Metris Will Broaden its
Consumer Lending Operations

Last spring the Office of the Comptroller of the Currency (OCC) placed Metris Companies under tighter regulator restrictions in response to its credit quality problems. Metris had been specializing in credit cards to subprime borrowers, but suffered soaring delinquency and chargeoff problems similar to those that plagued Providian during 2001. The new OCC restrictions apply to Metris' credit card subsidiary Direct Merchants Credit Card Bank. The restrictions affect the bank's marketing, credit line management, sales of "enhancement services" such as credit insurance, and also require the bank to submit capital and strategic plans to the OCC for review.

Apparently in response to closer regulator scrutiny of its credit card business, Metris has indicated that it is seeking to diversify its consumer lending operations into areas beyond credit cards. The OCC restrictions apply only to the company's credit card subsidiary, and not to the holding company. In mid-June Metris announced senior-level executive changes that signal intent to diversify into businesses such as auto and home lending. David Wesselink, a Metris Vice-Chairman, told the American Banker that the company will seek to diversify its businesses, and cited Capital One, Household International, and MBNA as models. Acquisitions of other consumer lending companies are a distinct possibility. Metris plans to use its extensive database on existing customers to cross-sell other types of consumer loans.