar for competitors such as First Data and Total System Services. "First Data has not integrated technology to deliver products and services that are innovative and unique in the market," says Galileo's Dave Wilkes. "Galileo might send a wake-up call to other processors that are moving secured and unsecured credit card transactions. Companies will be moving to Galileo from obsolete legacy system processors." However, Accomando Consulting President Jim Accomando says the card will not likely catch on with consumers because its separate purses have separate terms, conditions, and pricing--which will only serve to confuse consumers.
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