Company Aims For Database of Sub-Prime CustomersFinancial services marketer First Teleservices Corp. recently announced an agreement to merge with Equitex Inc. (NASDAQ: EQTX) in a swap of 625,000 shares of Equitex stock for all of the outstanding shares of First Teleservices.
The move makes First Teleservices the sole operating subsidiary of Equitex and is part of an effort by Equitex to begin marketing financial services to sub-prime or bad-credit consumers.
Among the company's goals is to build a database of 1 million sub-prime consumers who have lost their good credit rating "for reasons other than just being bad guys," said John Cahill, president of First Teleservices, Atlanta.
The reason for targeting non-deadbeat sub-prime consumers, according to Cahill, is that the company can offer a variety of financial services like secured credit cards on behalf of banks. Also, said Cahill, "once they're back on their feet, those customers remember who helped and become the most loyal customers that any bank can have in their portfolio."
As part of the effort, First Teleservices announced a marketing agreement with charged-off credit card debt broker Premier Capital LLC, Lawrence, KA. According to First Teleservices, Premier Capital has handed over more than 240,000 charged-off accounts to First Teleservices. Telephone representatives have begun contacting the account holders to try and collect the debt and find good candidates for the sub-prime database.
First Teleservices is forecasting that it will collect 40 percent of the debt, 25 percent of which it will keep.
As telemarketing representatives identify good candidates for the new database, "their names will go to a telemarketing operation where they will be talked to about the possibility of a secured [credit] cards that will be issued through existing financial institutions," said Cahill.
He added that telemarketing is crucial to the company's chances of building a profitable database of sub-prime consumers. "An experienced collector can get a good idea as to whether the person's conning them, or whether the person is really somebody who's in trouble and is trying to work their way back," said Cahill.
He said that First Teleservices Corp. will have at least six marketing agreements with banks and other financial institutions, similar to its arrangement with Premier Capital, signed within a month. He declined to name any of the companies with which he is negotiating.
Cahill added that he is looking for databases of sub-prime consumers from companies "who are interested in turning them into profit centers. We have a list of blue-ribbon [financial] companies that are prepared to offer their products and services to these customers through First Teleservices' marketing program."