This is a securities class action lawsuit against CompuCredit Corporation and certain officers and directors alleging violations of the Securities Exchange Act of 1934.
CompuCredit provides credit and related financial services and products to underserved and un-banked consumers.
The class action complaint alleges that during the Class Period, CompuCredit issued materially false and misleading statements regarding CompuCredit's business and financial results. As a result of CompuCredit's false statements, CompuCredit stock traded at artificially inflated prices during the Class Period, reaching its Class Period high of $40.61 per share in December 2006. Then, on June 10, 2008, The Wall Street Journal reported that federal regulators were expected to seek more than $100 million in fines and restitution against CompuCredit related to deceptive credit-card marketing tactics and abusive debt-collection practices. On this news, CompuCredit's stock dropped $2.49 per share to close at $6.30 per share on June 10, 2008, a one-day decline of 28% on extremely high volume.
According to the class action complaint, the true facts, which were known by CompuCredit but concealed from the investing public during the Class Period, were as follows:
(a) CompuCredit's assets contained millions of dollars worth of impaired and risky securities, many of which were backed by loans to subprime borrowers;
(b) CompuCredit was not adequately accounting for its provision for loan losses in violation of Generally Accepted Accounting Principles, causing its financial results to be materially misstated;
(c) CompuCredit's improper marketing and collection practices would lead to large fines and would harm CompuCredit's future results;
(d) CompuCredit had far greater exposure to anticipated losses and defaults related to its subprime customers than it had previously disclosed;
(e) given the deterioration in the market for asset-backed securities related to subprime consumers, CompuCredit would be forced to reduce its lending operations due to liquidity concerns as it relied upon the sale of its asset-backed securities to fund its ongoing operations; and
(f) given the increased volatility in the subprime market and increased level of delinquencies and defaults that CompuCredit was experiencing, CompuCredit had no reasonable basis to make projections about its financial results.
Name (Stock Symbol)
CompuCredit Corporation (CCRT)
CompuCredit Corporation provides credit and related financial services and products to underserved consumer credit market. It operates in four segments: Credit Cards, Investments in Previously Charged-Off Receivables, Retail Micro-Loans, and Auto Finance.
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