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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q/A

Amendment No. 1

|ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002.
|- | -------------------------------------------------------------------------------------------------------------------------------------

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|COMPUCREDIT CORPORATION                                                                  |  | logo
|---------------------------------------------------------------------------------------- |  | ----
|a Georgia Corporation
IRS Employer Identification No. 58-2336689
SEC File Number 0-25751
|245 Perimeter Center Parkway, Suite 600
Atlanta, Georgia 30346
(770) 206-6200           

Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ý    NO o

The
number of shares outstanding of the issuer's only class of Common Stock, no par value, (the "Common Stock"), as of August 1, 2002 was 46,559,165 shares.

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COMPUCREDIT CORPORATION        FORM 10-Q        TABLE OF CONTENTSJune 30, 2002

|         |  |                       |  |                                                                                       |  |                                                           |  | Page
|-------- |  | --------------------- |  | ------------------------------------------------------------------------------------- |  | --------------------------------------------------------- |  | ----
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                      
|         |  | Item 1.               |  | Financial Statements (Unaudited)                                                      |  |                                                          
|         |  |                       |  |                                                                                       |  | Condensed Consolidated Balance Sheets                     |  | 1   
|         |  |                       |  |                                                                                       |  | Condensed Consolidated Statements of Operations           |  | 2   
|         |  |                       |  |                                                                                       |  | Condensed Consolidated Statements of Shareholders' Equity |  | 3   
|         |  |                       |  |                                                                                       |  | Condensed Consolidated Statements of Cash Flows           |  | 4   
|         |  |                       |  |                                                                                       |  | Notes to Condensed Consolidated Financial Statements      |  | 5   
|         |  | Item 2.               |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 13                                                       
|         |  | Item 3.               |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 37                                                       
|PART II. |  | OTHER INFORMATION     |  |                                                                                      
|         |  | Item 1.               |  | Legal Proceedings                                                                     |  | 39                                                       
|         |  | Item 2.               |  | Changes in Securities and Use of Proceeds                                             |  | 39                                                       
|         |  | Item 3.               |  | Defaults Upon Senior Securities                                                       |  | 39                                                       
|         |  | Item 4.               |  | Submission of Matters to a Vote of Security Holders                                   |  | 39                                                       
|         |  | Item 5.               |  | Other Information                                                                     |  | 39                                                       
|         |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                      |  | 40                                                       
|         |  |                       |  | Signatures                                                                            |  | 41                                                       

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CompuCredit Corporation and Subsidiaries  Consolidated Balance Sheets

|                                                             |                                                                                                                                      | June 30,
2002 |         | December 31,
2001 |  
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------ | ------------- | ------- | ----------------- | -
|
|
|Assets                                                       |                                                                                                                                      |               |         |                   |  
|Cash and cash equivalents                                    |                                                                                                                                      | $             | 27,829  |                   | $
|Restricted cash                                              |                                                                                                                                      |               | 10,000  |                   |  
|Retained interests in credit card receivables securitized    |                                                                                                                                      |               | 310,074 |                   |  
|Accrued interest and fees                                    |                                                                                                                                      |               | 18,262  |                   |  
|                                                             |                                                                                                                                      |               |         |                   |  
|Net credit card receivables                                  |                                                                                                                                      |               | 328,336 |                   |  
|Amounts due from securitization                              |                                                                                                                                      |               | 14,263  |                   |  
|Deferred costs, net                                          |                                                                                                                                      |               | 11,632  |                   |  
|Software, furniture, fixtures and equipment, net             |                                                                                                                                      |               | 30,490  |                   |  
|Prepaid expenses                                             |                                                                                                                                      |               | 1,349   |                   |  
|Investment in equity-method investee                         |                                                                                                                                      |               | 39,434  |                   |  
|Other assets                                                 |                                                                                                                                      |               | 13,562  |                   |  
|                                                             |                                                                                                                                      |               |         |                   |  
|Total assets                                                 |                                                                                                                                      | $             | 476,895 |                   | $
|                                                             |                                                                                                                                      |               |         |                   |  
|Liabilities                                                  |                                                                                                                                      |               |         |                   |  
|Accounts payable and accrued expenses                        |                                                                                                                                      | $             | 15,952  |                   | $
|Notes payable                                                |                                                                                                                                      |               | 31,443  |                   |  
|Deferred revenue                                             |                                                                                                                                      |               | 8,114   |                   |  
|Income tax liability                                         |                                                                                                                                      |               | 9,036   |                   |  
|                                                             |                                                                                                                                      |               |         |                   |  
|Total liabilities                                            |                                                                                                                                      |               | 64,545  |                   |  
|Shareholders' equity                                         |                                                                                                                                      |               |         |                   |  
|Preferred stock, no par value, 10,000,000 shares authorized: |                                                                                                                                      |               |         |                   |  
|                                                             | Series A preferred stock, 30,000 and 30,000 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively       |               |         | 30,871            |  
|                                                             | Series B preferred stock, 10,000 and 10,000 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively       |               |         | 10,503            |  
|Common stock, no par value:                                  |                                                                                                                                      |               |         |                   |  
|                                                             | 150,000,000 shares authorized, 46,559,165 and 46,559,165 issued and outstanding at June 30, 2002 and December 31, 2001, respectively |               |         |                  |  
|Additional paid-in capital                                   |                                                                                                                                      |               | 240,352 |                   |  
|Note issued to purchase stock                                |                                                                                                                                      |               | (500    | )                 |  
|Retained earnings                                            |                                                                                                                                      |               | 131,124 |                   |  
|                                                             |                                                                                                                                      |               |         |                   |  
|Total shareholders' equity                                   |                                                                                                                                      |               | 412,350 |                   |  
|                                                             |                                                                                                                                      |               |         |                   |  
|Total liabilities and shareholders' equity                   |                                                                                                                                      | $             | 476,895 |                   | $
|                                                             |                                                                                                                                      |               |         |                   |  

See
accompanying notes.

1

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CompuCredit Corporation and Subsidiaries  Consolidated Statements of Operations (Unaudited)

|                                                      |                                                                              | For the three months ended
June 30, |         | For the six months ended
June 30, |  
|----------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------------- | ------- | --------------------------------- | -
|
|
|Interest income                                       |                                                                              | $                                   | 295     |                                   | $
|Interest expense                                      |                                                                              |                                     | (43     | )                                 |  
|                                                      |                                                                              |                                     |         |                                   |  
|Net interest income                                   |                                                                              |                                     | 252     |                                   |  
|                                                      |                                                                              |                                     |         |                                   |  
|Other operating income:                               |                                                                              |                                     |         |                                   |  
|                                                      | Securitization income, net                                                   |                                     |         |                                  |  
|                                                      | (Loss) income from retained interests in credit card receivables securitized |                                     |         | (62,921                           | )
|                                                      | Servicing income                                                             |                                     |         | 2,394                             |  
|                                                      | Other credit card fees                                                       |                                     |         | 23,858                            |  
|                                                      | Interchange fees                                                             |                                     |         | 4,065                             |  
|                                                      | Ancillary products                                                           |                                     |         | 3,852                             |  
|                                                      | Equity in income of equity-method investee                                   |                                     |         | 4,544                             |  
|                                                      |                                                                              |                                     |         |                                   |  
|Total other operating income                          |                                                                              |                                     | (24,208 | )                                 |  
|Other operating expense:                              |                                                                              |                                     |         |                                   |  
|                                                      | Non-servicing salaries and benefits                                          |                                     |         | 3,028                             |  
|                                                      | Credit card servicing                                                        |                                     |         | 15,817                            |  
|                                                      | Marketing and solicitation                                                   |                                     |         | 2,417                             |  
|                                                      | Professional fees                                                            |                                     |         | 647                               |  
|                                                      | Data processing                                                              |                                     |         | 1,813                             |  
|                                                      | Net occupancy                                                                |                                     |         | 1,158                             |  
|                                                      | Ancillary product expense                                                    |                                     |         | 1,054                             |  
|                                                      | Other                                                                        |                                     |         | 5,602                             |  
|                                                      |                                                                              |                                     |         |                                   |  
|Total other operating expense                         |                                                                              |                                     | 31,536  |                                   |  
|(Loss) income before income taxes                     |                                                                              |                                     | (55,492 | )                                 |  
|Income taxes                                          |                                                                              |                                     | 19,422  |                                   |  
|                                                      |                                                                              |                                     |         |                                   |  
|Net (loss) income                                     |                                                                              | $                                   | (36,070 | )                                 | $
|                                                      |                                                                              |                                     |         |                                   |  
|Net (loss) income attributable to common shareholders |                                                                              | $                                   | (37,099 | )                                 | $
|                                                      |                                                                              |                                     |         |                                   |  
|Net (loss) income per common sharebasic              |                                                                              | $                                   | (0.80   | )                                 | $
|Net (loss) income per common shareassuming dilution  |                                                                              | $                                   | (0.80   | )                                 | $

See
accompanying notes.

2

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CompuCredit Corporation and Subsidiaries  Consolidated Statements of Shareholders' Equity (Unaudited)  For the six months ended June 30, 2002 and 2001

|                             |                                           |   |        | Common Stock |            |        |   |   |   |   |         |     |  
|---------------------------- | ----------------------------------------- | - | ------ | ------------ | ---------- | ------ | - | - | - | - | ------- | --- | -
|
|
|
|Balance at December 31, 2000 |                                           | $ |       |              | 46,514,639 |        | $ |  |   | $ | 239,789 |     |  
|                             | Issuance of common stock                  |   |        |             |            | 44,526 |   |   |  |   |         | 563 |  
|                             | Note issued to purchase stock             |   |        |             |            |       |   |   |  |   |         |    |  
|                             | Net income                                |   |        |             |            |       |   |   |  |   |         |    |  
|                             |                                           |   |        |              |            |        |   |   |   |   |         |     |  
|Balance at June 30, 2001     |                                           | $ |       |              | 46,559,165 |        | $ |  |   | $ | 240,352 |     | $
|                             |                                           |   |        |              |            |        |   |   |   |   |         |     |  
|Balance at December 31, 2001 |                                           | $ | 39,512 |              | 46,559,165 |        | $ |  |   | $ | 240,352 |     | $
|                             | Issuance cost of Series A preferred stock |   |        | (140         | )          |       |   |   |  |   |         |    |  
|                             | Preferred dividends                       |   |        |             |            |       |   |   |  |   |         |    |  
|                             | Accretion of preferred dividends          |   |        | 2,002        |            |       |   |   |  |   |         |    |  
|                             | Net loss                                  |   |        |             |            |       |   |   |  |   |         |    |  
|                             |                                           |   |        |              |            |        |   |   |   |   |         |     |  
|Balance at June 30, 2002     |                                           | $ | 41,374 |              | 46,559,165 |        | $ |  |   | $ | 240,352 |     | $
|                             |                                           |   |        |              |            |        |   |   |   |   |         |     |  

See accompanying notes.

3

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CompuCredit Corporation and Subsidiaries  Consolidated Statements of Cash Flows (Unaudited)

|                                                                                                   |                                           | For the six months ended
June 30,                 |        
|-------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------------- | -------
|
|
|Operating activities                                                                               |                                           |                                                   |        
|Net (loss) income                                                                                  |                                           | $                                                 | (33,958
|Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: |                                           |                                                   |        
|                                                                                                   | Depreciation expense                      |                                                   |        
|                                                                                                   | Amortization expense                      |                                                   |        
|                                                                                                   | Securitization income                     |                                                   |        
|                                                                                                   | Retained interests income adjustment, net |                                                   |        
|                                                                                                   | Income from equity investee               |                                                   |        
|                                                                                                   | Changes in assets and liabilities:        |                                                   |        
|                                                                                                   |                                           | Increase in restricted cash                       |        
|                                                                                                   |                                           | Decrease (increase) in accrued interest and fees  |        
|                                                                                                   |                                           | Decrease in amounts due from securitization       |        
|                                                                                                   |                                           | Increase in deferred costs                        |        
|                                                                                                   |                                           | Decrease in prepaid expenses                      |        
|                                                                                                   |                                           | Decrease in accounts payable and accrued expenses |        
|                                                                                                   |                                           | Decrease in deferred revenue                      |        
|                                                                                                   |                                           | (Decrease) increase in income tax liability       |        
|                                                                                                   |                                           | Other                                             |        
|                                                                                                   |                                           |                                                   |        
|Net cash (used in) provided by operating activities                                                |                                           |                                                   | (9,567 
|Investing activities                                                                               |                                           |                                                   |        
|Investment in equity investee                                                                      |                                           |                                                   | (34,890
|Net loan payments (net loans originated or purchased)                                              |                                           |                                                   | (12,970
|Recoveries of loans previously charged off                                                         |                                           |                                                   | 13,602 
|Net proceeds from securitization                                                                   |                                           |                                                   | 4,321  
|Purchases and development of software, furniture, fixtures and equipment                           |                                           |                                                   | (3,158 
|                                                                                                   |                                           |                                                   |        
|Net cash used in investing activities                                                              |                                           |                                                   | (33,095
|Financing activities                                                                               |                                           |                                                   |        
|Preferred stock issuance costs                                                                     |                                           |                                                   | (140   
|Note issued to purchase stock                                                                      |                                           |                                                   |       
|Net proceeds from issuance of common stock                                                         |                                           |                                                   |       
|Proceeds from short-term borrowings                                                                |                                           |                                                   | 31,401 
|Repayment of short-term borrowings                                                                 |                                           |                                                   | (16,516
|                                                                                                   |                                           |                                                   |        
|Net cash provided by financing activities                                                          |                                           |                                                   | 14,745 
|Net decrease in cash                                                                               |                                           |                                                   | (27,917
|Cash and cash equivalents at beginning of period                                                   |                                           |                                                   | 55,746 
|                                                                                                   |                                           |                                                   |        
|Cash and cash equivalents at end of period                                                         |                                           | $                                                 | 27,829 
|                                                                                                   |                                           |                                                   |        
|Supplemental cash flow information                                                                 |                                           |                                                   |        
|Cash paid for interest                                                                             |                                           | $                                                 | 116    
|Cash paid for income taxes                                                                         |                                           | $                                                 | 4,000  
|Accretion of preferred stock dividends                                                             |                                           | $                                                 | 2,002  

See
accompanying notes.

4

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CompuCredit Corporation and Subsidiaries  Notes to Condensed Consolidated Financial Statements (Unaudited)  June 30, 2002

1. Organization and Basis of Presentation

The condensed consolidated financial statements include the accounts of CompuCredit Corporation and its wholly owned subsidiaries (collectively, "the Company").
The Company was formed for the purpose of offering unsecured credit and fee based products and services to a segment of the consumer credit market. The Company markets unsecured general purpose Visa
and MasterCard credit cards through direct mail, telemarketing, television and on the internet. Because only financial institutions can issue general purpose credit cards, the Company has a
contractual arrangement with a third party financial institution pursuant to which the financial institution issues general purpose credit cards, and the Company purchases the receivables relating to
such accounts. The Company also markets to its cardholders other fee-based products including card registration, memberships in preferred buying clubs, magazines, travel services and
credit life, disability and unemployment insurance.

The
accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by accounting principles generally accepted in the United States for complete consolidated financial statements. In the opinion of management, all normal recurring
adjustments considered necessary to fairly state the results for the interim periods presented have been included. The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the condensed consolidated financial statements as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from these
estimates. Certain estimates such as credit losses, payment and discount rates have a significant impact on the gains and losses recorded on securitizations and the value of retained interests in
credit card receivables securitized. Operating results for the three and six months ended June 30, 2002 are not necessarily indicative of the results for the year ended December 31,
2002. These condensed consolidated financial statements should be read in conjunction with the notes to the
financial statements for the year ended December 31, 2001 contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Certain
amounts in prior period financial statements have been reclassified to conform to the current period presentation. All significant intercompany balances and transactions have
been eliminated for financial reporting purposes.

2. Equity-Method Investment in CSG, LLC

CSG, LLC ("CSG") was formed during the second quarter of 2002 by affiliates of Goldman, Sachs & Co., Salomon Smith Barney and a wholly owned subsidiary of
the Company to acquire notes and a certificated interest issued by a trust ("CSG Trust") that owns a portfolio of credit card receivables. The Company accounts for its interest in CSG using the
equity-method of accounting. The Company has a 50% interest in CSG and funded its initial $34.9 million investment in CSG with cash of $3.5 million and by borrowing $31.4 million
(see note 7, Borrowings and Restricted Cash). CSG had net income before taxes of $9.1 million for the three months ended June 30, 2002. In exchange for servicing the receivables
owned by the CSG Trust, the Company will receive a servicing fee from the securitization structure.

5

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3. Significant Accounting Policies

The following is a summary of significant accounting policies followed in the preparation of the condensed consolidated financial statements.

Asset Securitization

The Company has securitized all of its credit card receivables. When the Company sells receivables in securitizations, it retains certain undivided ownership
interests, interest-only ("I/O") strips and servicing rights. Although the Company continues to service the underlying credit card accounts and maintains the customer relationships, these
securitizations are treated as sales and the securitized receivables are not reflected on the consolidated balance sheet. The retained ownership interests and the interest-only strips are
included in Retained Interests in Credit Card Receivables Securitized.

Under
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("Statement
No. 140"), gains and losses are recognized at the time of each sale. These gains or losses on sales of receivables depend in part on the previous carrying amount of the financial assets sold as
well as the fair value of the assets and cash proceeds received. These cash flows represent estimates of finance charges and late fees, servicing fees, costs of funds paid to investors, payment rates,
credit losses, and required amortization payments to investors. The Company initially records a servicing liability with respect to a securitization structure when the servicing fees the Company
expects to receive do not provide adequate compensation for servicing the receivables. The initial servicing liability is recorded at estimated fair market value. The servicing liability is then
evaluated each quarter and carried at its estimated fair market value with changes in fair value included in income. The change in the fair value is included as a component of the Company's income
from retained interests in credit card receivables securitized with actual expenses being recorded into operations as incurred. Because quoted market prices are generally not available, the Company
estimates fair value based on the estimated present value of future cashflows using management's best estimates of key assumptions as outlined in Note 4. The servicing liability is netted
against the value of the I/O strip and included in Retained interests in credit card receivables securitized on our Balance Sheet. In accordance with Statement No. 140, the Company does not
consolidate any of the qualified special purpose entities ("QSPEs") in their securitizations.

The
retained interests are subsequently accounted for as trading securities and reported at estimated fair market value with changes in fair value included in income in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("Statement No. 115"). Some of these estimates used in the
determination of the gains and losses and the related fair values of interest-only strips and retained ownership interests are influenced by factors outside the Company's control, and, as
a result, such estimates could materially change in the near term.

Amounts
due from securitization include payments recently received on the securitized receivables that are still held by the securitization structure but are payable to the Company
within the next 30 days.

Accrued Interest and Fees

Accrued interest and fees on the originated portfolio represent the estimated collectable portion of fees earned but not billed to the cardholder at any period
end. Prior to the second quarter of 2002, the Company estimated accrued interest and fees using its estimates of total accrued interest and fees earned but not yet billed. The new estimates better
reflect the Company's expectations of the collectible portion of these interest and fees and are in response to evolving regulatory guidance within the industry.    This change resulted in
an aggregate reduction of approximately $12.0 million in accrued interest and fees at June 30, 2002.

6

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Equity Investments

Investments are accounted for using the equity method of accounting if the investment gives the Company the ability to exercise significant influence, but not
control, over an investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee of between 20% and 50%, although other
factors, such as representation on the investee's board of directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate.
The Company records its equity in the income or loss of its investee within other operating income each period.

Servicing Income

As of June 30th, the Company is the servicer for the receivables underlying its securitizations transactions. The Company receives servicing fees equal to
either 0.1% of the originated principal receivables or 5% of the cash collected on the portfolios it purchased in 1998. The Company is also the servicer for the receivables that underlie the
securitization from which CSG purchased notes and a certificated interest issued by a trust. The Company receives a servicing fee associated with that securitization equal to 4.8% of the total average
receivables in the trust. The Company either performs the servicing or contracts with third-party providers. Gross servicing revenue is recognized as income on a monthly basis during the same period
in which the servicing is performed and is included as servicing income in the Company's Consolidated Statement of Operations. Total assets being serviced by the Company were $2.9 billion as of
June 30, 2002 and $1.9 billion as of December 31, 2001.

4. Securitizations

The Company securitizes all of its originated credit card receivables through Master Trusts. Credit card receivables are transferred to the Master Trusts, which
issue notes representing undivided ownership interests in the assets of the Master Trusts. The Company also securitized two purchased portfolios of credit card receivables through a securitization
structure with a third party commercial paper conduit administered by a national banking institution. Generally Accepted Accounting Principles require the Company to treat the transfers as sales and
the receivables are removed from the consolidated balance sheet. Under Statement No. 140, an entity recognizes the assets it controls and liabilities it has incurred, and derecognizes the
financial assets for which control has been surrendered and all liabilities that have been extinguished. An entity is considered to have surrendered control over the transferred assets and, therefore,
to have sold the assets, if the following conditions are met:



The
securitization transactions do not affect the relationship the Company has with its customers and the Company continues to service the credit card receivables.

7

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The
table below summarizes all of the Company's securitization activity:

|                                                                             |  | For the three months ended
June 30, |           | For the six months ended
June 30,
|---------------------------------------------------------------------------- |  | ----------------------------------- | --------- | ---------------------------------
|
|
|Securitization Activity:                                                     |  |                                     |           |                                  
|Gross amount of receivables securitized at period end                        |  | $                                   | 1,723,057 |                                  
|Proceeds from securitizations                                                |  |                                     | 414       |                                  
|Excess cash flows received on retained interests                             |  |                                     | 44,089    |                                  
|Pretax securitization income                                                 |  |                                     |          |                                  
|(Loss) income from retained interests in credit card receivables securitized |  |                                     | (62,921   | )                                

The
investors in the Company's securitization transactions have no recourse against the Company for its customers' failure to pay their credit card loans. However, most of the Company's
retained interests are subordinated to the investors' interests until the investors have been fully paid.

The
pretax securitization income recorded by the Company and the measurement of the Company's retained interests are dependent upon management's estimates of future cash flows using the
cash-out method. Under the cash-out method, the future cash flows (including the release of any cash related to credit enhancements) are recorded at a discounted value. The
cash flows are discounted based on the timing of when the Company expects to receive the cash flows. The discount rates are based on management's estimates of returns that would be required by
investors in an investment with similar terms and credit quality. Interest rates received on the credit card receivables are estimated based on the stated annual percentage rates in the credit card
agreements. Estimated default and payment rates are based on historical results, adjusted for expected changes based on the Company's credit risk models. Credit card receivables are typically charged
off when the loan becomes 180 days past due, although earlier charge offs may occur specifically related to accounts of bankrupt or deceased customers. Bankrupt and deceased customers' accounts
are typically charged off within 30 days of verification.

Subsequent
to each sale, the Company's retained interests are carried at estimated fair market value with changes in fair value included in income as they are classified as trading
securities. Since quoted market prices are generally not available, the Company estimates fair value based on the estimated present value of future cash flows using management's best estimates of key
assumptions.

The
Company has decreased its fair value estimate of its retained interests to better estimate the collectible portion of finance charge receivables. Prior to the second quarter of 2002,
accrued interest and fees were deducted from income from retained interests when the related receivables were charged off. This change in estimate was based in part on proposed bank regulatory
guidelines, which affect many other companies in the credit card industry. The effect of this change in estimate was to decrease the value of our retained interests by approximately
$54.7 million.

8

---

The
retained interests in credit card receivables securitized include the following:

June 30,
2002

December 31,
2001(In thousands)I/O strip

$
98,593

$
84,390Servicing liability


(40,501
)

(38,123
)Net I/O strip


58,092


46,267Fair value of Seller's Interest


251,982


312,622Retained interests in credit card receivables securitized

$
310,074

$
358,889


The
Company's net I/O strip is comprised of the I/O strip and the related servicing liability. The I/O strip reflects the fair value of the Company's rights to future income from the
portfolio. The servicing liability liability is recorded because the compensation for servicing certain portfolios is not expected to adequately compensate the Company for the costs of servicing
certain portfolios. The change in the servicing liability is included in income from retained interests in credit card receivables securitized.

Changes
in any of these assumptions used to value our retained interests could impact the fair value estimates and the realization of future cash flows. The weighted average key
assumptions used to estimate the fair value of the Company's retained interests that were not purchased in the open market as of the end of each period are presented below:

June 30,
2002

December 31,
2001Payment rate (monthly)

7.1
%
8.0
%Expected credit loss rate (annualized)

16.6

16.7Residual cash flows discount rate(1)

22.5

34.9Servicing liability discount rate

14.1

14.0


---

9

---

At
June 30, 2002, the following illustrates the hypothetical effect an adverse 5 and 10 percent change in key economic assumptions has on the retained interests in credit
card receivables securitized ($ in thousands):

Credit card
loansPayment rate (monthly)


7.1
%Impact on fair value of 5% adverse change

$
(1,464
)Impact on fair value of 10% adverse change

$
(1,810
)Expected credit loss rate (annualized)


16.6
%Impact on fair value of 5% adverse change

$
(7,596
)Impact on fair value of 10% adverse change

$
(15,184
)Residual cash flows discount rate


22.5
%Impact on fair value of 5% adverse change

$
(2,732
)Impact on fair value of 10% adverse change

$
(5,374
)Servicing discount rate


14.1
%Impact on fair value of 5% adverse change

$
(125
)Impact on fair value of 10% adverse change

$
(251
)


These
sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 5% and a 10% variation in assumptions generally cannot be
extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair
value of the retained interest is calculated without changing any other assumptions; in reality, changes in one assumption may result in changes in another. For example, increases in market interest
rates may result in lower prepayments and increased credit loses, which could magnify or counteract the sensitivities.

The
Company's managed loan portfolio underlying its securitizations is comprised of retained interests in loans securitized and the investor's share of securitized credit card loans. The
investor's share of
securitized credit card loans is not an asset of the Company. Therefore, they are not included in the Company's consolidated balance sheets. The principal balances outstanding as of June 30,
2002 and December 31, 2001, were $1.6 billion and $1.7 billion, respectively. The following table summarizes the balances included in the CompuCredit's managed loan portfolio
underlying its securitizations.

June 30,
2002

December 31,
2001(In thousands)Total principal balance

$
1,575,689

$
1,711,755Total finance charge balance


147,368


180,087Total loans

$
1,723,057

$
1,891,842Loans delinquent60 or more days

$
192,250

$
210,382


5. Commitments and Contingencies

The Company is an equity member of CSG. During the second quarter of 2002, CSG entered into a note purchase agreement whereby it has agreed to buy additional
interests in a portfolio of credit card receivables owned by CSG Trust in the event there is net new growth in the receivables or collections are not available to fund any new purchases by
cardholders. As of June 30, 2002, CSG Trust had total receivables of approximately $1.2 billion. The portfolio has and is expected to continue to decline during the life of the Trust as
payments are expected to exceed new purchases each month. As of June 30, 2002, if future purchases were to exceed payments available to fund purchases, CSG has agreed to purchase up to
$200 million of new notes from the trust. In general, the amount CSG has

10

---

agreed to purchase declines as the amount of credit available to cardholders for future purchases declines.

As
a member of CSG, the Company has agreed to guarantee the payment of the purchase price of the new notes if in fact purchases were to exceed payments available to fund purchases and if
in fact CSG itself failed to purchase the new notes under the note purchase agreement described above. As of June 30, 2002, CSG had not and was not required to purchase any additional notes
under the note purchase agreement. The Company's guarantee is limited to its ownership percentage in CSG (which at June 30, 2002 was 50%) times the total amount of the notes that CSG would be
required to purchase. Therefore, as of June 30, 2002, the maximum amount of the Company's guarantee was $100 million. The Company currently does not have any liability recorded with
respect to this guarantee.

6. (Loss) Income Per Share

The following table sets forth the computation of basic and diluted (loss) income per share:

|             |                                                                                   | For the three months ended
June 30, |   | For the six months ended
June 30,
|------------ | --------------------------------------------------------------------------------- | ----------------------------------- | - | ---------------------------------
|
|
|Numerator:   |                                                                                   |                                     |   |                                  
|             | Net (loss) income                                                                 |                                     | $ | (36,070                          
|             | Preferred stock dividends                                                         |                                     |   | (1,029                           
|             |                                                                                   |                                     |   |                                  
|             | (Loss) income attributable to common shareholders                                 |                                     | $ | (37,099                          
|Denominator: |                                                                                   |                                     |   |                                  
|             | Denominator for basic (loss) income per shareweighted-average shares outstanding |                                     |   | 46,559                           
|             | Effect of dilutive stock options                                                  |                                     |   | 26                               
|             |                                                                                   |                                     |   |                                  
|             | Denominator for diluted (loss) income per shareadjusted weighted-average shares  |                                     |   | 46,585                           
|             | Basic (loss) income per share                                                     |                                     | $ | (0.80                            
|             | Diluted (loss) income per share                                                   |                                     | $ | (0.80                            

The
Company's preferred shares, plus dividends that have been accreted, are convertible into approximately 4.6 million shares of common stock at $9.14 per share as of
June 30, 2002. These shares were not included in the computation of diluted EPS for the three and six months ending June 30, 2002, because including these shares would have been
anti-dilutive. Additionally, for the three and six months ended June 30, 2002, no stock options were included in the diluted earnings per share calculation because their inclusion
would have been anti-dilutive.

7. Borrowings and Restricted Cash

During the second quarter of 2002, the Company borrowed $31.4 million to partially fund the purchase of its equity interest in CSG. The loan bears interest
at prime plus 5% and is non-recourse to the Company. Although the note has a stated maturity in 2007, it is payable only with cash flows received from CSG and therefore does not have any
minimum payment amounts. It is anticipated that we will receive cashflows from CSG each month and therefore we anticipate repaying this loan monthly. The lender is entitled to share in a portion of
excess cash flows received by the Company from CSG once the loan has been repaid

During
the first quarter of 2002, the Company entered into an irrevocable standby letter of credit agreement for $10.0 million with a bank, for the purposes of securing the
Company's obligations to the financial institution that issues the credit cards marketed by the Company. The purpose of the letter of

11

---

credit is to protect the financial institution from non-payment by the Company of its obligation to purchase receivables arising in the credit card accounts on a daily basis. The Company
is required to
maintain a cash balance of $10.0 million with the bank that issued the letter of credit. Such cash has been disclosed as "Restricted cash" on the face of the balance sheet.

8. Subsequent Events

On July 12, 2002, a wholly owned subsidiary of the Company closed a transaction with Federated Department Stores, Inc. (NYSE: FD) to purchase stock
and other assets, which included retained interests in a trust that owns approximately $1.1 billion in face amount of credit card receivables, which represents approximately 2.4 million
accounts. The Company also hired approximately 830 employees from Federated, who will continue to service the receivables in the trust. Total cash consideration paid was approximately
$90 million. The Company will use the purchase method of accounting to record these transactions, and is still evaluating the factors which affect the various components of assets acquired and
liabilities assumed.

During
the third quarter of 2002, the Company's Board of Directors authorized a program to repurchase up to 5 million shares (approximately 11 percent) of its outstanding
common stock. Under the repurchase plan, the Company may buy back shares of it's common stock from time to time either on the open market or through privately negotiated transactions in compliance
with the Securities and Exchange Commission guidelines.

12

---



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our condensed consolidated financial statements and the related notes included
herein.

This
Management's Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements. We have based these forward-looking statements on our
current plans, expectations and beliefs about future events. In light of the risks, uncertainties and assumptions discussed under the caption "Risk Factors" in "Item 1. Business" of our Annual Report
on Form 10-K filed with the Securities and Exchange Commission and other factors discussed in that section, there is a risk that our actual results will differ materially from the
expectations and beliefs reflected in the forward-looking statements in this section.

General

CompuCredit is a credit card company that originates and purchases credit card receivables and markets products and services to its customers for which it earns
fees. We market unsecured Visa and MasterCard credit cards through direct mail, telemarketing, television and the internet.

Our
revenues primarily consist of (1) securitization income, (2) income from our retained interest in credit card receivables securitized, (3) servicing income,
(4) other credit card fee income, (5) interchange fees, (6) ancillary product revenue and (7) equity in the income of our equity-method investee.

Securitization
income is gain or loss we recognize at the time of each sale. Income or loss from retained interests in credit card receivables securitized is the income or loss we
recognize from the credit card receivables we have securitized. See "Credit Card Securitizations" and "Results of Operations" for additional information. Servicing income
consists of the gross fees we receive for servicing the various portfolios of credit card loans. Other credit card fee income includes annual fees, over-limit fees, cash advance fees and
other fees assessed to our cardholders. Interchange fees are the portion of the merchant fees assessed by Visa and MasterCard and passed on to us and are a function of the purchase volume of our
cardholders. Ancillary product revenue consists of the fees earned by
selling various fee-based products including various memberships, insurance, subscription and other products. Equity in the income of our equity-method investee is discussed below.

Our
primary operating costs include the costs of funding our receivables, credit losses and other operating expenses, such as employee compensation, account solicitation and marketing
expenses, data processing, servicing expenses and income taxes.

We
originate our receivables portfolio through the use of our target marketing system to originate customers through direct mail, television, telemarketing and internet campaigns. We
also add accounts by purchasing portfolios of credit card receivables or by forming entities with other partners to acquire retained interests in credit card receivables securitized. Absent portfolio
acquisitions, the size of our receivables depends in part on the timing, size and success of our marketing campaigns. During periods of reduced marketing our originated receivables portfolio may not
grow and may decline. We have reduced our marketing growth plans for 2002 as compared to 2001. We believe this is prudent for us given our concerns relating to the availability of financing, general
economic conditions and uncertainty regarding credit quality of accounts we historically have targeted.

We
intend to grow our existing portfolio through marketing campaigns during 2002, although at a much slower rate than 2001. During 2001 we added between 125,000 and 200,000 accounts per
quarter, while in 2002 we intend to add approximately 25,000 to 50,000 accounts per quarter, excluding any portfolio acquisitions.

13

---

During
the second quarter of 2002, we purchased a 50% interest in CSG, LLC ("CSG"). CSG was formed during the second quarter of 2002 by affiliates of Goldman, Sachs & Co., Salomon
Smith Barney and one of our wholly owned subsidiaries. CSG was formed to acquire notes and a certificated interest issued by a trust. Equity in the income of our equity-method investee is 50% of CSG's
income or loss, before income taxes. See "Results of Operations" and "Other Operating Income" for additional information on these revenues. We agreed to service the entire
portfolio of credit card receivables underlying the trust. In exchange for our servicing, we receive a fee. This acquisition increased the total portfolio that we service by approximately
$1.2 billion as of June 30, 2002. In our "Selected Credit Card Data," we include information relating to the receivables underlying our securitizations. Beginning with the second quarter
of 2002, our data reflects the credit card receivables that we have securitized as well as 50% of the managed receivables underlying the CSG trust (which reflects our 50% interest in CSG).

Additionally,
on July 12, 2002, one of our a wholly owned subsidiaries closed a transaction with Federated Department Stores, Inc. (NYSE: FD) to purchase various assets,
which included retained interests in a trust that owns approximately $1.1 billion in face amount of credit card receivables, which represents approximately 2.4 million accounts. We
purchased these assets because we believe they will be accretive to our portfolio and our earnings, and because we could obtain favorable funding. The $1.1 billion in receivables will increase
the receivables underlying our securitizations and we expect these
receivables to generate income for us as they perform after the acquisition. We also hired approximately 830 employees from Federated and we will continue to service the receivables in the trust.
Total cash consideration paid was approximately $90 million. We will use the purchase method of accounting to record these transactions, and we are still evaluating the factors which affect the
various components of assets acquired and liabilities assumed.

Our
income is dependent upon the size and the quality of the credit card receivables in the credit card accounts underlying our securitizations. When we reduce our marketing, we add
fewer accounts and this decreases the size of our expected growth in the portfolio of the credit card receivables. The result of not adding accounts that we otherwise were planning to add cannot be
predicted with certainty and would be very subjective to estimate; however we believe that when there is less growth in the portfolio, there will be less growth and possibly a reduction in our net
income as compared to years with higher growth.

We
have decreased our expectation of growth in our originated credit card receivables during 2002 as a result of the decrease in our marketing plans. We believe that our originated
managed loan portfolio may not grow during 2002 and at the end of 2002 will be fairly comparable to the balance at the end of 2001. Our experience is that typically during the first quarter of the
year, consumers spend less and make higher payments, possibly due to bonuses or tax refunds. We have found that consumers spend more in the fall, prior to the start of the school year and during the
holidays.

Reducing
our marketing plans also allowed us to make staff reductions in our marketing and professional services departments in January 2002 as we focused on reducing our
operating expenses. If we see improvements in the financial markets, we may increase our marketing plans during the last half of 2002, which we believe would in turn increase our receivables
portfolio. Additionally, any additional portfolio acquisitions during 2002 would increase our receivables portfolio.

Credit Card Securitizations

We began marketing and servicing credit card accounts in February 1997. Columbus Bank &Trust ("CB&T") originates VISA and MasterCard revolving
credit card accounts under an agreement with us. On a daily basis, CB&T sells us an interest in the receivables created that day. Each day, we in turn sell our interest in the receivables to trusts or
to multi-seller commercial paper conduits administered

14

---

by national banking institutions. The trusts or conduits issue notes to investors in order to obtain the cash to pay us for the receivables.

After
an initial purchase of notes by the investors, there is usually a period during which collections from the receivables are used to purchase new receivables. This is referred to as
a revolving period. The revolving period typically begins on the closing date of any particular series of notes and ends at
the beginning of the amortization period. At the end of the revolving period, the investment of collections in new receivables ends and collections are instead used to repay the investors. The period
during which investors are being repaid is referred to as an amortization period. The revolving periods have coincided with the maturity dates of each series which are either 364 days for
series issued to commercial paper conduits or three years for our series placed with other investors. The maturity date for each series is included in our "Liquidity, Funding and Capital Resources"
section.

All
collections received from the cardholders underlying each securitization are included in the securitization trusts. This includes collections from the cardholders for fees and other
charges on the accounts and collections from the cardholders repaying the principal portion of their account balances. The cash flows are then distributed in accordance with the securitization
documents. Cash is distributed to us as servicer for our servicing fee, to the investors for their interest on their outstanding notes, to us as the seller to fund new purchases during the revolving
period and to the investors to repay any portion of their outstanding notes that become due and payable. Any collections from cardholders remaining each month after making the payments noted above are
paid to us on our retained interests.

In
each securitization transaction, we retain the risk of compliance with federal and state laws and regulations regarding the securitized accounts and any fraudulent activity with
regard to the accounts. The fraud that we are responsible for includes the unauthorized use of the credit cards including identity theft or purchases on lost or stolen cards or account numbers. We
expense these fraud losses in other operating expense. To date, we have experienced very little fraud for unauthorized use of the credit cards.

The
investors in the securitizations require us to provide credit support for the receivables to reduce the risk of loss to the investors resulting from cardholders not repaying their
credit card balances when due. We negotiate with each investor the amount of the credit support, which is based on historical and expected delinquency and loss experience on the receivables. The
credit support is usually in the form of over-collateralization, which means that we sell the receivables for cash and a subordinate retained interest. Since the retained interest is
subordinate to the investor's investment, the investors get excess collateral for their cash purchase price. As a result, the receivables available to repay the investors exceed the total amount of
the investors' interests in the receivables. This excess is the retained interest that we own, which is also referred to as a subordinated interest, or a seller's interest.

The
investors in the securitized receivables have no recourse against us for our cardholders' failure to pay their credit card loans; however, substantially all of our seller's interests
are subordinated to the investors' interests until the investors have been fully repaid. This means that our seller's interests will first absorb any losses due to cardholders' failure to repay their
balances before investors in the securitizations have to absorb these losses.

We
will receive additional cash from the securitized receivables if collections from the receivables exceed required interest and principal payments to the investors. The collections
from the receivables depend on the performance of the receivables, which includes the timing and amount of payments on the receivables, the interest rates, fees and other charges paid on the
receivables, and their delinquency and loss rates.

Our
securitizations are treated as sales under Generally Accepted Accounting Principles. As such, we remove the securitized receivables from our consolidated balance sheet. As noted
above, we retain a

15

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seller's interest in the pool of assets included in each securitization, with the right to receive collections allocated to such subordinated interest after payments to investors are made. These
amounts are recorded as income from retained interests in credit card receivables securitized. The fair value of our seller's interests are based on the estimated present value of the future cash
flows using management's best estimates of key assumptions and the estimated collectible portion of finance charge receivables. We also recognize an "interest-only" ("I/O") strip, which is
the present value of the projected excess cash flows the receivables will produce during its life. The excess cash flow is the excess of the finance charges and late fees generated by the securitized
receivables over the related credit losses, interest paid to investors, servicing costs and other expenses. The I/O strip and the seller's interest are included in "Retained Interests in Credit Card
Receivables Securitized" on our consolidated balance sheet.

Amounts
Due from Securitization on our consolidated balance sheet include payments recently received on the securitized receivables that are still held by the securitization structure
but are payable to us in the next 30 days.

Securitizations
are accounted for under Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("Statement No. 140"), and, prior to April 1, 2001, were accounted for under Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities" ("Statement No. 125"). Under these statements, gains or losses are recognized at the time of each sale and as they are recorded
as securitization income or loss in our consolidated statement of operations. The gains or losses recognized on the sales of credit card receivables depend in part on the previous carrying amount of
the financial assets sold as well as the fair value of the financial assets and cash proceeds received.

We
believe our securitizations satisfy the conditions of Statement No. 140 for sale accounting because each trust, as the issuer, is a qualified special purpose entity ("QSPE").
The activities of each trust are limited to (1) acquiring, owning and managing its assets and the proceeds of those assets; (2) issuing and making payments on notes; and
(3) engaging in related activities. In addition, each holder of a beneficial interest in the notes has the right to pledge or exchange its beneficial interest. Finally, the transferor transfers
the receivables to each trust or to a third party conduit and does not maintain control over the receivables.

The
securitization transactions do not affect the relationship we have with our customers and we continue to service the credit card receivables. We either perform the servicing or
contract with third party service providers. The fees we receive to service credit cards are included in our servicing income and are discussed in our "Results of OperationsOther
Operating Income." We recognize a servicing liability when the compensation for servicing a portfolio is not adequate compensation for costs of servicing the portfolio. The amount of servicing revenue
we receive is dictated by the trust agreements
in our securitizations. We accept servicing revenue that is less than the anticipated servicing costs because, during the revolving period, we receive all of the excess cash flows from the
securitizations; these excess cash flows represent collections on the accounts in excess of the interest paid to the investors, the servicing fees paid to us as servicer and required amortization
payments. Because we receive the residual or excess cashflows during the revolving period, we expect that the total cash received, inclusive of both the servicing revenue and the excess cashflows,
will exceed our servicing costs. Although separately accounted for and valued from our interest-only strip, this amount is reported with our interest-only strip on our
consolidated balance sheet for financial reporting purposes. See "Net Securitization Income and Income from Retained Interests" for the assumptions used and the servicing liability
amounts.

The
amount of servicing revenue we receive is dictated by the trust agreements in our securitizations. We accept servicing revenue that is less than the anticipated servicing costs
because during the revolving period we receive all of the excess cash flows from the securitizations, which

16

---

represent collections on the accounts in excess of the interest paid to the investors, the servicing fees paid to us as servicer, and required amortization payments. Since we receive the residual or
excess cashflows during the revolving period, the total cash we expect to receive inclusive of both the servicing revenue as well as the excess cash flows is expected to more than cover our servicing
costs.

The
payment terms of each securitization structure are negotiated with investors. Some facilities enter into accumulation periods at pre-determined dates prior to their
maturity. During an accumulation period, a portion of cash collected form the cardholders is required to be accumulated in an account for the benefit of the facility and is not available to us to fund
new purchases. We also have a facility associated with our portfolios that we purchased in 1998 that was structured to use a percentage of cashflows each month to pay down amounts outstanding to the
investors. The structure was negotiated in this manner with the investors at its inception because the portfolio of receivables was decreasing very rapidly. This occurred because most of the accounts
were making payments in excess of new purchases and no new accounts were being added to the portfolio. We detail the maturity dates and describe our facilities and amounts being used to repay
investors in the "Liquidity, Funding and Capital Resources" section.

The
table below summarizes our securitization activity.

|                                                                             |  | For the three months ended
June 30, |           | For the six months ended
June 30,
|---------------------------------------------------------------------------- |  | ----------------------------------- | --------- | ---------------------------------
|
|
|Securitization Activity:                                                     |  |                                     |           |                                  
|Gross amount of receivables securitized at period end                        |  | $                                   | 1,723,057 |                                  
|Proceeds from securitizations                                                |  |                                     | 414       |                                  
|Excess cash flows received on retained interests                             |  |                                     | 44,089    |                                  
|Pretax securitization income                                                 |  |                                     |          |                                  
|(Loss) income from retained interests in credit card receivables securitized |  |                                     | (62,921   | )                                

The
decrease in net proceeds from securitizations is the result of repayment to third party investors due to a decline in the receivables underlying the securitizations. These proceeds
or distributions fluctuate based on the growth or decline of the principal portion of the receivables. During the three and six months ended June 30, 2002, the receivables decreased, which
resulted in cash flows being paid to the investors. During the three and six months ended June 30, 2001, the receivables grew, which allowed us to draw from the investors in our
securitizations, which created the proceeds from securitization. The excess cash flows received on our retained interests are a function of the size and average age of the receivables. Our pretax
securitization income is recognized when the receivables are securitized. We did not earn any securitization income during the three or six months ended June 30, 2002 because the receivables
decreased in size.

The
trusts or the conduits purchase receivables from us by raising proceeds from investors. These proceeds are raised by the trusts or by the conduits by issuing notes to investors. The
proceeds from the investors are then remitted to us as part of the purchase price of the receivables. We had the following total commitments and outstanding amounts in our securitizations for each
period presented:

As of June 30,
2002

As December 31,
2001(In millions)Total commitments from investors

$
1,693

$
2,046Total outstanding amounts


1,376


1,524


17

---

The
maturities of these notes vary and are more fully detailed in "Liquidity, Funding and Capital Resources." We try to structure our securitization funding source by having
commitments in excess of our current growth plans so that we have investors who will purchase notes from the trusts, which in turn allows the trusts to purchase the receivables from us. We believe we
have structured our securitization program to reduce our reliance on any one series of notes by staggering the maturity dates of the notes and by also having excess capacity if one particular series
of notes is not renewed at its maturity date. One of the reasons we have slowed our growth plans for 2002 is because we do not have any assurance that when any series of notes mature, they will be
renewed on terms that are favorable to us, or at all. This is more fully discussed in "Liquidity, Funding and Capital Resources."

We
include in our consolidated financial statements all of our wholly owned subsidiaries. However, in accordance with Statement No. 140, we do not consolidate any of the trusts,
which are QSPEs. We are required to service the receivables that have been sold. We also perform the administrative functions for the trusts including preparing daily and monthly reports relating to
the receivables. We do this pursuant to an administration agreement between us and the trustees of the trusts. The investors do not have any recourse against us for the cardholders' failure to pay
their credit card balances; however, most of our retained interests are subordinate to the investor's interests. Under our securitization agreements, our retained interests would absorb losses due to
the cardholders' failure to pay before the investors would have to absorb these losses.

Our
securitization documents require us, as servicer of the receivables, to covenant that we will maintain an acceptable ratio of tangible net worth to total managed loans or that we
will not default in the payment of material indebtedness or reduce the periodic finance charges assessed on the receivables below agreed upon levels. We have also agreed to service the receivables in
accordance with our servicing policies and procedures. In addition to the above, there are events described in our agreements that may trigger an early redemption, which would cause all collections on
the receivables to go to the investors to pay the principal on the notes. This would delay any cash being paid to us with respect to our seller's interests until the notes were paid in full. These
events include our failure as servicer to remit the collections that we receive from cardholders to the appropriate securitization accounts within the required time frames, our failure to provide
reports regarding the activity in the accounts within required time frames, or a breach of our representations and warranties. These events also include financial performance measures on the
underlying receivables. As servicer of the accounts, we do not covenant or make any representation or warranty regarding the collectibility of the receivables in the accounts.

Our
securitization documents require us, as the seller of the receivables, to make representations and warranties relating to the validity and the enforceability of the agreements
pursuant to which the receivables were created. We also make other standard representations and warranties including our ability to enter into the agreements and the accuracy of the information
provided by us to investors. If we breach any of these representations, we may cause an early redemption event and we may not be able to sell additional receivables into our securitization structures.
As seller of the receivables, we do not make any representation or warranty regarding the collectibility of the receivables in the accounts.

We
have not breached any representations or warranties or otherwise caused an early redemption event, and the underlying performance of the receivables has not caused an early redemption
event in any of our securitizations.

In
our securitization structure associated with our portfolios which we purchased during 1998, each month a percentage of the excess cash collected from the cardholders is paid to the
investors to decrease their remaining invested amount. This excess cash totaled $5.0 million for the three months ended June 30, 2002, and $3.1 million for the three months ended
June 30, 2001. Under the terms of the securitization, the investors are paid with a percentage of the cash collected less (a) servicing fees that we receive to service the accounts, and
(b) credit balance refunds. Beginning in April 2002, 100%

18

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of all the excess cash is being paid to the investors. Since the inception of the structure, a percentage of the cashflows has been used to pay down the amounts outstanding. The structure was
negotiated in this manner with the investors since the portfolio was decreasing very rapidly as most of the accounts were making payments in excess of purchases at the time we acquired the portfolio
and no new accounts were being added to the portfolio. Once the investors are repaid, all cash collected on any remaining receivables is payable to us, which management estimates to occur during the
later half of 2004.

Results of Operations

Net loss attributable to common shareholders for the three months ended June 30, 2002 was $37.1 million, or $0.80 per diluted share, compared to net
income of $14.7 million, or $0.32 per diluted share for the three months ended June 30, 2001. Net loss for the six months ended June 30, 2002 was $36.0 million, or $0.77
per diluted share, compared to net income of $21.1 million, or $0.45 per diluted share for the six months ended June 30, 2001.

Other
operating income includes (loss) income from retained interests in credit card receivables securitized, which decreased to a loss of $62.9 million for the three months ended
June 30, 2002 compared to income of $21.3 million for the three months ended June 30, 2001. (Loss) income from retained interests in credit card receivables securitized decreased
to a loss of $57.2 million for the six months ended June 30, 2002 compared to income of $36.7 million for the six months ended June 30, 2001. These decreases are due
primarily to (a) a decrease in our estimate of the fair value of our retained interests in finance charge receivables of approximately $54.7 million based in part on proposed bank
regulatory guidelines (b) a decrease in our estimate of accrued interest and fees earned but not billed of approximately $12.0 million to better estimate the collectible portion of these
fees, partially offset by (c) an approximately $22.8 million increase in the fair value of our retained interest due to a decrease of our residual cash flows discount rate to 22.5%.

Prior
to the second quarter of 2002, we estimated accrued interest and fees using our estimates of total accrued interest and fees earned but not yet billed. The new estimates better
reflect our expectations of the collectible portion of these interest and fees and are in response to evolving regulatory guidance within the industry.

During
the second quarter of 2002, we hired an independent financial advisory firm to evaluate the residual cash flow discount rate. The independent financial advisory firm concluded
that the appropriate residual cash flow discount rate was 22.5%. During the second quarter of 2002, we adopted their recommendation and revised the estimated residual cash flow discount rate to 22.5%
from 34.9% at March 31, 2002.

Our
income from retained interests also decreased due to a reduction in the profitability and cash flows from the credit card receivables underlying our retained interests. This is due
to an increase in the charge offs of the receivables, which is due to a larger percentage of our receivables aging through the second year of their life. When credit card receivables are first
originated, they tend to have low charge off rates in their first twelve months. The charge off rate then dramatically increases during year two and then moderates in year three and beyond. We have
seen this trend in the performance of our receivables and believe that it is typical in other credit card portfolios in the industry. We further describe the receivables portfolio in "Selected Credit
Card Data."

During
the second quarter of 2002, bank regulators required various financial institutions to evaluate the manner in which they estimate the fair value of their retained interests and in
particular how
accrued finance charges and fees are treated in their estimate. Based on proposed regulatory guidelines and review of the results of agreements with other credit card companies and the regulators, we
changed the manner in which we estimate the fair value of our retained interest and now only include the estimated collectible portion of finance charges and fees that have been billed to the

19

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cardholders account. As noted above, the impact of this change was to decrease our income from retained interests by approximately $54.7 million. Additionally, we also accrued only the
estimated collectible portion of the accrued interest and fees earned but not yet billed to the cardholders, which decreased our income from retained interest by $10.3 million and our other
credit card fees by $1.7 million.

The
largest component of our income comes from the profit generated from the credit card receivables underlying our securitizations. Growth in managed receivables cannot be predicted
with certainty. In general, it is a product of our marketing and other strategic efforts. In general, our growth is a product of (1) the growth in the number of accounts, and (2) the
amount of usagebalanceson accounts. Our growth also is dependent upon a number of factors that we are not able to control, such as levels of consumer spending, competition
and general economic conditions. During the second quarter of 2002, the credit card receivables underlying our securitizations decreased by approximately 4.8% due primarily to normal attrition. During
the second quarter of 2002, we added approximately 40,000 new accounts from our marketing efforts compared to approximately 167,000 new accounts during the second quarter of 2001.

Growth
in the number of accounts is a product of several factors, primarily the level of our marketing efforts, our competition, the general economy and our portfolio acquisition
efforts. Our marketing and solicitation expenses decreased to $2.4 million for the three months ended June 30, 2002 from $7.7 million for the three months ended June 30,
2001. We decreased our marketing in 2002 because we believed that we had limited access to liquidity and we did not want our portfolio to grow beyond what we may be able to fund in the future.
Additionally, during the second quarter of 2002, we concentrated on acquiring portfolios instead of originating a significant number of new accounts.

Other
operating income, excluding securitization income, (loss) income from retained interests in credit card receivables securitized, and equity in income of equity-method investee,
decreased slightly to $34.2 million for the three months ended June 30, 2002 from $35.3 million for the three months ended June 30, 2001 and increased slightly to
$68.7 million for the six months ended June 30, 2002 from $68.6 million for the six months ended June 30, 2001.

Other
operating expenses decreased to $31.5 million for the three months ended June 30, 2002 from $34.8 million for the three months ended June 30, 2001 and
decreased to $68.9 million for the six months ended June 30, 2002 from $75.0 million for the six months ended June 30, 2001. The decrease is due primarily to the decrease
in our marketing and solicitation expenses.

Net Interest Income

Net interest income consists of interest income earned on cash and cash equivalents less interest expense. Net interest income totaled $0.3 million for the
three months ended June 30, 2002 and $0.6 million for the three (3) months ended June 30, 2001, net interest income totaled $0.6 million for the six months ended
June 30, 2002 and $1.6 million for the six (6) months ended June 30, 2001. The decrease in net interest income during 2002 is attributable to the reduction of the prime
rate, as well as a reduction in our average cash and cash equivalents.

During
the second quarter of 2002, we entered into a loan in the amount of $31.4 million to partially fund the purchase of an equity interest in CSG. The loan bears interest at
Prime + 5%, is non-recourse to the Company, and is only payable from the cash flows received from CSG. Interest expense associated with this loan was nominal for the three
months ended June 30, 2002. Until January 2002, $15.0 million was outstanding under our $25.0 million one-year revolving credit facility and
$10.0 million was reserved for a letter of credit in favor of a third party servicer. The revolving credit facility expired in January 2002 and was paid in full. During the three and six
months ended June 30, 2001, we had nominal interest expense.

20

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Net Securitization Income and (Loss) Income from Retained Interests

Retained Interests in Credit Card Receivables Securitized are valued in accordance with the provisions of Statement No. 140. These retained interests are
subsequently accounted for as trading securities and reported at estimated fair market value in accordance with Financial Accounting Standard No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("Statement No. 115"). See "Credit Card Securitizations."

Net
securitization income is recognized under Statement No. 140 at the time the receivables are securitized. Gains or losses on sales of receivables depend in part on the previous
carrying amount of the financial assets sold as well as the fair value of the assets and cash proceeds received. In a sale, we receive cash, retain an interest in the receivables sold (Seller's
Interest) and retain rights to receive cash in the future (the "I/O" interest only, or "I/O strip"). We did not earn any net securitization income during the three and six months ended June 30,
2002 because our portfolio decreased in size. Net securitization income was $0.2 million and $0.5 million for the three and six months ended June 30, 2001.

(Loss)
income from retained interests in credit card receivables securitized includes the income earned on the retained interests and any changes in the fair value of the retained
interest in credit card receivables securitized in accordance with Statement No. 115. Loss from retained interests in credit card
receivables securitized for the three months ended June 30, 2002 was $62.9 million, compared to income of $21.3 million for the three months ended June 30, 2001. Loss from
retained interests in credit card receivables securitized for the six months ended June 30, 2002 was $57.2 million, compared to income of $36.7 million for the six months ended
June 30, 2001. The decrease in our income from retained interests in credit card receivables securitized is due primarily to (a) a decrease in our estimate of the fair value of our
retained interests in finance charge receivables of approximately $54.7 million based in part on proposed bank regulatory guidelines and (b) a decrease in our estimate of accrued
interest and fees earned but not billed of approximately $12.0 million to better estimate the collectible portion of these fees, partially offset by (c) an approximately
$22.8 million increase in our retained interest due to decreasing our residual cash flows discount rate to 22.5%. The remainder of the $62.9 million loss was due primarily to an increase
in charge offs.

The
fair value of our retained interests in credit card receivables securitized is estimated by discounting the expected future cash flows from the securitized receivables at rates which
we believe are consistent with those that would be used by an independent third party. These rates historically reflect (a) prior transactions completed by us, (b) average rates
disclosed by our peers and (c) average rates we have reviewed from transactions where the total interest rate to the investor has been disclosed. During the second quarter of 2002, we hired an
independent financial advisory firm to evaluate the residual cash flow discount rate. The independent financial advisory firm concluded that the appropriate residual cash flow discount rate was 22.5%.
During the second quarter of 2002, we adopted the recommendation of the independent financial advisory firm and revised the estimated residual cash flow discount rate to 22.5% from 34.9% at
March 31, 2001. Because quoted market prices are generally not available, the fair value of our retained interests is based on the estimated present value of future cash flows from the
receivables that have been securitized using management's best estimates of finance charges and late fees, servicing fees, costs of funds paid to investors, payment rates, credit losses, discount
rates and required amortization payments to investors. The weighted average key assumptions used as of the end of each period are presented below. Changes in any of

21

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these assumptions could impact the estimates of the fair value of our retained interest as well as the realization of expected future cash flows (see "Critical Accounting Policies.")

|                                       |  | At or for the Three Months Ended |  
|-------------------------------------- |  | -------------------------------- | -
|
|
|
|Assumptions                            | 
|Payment rate (monthly)                 |  | 7.1                              | %
|Expected credit loss rate (annualized) |  | 16.6                             | %
|Residual cash flows discount rate      |  | 22.5                             | %
|Servicing liability discount rate      |  | 14.1                             | %

Management
estimates the fair value of the retained interests at the end of each period. Fair value is estimated as the amount the retained interests could be bought for, or sold for, in
a current transaction between willing parties; specifically, other than in a forced liquidation. We believe that quoted market prices in active markets are the best evidence of fair value. Because
quoted market prices are not available for our retained interests, the estimated fair value is based on the best information available under the circumstances. As such, we utilize a discounted cash
flow approach, under which our estimated future cash flows are discounted at the estimated rate of return that we believe an investor in our retained interests would expect to be associated with such
an investment (the "residual cash flows discount rate").

Estimated
default and payment rates are based on historical results, adjusted for expected changes based on our credit risk models. The payment rate decreased from 2001 to 2002,
primarily due to the seasoning of the originated portfolio and the effects of the generally poor economic climate on our cardholders. Expected credit loss rates have increased due to the generally
poor economic climate, increases in our delinquencies and our expected overall credit quality decline within our portfolios given the trending higher weighted-average age of the portfolios. We compare
historical loss rates on each vintage of our portfolio at comparable points in their lives to project our expected credit loss rate. Our servicing liability discount rate is based on management's
estimate of the required returns for Company's who service similar assets.

The
residual cash flow discount rate is dependant on the asset backed securities market and the various companies that make up this market (e.g., Providian, Capital One, Metris, NextCard
and CompuCredit). The asset backed securities market is influenced by the results of the issuers who participate in the market, as well as (a) the reaction of rating agencies to the results of
issuers, (b) general economic conditions and (c) the investment appetite of investors, which include banks, commercial paper conduits administered by banks, money market funds, pension
funds, hedge funds and insurance companies. Also, as demonstrated to us in December 2001, they also are impacted by our own perceived liquidity and negotiating positions. However, absent exigent
circumstances, the asset backed securities market tends to react to the overall performance of the group as opposed to the individual companies comprising the group (i.e., the advance rates, pricing
and terms available are responsive to the peer group that includes us, as opposed to just us).

Our
residual cash flows discount rate has been volatile during the latter part of 2001 and the first half of 2002. That volatility was unprecedented and unforeseen, both by us and other
market participants, but reflected the prevailing market conditions in the asset backed securities market as well as our own liquidity. GAAP requires, however, that we estimate the residual cash flows
discount rate at the end of each period.

During
the fourth quarter of 2001, we completed transactions at very unfavorable pricing, which yielded a 35% return to the buyers. This pricing reflected the deterioration of the asset
backed

22

---

securities markets and our near-term liquidity needs in December 2001. The December transaction was the most readily available information upon which to base the Company's fourth
quarter 2001 discount rate estimateat this point we increased our discount rate to 34.9%.

During
the first quarter of 2002, due to the continued general weakness of the economy and the continued stress and liquidity challenges that we saw in the asset backed securities
markets, we did not believe that there was sufficient evidence to warrant a reduction in our discount rate. In the second quarter of 2002, however, our liquidity position improved with the purchase
(through our 50%-owned equity method investee, CSG) of the retained interests from Providian. Additionally, we finalized the terms of a new securitization structure with more favorable advance rates,
pricing and other terms. As a result, we concluded, after consultation with and corroboration by an independent third-party valuation firm, that a reduction in our discount rate was
warrantedat this point we reduced our discount rate to 22.5%. The valuation techniques utilized by the third-party valuation firm included analyzing our recent transactions and our
competitors (both direct and indirect) discount rates and cost of equity, with equal weighting given to each.

Our
retained interests in credit card receivables securitized include the following:

June 30,
2002

December 31,
2001(In thousands)I/O strip

$
98,593

$
84,390Servicing liability


(40,501
)

(38,123
)Net I/O strip


58,092


46,267Fair value of Seller's Interest


251,982


312,622Retained interests in credit card receivables securitized

$
310,074

$
358,889


Our
net I/O strip is comprised of the I/O strip and the related servicing liability. The I/O strip reflects the estimated fair value of our rights to future income from the portfolio.
The servicing liability reflects the estimated fair value of the cost to service the portfolio above and beyond the servicing income we expect to receive from the securitization. The change in the
servicing liability is included in income from retained interests in credit card receivables securitized. The decrease in our retained interests at June 30, 2002 from December 31, 2001
is a function of the decrease in the total receivables securitized at the end of each of the stated periods and a change in the estimates used to value our retained interest in credit card receivables
securitized.

Equity-Method Investment in CSG, LLC

CSG, LLC ("CSG") was formed during the second quarter of 2002 by affiliates of Goldman, Sachs & Co., Salomon Smith Barney and a wholly owned subsidiary of
the Company to acquire notes and a certificated interest issued by a trust ("CSG Trust") that owns a portfolio of credit card receivables. We have a 50% interest in CSG and funded our
$34.9 million interest in CSG with cash. We borrowed $31.4 million of the required cash. We are accounting for our interest in CSG using the equity method of accounting. We recorded
approximately $4.5 million of income during the second quarter of 2002. This income primarily consisted of interest income earned by CSG on the notes and certificated interest it acquired in
the second quarter of 2002 from the CSG Trust.

23

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Other Operating Income

Other operating income, excluding securitization income, (loss) income from retained interests in credit card receivables securitized, and equity in income of
equity-method investee consists of the following:

|                       |                              | Three Months Ended
June 30, |        | Six Months Ended
June 30,
|---------------------- | ---------------------------- | --------------------------- | ------ | -------------------------
|
|
|Gross servicing income |                              | $                           | 2,394  |                          
|Other credit card fees |                              |                             | 23,858 |                          
|Interchange fees       |                              |                             | 4,065  |                          
|Ancillary products     |                              |                             | 3,852  |                          
|                       |                              |                             |        |                          
|                       | Total other operating income |                             | $      | 34,169                   
|                       |                              |                             |        |                          

Other
operating income decreased to $34.2 million for the three months ended June 30, 2002 from $35.3 million for the three months ended June 30, 2001 and
increased to $68.7 million for the six months ended June 30, 2002 from $68.6 million for the six months ended June 30, 2001. The receivables underlying the securitizations
remained relatively unchanged at approximately $1.7 billion at June 30, 2002 and June 30, 2001. Our servicing income increased for the three and six months ended June 30,
2002 compared to the same periods in 2001 primarily due to the servicing revenue we earned as the servicer of receivables associated with the CSG Trust. Other credit card fees increased to
$23.9 million from $20.8 million due to increases in annual, over-limit, cash advance, insufficient funds, maintenance and other miscellaneous fees. Interchange fees are the
portion of the merchant fee assessed by Visa and passed on to us on the purchase volume on our credit card receivables. Interchange fees decreased to $4.1 million from $5.5 million due
to a decrease in the purchase volume on the credit card receivables. Ancillary product revenue decreased to $3.9 million from $7.4 million due to fewer customers purchasing our products
and because we have decreased our growth in new accounts during the past three quarters. Our ancillary product income is very sensitive to our new account growth as sales of our fee-based
products are higher to new customers than to existing cardholders. Because we have decreased our growth plans for new accounts in 2002, our ancillary product income may continue to decline in 2002.

Other Operating Expense

Other operating expense consists of the following for the periods indicated:

|                                    |                              | Three Months Ended
June 30, |        | Six Months Ended
June 30,
|----------------------------------- | ---------------------------- | --------------------------- | ------ | -------------------------
|
|
|Non-servicing salaries and benefits |                              | $                           | 3,028  |                          
|Credit card servicing               |                              |                             | 15,817 |                          
|Marketing and solicitation          |                              |                             | 2,417  |                          
|Professional fees                   |                              |                             | 647    |                          
|Data processing                     |                              |                             | 1,813  |                          
|Net occupancy                       |                              |                             | 1,158  |                          
|Ancillary product expense           |                              |                             | 1,054  |                          
|Other                               |                              |                             | 5,602  |                          
|                                    |                              |                             |        |                          
|                                    | Total other operating income |                             | $      | 31,536                   
|                                    |                              |                             |        |                          

24

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Other
operating expense for three months ended June 30, 2002 decreased to $31.5 million from $34.8 million for the three months ended June 30, 2001 and
decreased to $68.9 million for the six months ended June 30, 2002 compared to $75.0 million for the six months ended June 30, 2001. This decrease is due primarily to a
decrease in marketing and solicitation expenses, data processing expenses and ancillary product expenses, offset by increases in credit card servicing, non-servicing salaries and benefits,
and other expenses. Credit card servicing costs primarily include collections and customer service expenses. These expenses include in-house collections and customer service expenses as
well as costs associated with corresponding with our cardholders. Servicing expense also includes outsourced collections and customer service expenses.

During
2001, based on anticipated growth in our managed receivables, we increased our infrastructure, customer service and collection personnel. Salaries and benefits, net occupancy and
other expenses increased as our operations expanded to service the increase in managed loans. In 2002, marketing and solicitation costs decreased due to reduced budgeted levels of direct mail,
television, telemarketing and internet campaigns. Data processing expenses decreased due to the realization of certain cost cutting efforts implemented in January of 2002. Ancillary product expense
decreased due to a decrease in ancillary product marketing and a decrease in ancillary products sold.

Other
expenses include depreciation, fraud, travel and entertainment, insurance, hiring expense, corporate communications, leased equipment expenses, office supplies and other
miscellaneous expenses. During 2001, expenses in this category, other than fraud, increased incrementally as we added infrastructure to support the growth in managed receivables. Our fraud expense
includes the expense of unauthorized use of the credit cards including identity theft or purchases on lost or stolen cards. To date, we have experienced very little fraud for unauthorized use and the
total expense was approximately 0.17% of the average managed receivables for the three months ended June 30, 2002 and approximately 0.16% for the three months ended June 30, 2001.

Income Taxes

Income tax benefit was $19.4 million for the three months ended June 30, 2002 compared to income tax expense of $7.9 million for the three
months ended June 30, 2001. Income tax benefit was $18.3 million for the six months ended June 30, 2002 and income tax expense was $11.4 million for the six months ended
June 30, 2001. Our effective tax rate was 35.0% for each of the three and six months ended June 30, 2002 and 2001. Substantially all of our income tax liabilities at June 30, 2002
were deferred tax liabilities.

Selected Credit Card Data

In August 1997, we began securitizing our credit card receivables. In each securitization, we receive cash, retain an interest in the receivables that are
securitized, retain the rights to receive cash in the future and service the accounts. Securitizations are treated as sales under Generally Accepted Accounting Principles ("GAAP"). As such, we remove
the securitized loans from our consolidated balance sheet. During the second quarter of 2002, we purchased a 50% interest in CSG, LLC, which was formed to acquire notes and a certificated interest in
a trust ("CSG Trust") that owns a portfolio of credit card receivables. The performance of the underlying credit card receivables will affect the future cash flows we actually receive. The information
in the following table and in this entire Selected Credit Card Data section is presented to reflect credit card receivables that we have securitized and 50% of the managed receivables underlying the
CSG Trust (which reflects our ownership percentage in CSG, LLC). We have included 50% of the managed receivables underlying the CSG Trust because we have a 50% interest in the LLC that owns an
interest in the trust. Our future cash flows and income are dependent on how the receivables in the trust perform. In addition to owning our 50% interest in

25

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CSG, we are the servicer for the CSG trust. We receive a servicing fee from the CSG Trust, which we believe is adequate compensation for the servicing we perform.

|                               |  | At or for the Three Months Ended |          
|------------------------------ |  | -------------------------------- | ---------
|
|
|
|Period-end managed loans       |  | $                                | 2,260,442
|Period-end managed accounts    |  |                                  | 2,285    
|Average managed loans          |  | $                                | 1,945,024
|Net interest margin            |  |                                  | 13.1     
|Other credit card income ratio |  |                                  | 7.3      
|Operating ratio                |  |                                  | 7.6      

The net interest margin includes all net interest and late fee income on all outstanding loans, less the interest expense paid to the investors
and finance charge charge offs. Our other credit card income includes other credit card fees, such as over-limit fees, cash advance fees, maintenance fees, miscellaneous fees, interchange
income and ancillary product income. Our operating ratio includes all expenses associated with our business, net of any servicing income we receive as servicer for the CSG Trust, other than marketing
and solicitation and ancillary product expenses, and is expressed as a percentage of average managed loans.

We
acquired portfolios during 1998 at substantial discounts. The portfolio of credit card receivables owned by the CSG Trust was also acquired at a substantial discount. The presented
credit card data excludes some of the acquired receivables and the related accounts, which at the time of purchase, were closed accounts or in a late delinquency status. Our belief is that these
accounts were either in the process of being charged off by the seller due to delinquency or were likely to be charged off in the near term. In each purchase, the accounts and the receivables were
purchased as part of the portfolio as the sellers desired to sell the entire portfolio. The same representations and warranties from the sellers were made on these receivables that were made on the
entire portfolio; however, the sellers did not provide any representations or warranties as to the ability or willingness of the cardholders to repay their accounts. There is no recourse to any seller
in the event the cardholders simply do not pay on accounts that have been acquired.

The
following summarizes the accounts and receivables purchased and those excluded from our credit card data:

Purchases occurring in2002

1998(In thousands)Acquired accounts


383


201Acquired receivables

$
615,721

$
579,700Excluded accounts


38


52Excluded receivables

$
74,388

$
137,200


The
portfolios acquired during 1998 and the portfolio acquired during 2002 by the CSG Trust were acquired at substantial discounts. A portion of each discount related to the excluded
accounts noted above. A portion of each discount related to the credit quality of the remaining acquired receivables and was calculated as the difference between the face amount of the receivables
purchased (less the excluded accounts described above) and the expected future cash flows expected to be collected. The balance of the discount for each purchase is not needed for credit quality, is
referred to as accretable yield, and is being amortized into net interest margin, using the interest method over the estimated life of each acquired portfolio for purposes of reporting our selected
credit card data. At June 30, 2002,

26

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$10.5 million of the accretable yield remained. The following table summarizes the discounts associated with the acquired portfolios:

Purchases occurring in2002

1998(In millions)Total face value acquired

$
615.7

$
579.7Total discount


249.0


284.5Portion used for excluded receivables


74.4


137.2Portion needed for credit quality


169.9


87.5Portion reflecting accretable yield


4.7


59.8


Our
net interest margins are influenced by a number of factors, including the level of finance charges and late fees billed, the weighted average cost of funds and the level of our
finance charge charge offs. Our net interest margin for the three months ended June 30, 2002 was 13.1% as compared to 16.9% for the three months ended March 31, 2002. The decrease in our
net interest margin is due to a decrease in late fee income billed to our cardholders and an increase in the finance charge charge offs on the portfolio, partially offset by an increase in billed
finance charges. The net effect of these changes was to decrease our net interest margin by approximately $10.3 million.

Each
quarter, we re-underwrite our portfolio to price our products to appropriately reflect the level of each customer's credit risks. As part of this underwriting process,
existing customers may be offered increased or decreased pricing depending on their credit risk as well as their supply and demand for credit. Increases in pricing may increase our net interest
margin, while decreases in pricing may reduce our net interest margin. We expect our net interest margin to begin to increase during the third quarter of 2002 due primarily to expected decreases in
finance charge charge offs for the remainder of 2002. The increase in finance charge charge offs is based on the current economic environment as well as the expected seasoning of the credit card
accounts.

Our
operating ratio includes all costs of operating our business, other than marketing expenses and ancillary product expenses. Our operating ratio fluctuates based on our rate of loan
growth and the level of our expenditures on our infrastructure, our personnel, our collections and customer service operations, our internet technology and our database management system. The
operating ratio decreased to 7.6% during the three months ended June 30, 2002 as compared to 9.0% during the three
months ended March 31, 2002 as we continued to implement cost cutting initiatives, including automation projects. We expect to continue to reduce our operating ratio as a percentage of average
managed loans during the second half of 2002. Included in our operating expenses for the second quarter of 2002 was approximately $3.7 million paid to our primary subservicer to reimburse them
for servicing fewer accounts than previously projected.

Asset Quality

Our delinquency and net loan charge off rates at any point in time reflect the credit performance of our receivables. The average age of our credit card accounts,
the timing of portfolio purchases, the success of our collection and recovery efforts and general economic conditions affect our delinquency and charge off rates. The average age of our credit card
account portfolio also affects the stability of delinquency and loss rates of the portfolio.

Our
strategy for managing delinquency and loan losses consists of active account management throughout the customer relationship. This strategy includes credit line management and
pricing based on the risk of the credit card accounts.

27

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Delinquencies.Delinquencies have the potential to impact net income in the form of net credit losses. Delinquencies are also
costly in terms of the personnel and resources dedicated to resolving them. A credit card account is contractually delinquent if the minimum payment is not received by the specified date on the
customer's statement. It is our policy to continue to bill interest and fee income on all credit card accounts, except in limited circumstances, until the account and all related receivables, interest
and other fees are charged off. See "Net Charge offs."

The
following table presents the delinquency trends of all of the credit card receivables underlying our securitizations, as well as, 50% of the receivables underlying the CSG Trust:

|                                                 |  | At or for the Three Months Ended |        
|------------------------------------------------ |  | -------------------------------- | -------
|
|
|
|Total                                            |  |                                  |        
|Receivables delinquent:                          |  |                                  |        
|30 to 59 days past due                           |  | $                                | 104,337
|60 to 89 days past due                           |  |                                  | 67,154 
|90 or more days past due                         |  |                                  | 136,501
|                                                 |  |                                  |        
|Total 30 or more days past due                   |  | $                                | 307,992
|Total 60 or more days past due                   |  | $                                | 203,655
|Receivables delinquent as % of period-end loans: |  |                                  |        
|30 to 59 days past due                           |  |                                  | 4.6    
|60 to 89 days past due                           |  |                                  | 3.0    
|90 or more days past due                         |  |                                  | 6.0    
|                                                 |  |                                  |        
|Total 30 or more days past due                   |  |                                  | 13.6   
|Total 60 or more days past due                   |  |                                  | 9.0    

Our 60 or more days past due delinquency rates have decreased from 12.2% at March 31, 2002 to 9.0% at June 30, 2002. We expect the
portfolio delinquencies to increase as the receivables acquired in connection with our 2002 acquisitions age into later delinquency status.

The
following table presents the delinquency trends for our originated portfolio:

|                                                 |  | At or for the Three Months Ended |        
|------------------------------------------------ |  | -------------------------------- | -------
|
|
|
|Originated Portfolio                             |  |                                  |        
|Receivables delinquent:                          |  |                                  |        
|30 to 59 days past due                           |  | $                                | 75,024 
|60 to 89 days past due                           |  |                                  | 53,010 
|90 or more days past due                         |  |                                  | 130,996
|                                                 |  |                                  |        
|Total 30 or more days past due                   |  | $                                | 259,121
|Total 60 or more days past due                   |  | $                                | 184,097
|Receivables delinquent as % of period-end loans: |  |                                  |        
|30 to 59 days past due                           |  |                                  | 4.6    
|60 to 89 days past due                           |  |                                  | 3.2    
|90 or more days past due                         |  |                                  | 8.0    
|                                                 |  |                                  |        
|Total 30 or more days past due                   |  |                                  | 15.8   
|Total 60 or more days past due                   |  |                                  | 11.2   

The 60 or more days past due delinquency rates in our originated portfolio decreased to 11.2% at June 30, 2002 from 12.5% at
March 31, 2002. This decrease is primarily reflected in the 90 or more

28

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days past due category. We anticipate fairly stable delinquency rates in our originated portfolio going forward. Our delinquency rates have increased in general due primarily to the seasoning of
receivables that were originated during 2000 and 1999 and the general economic conditions that prevailed during 2001 and the nine months ended September 30, 2002. As the average age of an
originated credit card receivables portfolio increases, delinquency rates can be expected to be low during the first six months of their life; dramatically increase and peak towards the rest of the
first year and during the second year; and then decrease and stabilize after year two. We have observed this trend in the industry as well as within our own originated portfolio.

The
following table presents the delinquency trends for our purchased portfolio:

|                                                 |  | At or for the Three Months Ended |       
|------------------------------------------------ |  | -------------------------------- | ------
|
|
|
|Purchased Portfolio                              |  |                                  |       
|Receivables delinquent:                          |  |                                  |       
|30 to 59 days past due                           |  | $                                | 4,937 
|60 to 89 days past due                           |  |                                  | 2,900 
|90 or more days past due                         |  |                                  | 5,253 
|                                                 |  |                                  |       
|Total 30 or more days past due                   |  | $                                | 13,090
|Total 60 or more days past due                   |  | $                                | 8,153 
|Receivables delinquent as % of period-end loans: |  |                                  |       
|30 to 59 days past due                           |  |                                  | 5.7   
|60 to 89 days past due                           |  |                                  | 5.1   
|90 or more days past due                         |  |                                  | 7.7   
|                                                 |  |                                  |       
|Total 30 or more days past due                   |  |                                  | 15.2  
|Total 60 or more days past due                   |  |                                  | 9.5   

The 60 or more days past due delinquency rate in our purchased portfolio increased to 9.5% at June 30, 2002, compared to 8.6% at
March 31, 2002 due primarily to a decline in the average managed loans in our purchased portfolio.

29

---



The following table represents 50% of the receivables underlying the CSG Trust:

|                                                 |  | At or for the Three Months Ended |       
|------------------------------------------------ |  | -------------------------------- | ------
|
|
|
|50% of CSG Trust                                 |  |                                  |       
|Receivables delinquent:                          |  |                                  |       
|30 to 59 days past due                           |  | $                                | 24,376
|60 to 89 days past due                           |  |                                  | 11,153
|90 or more days past due                         |  |                                  | 252   
|                                                 |  |                                  |       
|Total 30 or more days past due                   |  | $                                | 35,781
|Total 60 or more days past due                   |  | $                                | 11,405
|Receivables delinquent as % of period-end loans: |  |                                  |       
|30 to 59 days past due                           |  |                                  | 4.5   
|60 to 89 days past due                           |  |                                  | 2.1   
|90 or more days past due                         |  |                                  | 0.0   
|                                                 |  |                                  |       
|Total 30 or more days past due                   |  |                                  | 6.6   
|Total 60 or more days past due                   |  |                                  | 2.1   

We
are using our account management strategies on our portfolio, which are intended to reduce the expected increase in delinquency rates as our portfolio continues to mature. Examples of
management
strategies include conservative credit line management, purging of inactive accounts and collection strategies intended to optimize the effective account to collector ratio across delinquency buckets.
We measure the success of these efforts by measuring delinquency rates.

Charge offs.In the tables that follow, gross yield ratio represents finance charges and late fees as a percentage of average
managed loans. The other credit card income ratio represents the aggregate of other fees earned on credit cards (such as annual membership fees, over-limit fees, cash advance fees,
interchange fees, and ancillary products revenues) as a percentage of average managed receivables. Combined gross charge offs represent the aggregate amounts of accrued finance charge, fee, and
principal losses from customers unwilling or unable to pay their receivables balances, as well as bankrupt and deceased customers, less current period recoveries. Net charge offs include only the
principal amount of these losses, net of recoveries; they exclude accrued finance charges and fee charge offs, which are charged against the related income at the time of charge off. Losses from
fraudulent activity in accounts are also excluded from net charge offs and are included separately in other operating expenses. We generally charge off receivables when they become contractually
180 days past due. However, bankrupt accounts and the accounts of deceased customers without a surviving, contractually liable individual or an estate large enough to pay the debt in full are
charged off within 30 days of notification of the customer's bankruptcy or death and subsequent confirmation, if applicable.

For
purposes of reporting adjusted charge offs and the adjusted charge off ratios on the managed receivables below, the discount related to credit quality discussed earlier in this
section was utilized to offset a portion of actual net charge offs. Because we treat the credit quality discount component of our acquisition discount as related exclusively to acquired principal
balances, the difference between our net charge offs and our adjusted charge offs for each respective reporting period represents the

30

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total dollar amount of our charge offs that were charged against our credit quality discount during each respective reporting period.

The
following table presents the charge off data for all of the credit card receivables underlying our securitizations as well as 50% of the receivables underlying the CSG Trust:

|                                |  | 2002 |         | 2001 |   | 2000    |  
|------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|
|Gross yield ratio               |  |      | 29.9    | %    |   | 32.3    | %
|Other credit card income ratio  |  |      | 7.0     | %    |   | 7.4     | %
|Combined gross charge offs      |  | $    | 143,840 |      | $ | 129,251 |  
|Net charge offs                 |  | $    | 72,979  |      | $ | 68,407  |  
|Adjusted charge offs            |  | $    | 72,979  |      | $ | 68,407  |  
|Combined gross charge off ratio |  |      | 29.6    | %    |   | 27.8    | %
|Net charge off ratio            |  |      | 15.0    | %    |   | 14.7    | %
|Adjusted charge off ratio       |  |      | 15.0    | %    |   | 14.7    | %

Our generally declining other credit card income ratio can be attributed to our growth slowdown during 2001 and 2002, which resulted in a
declining number of new cardholders, which yield higher ancillary product revenues than our mature cardholder relationships.

The
trending increase in combined charge offs and net charge offs and their respective ratios throughout the latter part of 2001 and 2002 can generally be attributed to the expected
seasoning of our originated portfolio into the second and third years of our portfolio's life as discussed above and the effects of the generally poor economic environment that we have seen throughout
2001 and 2002 on our customer base level and their level of purchases and ability to pay. Further analysis of these trends is provided below with the tables that relate to more specific components of
our overall portfolio.

The
difference between net charge offs and adjusted net charge offs represents the charge offs associated with acquired receivables that were charged against a credit quality discount
that we establish relative to our acquisitions on the acquisition date thereof. As explained above, it is necessary to establish this credit quality discount to allow us to view the true economic
losses associated with our acquired receivables; because by the acquisition date we know of credit quality issues within a portfolio and because we adjust our purchase price accordingly,
post-acquisition charge offs of known credit quality issues at the acquisition date do not represent economic losses to CompuCredit.

We
continue to focus our resources on refining our credit underwriting standards for new accounts and to increase our focus on collection and post charge off recovery efforts to minimize
losses. See the "Collection Strategies" discussion below.

The
following table presents the charge off data for our originated portfolio:

|                                |  | 2002 |         | 2001 |   | 2000    |  
|------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|
|Gross yield ratio               |  |      | 30.4    | %    |   | 32.9    | %
|Other credit card income ratio  |  |      | 7.6     | %    |   | 7.7     | %
|Combined gross charge offs      |  | $    | 140,031 |      | $ | 125,755 |  
|Net charge offs                 |  | $    | 70,347  |      | $ | 66,364  |  
|Adjusted charge offs            |  | $    | 70,347  |      | $ | 66,364  |  
|Combined gross charge off ratio |  |      | 33.5    | %    |   | 28.7    | %
|Net charge off ratio            |  |      | 16.8    | %    |   | 15.2    | %
|Adjusted charge off ratio       |  |      | 16.8    | %    |   | 15.2    | %

The general trending decline in the other credit card income ratio from 2001 through 2002 is due to our growth slowdown during this period, which
has resulted in a declining number of new cardholders, which yield higher ancillary product revenues than our mature cardholder relationships.

31

---

Our combined gross charge off ratio has generally trended higher during the latter part of 2001 and throughout 2002 primarily due to the seasoning of the originated portfolio and the generally poor
overall economic conditions that have existed throughout this time period. As our portfolio matures, we expect charge off rates to also increase and then stabilize. Typically, as our accounts mature,
there are very few charge offs during the first 180 days, then the charge offs are expected to increase and peak in the second year and then stabilize in the third year and beyond. While we
have noticed this general trend within our originated portfolio and believe that this trend line applies in moderate to good economic environments, our charge offs have not moderated as quickly as
expected, we believe primarily due to the generally poor economic conditions that have existed since the end of 2001 and the effects of these conditions on the ability of our cardholders to make their
required payments. We also note that the combined gross charge off ratio and the net charge off ratio were adversely impacted by reductions during the quarter in the average managed receivables
balances used in the denominator of the respective ratio computations.

The
following table presents the charge off data for our purchased portfolios:

|                                |  | 2002 |       | 2001 |   | 2000  |  
|------------------------------- |  | ---- | ----- | ---- | - | ----- | -
|
|Gross yield ratio               |  |      | 25.0  | %    |   | 22.0  | %
|Other credit card income ratio  |  |      | 2.7   | %    |   | 2.7   | %
|Combined gross charge offs      |  | $    | 3,398 |      | $ | 3,496 |  
|Net charge offs                 |  | $    | 2,222 |      | $ | 2,043 |  
|Adjusted charge offs            |  | $    | 2,222 |      | $ | 2,043 |  
|Combined gross charge off ratio |  |      | 14.5  | %    |   | 12.9  | %
|Net charge off ratio            |  |      | 9.5   | %    |   | 7.5   | %
|Adjusted charge off ratio       |  |      | 9.5   | %    |   | 7.5   | %

Our net, adjusted charge off, and combined gross ratios increased at June 30, 2002, compared to March 31, 2002, primarily due to the
decline in our average managed receivables in our purchased portfolio.

The
following table presents the charge off data for 50% of the receivables underlying the CSG Trust:

2002Jun. 30Gross yield ratio


27.3
%Other credit card income ratio


3.7
%Combined gross charge offs

$
410Net charge offs

$
410Adjusted charge offs

$
410Combined gross charge off ratio


0.9
%Net charge off ratio


0.9
%Adjusted charge off ratio


0.9
%


Credit Losses.For securitized receivables, anticipated credit losses are reflected in the calculations of net securitization
income and the fair value of our retained interests in credit card receivables securitized while the actual charge offs are included in income from retained interests in credit card receivables
securitized. In evaluating credit losses, we take into consideration several factors, including (1) historical charge off and recovery activity by receivables portfolio, (2) recent and
expected delinquency and collection trends by receivables portfolio, (3) the impact of current economic conditions and recent economic trends on the customers' ability to repay and
(4) the risk characteristics of the portfolios.

32

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Collections Strategies.The goal of the collection process is to collect as much money from the cardholder as possible in the
most cost effective and efficient manner. To this end, we employ competitive techniques that focus on having the lowest possible delinquencies for our portfolios. As part of our collection analysis
and consistent with what we believe to be prevalent industry practice, we evaluate our economic investment in the cardholder (i.e., the principal balance) and aggressively attempt to recover our
economic investment made on each receivable.

We
consider managements' experience in operating professional collection agencies, coupled with our proprietary systems, to be a competitive advantage in minimizing delinquencies and bad
debt losses. Our collectors employ various and evolving tools when working with a cardholder, and they routinely test and evaluate new tools in their drive toward improving our collections with the
greatest degree of efficiency possible. These tools include programs under which we may reduce or eliminate a cardholder's APR or waive a certain amount of accrued late fees, provided the cardholder
makes a minimum number or amount of payments. In some instances, we may agree to match a customer's payments, for example, with a commensurate reduction of accrued finance charges or waiver of accrued
late fees. In other situations, we may actually settle with customers and adjust their accrued finance charges and accrued late fees, for example, based on their commitment and their follow through on
their commitment to pay certain portions of the balances that they owe. Our collectors may also decrease a customer's minimum payment once a certain number of minimum payments are received. We also
may occasionally use our marketing group to assist in determining various programs to assist in the collection process. Moreover, we willingly participate in the Consumer Credit Counseling Service
("CCCS") program by waiving a certain percent of a customer's debt that is considered our "fair share" under the CCCS program.

We
are constantly monitoring and adapting our collection strategies, techniques, technology and training to optimize our efforts to reduce delinquencies and charge offs. We use our
systems to develop these proprietary collection strategies and techniques, which we employ in our operations. We analyze the output from these systems to identify the strategies and techniques that we
believe are most likely
to result in curing a delinquent account in the most cost-effective manner, rather than treating all accounts the same based on the mere passage of time.

Our
collection strategies include utilizing both internal and third-party collectors and creating a competitive process of rewarding the most effective and efficient group of collectors
from within our system and among third-party agencies. We divide our portfolios into various groups that are statistically equivalent and provide these groups of accounts to our various internal and
external collection shops. We compare the results of the internal and external collectors against one another to determine which techniques and which collection groups are producing the best results.

The
various credit card data and charge off statistics above generally reflect our application of customer payments first to accrued finance charges, then to fees, and then to principal.
However, pursuant to the payment application discretion that we have under our cardholder agreements, we have varied from this general payment application priority where appropriate at certain stages
of an account's delinquency to assist our collectors in evaluating our cardholder relationships against our economic investment made in the cardholder relationship. To assist them in making this
evaluation, we have, in certain circumstances and at certain stages of an account's delinquency, applied customer payments first to principal and then to accrued finance charges and fees. Application
of payments in this manner permits our collectors to know real time the degree to which a customer's payments over the life of an account have covered the principal credit extensions to the customer
over the life of the account. This allows our collectors to readily identify our potential "economic" loss associated with a charge off of a particular account (i.e., the excess of principal loaned to
the customer over payments received back from the customer throughout the life of the account). Armed with this information, our collectors will focus on settling with customers in a way that ideally
will best protect us from economic loss on the cardholder relationship. Under this approach, for example, our collectors may forgo

33

---

collections of accrued finance charges and fees in order to preserve our opportunity to at least achieve repayment of our principal credit extensions to the cardholder. Our selection of collection
techniques, including, for example, whether we apply payments to finance charges or principal, impacts the statistical performance of our portfolios.

As
in all aspects of our risk management strategies, we compare the results of each of the above strategies with other collection strategies and devote resources to those strategies that
yield the best results. Results are measured based on delinquency rates, expected losses and costs to collect. Existing strategies are then adjusted as suggested by these results. Management believes
that maintaining the ongoing discipline of testing, measuring and adjusting collection strategies will result in minimized bad debt losses and operating expenses. We believe this on-going
evalution differs from the approach taken by the vast majority of credit grantors that implement collection strategies based on commonly accepted peer group practices.

Liquidity, Funding and Capital Resources

A primary financial goal is to maintain an adequate level of liquidity through active management of assets and liabilities. Because the characteristics of our
assets and liabilities change, liquidity management is a dynamic process affected by the pricing and maturity of our assets and liabilities.

We
finance our business through cash flows from operations, asset securitizations and the issuance of equity:



34

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Maturity Date

Facility Limit(in millions)August 2002(1)

$
67.9October 2002


306.0March 2003


250.0September 2003(2)


627.4July 2004(3)


441.5$
1,692.8


---



During
the six months ended June 30, 2002, we used approximately $9.6 million in cash operating the company. Our cash used by operating the company is dependent on the
performance of our managed portfolio including charge off rates, net interest margin, payment rates and operating expenses. Based on our current expectations of our managed portfolio performance and
our expected growth rates during the third and fourth quarter of this year, we expect to have positive cash flow from operations during these quarters.

We
continue to explore a wide range of options for liquidity in order for us to maintain our growth and to be prepared for adverse changes in the securitization marketplace. These
options may include revolving lines of credit, selling a subordinated interest in one or more of our securitizations, or the issuance of debt or equity. We may explore other options as well. There
cannot, however, be any assurances that we will be able to obtain liquidity on satisfactory terms. Should we not obtain additional liquidity, we will need to significantly limit our growth and will be
more susceptible to adverse changes in the securitization marketplace.

Our
most significant source of liquidity is the securitization of credit card receivables. The maturity terms of our securitizations vary. With the exception of the
three-year securitizations that we completed

35

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in July 2001 and August 2000, most are one-year securitizations. Once repayment begins, payments from customers on credit card receivables are accumulated to repay the
investors and are no longer reinvested in new credit card receivables. At that time, our funding requirements for new credit card receivables will increase accordingly. The occurrence of events may
also cause the securitization transactions to amortize earlier than scheduled or may require additional enhancements. These events include a decline in the portfolio's annual yield or a decline in the
payment rate, in each case, below set rates, or an increase in delinquencies or charge offs, in each case, above set rates. The portfolio's annual yield typically includes finance charges and past due
fees earned on the receivables less servicing fees and credit losses. These events would accelerate the need to utilize alternative funding sources. If our securitization facilities begin to trap cash
flows to repay the investors and we are unable to obtain additional sources of liquidity such as other securitization facilities, other debt or we are unable to issue additional equity, we would begin
to close the credit card accounts that are open to new purchases and thus significantly reduce our need for any additional cash. Under each of our securitization structures, there has not been an
early amortization period. As each facility expires or comes up for renewal, there can be no assurance that the facility will be renewed or if renewed there can be no assurance that the terms will be
as favorable as the terms that currently exist. Either of these events could significantly increase our need for additional liquidity. For additional information
regarding our securitization practice, see the information under the caption "Credit Card Securitizations."

Our
most significant uses of cash are marketing expenses, operating expenses and the purchase of the credit card receivables that arise from the accounts that are issued through our
relationship with Columbus Bank & Trust. We raise cash by selling the credit card receivables into our securitization programs. When we sell the receivables we receive cash and a seller's
interest (a portion of which is regularly referred to as a "retained interest"). Since the amount of cash that we receive is less than the face amount of the receivables, this seller's interest is a
use of cash for us. The receivables in the securitization programs then generate cash as the cardholders make payments on their accounts. This cash is allocated by the securitization agreements to pay
for servicing the receivables, to pay interest on the investor's notes, to cover charge offs, and to repay any portion of the investor's notes that are due. Any excess cash after the above allocations
is remitted to us.

During
periods of rapid receivables growth, the cash that we raise from selling the credit card receivables and from our interests in the trusts is not by itself enough to cover our uses
of cash. During periods of decline in the receivables, there typically would be enough cash flow to cover our costs and we would generate excess cash flow (depending on the performance of the
underlying receivables). To fund our use of cash associated with our significant growth during 1999, 2000 and 2001, we used the proceeds from our initial public offering and our follow-on
offering. During the fourth quarter of 2001, we used a portion of our revolving credit facility, and we also raised additional cash by selling retained interests and preferred stock that we described
more fully in our 2001 Annual Report on Form 10-K. During 2002, we used our cash flows from our fourth quarter 2001 transactions and a note to fund our operations.

Absent
changes in the manner in which we securitize credit card receivables, we believe that our asset securitizations, cash flow from operations and cash flows from our investment in
CSG generally will provide adequate liquidity for our business at its current level. However, in order for us to continue growing our business, we will need additional sources of liquidity to fund our
retained interest portion of the growth. In addition, should the terms of the securitizations available to us become less favorable, we also will need additional sources of liquidity to fund our
retained interests. We are particularly concerned about the continued availability of securitizations on terms previously available to us given the recent poor performance of several of our
competitors and the impact of their performance on the marketplace for securitizations.

36

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Critical Accounting Policies

Our financial statements are prepared in accordance with GAAP. These principles are numerous and complex. Our significant accounting policies are summarized in
the notes to our financial statements. In many instances, the application of GAAP requires management to make estimates or to apply
subjective principles to particular facts and circumstances. A variance in the estimates used or a variance in the application, or interpretation of GAAP could yield a materially different accounting
result. It is impracticable for us to summarize every accounting principle that requires us to use judgment or estimates in its application. In our Annual Report on Form 10-K for
the year ended December 31, 2001, we discuss the two areas, valuation of retained interests and non-consolidation of special purpose entities, where we believe that the estimations,
judgments or interpretations that we have made, if different, would have yielded the most significant differences in our financial statements, and we urge you to review that discussion. In addition,
in Note 4 to the financial statements included in this report we updated our sensitivity analysis with respect to valuations.

Forward-Looking Information

All statements in this quarterly report concerning our operating and earnings expectations for fiscal year 2002 and our liquidity expectations, and all other
statements regarding our future performance (including those using words such as "believe," "estimate," "project," "anticipate, or "predict"), are forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause our actual results to differ materially from those suggested by
these forward-looking statements. These factors include, among others, the following risks and others set forth under the caption "Risk Factors" in our Annual Report on Form 10-K
for the year ended December 31, 2001:



37

---



We
expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate sensitivity is comprised of basis risk, gap risk and market risk. Basis risk is caused by the difference in the interest rate indices used to price
assets and liabilities. Gap risk is caused by the difference in repricing intervals between assets and liabilities. Market risk is the risk of loss from adverse changes in market prices and rates. Our
principal market risk is related to changes in interest rates. This risk affects us directly in our lending and borrowing activities, as well as indirectly as interest rates may impact the payment
performance of our customer.

We
incur basis risk because we fund managed assets at a spread over the commercial paper rate or LIBOR while the rates on the underlying assets are indexed to the prime rate. This basis
risk results from the potential variability in the spread between the prime rate and the commercial paper rate, on the one hand, and LIBOR, on the other hand, over time. We have not hedged our basis
risk due to the cost of hedging this risk versus the benefits from elimination of this risk.

We
attempt to minimize the impact of market interest rate fluctuations on net interest income and net income by regularly evaluating the risk inherent in our asset and liability
structure, especially our off-balance sheet assets and liabilities such as securitized receivables. The impact of market interest rate fluctuations on our securitized receivables is
reflected in the valuation of our retained interests in

38

---

credit card receivables securitized. This risk arises from continuous changes in our asset and liability mix, changes in market interest rates, including changes affected by fluctuations in
prevailing interest rates, payment trends on our interest-earning assets and payment requirements on our interest-bearing liabilities, and the general timing of all other cash flows. To manage our
direct risk to market interest rates, management actively monitors market interest rates and the interest sensitive components of our securitization structures. Management seeks to minimize the impact
of changes in interest rates on the fair value of assets, net income and cash flow primarily by matching asset and liability repricings. There can be no assurance that management will be successful in
its attempt to manage such risks.

At
June 30, 2002, all of our credit card receivables and other interest-earning assets had variable rate pricing, with receivables carrying annual percentage rates at a spread
over the prime rate, subject to interest rate floors. At June 30, 2002, our securitizations had $1.8 billion in variable rate, interest-bearing liabilities, payable to investors compared
to $1.3 billion as of June 30, 2001. Since both our managed interest-earning assets and substantially all of our managed interest-bearing liabilities reprice approximately every
30 days, we believe that the impact of a change in interest rates would not be material to our financial performance.

We
believe we are not exposed to any material foreign currency exchange rate risk or commodity price risk.

39

---



PART IIOTHER INFORMATION

Item 1. Legal Proceedings

CompuCredit is not presently subject to any material litigation and to our knowledge, no material litigation is threatened against us. Routine litigation arising
from the ordinary course of business is not expected to result in material losses to us.

Item 2. Changes in Securities and Use of Proceeds.



Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

As previously reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, we held our annual shareholders
meeting on May 9, 2002 for the purpose of electing nine members of our Board of Directors and to remove the conversion limitations on the Series A Preferred Stock and the Series B
Preferred Stock. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934, and there was no solicitation in opposition to management's
solicitations.

(1)  Votes
regarding the election of nine directors to hold office for a term of one year and until their respective successors are elected and qualified were as follows:

DIRECTOR

FOR

ABSTAIN/BROKER
NON-VOTESDavid G. Hanna

39,172,782

3,034,453Peter L. Briger, Jr.

42,158,168

49,067Richard W. Gilbert

39,166,482

3,040,753Frank J. Hanna, III

41,948,468

258,767Richard R. House, Jr.

39,796,082

2,411,153Richard E. Huddleston

42,145,468

61,767Gail Coutcher-Hughes

42,145,468

61,767Mack F. Mattingly

42,157,168

50,067Thomas G. Rosencrants

42,143,968

63,267


(2)  Votes
regarding the removal of conversion limitations on the Series A Preferred Stock and the Series B Preferred Stock were as follows:

FOR

AGAINST

ABSTAIN/BROKER
NON-VOTES36,315,421

216,347

5,675,440


Item 5. Other Information.

None.

40

---

Item 6. Exhibits and Reports on Form 8-K.



|Exhibit
Number |  | Description of Exhibit                                                                                                                                                                                                                                                                                                            |  | Incorporated by reference from CompuCredit's SEC filings unless otherwise indicated:
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------
|10.1           |  | CSGQ Trust Master Indenture, dated as of June 25, 2002, among CSG Trust, as Issuer, CitiBank, N.A., as Note Administrator, and U.S. Bank National Bank, as Indenture Trustee.                                                                                                                                                     |  | August 14, 2002, Form 10-Q, exhibit 10.1                                            
|10.2           |  | Series 2002-1 Indenture Supplement, Term Notes, dated as of June 25, 2002, among CSG Trust, as Issuer, CitiBank, N.A., as Note Administrator, and U.S. Bank National Bank, as Indenture Trustee.                                                                                                                                  |  | August 14, 2002, Form 10-Q, exhibit 10.2                                            
|10.2(a)        |  | Series 2002-A Indenture Supplement, Variable Funding Notes, dated as of June 25, 2002, among CSG Trust, as Issuer, CitiBank, N.A., as Note Administrator, and U.S. Bank National Bank, as Indenture Trustee.                                                                                                                      |  | August 14, 2002, Form 10-Q, exhibit 10.2(a)                                         
|10.3           |  | CSGQ Trust, Series 2002-A Variable Funding Notes Purchase Agreement, dated as of June 25, 2002, among PACCT LLC, as Seller, Providian National Bank, in its capacity and as Accounts Owner, CSG, LLC, as Purchaser, and MTGLQ Investors, L.P., SB Funding
Corp. and CompuCredit Acquisition Corporation, as Secondary Purchasers. |  | August 14, 2002, Form 10-Q, exhibit 10.3                                            
|10.4           |  | Transfer and Servicing Agreement, dated as of June 25, 2002, among PACCT LLC, as Transferor, CompuCredit Corporation, as Servicer, and CSG Funding, LLC, as O/C Holder.                                                                                                                                                           |  | August 14, 2002, Form 10-Q, exhibit 10.4                                            
|10.5           |  | Trust Agreement, dated as of June 25, 2002, among PACCT LLC, as Transferor, CSG Funding, LLC, as O/C Holder, and Wilmington Trust Company, as Owner Trustee.                                                                                                                                                                      |  | August 14, 2002, Form 10-Q, exhibit 10.5                                            
|10.6           |  | CSGQ Trust, Series 2002-1 Class B Notes, Series 2002-1 O/C Certificates, dated June 25, 2002, and PACCT, LLC as Seller                                                                                                                                                                                                            |  | August 14, 2002, Form 10-Q, exhibit 10.6                                            
|10.7           |  | Sale and Purchase Agreement, dated as of July 2, 2002, among Minnesota Telemarketing, Inc., as Seller, Fingerhut Companies, Inc., as Seller and Licensor, FACS Group, Inc., as Subservicer and Licensor, Axsys National Bank, as Licensor, and CompuCredit
Acquisition Corporation III, as Purchaser.                             |  | August 14, 2002, Form 8-K, exhibit 2.1                                              



Current
Report on Form 8-K/A dated April 4, 2002, including Exhibit 99.1, which contains certain information regarding Changes in
Registrant's Certifying Accountant.

Current
Report on Form 8-K dated April 19, 2002, including Exhibit 99.1, which contains certain information regarding Changes in Registrant's Certifying
Accountant.

Current
Report on Form 8-K dated August 14, 2002, including Exhibit 2.1, which contains certain information regarding the purchase of certain assets from
Federated Department Stores by a subsidiary of the Registrant.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|               |  | CompuCredit Corporation
|-------------- |  | -----------------------
|March 24, 2003 |  | By                     

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CERTIFICATIONS

I,
David G. Hanna, certify that:

1.    I
have reviewed this quarterly report on Form 10-Q/A of CompuCredit Corporation;

2.    Based
on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

3.    Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

|Date: March 24, 2003 |  | /s/DAVID G. HANNADavid G. Hanna Chief Executive Officer
and Chairman of the Board
|-------------------- |  | ---------------------------------------------------------------------------------

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I, J.Paul Whitehead, III, certify that:

1.    I
have reviewed this quarterly report on Form 10-Q/A of CompuCredit Corporation;

2.    Based
on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and

3.    Based
on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.

|Date: March 24, 2003 |  | /s/J. PAUL WHITEHEAD, IIIJ. Paul Whitehead, III Chief
Financial Officer
|-------------------- |  | -----------------------------------------------------------------------

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