Consumer Payment Card News

NextCard Shutdown

If you have a NextCard VISA buried in your wallet or squirreled away in your sock drawer, there is a very good chance the card it has been deactivated. The FDIC, which took over the NextCard accounts in February, decided this week to shut down about 800,000 of NextCard’s one million VISA accounts. The FDIC began notifying cardholders on Tuesday, via email, of the deactivation action, which took effect Wednesday, July 10th. The FDIC told cardholders there will be no refund of annual fees and that all points accrued in the NextCard incentive program have been eliminated. However,, an investor in NextCard, indicated it will honor the points. VISA reportedly said it has lined up two issuers to contact affected customers during the next few weeks to offer balance transfers. The cards affected were tied to a credit card securitization or a bond that was called by investors. The FDIC has been trying to find a buyer for the credit card accounts, but could find no takers. However, the FDIC was able to sell about 200,000 of non-securitzed credit card accounts to CardWorks or Merrick Bank. The OCC closed NextBank on Feb. 7th and the FDIC was appointed the receiver. NextCard tried to find an acquisition partner after regulators determined last year that the bank was undercapitalized. The OCC said NextBank was classifying some delinquent accounts sold into a securitization trust as fraud losses, although the delinquencies were actually attributable to credit quality problems. The FDIC estimated that the cost to the Bank Insurance Fund for the failure of NextBank will run between $300 and $400 million.

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