Post #2
The Denver Post article referenced at the end of this post includes further details about the FDIC complaint involving BestBank, its former CEO and president, and Baetz and Gallant, the principal shareholders of CLCK. According to the article, the FDIC complaint involves the credit card program described in the BBB alert in #reply-6245751. Per the article, the cards were targeted for those with poor or no credit. Specifically, a successful applicant could not be in bankruptcy and could have no more than one delinquent account in the prior six months. The article describes a moderately complex chain of payments between BestBank, Century Financial and the All Around Travel Club (AATC): Those who joined AATC were given a BestBank Visa card with a $600 credit limit and were immediately charged the $498 AATC membership fee and the credit card's $45 annual fee, leaving $67 in available credit to the card holder. BestBank would then make a $543 payment to Century Financial. Century would then keep the $45 membership fee and send on the $498 to AATC. AATC would send back $398 to Century and forward a $25 card fee to BestBank. Of the $398 sent to Century, $30 would be sent to BestBank as a merchant fee. So if all these transactions went as described, the $543 would be divided up as follows:
Century: $413
AATC: $75
BestBank: $55
Note: The article calculates the amounts received by Century as $418 and $70, respectively, so there is an error of some sort in either my calculations or theirs.
The problems cited by the FDIC complaint (as described in the Denver Post article) centered around the reserves allocated for delinquencies:
... The agreement required Century Financial to purchase accounts that were more than 120 days delinquent. It was also required to maintain a reserve account equal to 4 percent of the total credit card receivables on the bank's books; reserves of 15 percent of the accounts 30 to 59 days delinquent; 25 percent of those 60 to 89 days delinquent; and 50 percent of those 90 to 120 days delinquent.
And after April 1, 1998, Century Financial was to pay BestBank 1 percent of new account balances to be added to the allowance for loan and lease losses.
But by May 29, 1998, the numbers weren't adding up, according to the complaint. The reserve account balance then was only $8.8 million, despite delinquencies of at least $179 million. Even if all of those accounts were less than 60 days late, the reserve balance should have been $26.85 million.
The complaint said Century Financial performed certain bookkeeping maneuvers to make accounts appear current without any payments by cardholders.
Nearly 370,000 accounts, about 74 percent of the total active credit cards, were improperly credited during the first half of this year and Mattar and Boyd knew of the practice, according to the complaint. ...
denverpost.com
According to the CLCK 10-K for 1997, "Century Financial Group, Inc., is owned by the Company's primary shareholders, Glenn Gallant and Douglas Baetz."
sec.gov
Also, according to Florida Division of Corporation records, Baetz and Gallant are respectively the Vice President and Secretary of All Around Travel Club ( see #reply-6245780 ).
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