XtraCash pursuing all former CCC merchants

XtraCash ATM, the San Diego-based subsidiary of Amicus Financialthat won a bidding contest for the exclusive right to solicit former Credit Card Center merchants, expects to sign perhaps a third of those former CCC customers within a year's time.

Eugene DeSilva, Amicus Financial's chief officer of remote banking, said that more than half of some 15,000 merchants on CCC's customer list have already been contacted by XtraCash, while others should receive calls soon. Under an agreement approved by Pennsylvania's Eastern District Bankruptcy Court, Amicus has the exclusive right to solicit former CCC customers until late August 2002.

"So far, we have achieved the results we anticipated. We've received a very positive response overall," DeSilva said. "We're on track to get the numbers we expect."

According to DeSilva, merchants who opt to switch their business to XtraCash will receive a one-time bonus at the time they sign a new contract and another one-time bonus, based on average transaction volumes, six months after signing.

DeSilva did not disclose the amount of these payments, but according to a letter dated Aug. 14 and signed by former CCC chief executive officer Andrew Kallok, the terms of the XtraCash offer include a $200 signing bonus and an additional payment of up to $4.50 multiplied by the average monthly transactions.

The letter, which is written on CCC letterhead, states that: "We are pleased to announce that Credit Card Center has succeeded in obtaining an offer from XtraCash Inc., an affiliate of CIBC, the seventh-largest bank in the world, to purchase the right to solicit your processing and maintenance service."

The letter concludes: "You will be contacted directly after the August 24, 2001 hearing directly by the successful bidder with more details."

Calling All CCC Customers

Amicus Financial, the electronic banking division of Canadian financial power CIBC, currently manages more than 8,000 ATMs in the U.S. and Canada.

DeSilva said the company's ATM business falls under three distinct categories: Amicus-owned machines used by private-label bank customers such as Marketplace Bank at Winn-Dixie stores, Safeway SELECT Bank at Safeway stores and President's Choice Financial at Loblaw supermarkets; a network in which Amicus provides service and maintenance for other ATM owners; and an ISO network managed by XtraCash which provides service and processing for individual retailers such as former CCC customers.

Following the payment of the two bonuses, DeSilva said merchants signing with XtraCash could expect "more of a traditional ISO business arrangement" without the monthly revenue guarantees and promises of free supplies and service made by CCC.

Many in the industry believe that Amicus may only pursue CCC's higher-volume accounts of several hundred transactions a month. However, DeSilva said Amicus is interested in all of the former CCC sites.

"We do not have any transaction cutoff in mind," he said. "All sites would fit into one or more of our business lines."

In fact, DeSilva said Amicus is interested in developing additional incremental revenue streams beyond the surcharge at some of the sites.

He said this might help former CCC merchants offset some of their leasing costs, which typically are $260 a month or more.

"There are groups out there designing concepts and products that will work with low transaction volume machines," he said. "It can cost less than you might expect to retrofit or expand some of these machines."

Legally bound

Perhaps the most controversial aspect of the Amicus arrangement is its contention that the contracts of merchants who have already switched their business to other ISOs are now null and void - whether the conversion took place before or after the court's Aug. 24 ruling.

Many companies have received a strongly-worded letter from Amicus attorneys, dated Oct. 18, in which they warn that "CCC's bankruptcy estate and XtraCash intend to seek appropriate judicial relief to stop forthwith any and all entities from continuing any efforts to approach CCC's customers for the purpose of inducing them to terminate their relationships with CCC."

The letter continues: "CCC and XtraCash will also seek such relief against leasing companies and processors that are encouraging and assisting parties who are 'slamming' customers of CCC. To avoid the need for such litigation, we hereby demand that you cease and desist forthwith in your solicitations of CCC customers, and unwind any contracts you already have executed with them."

Kitt Turner, an attorney with Eckert Seamans Cherin & Mellott, LLC, a Pittsburgh-based firm representing the Unsecured Creditors Committee in the CCC case, said that companies that hired former CCC sales representatives who used their lists of CCC clients to switch accounts may face possible legal action."The legality of using what was a confidential asset of CCC to go afterthat business is pretty questionable," she said.

Turner also said that any accounts switched after CCC's June 6 filing are in violation of the automatic stay imposed by the court in the bankruptcy case. "If they didn't have the court's permission to switch, they've got a problem," she said.

A number no one knows

While no one knows how many merchants have switched their accounts, the number may be significant. Todd Clark, executive vice president of Core Data Resources, an Amarillo, Texas-based company that at one time processed transactions for up to 7,000 CCC terminals, said that less than 10 percent of those ATMs remain online - although he's unsure of how many have switched to other ISOs and how many have just unplugged their machines.

According to Amicus spokesman Adam Parker, former CCC merchants can pass on the XtraCash offer - but no other company may legally sign them to a new contract until after August of 2002.

"Any merchant that had a contract with CCC can sign on with XtraCash ATM or can opt to leave his or her ATM inactive," Parker said. "Technically the merchant can go with another manager, but the manager can't sign the merchant - so this option is rendered unworkable."

Scott A. Dietterick, an attorney with James, Smith, Durkin & Connelly LLP, a Hershey, Pa.-based firm representing several retailers seeking to be released from their CCC contracts, said he believes that the end result could be more litigation.

"(Amicus is) telling (the merchants) they have the right not to go with XtraCash, but what alternatives do they have? I can definitely see the potential for future conflicts over this," Dietterick said.