From http://www.cardforum.com/cgi-bin/readstory.pl?story=20020710CLDN105.xml "The Federal Deposit Insurance Corp. this morning deactivated all 800,000 NextCard Inc. credit card accounts supporting the NextCard Credit Card Master Note Trust after the trust went into early amortization, an FDIC spokesperson tells CardLine. "We knew that on July 10 the trust was going into early amortization; therefore, we deactivated the cards," the spokesperson says. The U.S. Office of the Comptroller of the Currency named the FDIC NextBank N.A.â??s receiver in February. NextBank was a subsidiary of San Francisco-based NextCard. When early amortization occurs, all of the payments go to the bondholders instead being used to fund new credit card purchases, the spokesperson says. Trusts can go into early amortization for a number of reasons, including excessive losses. In the case of NextCardâ??s trust, the losses were mounting, reducing the required positive spread between the trustâ??s revenues and expenses. Standard & Poorâ??s says the default rate on the trustâ??s gross principal as of May 31 reached 16.61% compared with less than 7% prior to October. As a result, the value of NextBankâ??s card loans had dropped to $1.4 billion at the end of May from $1.74 billion in November. The FDIC failed to find a buyer for the trust, the spokesperson says. The FDIC mailed letters to all 800,000 cardholders Monday warning them that the agency planned to deactivate their cards. The next day it followed up with 500,000 e-mails, the spokesperson says. Three hundred thousand of the 800,000 NextCard accounts had not been active for 90 days. The agency estimates that its bank insurance fund will spend $300 million to $400 million paying for NextBankâ??s failure." VJ
