News

E*Trade in talks with leasing companies

At least three leasing companies that provided financing for ATMs sold by Credit Card Center will encourage those merchants to consider doing business with E*Trade ATM, one of the country's biggest ISOs. They've taken the unusual step of approaching E*Trade on the merchants' behalf.

January 3, 2002

Some former customers of Credit Card Center, the beleaguered Philadelphia ISO that filed for bankruptcy on June 6, will soon receive offers from their leasing companies to switch their contracts to E*Trade ATM, one of the country's largest ISOs.

Saul Caprio, marketing director of E*Trade ATM, said his company has been in discussions with three of the leasing companies that provided financing for ATMs sold by CCC. He did not identify the three businesses.

The leasing companies approached E*Trade ATM to create programs for their CCC clients, most of whom have not received any residual checks since the first of the year when CCC's finances began to unravel. Not all of the leasing companies who did business with CCC are working with E*Trade. The decision to switch will be up to the merchant and not the leasing company, Caprio stressed.

"We are not soliciting merchants to make this change," he said. "The leasing companies will inform merchants of any new program, which will vary from company to company. If a merchant finds the program agreeable, he can sign with us. The merchant can elect to select the course of action that's best for him."

Pete Fagerlin, vice president of Concord, Calif.-based QL Capital, had no comment when asked if his company had contacted E*Trade.

Dave Lyon, vice president of Frontier Leasing in Urbandale, Iowa, said that while his company has spoken to E*Trade, it has not made any formal agreements with the ISO. "At this point, I'm not sure what we'll be doing, in light of the bankruptcy," he said. Lyon noted that his company obtained the CCC contracts as part of a portfolio purchased from Liberty Leasing in March. "Our direct dealings with CCC have been very minimal."

If a merchant decides to transfer a contract to E*Trade under terms of any newly negotiated program, "he will be eligible to receive compensation as determined by the leasing company," Caprio said.

Caprio said he could not comment on any possible compensation since it would vary from company to company. To his knowledge, he said, none of the leasing companies that E*Trade is working with has disclosed the terms of possible programs to merchants.

The terms of E*Trade contracts would not be the same as those outlined in CCC contracts. "We're not making any special promises. We're making regular ATM promises," Caprio said. He noted, for instance, that there would be no guaranteed advertising revenue.

Tommy Patel, manager of MK Foods in Valdosta, Ga., said his father was contacted last week by a woman identifying herself as an E*Trade representative. Patel, whose machine was financed by QL Capital, said his father was told that he would receive half of what he was owed by CCC, approximately $1,200. He was told that he would receive paperwork confirming the verbal offer within two weeks.

Ann Chance, owner of Ann's Place in Brunswick, Ga., said she has been contacted twice by a man identifying himself as a representative of E*Trade. Chance, who signed a contract with CCC in January, said she has never received a monthly residual payment and has unplugged her machine.

Her machine was financed by Advanta Leasing Corp., which stopped originating leases for small equipment, including ATMs, in January. According to a recent Philadelphia Inquirer report, Advanta filed a lawsuit against CCC this spring in a dispute over business practices.

While Chance would like to have a working ATM at her gas station/convenience store, she said she is leery of working with any ATM company after her experience with CCC. "I want to make sure it's legal. I don't want to have problems with any company," she said.

Caprio acknowledged that it is not the norm for leasing companies to take such a direct interest in the ATM business. "I think this is an unusual situation they're under, and it's an unusual situation their customers are under," he said. "I think the leasing companies are trying to give the merchants some choices they might not otherwise have had."

Caprio emphasized that E*Trade ATM has only had contact with the leasing companies to date, and has not had any direct contact with CCC.

Two Pennsylvania bars, Dilly's of Chambersburg and the Stardust Lounge in Waynesboro, have filed a class-action complaint against seven leasing companies that financed ATMs for CCC: Advanta Leasing Corp., based in Spring House, Pa.; Information Leasing Corp., of Cincinnati; QL Capital Inc., of Concord, Calif.; United Star Leasing, of Syracuse, N.Y.; Progress Leasing, an affiliate of Progress Bank, which is based in Blue Bell, Pa.; Frontier Leasing, of Urbandale, Iowa; and Newcourt Financial USA, of Chicago.

The suit contends that because CCC was an agent for the leasing companies named in the suit, they must pay what the company promised to its customers.

Caprio said E*Trade agreed to work with the leasing companies to give merchants a chance to earn surcharge-based revenue with their ATMs. "These merchants need to be taken care of," he said.

Also, he said, E*Trade has a stake in improving the image of the ATM industry. "This business is important to us. It needs to have a better reputation."