The booming credit universe is providing rich pickings for providers of independent research.Worried over conflicts of interest, bond buyers are increasingly turning to independent credit analysis rather than relying on recommendations from the sell side of banks. “We started this company knowing that institutional customers knew that the information provided to the them by the sell side was tainted,” says Paul Ciasullo, an analyst at independent credit research team Creditsights in New York. “It may be new to mom and pop unfortunately, but its not new to the institutions to which were selling our research.”
“Unlike other types of financial institutions that need to generate a profit to satisfy stockholders, credit unions are member-owned,” explains Peter V. Yeager, director of government and public affairs with the Credit Union Affiliates of New Jersey, Hightstown. “The boards of directors do not get paid, only the staff. There are no stockholders. All excess earnings are returned to members in the form of highly competitive dividend rates on savings and investment accounts, great interest rates on loans and the addition of new products and services.”
NEW YORK (AP) — Digging for gold in the growing mounds of tarnished credit and bankruptcies, some credit-card issuers are issuing cards to some of the worst credit risks — sometimes charging hundreds of dollars in fees. “Weve begun to see more and more of these offers, and we suspect this is an area thats going to grow,” said Ruth Susswein, executive director of Bankcard Holders of America in McLean, Va. “But be aware that these offers can be very costly and may be a bad deal, although theyre certainly not going to be pitched that way.” Until recently, people with past credit problems could only get credit cards if they first put up enough money to at least cover their credit limit. The new products arent secured, but holders of the new cards are required to make an up-front payment or pay special fees over time. These fees can sometimes be considerable, and unlike a secured account, they dont earn interest. AmCredit in Sioux Falls, S.D., buys debts that others have given up on for pennies on the dollar. Through a 5,000-card pilot program launched last May, it asks people who have already been through bankruptcy to repay all or a portion of their old debt. In exchange, AmCredit will extend a modest line of new credit, typically 10 percent of what the bankrupt person agrees to pay back. Susswein says the offer isnt a good deal. Anybody who has been through bankruptcy has already had the debts wiped out. “Dont assume debt that is already not yours to pay,” she said. Martin Burke, vice chairman of Service One, which markets and services the AmCredit program, said the AmCredit cards offer “an opportunity for people to take advantage of one of their old obligations to re-establish themselves as credible.” Some creditors dont want to lend money to people who have only had secured cards, because they dont demonstrate that someone can actually pay back a loan, Burke added. Cardholders do not pay an initial fee, but pay a 6.9 annual percentage rate for the six months and 18.99 percent thereafter. First Premier Bank in Sioux Falls offers loans from $250 to $1,000, for which consumers pay a $49 up-front processing fee, another $89 to join the program, plus an annual fee of $89. Of the total $227 initial cost, $178 can be paid out over time, but that counts against the card holders credit limit. Cardholders pay a 21 percent annual rate. Bill Connor, vice president for new business at First Premier, said some customers do not want a secured credit card because they incorrectly perceive that a merchant accepting the card for payment can tell it is secured, or because they have a hard time raising a security deposit. First Premier, which piloted about 105,000 unsecured cards three months ago, also has several secured products in the marketplace, Connor said. Cross Country Bank in Wilmington, Del., which recently bought Ocean Independent Banks credit-card business, offers unsecured credit between $350 and $2,500. Consumers pay $100 up front, $50 a year, and APR of 20.99 percent, Susswein said. Susswein thinks a secured credit card is a better deal for people with spotty credit. Although the deposits for secured cards typically earn minimal interest — under 3 percent — that is still better than giving the money away in the form of fees, she said. “I agree with (that) conclusion,” Connor admitted, “but the client is the person who makes the decision here.”
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