The WFNB (World Financial Network Bank) is a Credit card banking system of the Alliance Systems Corporation located in Columbus, Ohio in United States. The bank provides credit cards in collaboration with its Affiliate bank, the World Financial Capital Bank. It underwrites accounts and the purchases for commercial credit and credit card clients.
Founded in 1989, the bank was formerly referred to as the World Financial Network National Bank. The bank has more than 85 credit card co-brand private programs that represent about $3.8 billion managed receivables and 105 million cardholders. Its clients are mostly specialty retailers. In response to agency request, published in the Federal Register dated May 19, 2008, the following comments were gathered:
Changes in the consumer’s interest rate alongside other account terms
From the proposal made on June 2007, it is a requirement that when change-in-terms notice comes along with periodic statement, then creditors give a tabular disclosure of key terms changed in front of periodic statement. Consistent with 2008 Regulation AA Proposal, which restricts the creditors ability of applying increased rate to existing balances; it would be a requirement that all creditors clarify how any increase in rate would affect existing balances.
Inability to increase interest rate for the existing balances could generate disclosure and system issues relating to balance circulation in the periodic statements. When this happen, it may cause other system issues like the number of balance circulations, which can be simultaneously performed on statement and account issues relating to knowing the amount of each portion of balance that is circulated. In addition, statements with the multiple balance circulations may be hard for consumers to analyze and understand. The WFNB believes that there is a need for an exception for this rule proposed for the fresh acquired portfolios.
Any inability to re-price the accounts may generate the chilling effect in getting existing portfolios. This could further affect security. Distressed sellers may find difficulties in getting buyers for any portfolio priced below the existing market rates. This is because inability of buyers to re-price the existing balances via change-in-terms upon acquisition. Issuers may also charge higher interest rates at the account outset to consumers due to inability to raise the rates and get them apply to the existing balances during later dates.
Inability to re-price the existing balances may affect consumers since issuers may want to make up for the lost revenue through raising risk cutoff on portfolios. This may further inhibit marginal credit risking consumers from getting financial alternatives. It may also force issuers to decrease card member benefits like rewards programs or increase other fees and rates.
Now, it may be necessary that consumers comply with the reasonable payment instructions such as the cut-off hour for getting payments. The proposal dated May 2008 deem cut-off hour for all the mailed payments made before 5:00 PM on due date to be unreasonable instruction. No creditors that set the due dates during holidays or weekends but does not accept payments mailed on these days would be in a position to consider payments received in the following business day as late. World Financial Network Bank does not believe on the unreasonable deeming policy that the cut-off hour for all payments mailed before 5:00 PM. It likens this case to that of UCC (Uniform Commercial Code) section 4-108 that states “Time of Receipts.”
Grace Period labels
The WFNB (World Financial Network Bank) makes no comment on the consumer understanding on “grace period” versus “how to avoid the interest”. However, it ask its board members to acknowledge that the printing, distribution and destruction of the card member agreements, new card applications and other documents , currently referencing “grace period” involves execution, operational planning and significant cost.
WFNB believes that its board members should provide extended period for the industry to comply proposed changes. Issuers would then replace collateral with the updated documents (that utilizes on “how to avoid the interest” phrase) as the existing stock is being depleted during this period.