Credit card receivables

The structure of a mortgage master trust is essentially identical to a credit card master trust except that credit card receivables are replaced with mortgage collateral (see Exhibit 11.13). The originator sells an equitable interest in a specified group of mortgages to the master trust. This can then be used as collateral for a number of securitisations. Over time, additional mortgages may be added to the trust, subject to various constraints to protect the quality of the collateral. The same pool of mortgages will support all the series of notes issued by all issuers, with... 

We define European credit card transactions as those transactions that are backed by credit card receivables that originated in Europe. A US dollar-denominated credit card transaction backed by sterling-denominated receivables would therefore count as a European transaction, while a euro-denominated transaction backed by US dollar-denominated receivables would count as a non-European transaction. 

From the 28 CCABS transactions shown in Exhibit 13.4, 26 are backed by sterling-denominated credit card receivables and two have euro-denominated collateral. In 2000, Findomestic Banca S.p.A. issued 311 million of notes backed by Italian credit card receivables. In 2001, Diners Card Europe S.p.A. (and other European Diners Club operations) completed its first transaction in a euro-denominated issue. The collateral includes receivables in Italy, Germany, the United Kingdom, Ireland, the Netherlands, and Belgium. 

Master trusts allow issuers to sell multiple securities from a single trust. There is no segregation of any sort between the receivables in the trust and as such, all issues are backed by the same collateral. The master trust structure affords the issuer great flexibility, since the cost and effort associated with issuing a new series from a master trust is lower than for creating a new trust for every issue. For example, an issuer creates a new master trust and sells 100 million in credit card receivables from selected accounts into the master trust and then issues securities backed by these receivables. When more financing is needed, the issuer sells a further 100 million in receivables from more accounts into the same trust and issues more securities. This means that the issuer does not have to set up new master trusts if it wants to securitise new receivables. All securities are issued from the same master trust and backed by the same collateral. 

Three types of consumer finance receivables have been securitised in the past credit card receivables, auto receivables (essentially auto loan and auto lease receivables), and other consumer finance receivables, which typically include unsecured personal loans. Credit card receivables are discussed in Chapter 13. The purpose of this chapter is to provide an overview of the European auto and consumer loan ABS markets and review the structural, collateral, and performance characteristics of the two asset classes. We decided to review auto and consumer loan ABS combined in one chapter because of the many similarities between the two asset classes. 

An ABS is a bond issued by a single purpose vehicle (SPV) that is secured with a large number of assets (the Assets ) of one same type pooled in a portfolio. These Assets are usually the sole recourse the investors will have for repayment of the bonds. Examples of Assets are residential mortgages, commercial mortgages, credit card receivables, aircraft leases, and the like. 

The delinquency ratio is measured as the value of credit card receivables overdue for more than 90 days as a percentage of total credit card receivables. The ratio provides an early indication of the quality of the credit card portfolio. 

The default ratio refers to the total amount of credit card receivables written oflF during a period as a percentage of the total credit card receiv-... 

Besides the use of photochromic systems in light filters, their color development has also received considerable attention. For example, the introduction of photochromic components into product labels, tickets, credit cards, etc adds a mechanism for verification of authenticity (41,42). The active components are invisible until activated with an ultraviolet light source, after which they are easily detected. 

Charge it Put it on my account Add it to my student loan As these statements indicate, buying on credit is a way of life in the United States. Simply stated, credit is an arrangement to receive cash, goods, or services now and pay for them in the future (Rejda and McNamara, 1998). Consumer credit is differentiated from other types of credit (i.e., business credit) in that it is credit for personal and family needs (except a home mortgage). According the 2004 Survey of Consumer Finance, the median value of credit-card balances and installment loans for a typical family in 2004 was 13,700 (Bucks et al., 2006). Installment loans describe consumer loans that require fixed payments and a fixed term (e.g., an automobile loan). 

I check the mail every day with a sense of anticipation, hoping for checks and invitations, but receiving bills, catalogs, and PennySaver mailers instead. The selection today is mostly junk a credit card offer, local coupon book, catalogs and, wait a second—jackpot Here is something even better than checks or invitations the 2006 Johnny s Selected Seeds catalog. 

Electronic records include data-storing memory cards used in embedded control systems such as steam sterilizers. These cards are used to transfer data (critical parameters, cycle times, etc.) from the control system to a main database application which is usually networked. A memory card is about the size of a credit card. Manual installation, removal, and transfer of the memory cards must be conducted in accordance with defined procedures. Reuse of cards must be carefully considered data must not be deleted until confirmation is received that it has been successfully downloaded to the database. The local operating enviromnent and the possibility of EMl/ESD damage to data integrity of the memory card must also be evaluated. 

In other cases, identifiable information may be necessary for nsers to receive the benefits from using online technologies. Customiztition and online payment and delivery clearly require users personal information. To some extent, these activities may be handled through online pseudoidentities. However, when a reasonable level of privacy is assured, customers may be willing to reveal their identity just as they do by giving out credit card information over the phone. 

In the case of cobranded cards, the bank allies with a company, such as an automobile manufacturer, and the two companies market the card jointly. Such agreements benefit the bank because it can attract additional customers and increase its receivables under management. It also benefits the company through the promotion of its products. For example, in 1993, HFC Bank PLC, a wholly owned indirect snbsidiary of Household, Inc. in the United States, introduced the GM Card in the United Kingdom. It has standard credit card features but customers can also earn reward points for purchases made on the card and redeem them when they buy a new or used Vauxhall car. The agreements for cobranded cards are likely to have different arrangements for sharing expenses and revenues. 

One of the goals in credit card securitisation, as with the securitisation of other assets, is to remove receivables from the issuing card bank s regulatory balance sheet in order to free up capital. Driven by the need of banks to diversify sources of funding and reduce regulatory capital, the first securiti-... 

In the United States, standalone trusts were the dominant issuance vehicles from 1987 to 1991. An originator designates a specific pool of credit card accounts and sells the receivables and rights to the future receivables arising from those accounts to a discrete trust. The major disadvantage with standalone trusts is that each subsequent securitisation requires the issuer to set up a new trust. This structure was used until 1991 when the master trust became the preferred issuance vehicle. 

A simplified credit card master trust structure is shown in Exhibit 13.6. This particular structure has been developed in the United States and was introduced in Europe with the creation of MBNA s UK Receivables Trust II. 

The typical credit card transaction structure has three different cash flow periods revolving, accumulation, and early amortisation. Each period performs a distinct function and allocates cash flows differently. Credit card transactions are usually structured as soft bullets in order to mimic a traditional corporate bond, that is, investors receive monthly or quarterly payments of interest with one single payment of principal on the scheduled redemption date. 

Barclays Capital has developed an index for the European CCABS market, called the Barclays European Credit Card Indicators (BECCI). BECCI includes approximately 12 billion equivalent in receivables held in publicly rated ABS credit card transactions. It covers approximately 85% of the whole European credit card ABS market. Transactions are not included if their performance data is not or not yet publicly available. The various performance indicators are calculated on a weighted average based on the publicly rated notes outstanding. 

When analysing the delinquencies of a particular credit card portfolio, the reported levels should be reviewed on a like-for-like basis, that is, it is important to know about the originator s policies towards delinquencies and charge-offs. Exhibit 13.17 shows receivables that have... 

After doing the custom frames for six months, and receiving numerous inquiries for specialty components such as titanium axles, RockShock shocks, and specialty handlebars, John began looking for suppliers. He knew from his experience with the frames that he did not want to stock an inventoiy of parts, but he felt that he could still sell components. Initially, he partnered with a small machine shop making titanium turned parts such as axles and hubs. He set up his Web site so that, when ABC received the order and the credit card amount, an order was placed with the machine shop to drop-ship the component to the customer and credit the machine shop s bank account (transaction with customer, transaction with supplier with accompanying information for both). 

Speedpass is a small radio-frequency identification device the driver uses by holding it close to a receiver built into the gasoline pump. The driver transmits credit card information and customer ID to ExxonMobil s information network. The transaction is approved and the customer begins... 

There is, however, more to this unsolicited mass mailing than just securing market share. This can be illustrated via another credit card experiment, this time presented to a 1968 government hearing on the practice by a spokesperson from the American Bankers Association. In the experiment. New York-based Marine Midland Bank sent 33,357 promotional credit card application forms to potential users. They received responses from only 221, or 0.7 per cent. However, when cards were sent directly to 731 recipients, 19 per cent were actively using them within 60 to 90 days (Bailey 1968 24). The spokesperson expanded on this theme ... 

If a credit card company writes and asks you to cut up the card and return it, can it be assumed that they have terminated the account the letter they sent to me asks me to cut up and return my card back to them, but when i called the manager [he] told me to keep hold of it, which do you think i am best to do i did call them as soon as i [received] the letter telling me to return my credit card cut up. .. cos i thought to myself what the bloody hell they playin at ... 

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