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Credit And Banking News

01/08/00

Dearborn, MI - based Ford Motor Credit Company (Ford Credit), the auto financing subsidiary of the Ford Motor Company has agreed to pay the Federal Trade Commission $650,000 for alleged violations of the Equal Credit Opportunity Act. According to the FTC, Ford Credit improperly failed to combine the incomes of unmarried joint applicants, resulting in less favorable terms for such applicants compared to married couples.

The settlement is one of the largest ever for ECOA violations. In May of last year, Philadelphia, PA - based Franklin Acceptance Corporation paid $800,000 in similar circumstances, along with Fair Credit Reporting Act violations. The Ford Credit settlement is to be used to compensate credit applicants who were adversely affected by the discrimination during the period from May 1994 to August 1995.

The ECOA and its implementing Regulation B prohibit discrimination against an applicant for credit on the basis of race, color, religion, national origin, sex, marital status, or the fact that an applicant's income is derived from public assistance. Regulation B specifically prohibits discounting or refusing to consider income on the basis of marital status.

The complaint and consent decree were filed in the United States District Court for the Eastern District of Michigan on December 9, 1999.

 

12/21/99

Chicago, IL-based Bank One Corp, the second-largest credit card issuer in the country, announced that chairman and CEO John B. McCoy "has decided to retire" after 15 years. Company president Verne Istock is now temporary acting CEO pending selection of a permanent replacement for McCoy.

In August 1999, the $260 billion-asset Bank One announced declining profits at its credit card-issuing unit, First USA, partly as a result of extensive use of low introductory "teaser rates" on new accounts. Once boasting growth of 20 percent, First USA has experienced reduced profit margins as a result of low introductory and fixed rates on credit cards, as well as expensive acquisitions, such as First Chicago, NBD in 1998.

While Bank One's stock fell 47 percent after the August announcement, Wall Street pumped it up by more than 11 percent after the McCoy departure was disclosed, amid wide speculation that Bank One, or at least First USA was a target for acquisition, possibly by number-one card issuer Citibank.

 

December 3, 1999

Sub-prime card issuer Beaverton, OR-based Renaissance Holdings is being acquired by Prospect Heights, IL-based issuer Household International for $300 million.

 

November 25, 1999

San Francisco-based Nextcard has announced its first non-Internet advertising campaign, with ads to appear in the Wall Street Journal, New York Times, and other business publications. Television spots will appear next year.

 

Riverwoods, IL-based Discover announced that accounts are up more than five million in the past year, which they attribute to merchant initiatives and improved branding. They had discontinued the Bravo brand, and introduced Discover Platinum in that time period.

 

Redmond, WA-based Microsoft has finally released Windows For Smartcards, and building kits will be available to software developers next month. Look for manufacturers to start including Microsoft-driven smart card readers for Microsoft-driven ecommerce applications in PCs next year.

 

New York-based Standard & Poor's announced that charge-offs on bank credit cards were 5.5% of receivables last month, down from 6.2% a year ago, and attributed the improvement to a stronger economy and tighter approval guidelines among card issuers.

 

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