The worst credit card in America is dead . . . for now. The Net 1st
MasterCard, issued to new "credit-challenged" cardholders with a $500 balance
and a $500 credit limit, bit the dust as banking regulators shut down the
issuer, Florida-based Net First National Bank. The Office of the
Comptroller of
the Currency closed the bank last Friday primarily because of bad SBA business
loans. However the OCC said Net First National Bank failed to comply with
19 of
the 20 articles in a enforcement action taken 18 months ago. The Sept 2000
enforcement action by the OCC required the bank to take a series of steps to
develop and implement sound credit administration and underwriting practices;
hire competent, experienced and permanent senior management; and develop and
implement a capital plan and a strategic plan acceptable to the OCC. In
addition, the enforcement action required the bank to stop marketing its
“Pay-As-You-Go” or “Net 1st MasterCard” credit card product until it proved
the
program was in compliance with all applicable federal and state laws,
including
consumer protection laws. The OCC found a number of unsafe and unsound
practices at the bank, including: weak loan underwriting, excessive turnover
among senior management, disarray among the Board of Directors, insufficient
capital to support the risks undertaken by the bank and inaccurate financial
books and records. The “Net 1st MasterCard” did not cause the bank failure
since the card is issued with a balance equal to the credit limit.
According to
Atlanta-based Impulse Marketing, the “Net 1st MasterCard” has been issued to
more than 500,000 consumers to-date and signs up an average of 1,500 per day.
The program generated substantial fee income to Net First National Bank.
CO-based Equitex and its FL-based Key Financial Systems subsidiary, which
markets and services the credit card program, is now seeking a buyer for its
portfolio which holds about $5 million in secured card deposits. The firm
hopes
to resume marketing its patented “Pay-As-You-Go” credit card program with
another issuer. Under the “Pay-As-You-Go” card program, consumers receive a
credit card with a $500 balance and make a $15 monthly payment, of which $8 is
applied to the monthly fee and $7 is applied to the balance and deposited with
the bank as a useable or refundable credit. Most of the links to the ‘Net 1st
MasterCard’, extensively promoted on the Internet, are being routed to Hoven,
SD-based Plains Commerce Bank, which offers an unsecured sub-prime VISA card.
Plains charges a $225 acceptance fee, $79 processing fee, $50 annual fee,
and a
$6 monthly participation fee and guarantees an initial credit limit of $300.
The worst credit card in America is dead . . . for now. The Net 1st
MasterCard, issued to new "credit-challenged" cardholders with a $500 balance
and a $500 credit limit, bit the dust as banking regulators shut down the
issuer, Florida-based Net First National Bank. The Office of the
Comptroller of
the Currency closed the bank last Friday primarily because of bad SBA business
loans. However the OCC said Net First National Bank failed to comply with
19 of
the 20 articles in a enforcement action taken 18 months ago. The Sept 2000
enforcement action by the OCC required the bank to take a series of steps to
develop and implement sound credit administration and underwriting practices;
hire competent, experienced and permanent senior management; and develop and
implement a capital plan and a strategic plan acceptable to the OCC. In
addition, the enforcement action required the bank to stop marketing its
“Pay-As-You-Go” or “Net 1st MasterCard” credit card product until it proved
the
program was in compliance with all applicable federal and state laws,
including
consumer protection laws. The OCC found a number of unsafe and unsound
practices at the bank, including: weak loan underwriting, excessive turnover
among senior management, disarray among the Board of Directors, insufficient
capital to support the risks undertaken by the bank and inaccurate financial
books and records. The “Net 1st MasterCard” did not cause the bank failure
since the card is issued with a balance equal to the credit limit.
According to
Atlanta-based Impulse Marketing, the “Net 1st MasterCard” has been issued to
more than 500,000 consumers to-date and signs up an average of 1,500 per day.
The program generated substantial fee income to Net First National Bank.
CO-based Equitex and its FL-based Key Financial Systems subsidiary, which
markets and services the credit card program, is now seeking a buyer for its
portfolio which holds about $5 million in secured card deposits. The firm
hopes
to resume marketing its patented “Pay-As-You-Go” credit card program with
another issuer. Under the “Pay-As-You-Go” card program, consumers receive a
credit card with a $500 balance and make a $15 monthly payment, of which $8 is
applied to the monthly fee and $7 is applied to the balance and deposited with
the bank as a useable or refundable credit. Most of the links to the ‘Net 1st
MasterCard’, extensively promoted on the Internet, are being routed to Hoven,
SD-based Plains Commerce Bank, which offers an unsecured sub-prime VISA card.
Plains charges a $225 acceptance fee, $79 processing fee, $50 annual fee,
and a
$6 monthly participation fee and guarantees an initial credit limit of $300.