The Colorado State Bank Commissioner closed sub-prime VISA credit card issuer BestBank Thursday and appointed the FDIC as receiver. According to the Bank Commissioner, BestBank, based in Boulder, CO, was critically undercapitalized. The FDIC spent the weekend attempting to arrange a transaction under which the failed banks insured deposits will be assumed by a healthy bank and reopen for business this morning. In the interim the FDIC and VISA will continue to honor BestBank’s 500,000 VISA cards. The issuer specializes in sub-prime and secured credit cards on a nationwide basis. In the first six months of 1998, BestBank’s receivables surged 52%. Two weeks ago BestBank purchased $5 million of credit card loans from SD-based The Credit Store. The Credit Store’s principal business is the acquisition of charged-off consumer debt and the conversion into new unsecured credit card accounts. With the acquisition BestBank became a MasterCard issuer too. Columbia Capital Corp. and First Independent Computers, BestBank’s processor, said it expects the closing to have little effect on their contract despite the fact that it derives a substantial portion of its revenue from the BestBank contract. This is the first bank failure in Colorado since July 1993.
The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) announced Thursday that it was appointed receiver for BestBank, Boulder, Colorado. The bank was closed on Thursday, July 23, 1998, by the Colorado State Bank Commissioner, and the FDIC was named receiver.
The FDIC is attempting to arrange a transaction under which the failed banks insured deposits will be assumed by a healthy bank and reopen for business no later than Monday, July 27, 1998. If this effort proves unsuccessful, the FDIC will move immediately to make available depositors funds up to the statutory insurance limit of $100,000.
The FDIC expects to make an announcement of the outcome of its efforts within the next few days.
This is the first bank failure in Colorado since Jefferson Bank and Trust, Lakewood, Colorado, failed on July 2, 1993.
Columbia Capital Corp. Reports Effect of Receivership of Best Bank Columbia Capital Corp. Friday reported that although it derives a substantial portion of its revenue by processing credit card accounts for the former Best Bank it should little effect on the company. The FDIC as well as VISA have indicated the Company will continue processing these accounts for the FDIC under existing contracts.
Management of the Company believes that this event will have no significant effect on the operation, revenue or profitability of the Company. The Company continues to operate as it did previously.
The Company continues to add new business and to fulfill its obligations to current and new customers such as Millennium Health Card and The Check Cashing Stores. These new customers will begin adding accounts in August 1998.
Columbia Capital Corp. operates through its wholly-owned subsidiary, First Independent Computers, Inc. The Company is a multi-faceted information and transaction processing service organization. The services provided by the Company include credit and debit card processing and servicing, transaction processing for the health care industry, bank and financial services processing and document management and distribution services. The Company concentrates on a niche market, consisting of small to medium-sized financial institutions, retailers and health care providers that have not achieved the economies of scale to operate their own in-house programs and systems.