<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                              --------------------

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

                       THE SECURITIES EXCHANGE ACT OF 1934

                For the fiscal year ended    Commission file number

                    December 31, 1999              001-12351

                              --------------------

                              METRIS COMPANIES INC.

             (Exact name of registrant as specified in its charter)

                Delaware                          41-1849591
       (State of Incorporation)      (I.R.S. Employer Identification No.)

       600 South Highway 169, Suite 1800, St. Louis Park, Minnesota 55426
                    (Address of principal executive offices)

                                 (952) 525-5020

              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to section 12(g) of the Act:

                          Common Stock, $.01 Par Value

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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X  No

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

As of February 25, 2000, 38,683,524 shares of the Registrant's Common Stock were
outstanding   and  the   aggregate   market   value  of  common  stock  held  by
non-affiliates of the Registrant on that date was  approximately  $1,006,795,000
based upon the closing  price on the New York Stock  Exchange  on  February  25,
2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain  portions  of the  Annual  Report  to  Shareholders  for the year  ended
December 31, 1999, are incorporated by reference in Parts II and IV.

Certain  portions of the Proxy  Statement for the Annual Meeting of Shareholders
of Metris Companies Inc. to be held on May 9, 2000, which will be filed with the
Securities and Exchange  Commission within 120 days after December 31, 1999, are
incorporated by reference in Part III.


<PAGE>


                                TABLE OF CONTENTS

PART I

                                                                       Page

Item 1. Business......................................................... 2

Item 2. Properties.......................................................34

Item 3. Legal Proceedings................................................34

Item 4. Submission of Matters to a Vote of Security Holders..............34


PART II

Item 5. Market for Registrant's Common Equity and Related
            Stockholder Matters..........................................34

Item 6. Selected Financial Data..........................................35

Item 7. Management's Discussion and Analysis of Financial
            Condition and Results of Operations..........................35

Item 7A.Quantitative and Qualitative Disclosures
            About Market Risk............................................35

Item 8. Financial Statements and Supplementary Data......................36

Item 9. Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure..........................75


PART III

Item 10. Directors and Executive Officers of the Registrant..............75

Item 11. Executive Compensation..........................................75

Item 12. Security Ownership of Certain Beneficial
             Owners and Management.......................................75

Item 13. Certain Relationships and Related Transactions..................75


PART IV

Item 14. Exhibits, Financial Statement Schedules
             and Reports on Form 8-K.....................................76

Signatures...............................................................77

Exhibit Index............................................................79


<PAGE>


PART I

Item 1.  Business

     Metris Companies Inc. ("MCI" and collectively  with its  subsidiaries,  the
"Company,"   which  may  be   referred  to  as  "we,"  "us"  and  "our")  is  an
information-based  direct  marketer of consumer  credit  products and  fee-based
services,  primarily to moderate-income consumers. The Company's consumer credit
products  are  primarily  unsecured  and  secured  credit  cards  issued  by its
subsidiary,  Direct Merchants Credit Card Bank,  National  Association  ("Direct
Merchants  Bank").  Our  customers and prospects  include  individuals  for whom
credit bureau  information is available  ("External  Prospects") and other third
party sources  including  customer lists and databases.  We market our fee-based
services,  including debt waiver programs,  membership  clubs,  extended service
plans, and third-party insurance,  to our credit card customers and customers of
third parties.

     MCI was  incorporated  in Delaware on August 20, 1996. We became a publicly
held company in October 1996 after  completing an initial public  offering.  Our
principal subsidiaries are Direct Merchants Bank, and Metris Direct, Inc. During
the third quarter of 1998, Fingerhut  Companies,  Inc., which held approximately
83% of our common stock,  received  written  approval from the Internal  Revenue
Service to  distribute  its interest in us to their  shareholders  in a tax-free
spin off (the "spin off").

Business Segments

     We measure performance and operate in two business segments:

     Consumer Credit Products, which are primarily unsecured and secured credit
     cards issued by Direct Merchants Bank; and

     Fee-Based Services, which include debt waiver programs, membership clubs,
     extended service plans and third-party insurance offered to our credit card
     customers and customers of third parties.

     We receive income from our consumer credit products through: interest
charges assessed on outstanding credit card loans; credit card fees (including
annual membership, cash advances, overlimit fees, and past-due fees); and
interchange fees. The primary expenses of this business are the costs of funding
the loans, provisions for loan losses and operating expenses including employee
compensation, account solicitation and marketing expenses and data processing
and servicing expenses. Profitability is affected by response and approval rates
to solicitation efforts, loan growth, interest spreads on loans, credit card
usage, credit quality (delinquencies and charge-offs), card cancellations and
fraud losses.

     In addition to selling fee-based services to third parties, our fee-based
services business derives benefits from our consumer credit products business
because we cross-sell these services to our credit card holders. Nonetheless,
our two business segments are different with respect to the factors that affect
profitability, including how income is generated and how expenses are incurred.
These differences require us to manage our operations separately.

     We receive revenue from our fee-based services through fees and
commissions. Our expenses include costs of solicitation, underwriting and claims
servicing expenses, fees paid to third parties and other operating expenses. The
primary factors that affect  profitability for this business are: response rates
to solicitation efforts, returns or cancel rates, and claims rates.

     We primarily target moderate-income consumers whom we believe have
historically  been  overlooked  by other  credit card  companies.  We target and
evaluate  prospective  customers in this market by using our proprietary scoring
techniques,  together with  information  from credit  bureaus and other customer
lists and databases,  to determine a potential customer's  creditworthiness.  We
also use  sophisticated  modeling  techniques  to evaluate  the  expected  risk,
responsiveness,  and profitability of each prospective customer and to offer and
price the products and services we believe to be appropriate  for each customer.
(See more detailed discussion following under "Business Lines.")

Strategy

         The principal components of our strategy are the following:

     Identify and solicit additional External Prospects for credit cards. We
intend to continue adding moderate-income consumers through the use of our own
internally developed risk models. We have developed our own proprietary credit
risk modeling system (the "Proprietary Modeling System"). By incorporating
individual credit information from the major credit bureaus into this
Proprietary Modeling System and eliminating those individuals contained in the
Fingerhut suppression and bad debt file (the "Suppress File"), we expect to
generate additional customer relationships from External Prospects.

     Use risk-based pricing. We determine the specific pricing for an
individual's credit card offer through the prospective customer's risk profile
and expected responsiveness prior to solicitation, a practice known as
"risk-based pricing." We believe the use of risk-based pricing allows us to
maximize the profitability of a customer relationship.

     Pursue acquisitions of credit card portfolios. We expect to continue to
pursue acquisitions of credit card portfolios and/or other businesses whose
customers fit our product and target market profile or which otherwise
strategically fit with our business.

     Increase the number of third party customers using our products and
services. We will seek to access additional customers for our products and
services by establishing relationships with third parties. Our strategy is to
continue to use our proprietary risk, response and profitability models to
solicit strategic partner's customers for credit cards, and to focus our
cross-selling activities in order to increase the volume of fee-based services
and extended service plans purchased by these customers.

     Sell multiple products and services to each customer. We intend to maximize
the profitability of each customer relationship by selling additional products,
thereby leveraging our account acquisition costs and infrastructure. Currently
we focus our efforts on selling fee-based services to our credit card customers
and customers of third parties.

     Diversify product offerings to our customers. We intend to segment markets
to expand the success of our existing credit and fee-based products. To do so,
we plan to analyze the data in our proprietary database and the databases of
others to determine the needs of our target markets, then develop, test and
effectively market these new products to our target markets.

Spin Off

     During the third quarter of 1998, Fingerhut received formal written
approval from the Internal Revenue Service to complete the tax-free spin off of
their 83% interest in the Company. The Fingerhut Board of Directors approved the
spin off and completed the distribution of Metris shares on September 25, 1998
to Fingerhut shareholders.

     Each of the agreements between us and Fingerhut, other than the tax sharing
agreement, remain in effect after the spin off. Although the administrative
services agreement remains in effect, it is expected that the only continuing
administrative services to be provided by Fingerhut to us will be information
systems, and that these services will continue to be provided for no longer than
24 months following the spin off.

     Each of the agreements between us and Fingerhut may terminate early due to
a change of control of the Company, as defined in the Risk Factors on page 26.
The spin off itself did not constitute a change of control. However, now that
Fingerhut does not own the stock of the Company, it is possible for a change of
control to occur, thus causing early termination of these agreements.

     On November 13, 1998, we entered into agreements with affiliates of the
Thomas H. Lee Company to invest $300 million in the Company. The terms of the
transaction provided that the Lee Company investment would convert into 0.8
million shares of Series C Perpetual Convertible Preferred Stock upon
shareholder approval and receipt of notice that there was no regulatory
objection to the transaction. We determined that this conversion might result in
a change of control as defined in certain agreements between us and Fingerhut,
which would permit Fingerhut to terminate any or all of the agreements.
Therefore, on December 8, 1998, we obtained an agreement (the "Waiver
Agreement") from Fingerhut to waive its right to terminate the agreements if a
change of control occurred as a result of the conversion.

     Pursuant to the Waiver Agreement, the Company and Fingerhut amended
certain of their other agreements.  The most significant  change occurred in the
database access  agreement.  Our exclusive  license to use Fingerhut's  customer
database to market financial  service products will become  non-exclusive  after
October 31, 2001.

     Currently, no individual holds titles of officer or director at both
Fingerhut and the Company.

Business Lines

     We operate primarily through two businesses: consumer credit products and
fee-based services.

     Consumer credit products

     Products. Our consumer credit products are primarily unsecured and secured
credit cards, including the Direct Merchants Bank MasterCard(R) and Visa(R). We
offer co-branded credit cards and may also offer other consumer credit products
either directly or through alliances with other companies. At December 31, 1999,
we had approximately 3.7 million credit card accounts with approximately $7.3
billion in managed credit card loans. According to the Nilson Report, at
December 31, 1999, we were the 9th largest MasterCard issuer in the United
States based on the number of cards issued, and the 11th largest credit card
issuer based on managed credit card loan balances.

     Prospects. Our primary sources of prospects to solicit for credit card
offers are obtained from credit bureau queries and individuals in third-party
customer lists and databases. Currently, our most significant source is the
leads obtained from credit bureau inquiries. Our most significant third party
customer source is a database maintained by Fingerhut, a wholly owned subsidiary
of Federated Department Stores, Inc. Fingerhut is a database marketing firm that
sells a broad range of products and services via catalogs, telemarketing,
television, the Internet and other media. Substantially all of Fingerhut's sales
are made using closed-end and revolving credit card loans. As customers make
payments and order new products, Fingerhut enters a variety of payment,
behavioral, and other data into its database. Fingerhut uses information in its
database, along with sophisticated proprietary credit scoring models, to produce
its proprietary credit scores for its customers. The Fingerhut database also
includes Fingerhut's suppress file, which contains information on individuals
about whom it has information relating to indicators of unacceptably high risk.
Fingerhut periodically updates the information in its database. Fingerhut does
not report its credit information to the credit bureaus, which means this
information is not publicly available. At December 31, 1999, Fingerhut customers
represented approximately 30% of our accounts and managed loans.

     Credit Scoring. We use internally and externally developed proprietary
models to enhance our evaluation of prospects. These models help segment these
prospects into narrower ranges within each risk score provided by Fair, Isaac
and Co ("FICO"), allowing us to better evaluate individual credit risk and to
tailor our risk-based pricing accordingly. We also use this segmentation along
with the Fingerhut suppress file to exclude certain individuals from our
marketing solicitations.

     We generate External Prospects from lists obtained from the major credit
bureaus based on criteria established by us. We use proprietary models and
additional analysis in conjunction with files obtained from the credit bureaus
to further segment prospects based upon their likelihood of delinquency. We also
eliminate any names which are included in the Fingerhut suppress file. We
currently do not solicit prospects obtained from the credit bureaus who do not
have risk scores calculated by FICO.

     We believe that our proprietary models in conjunction with additional
analysis is effective in further segmenting and evaluating risk within risk
score bands. However, for certain campaigns the models and additional analysis
were less effective in doing so than in other campaigns. We have and continue to
use the results of our analysis of prospects to adjust the proprietary models to
determine the pricing for various segments and to exclude certain segments from
subsequent direct marketing efforts. While we believe that the proprietary
models and additional analysis are valuable tools in analyzing relative risks,
it is not possible to accurately predict which consumers will default or the
overall level of defaults, and we cannot assure you as to the levels of actual
delinquencies or losses.

     We also use the Fingerhut database to identify potential customers.
Fingerhut uses the information in their database, along with its proprietary
credit scoring models, to create the Fingerhut score. We also acquire credit
bureau information, including FICO scores, for all Fingerhut customers. For
those Fingerhut customers who have FICO scores, we use the Fingerhut score to
further segment Fingerhut customers into narrower ranges within each FICO score
subsegment, allowing us to better evaluate credit risk and to tailor its
risk-based pricing accordingly. Additionally, we use the Fingerhut score to
target individuals who have no credit bureau information, and consequently no
FICO score, allowing us to target Fingerhut customers who would not typically be
solicited by other credit card issuers. The Fingerhut score has been effective
in enhancing our ability to select which Fingerhut customers to solicit and in
rank ordering Fingerhut customers according to their likelihood of delinquency.

     We believe that both the proprietary models and the Fingerhut score, in
conjunction with the Fingerhut suppress file, give us a competitive advantage in
evaluating the credit risk of moderate-income consumers. We believe that due to
the amount and type of credit information available in the Fingerhut database,
the Fingerhut score is currently more effective than our proprietary models in
allowing us to evaluate the credit risk of prospects having lower FICO scores.
Therefore, we have been willing to solicit certain consumers who have lower FICO
scores if they also have an appropriate Fingerhut score. As a result, our
Fingerhut-sourced credit card customers generally have lower initial FICO scores
than do other prospects. After every marketing campaign, we monitor the
performance of the proprietary models and continually re-evaluate the
effectiveness of these models in segmenting credit risk, resulting in further
refinements to our selection criteria for prospects. Over time, we believe that
we will capture additional credit information on the behavioral characteristics
of prospects which will allow us to further increase the effectiveness of our
proprietary models.

     Solicitation. Prospects for solicitation include both External Prospects
and customers of third parties. Prospects are contacted on a nationwide basis
primarily through pre-screened direct mail and telephone solicitations. We
receive responses to our solicitations, perform fraud screening, verify name and
address changes, and obtain any information which may be missing from the
application. Applications are sent to third party data entry providers, which
key the application information and process the applications based on the
criteria provided by us. We then make the credit decisions and approve, deny or
begin the exception processing. We process exceptions for, among other things,
derogatory credit bureau information and fraud warnings. Exception applications
are processed manually by credit analysts based on policies approved by our
credit committee.

     Pricing. Through risk-based pricing, we price credit card offers based upon
a prospect's risk profile prior to solicitation or upon receipt of an
application. We evaluate a prospect to determine credit needs, credit risk, and
existing credit availability and then develop a customized offer that includes
the most appropriate product, brand, pricing and credit line. We currently offer
over 100 different pricing structures on our credit card products, with annual
fees ranging from $0 to $75 and annual interest rates up to 28.99%. After credit
card accounts are opened, we periodically monitor customers' internal and
external credit performance and recalculate delinquency, profitability,
attrition and bankruptcy predictors. As customers evolve through the credit life
cycle and are regularly rescored, the lending relationship may evolve to include
more or less restrictive pricing and product configurations.

     Age of Portfolio. The following table sets forth, as of December 31, 1999,
the number of total accounts and amount of outstanding loans based on the age of
the managed accounts. (Accounts in acquired portfolios are presented based on
when the account was originated with the previous issue.)





<TABLE>
                                                                   Percentage of
Age Since                    Number       Percentage     Loans          Loans
Origination               Of Accounts    of Accounts  Outstanding   Outstanding
-----------               -----------    -----------  -----------   -----------
                                                      (Dollars in
                                                       thousands)
<S>                       <C>              <C>       <C>               <C>
0-6 Months .............    639,084         17.4%    $  528,100          7.3%
7-12 Months ............    267,788          7.3%       367,827          5.0%
13-18 Months ...........    394,299         10.7%       889,548         12.2%
19-24 Months ...........    265,667          7.2%       544,849          7.5%
25-36 Months ...........    575,557         15.6%     1,336,775         18.4%
37+ Months .............  1,537,183         41.8%     3,614,223         49.6%
                          ---------        -----     ----------        -----
     Total .............  3,679,578        100.0%    $7,281,322        100.0%
                          =========        =====     ==========        =====


</TABLE>


     Geographic Distribution. We solicit credit card customers on a national
basis and, therefore, maintain a geographically diversified portfolio. The
following table shows the distribution of total accounts and amount of
outstanding loans by state, as of December 31, 1999.




                                                                   Percentage of
                             Number      Percentage     Loans           Loans
State                     Of Accounts   of Accounts   Outstanding   Outstanding
-----                     -----------   -----------   -----------   -----------
                                                     (Dollars in
                                                       thousands)

California .............    457,308         12.4%    $  926,613         12.7%
Texas ..................    334,153          9.1%       655,687          9.0%
New York ...............    273,917          7.4%       553,787          7.6%
Florida ................    264,762          7.2%       545,003          7.5%
Ohio ...................    151,142          4.1%       302,786          4.2%
Illinois ...............    140,309          3.8%       276,493          3.8%
Pennsylvania ...........    116,823          3.2%       231,388          3.2%
Michigan ...............    100,769          2.7%       198,064          2.7%
Georgia ................     96,713          2.6%       195,845          2.7%
Virginia ...............     96,543          2.6%       193,400          2.6%
North Carolina .........     98,416          2.7%       187,146          2.6%
All others (1) .........  1,548,723         42.2%     3,015,110         41.4%
                         ----------        -----     ----------        -----
     Total .............  3,679,578        100.0%    $7,281,322        100.0%
                         ==========        =====     ==========        =====

      (1) No other state accounts for more than 2.5% of loans outstanding.

     Credit Lines. Once we approve an account we use automated screening and
credit scoring techniques to establish an initial credit line based on the
individual's risk profile. Excluding the portfolios that were purchased from
other companies, our credit lines are below the industry average, due to our
risk assessment methods and the higher average risk inherent in our target
market. We may elect, at any time and without prior notice to a cardholder, to
prevent or restrict further credit card use by the cardholder, usually as a
result of poor payment performance or our concern over the creditworthiness of
the cardholder. We manage credit lines based on the results of the behavioral
scoring analysis, and in accordance with our internally established criteria.
These analysis models automatically and regularly assign credit line increases
and decreases to individual customers, as well as determine the systematic
collection steps to be taken at the various stages of delinquency. We use these
models to manage the authorization of each transaction, as well as the
collections strategies used for non-delinquent accounts with balances above
their assigned credit lines.


<PAGE>


     The following table sets forth information with respect to account balance
and credit limit ranges of our managed loan portfolio, as of December 31, 1999.




                                                                  Percentage
Credit               Number       Percentage                         of
Limit                  of             of            Loans           Loans
Range               Accounts       Accounts      Outstanding     Outstanding
-----               --------       --------      -----------     -----------
                                                 (Dollars in
                                                  thousands)

$1,000 or Less       457,657         12.4%       $  237,307          3.3%
$1,001-$2,000 .      546,815         14.9%          654,971          9.0%
$2,001-$3,500 .      722,561         19.6%        1,274,394         17.4%
$3,501-$5,000 .      666,347         18.1%        1,564,087         21.5%
Over $5,000 ...    1,286,198         35.0%        3,550,563         48.8%
                   ---------        -----        ----------        -----
     Total ....    3,679,578        100.0%       $7,281,322        100.0%
                   =========        =====        ==========        =====









                                                                   Percentage
                     Number       Percentage                           of
Account                of             of            Loans            Loans
Balance Range       Accounts       Accounts      Outstanding      Outstanding
-------------       --------       --------      -----------      -----------
                                                 (Dollars in
                                                  thousands)
Credit Balance ..     59,807          1.6%       $    (5,790)         (.1%)
No Balance ......    668,361         18.2%                --           --
$1,000 or Less ..    948,063         25.8%           423,452          5.8%
$1,001-$2,000 ...    601,480         16.3%           942,125         13.0%
$2,001-$3,500 ...    668,151         18.2%         1,863,690         25.6%
Over $3,500 .....    733,716         19.9%         4,057,845         55.7%
                   ---------        -----        -----------        -----
     Total ....    3,679,578        100.0%       $ 7,281,322        100.0%
                   =========        =====        ===========        =====




     Servicing, Billing and Payment. We have established a relationship with
First Data Resources, Inc. ("FDR") for cardholder processing services. FDR is a
subsidiary of First Data Corporation, a provider of information processing and
related services including cardholder processing (services for financial
institutions which issue credit cards to cardholders), and merchant processing
(services for financial institutions which make arrangements with merchants for
the acceptance of credit cards as methods of payment). FDR provides the
following services for us:

*    data processing;

*    credit card reissuance;

*    monthly statements; and

*    interbank settlement.



<PAGE>


     Our processing services agreement with FDR expires in 2006. We handle the
following functions internally:

*    applications processing; and

*    back office support for mail inquiries and fraud management.

     In addition, we handle most in-bound customer service telephone calls for
our customer base.

     We generally assess periodic finance charges on an account if the
cardholder has not paid the balance in full from the previous billing cycle. We
base these finance charges on the average daily balance outstanding on the
account during the monthly billing cycle. The servicer applies payments in the
following order: first to any billed and unpaid fees, next to billed and unpaid
finance charges and then to billed and unpaid transactions in the order
determined by us. If we are not paid in full prior to the due date, which is 25
days after the statement cycle date, we impose finance charges on all purchases
from the date of the transaction to the statement cycle date. We also impose
finance charges on each cash advance from the day we make the advance until the
cardholder pays the advance in full. The finance charge is applied to the
average daily balance. For most cardholders, if they pay the entire balance on
the account by the due date, we do not impose a finance charge on purchases.

     We assess an annual fee on some credit card accounts. We may waive the
annual fee, or a portion thereof, in connection with the solicitation of new
accounts depending on the credit terms offered, which we determined based on the
prospect's risk profile prior to solicitation, or when we determine a waiver to
be appropriate considering the account's overall profitability. In addition to
the annual fee, we charge accounts other fees, including:

*   a late fee with respect to any unpaid monthly balance if we do not
    receive the required minimum monthly payment by the due date;

*   a cash advance fee for each cash advance;

*   a fee with respect to each check submitted by a cardholder in payment of
    an account, which the cardholder's bank does not honor;

*   an overlimit charge if, at any time during the billing cycle, the total
    amount owed exceeds the cardholder's credit line by at least $30; and

*   card processing or application fees for some card offers.

     Each cardholder is subject to an agreement governing the terms and
conditions of the accounts. Pursuant to the agreement, we reserve the right to
change or terminate certain terms, conditions, services and features of the
account (including periodic finance charges, late fees, returned check charges
and any other charges or the minimum payment), subject to the conditions set
forth in the account agreement.

     FDR sends monthly billing statements to cardholders on our behalf. When we
establish an account, we assign a billing cycle. Currently, there are 20 billing
cycles. Each of the cycles has a separate monthly billing date based on the
respective business day the cycle represents in each calendar month. Each month,
we send a statement to all accounts with an outstanding balance greater than $1.
All cardholders with open accounts must make a minimum monthly payment,
generally of the greater of: $15, 2.5% of the outstanding balance, the finance
charge or the balance of the account if the balance is less than $15. If we do
not receive the minimum payment by the due date, we consider the account
delinquent.

     Most merchant transactions by cardholders are authorized online. The
remaining transactions generally are low dollar amounts, typically below $50.
All authorizations are handled through FDR's adaptive control system.

     Delinquency, Collections and Charge-offs. We consider an account delinquent
if we do not receive a payment due within 25 days from the closing date of the
statement. We manage the collections work internally. We determine the
collection actions to take by using the adaptive control system, which
continually monitors all delinquent accounts. We close accounts that become 60
days contractually delinquent, but do not necessarily charge them off. We charge
off and take accounts as a loss either within 60 days after formal notification
of bankruptcy or at the end of the month during which they become contractually
180 days past due. We immediately reserve for and charge off accounts that we
identify as fraud losses no later than 90 days after the last activity. We refer
charged-off accounts to our recovery unit for coordination of collection efforts
to recover the amounts owed. When appropriate, we place accounts with external
collection agencies or attorneys. Periodically, we sell a portion of our
charged-off portfolio to third-parties.

     Fee-Based Services

     We sell or offer fee-based services, including:

*    debt waiver protection for unemployment, disability, and death;

*    membership programs such as card registration, purchase protection and
     other club memberships; and

*    third-party insurance, directly to our credit card customers and
     customers of third parties.

     We currently administer the extended service plans that we sell through a
third-party retailer, and our customers pay the retailer directly. In addition,
we develop customized targeted mailing lists from information contained in both
our and Fingerhut's databases for use by unaffiliated companies in their own
financial services product solicitation efforts that do not directly compete
with ours.

     We currently market the following programs:

     Account Protection Plus(SM). Account Protection Plus is a program we have
developed that protects customers from interest charges on our credit cards in
the event that they become disabled or unemployed. The customer's account is
"frozen" for six months, with no payments due or interest accruing during this
time. In the event of death, the amount due, up to the credit limit, is waived
and the account is closed. Because this is an internally administered program,
we are responsible for all of the program's associated costs. We also offer
Account Benefit PlanSM which forgives the customer's balance due in the event of
death but offers no protection in the event of disability or unemployment.

     Accidental Death Insurance. Beginning in May 1999, we began reinsuring the
risk associated with underwriting accidental death insurance. Under an
arrangement with a third-party insurance provider, this carrier sells accidental
death policies to our customers for a fee. Our captive insurance company, ICOM
Limited, then reinsures these policies from the third-party insurance provider.
When these policies are reinsured by us, we assume all risk of loss and incur
all administrative expenses related to servicing these policyholders. Prior to
May 1999 we earned a fee from a third-party insurance administrator for the
marketing and billing of the third-party's accidental death insurance program.

     Credit Life. Credit Life is a program that we have developed to provide the
cardholder various coverage options. Depending on which coverage has been
selected, the program will make the minimum payment on the cardholders credit
card balance in the event of disability or unemployment for a period of six
months, pay off the entire balance in the event of death, and provide a death
benefit in the event of accidental death. A third party insurance company
underwrites the policy and then reinsures those policies with ICOM Limited, our
captive insurance subsidiary. We market this insurance program to our credit
card customers only.

     Cash Benefit. Cash Benefit is a fee-based service launched in September
1999 that pays a set amount per month in the event of disability or unemployment
and has a death benefit. A third-party insurance company markets, fulfills and
underwrites the policies. We currently market Cash Benefit to our credit card
customers only.

     PurchaseShield(R). PurchaseShield is a membership program that offers
various levels of purchase protection to its members. Eligible purchases made on
members' credit cards are protected with the following benefits:

*    warranty extension;

*    sale price protection; and

*    product return guarantee.

     In addition, PurchaseShield offers its members a household repair rebate
that can be used on certain existing in-home electro-mechanical item repairs.
Because we administer the program ourselves, we receive all revenues and are
responsible for all of the program's associated costs. We currently offer
PurchaseShield to our credit card customers and credit card customers of third
parties.

     Card Registration. Card registration protects members from fraudulent
charges if their credit cards are lost or stolen and provides emergency cash and
airline tickets, change of address notification and lost or stolen card
notification, valuable property and document registration, a messaging service
and car rental discounts. We currently offer card registration service under the
names Fraud Alert Services(SM) and SafeKeeper(SM) to our credit card customers
and customers of third parties. We are responsible for all of its associated
costs and revenues.

     DirectAlert(SM). DirectAlert is a fee-based service launched in April 1999
to help members monitor and review their credit report. Members of DirectAlert
receive the following benefits:

*    access to their credit report in an easy to read format;

*    quarterly updates detailing any changes in their credit report and the
     names of anyone who has requested or received a copy of their credit
     report;

*    toll-free access to credit experts who are ready to answer questions and
     assist with any disputes; and

*    retirement information verification which can help members examine
     their  financial  future by giving  them an idea of what they will
     receive from social security after they retire.

     We currently offer DirectAlert to our credit card customers, credit card
customers of third parties and the Internet market.

     Travel Club.  TripSaver(SM)  is a fee-based  service  launched in September
1999 that offers  discounted  travel services  through the Metris travel agency.
Members  of  TripSaver  receive  benefits  of  airline,  hotel  and  car  rental
discounts,  lowest price guarantee,  5% cash back on services booked through the
Metris  travel agency and other travel  related  discounts.  We currently  offer
TripSaver to our credit card customers only.

     Extended Service Plans. We administer extended service plans sold by
retailers. Extended service plans provide warranty coverage beyond the
manufacturer's warranty. In general, the extended service plans that we
administer provide customers with the right to have their covered purchases
repaired, replaced, or in certain circumstances, the purchase price of the
product refunded, within certain limits that we determine. Within the warranty
industry, extended service plans are available for a wide variety of products,
including consumer electronics and appliances, furniture, jewelry, automotives,
and household mechanical systems such as heating, plumbing and electrical
systems. We currently administer extended service plans for consumer
electronics, appliances, furniture and jewelry purchased from third-party
retailers.

     ServiceEdge(R) is our extended service plan administered by the Company for
consumer electronics and all other electro-mechanical items. ServiceEdge
customers have the right to have their purchases repaired or replaced in the
event of electrical or mechanical failure or defects in materials and
workmanship for coverable events after the manufacturer's warranty expires.

     Quality Furniture Care(SM) is our extended service plan program for
furniture. The services provided to Quality Furniture Care customers include
stain cleaning, structural defect or damage repair, or replacement if the
merchandise cannot be repaired.

     Quality Jewelry Care(SM) is our extended service plan for jewelry. The
services provided to Quality Jewelry Care customers include repair, soldering,
ring sizing, prong re-tipping, and cleaning. We contract with third-party
jewelers to perform the services to our customers.

     Most of the extended service plans that we administer continue for two
years from the date of the product purchase (three to five years in limited
cases). The customer pays the retail company a one-time fee for this coverage
based on the price of the product, the term of coverage and the loss risk of the
product. Customers may also be offered the opportunity to renew their coverage
in one-year extensions, presently up to six years from the date of purchase,
upon payment of an additional fee for each renewal. We are responsible for
claims risk and claims processing for all extended service plans sold.

     Home ServiceEdge(SM). Home ServiceEdge is a fee-based service launched in
September 1999 that covers repairs for a number of major appliances in the home.
The plan will assist the customer in locating and arranging for service and, in
the event the appliance cannot be fixed, will pay a fixed dollar amount towards
the replacement of the appliance. We currently offer Home ServiceEdge to our
credit card customers only.

     Tailored List Development. We currently work with several companies to
develop targeted mailing lists. We earn revenue for each name that is solicited
by these companies from our customer databases. We also earn revenue from the
sale of advertising space included in our monthly billing statements.

     Other Membership Clubs. We have cooperative marketing arrangements with
several third parties to market the third party's memberships in clubs that do
not compete with our services or clubs. Additionally, we have other arrangements
with third parties, which we assumed from acquired credit card portfolios, that
provide us with revenue from ongoing membership fees billed to our acquired
credit card holders.


<PAGE>


Liquidity, Funding and Capital Resources

     One of our primary financial goals is to maintain an adequate level of
liquidity through active management of assets and liabilities. Because the
pricing and maturity characteristics of our assets and liabilities change,
liquidity management is a dynamic process, affected by changes in short- and
long-term interest rates. We use a variety of financing sources to manage
liquidity, refunding and interest rate risks.


                 Metris Companies Inc. Year-End Funding Mix*
                 -------------------------------------------

                                     1999                       1998
                                     ----                       ----
Total Year-End Funding          $     7.3 billion         $     5.3 billion

Bank Loans                              1.4%                       2.1%
Long-term Debt                          3.4%                       3.8%
Equity                                  8.6%                       8.1%
Bank Conduit Securitizations           10.3%                      17.6%
Deposits                               10.7%                         --
Metris Master Trust                    65.6%                      68.4%
                               -------------              -------------
                                      100.0%                     100.0%
                               =============              =============

                 (*Chart replaces graph in 1999 Annual Report.)

     We finance the growth of our credit card loan portfolio through asset
securitization, subsidiary bank deposits, bank loans, long-term debt issuance,
cash flow from operations and equity issuance.

Asset Securitization

     A significant source of our funding is the securitization of our credit
card loans. Securitization involves packaging and selling both current and
future receivable balances of pools of credit card accounts, while retaining the
servicing of such receivables. Our securitizations are treated as sales under
generally accepted accounting principles. As a result, the securitized
receivables are removed from our balance sheet and treated as managed loans.

     We primarily securitize receivables by selling the receivables either to
our proprietary trust, the Metris Master Trust, or to bank-sponsored
multi-seller conduits.

     The Metris Master Trust. The Metris Master Trust was formed in May 1995
pursuant to a pooling and servicing agreement, which was amended on July 30,
1998. Metris Receivables, Inc., one of our subsidiaries, transfers receivables
in designated accounts to the trust in exchange for proceeds and an interest in
the trust. Metris Receivables, Inc. may then exchange portions of this interest
for one or more series of securities which it may then sell publicly or
privately to third-party investors. The securities each represent undivided
interests in all of the receivables in the trust, and may be split into separate
classes which have different terms. The different classes of an individual
series are structured to obtain specific credit ratings. As of December 31,
1999, ten series of securities have been issued by the trust. We currently
retain the most subordinated class of securities in each series and sell all the
other classes.

     Generally, each series involves an initial reinvestment period (a
"revolving period") in which principal payments on receivables allocated to such
series are returned to Metris Receivables, Inc. and reinvested in new
receivables arising in the accounts. After the revolving period ends, principal
payments allocated to the series are then used to repay the investors. This
period is referred to as the amortization period. Currently, the trust has one
series which is in a controlled amortization period. The scheduled amortization
period is set in the agreements governing each series. However, all series set
forth certain events by which amortization can be accelerated (early
amortization). Usually, this would occur if the portfolio collections less
charge-offs for bad debt, financing costs and operational costs drop below a
minimum amount. Because new receivables in designated accounts cannot be funded
while a series is in amortization, early amortization would accelerate our
funding requirements for new receivables in the accounts. We do not have any
series that are in early amortization.

     Each month, each series is allocated its share of finance charge
collections which are used to pay investors interest on their securities, to
reimburse them for their share of losses due to charge-offs and to pay their
share of servicing fees. Amounts remaining may be deposited in cash accounts of
the trust as additional protection for future losses. Once each of these
obligations is fully met, any remaining finance charge collections, if any, are
returned to us.

     Bank-Sponsored Conduit Programs. We maintain flexibility in our current
securitization program by negotiating with bank-sponsored conduits. These
conduits purchase an interest in receivables arising in designated accounts.
These transactions also feature a revolving period in which principal payments
on receivables allocated to the conduits are returned to us and reinvested in
new receivables. These agreements also have early amortization triggers. Finance
charge collections are used to pay certain obligations, including servicing
fees, interest on the principal amount of the conduits investment in the
applicable receivables, and recouping charge-offs. After such allocation,
remaining finance charge collections, if any, are returned to us.

     At December 31, 1999 and 1998, we had received cumulative net proceeds of
approximately $5.5 billion and $4.6 billion, respectively, from sales of credit
card loans to the trust and conduits. We used cash generated from these
transactions to reduce borrowings and to fund credit card loan portfolio growth.
We rely upon the securitization of our credit card loans to fund portfolio
growth and, to date, have completed securitization transactions on terms that we
believe are satisfactory. Our ability to securitize our assets depends on the
favorable investor demand and legal, regulatory and tax conditions for
securitization transactions, as well as continued favorable performance of our
securitized portfolio of receivables. Any adverse change could force us to rely
on other potentially more expensive funding sources and, in the worst case
scenario, could create liquidity risks if other funding is unavailable or
significantly limit our ability to grow.

     The following table presents the amounts, at December 31, 1999, of investor
principal in securitized receivables scheduled to amortize in future years. We
base the amortization amounts on estimated amortization periods which are
subject to change based on trust and conduit performance.

(Dollars in thousands)
2000                                                   $2,116,040
2001                                                    2,102,273
2002                                                            0
2003                                                      500,000
2004                                                      300,000
Thereafter                                                500,000
                                                       ----------
Total Securitized Loans at December 31, 1999           $5,518,313
                                                       ==========

Subsidiary Bank Deposits

     Beginning in the first quarter of 1999, Direct Merchants Bank began issuing
certificates of deposit. These CDs are issued in increments of $100,000. As of
December 31, 1999, $758.5 million of CDs were outstanding with maturities
ranging from three months to two years with fixed interest rates ranging from
5.2% to 6.6%.

Bank Loans

     We have a $200 million, three-year revolving credit facility and a $100
million five-year term loan with a syndicate of banks and money market mutual
funds. These credit facilities became effective upon the spin off from Fingerhut
on September 25, 1998, and replaced our $300 million, five-year revolving credit
facility. The credit facilities are secured by receivables and subsidiary stock
and are guaranteed by one of our subsidiaries. Financial covenants in the credit
facilities include, but are not limited to, requirements concerning minimum net
worth, minimum tangible net worth to net managed receivables and tangible net
worth plus reserves to delinquent receivables. At December 31, 1999 and 1998, we
were in compliance with all financial covenants under these credit facilities.
At December 31, 1999 and 1998, we had outstanding borrowings of $100 million and
$110 million, respectively, under these credit facilities.

Long-Term Debt and Equity Issuance

     In addition to cash flow from operations, bank loans, subsidiary bank
CDs,  and  asset  securitizations,  we use long  term  debt and  equity  to fund
continued credit card growth.

     On July 15, 1999, we privately issued and sold $150 million of 10.125%
Senior Notes due 2006 pursuant to an exemption from registration under Rule 144A
of the Securities Act of 1933. In October of 1999, we commenced an exchange
offer for the senior notes pursuant to a registration statement. The terms of
the new senior notes are identical in all material respects to the original
private issue. We completed the exchange offer in November of 1999. In November
1997, we issued and sold $100 million of 10% senior notes due 2004. The senior
notes are guaranteed on the same loan basis as the Senior Notes due 2006.

     On November 13, 1998, we sold $200 million in Series B Perpetual
Convertible  Preferred  Stock and $100  million in 12% Senior  Notes due 2006 to
affiliates  of the Thomas H. Lee  Company.  We also issued 7.5 million  ten-year
warrants to purchase  shares of our common stock for $15,  subject to adjustment
in certain circumstances. The Series B Preferred had a 12.5% dividend payable in
additional shares of Series B Preferred for 10 years, then converting to payable
in cash.

     On March 12, 1999, shareholders approved conversion of the Series B
Preferred and 12% Senior Notes into Series C Perpetual Convertible Preferred
Stock. On May 28, 1999, notice was received that there was no regulatory
objection to the conversion to the Series C Preferred, and the Series B
Preferred and the 12% Senior Notes were converted into 0.8 million shares of
Series C Preferred at a conversion price of $18.63 and the warrants were
canceled. The Series C Preferred has a 9% dividend payable in additional shares
of Series C Preferred and will also receive any dividends paid on our common
stock on an as converted basis. The cumulative payment-in-kind dividends are
effectively guaranteed for a seven-year period. Assuming conversion of the
Series C Preferred into common stock had occurred at December 31, 1999, the Lee
Company would have owned over 30% of the Company on a diluted basis.

     Converting to the Series C Preferred caused a one-time, non-cash,
accounting adjustment for extinguishing the Series B Preferred and 12% Senior
Notes. We allocated the excess of the fair value of the Series C Preferred over
the carrying value of the Series B Preferred and the 12% Senior Notes at the
time of the conversion to the 12% Senior Notes and the Series B Preferred Stock
based upon their initial fair values. We recognized the $50.8 million allocated
to the 12% Senior Notes as an extraordinary loss from the early extinguishment
of debt and the $101.6 million allocated to the Series B Preferred as a
reduction of net income applicable to common stockholders. We did not record the
extraordinary loss attributable to the 12% Senior Notes net of taxes. These
adjustments had no impact on total stockholders' equity.

General

     The Federal Reserve Act imposes various legal limitations on the extent to
which banks that are members of the Federal Reserve System can finance or
otherwise supply funds to certain of their affiliates. In particular, Direct
Merchants Bank is subject to certain restrictions on any extensions of credit to
us or our subsidiaries. Additionally, Direct Merchants Bank is limited in its
ability to declare dividends to us. Therefore, Direct Merchants Bank's
investments in federal funds sold are generally not available for our general
liquidity needs or the needs of our subsidiaries. These restrictions were not
material to our operations at December 31, 1999 and 1998.

     As the portfolio of credit card loans grows, or as the trust and
conduit  certificates  amortize or are  otherwise  paid,  our funding needs will
increase accordingly. We believe that our asset securitizations, subsidiary bank
deposits,  bank  loans,  long term debt,  cash flow from  operations  and equity
issuance will provide  adequate  liquidity for meeting  anticipated  cash needs,
although we cannot give assurance to that effect.

Competition

     As a marketer of consumer credit products, we compete with numerous
providers of financial  services,  many of which have greater  resources than we
do. In particular, our credit card business competes with national, regional and
local bank card issuers as well as other general  purpose  credit and debit card
issuers.  In general,  customers are attracted to credit card issuers largely on
the  basis of price,  credit  limit and  other  product  features;  as a result,
customer  loyalty is often  limited.  However,  we believe  that our strategy of
focusing on the moderate  income sector and our exclusive  access to information
from the Fingerhut  customer  database  allows us to compete  effectively in the
market for moderate income cardholders to market financial services products.

     There are numerous competitors in the fee-based services market, including
insurance companies, financial services institutions and other membership-based
or consumer-enhancement service providers, many of which are larger, better
capitalized and more experienced than we are. However, we believe that our
agreements with Fingerhut, including our exclusive right to use the Fingerhut
customer database to market financial services and our right to be the exclusive
provider of extended service plans to Fingerhut customers, will allow us to
compete effectively in this market. As we continue to expand our business to
market extended service plans to the customers of third-party retailers, we will
also compete with manufacturers, financial institutions, insurance companies and
a number of independent administrators, many of which have greater operating
experience and financial resources than we do.

Regulation

     The Company and Direct Merchants Bank

     Direct Merchants Bank is a limited purpose credit card bank chartered as a
national banking association. It is a member of the Federal Reserve System. Its
deposits are insured by the Bank Insurance Fund which is administered by the
Federal Deposit Insurance Corporation ("FDIC") and it is subject to
comprehensive regulation and periodic examination by the Office of the
Comptroller of the Currency ("OCC"), its primary regulator. It is also subject
to regulation by the FDIC, as a back-up regulator. Direct Merchants Bank is not
a "bank" as defined under the Bank Holding Company Act of 1956, as amended (the
"BHCA") because it:

*    engages only in credit card operations;

*    does not accept demand deposits or deposits that the depositor may
     withdraw by check or similar means for payment to third parties or others;

*    does not accept any savings or time deposits of less than $100,000,
     except for deposits pledged as collateral for extensions of credit;

*    maintains only one office that accepts deposits; and

*    does not engage in the business of making commercial loans.

     As a result, we are not a bank holding company under the BHCA. If Direct
Merchants Bank failed to meet the credit card bank criteria described above,
Direct Merchants Bank's status as an insured bank would make us subject to the
provisions of the BHCA. We believe that becoming a bank holding company would
limit our ability to pursue future opportunities.

     Exportation of Interest Rates and Fees

     Under current judicial interpretations of federal law, national banks such
as Direct Merchants Bank may charge interest at the rate allowed by the laws of
the state where the bank is located and may "export" those interest rates on
loans to borrowers in other states, without regard to the laws of such other
states.

     In 1996, the Supreme Court of the United States held that national banks
may also impose late payment fees allowed by the laws of the state where the
national bank is located on borrowers in other states, without regard to the
laws of such other states. The Supreme Court based its opinion largely on its
deference to a regulation adopted by the OCC that includes certain fees,
including late fees, overlimit fees, annual fees, cash advance fees and
membership fees, within the term "interest" under the provision of the National
Bank Act that has been interpreted to permit national banks to export interest
rates. As a result, national banks such as Direct Merchants Bank may export such
fees.

     Dividends and Transfers of Funds

     There are various federal law limitations on the extent to which Direct
Merchants Bank can finance or otherwise supply funds to the Company and its
affiliates through dividends, loans or otherwise. These limitations include:
minimum regulatory capital requirements; restrictions concerning the payment of
dividends out of net profits or surplus; and Sections 23A and 23B of the Federal
Reserve Act governing transactions between a bank and its affiliates. In
general, Federal law prohibits a national bank such as Direct Merchants Bank
from making dividend distributions on common stock if the dividend would exceed
currently available undistributed profits. In addition, Direct Merchants Bank
must get OCC prior approval for a dividend, if such distribution would exceed
current year net income combined with retained earnings from the prior two
years. Direct Merchants Bank cannot make a dividend if the distribution would
cause the bank to fail to meet applicable capital adequacy standards. Finally,
although not a regulatory restriction, the terms of certain debt agreements
prohibit the payment of dividends in certain circumstances.

     Capital Adequacy

     The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), requires the banking agencies to prescribe certain non-capital
standards for safety and soundness relating generally to operations and
management, asset quality and executive compensation. FDICIA also provides that
regulatory action may be taken against a bank that does not meet such standards.

     The OCC has adopted regulations that define the five capital categories
(well-capitalized, adequately-capitalized, undercapitalized,
significantly-undercapitalized and critically-undercapitalized) identified by
FDICIA, using the total risk-based capital, Tier 1 risk-based capital and
leveraged capital ratios as the relevant capital measures. Such regulations
establish various degrees of corrective action to be taken when an institution
is considered undercapitalized. Under the regulations, a "well-capitalized"
institution must have a Tier 1 capital ratio of at least 6%, a total capital
ratio of at least 10% and a leverage ratio of at least 5% and not be subject to
a capital directive order. An "adequately- capitalized" institution must have a
Tier 1 capital ratio of at least 4%, a total capital ratio of at least 8% and a
leverage ratio of at least 4% (3% in some cases). Under these guidelines, Direct
Merchants Bank is considered well-capitalized.

     The OCC's risk-based capital standards explicitly consider a bank's
exposure to declines in the economic value of its capital due to changes in
interest rates when evaluating a bank's capital adequacy. Interest rate risk is
the exposure of a bank's current and future earnings and equity capital arising
from adverse movements in interest rates. The evaluation will be made as a part
of the institution's regular safety and soundness examination.

     The FDICIA requires the FDIC to implement a system of risk-based premiums
for deposit insurance pursuant to which the premiums paid by a depository
institution will be based on the probability that the FDIC will incur a loss in
respect of such institution. The FDIC has adopted a system that imposes
insurance premiums based upon a matrix that takes into account a bank's capital
level and supervisory rating. Direct Merchants Bank pays the lowest rate on
deposit insurance premiums for its capital level and supervisory rating.

     Under FDICIA, only "well-capitalized" and "adequately- capitalized" banks
may accept brokered deposits. "Adequately- capitalized" banks, however, must
first obtain a waiver from the FDIC before accepting brokered deposits and such
deposits may not pay rates that significantly exceed the rates paid on deposits
of similar size and maturity accepted from the bank's normal market area or the
national rate on deposits of comparable maturity, as determined by the FDIC, for
deposits from outside the bank's normal market area. Direct Merchants Bank may
accept brokered deposits as part of its funding and began issuing certificates
of deposit in the first quarter of 1999. These CDs are issued through third
party registered deposit brokers in increments of $100,000.


<PAGE>


     Lending Activities

     Direct Merchants Bank's activities as a credit card lender are also subject
to regulation under various federal consumer protection laws including the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Community Reinvestment Act (the "CRA") and the Soldiers' and
Sailors' Civil Relief Act. Regulators are authorized to impose penalties for
violations of these statutes and, in certain cases, to order Direct Merchants
Bank to pay restitution to injured cardholders. Cardholders may also bring
actions for certain alleged violations of such regulations. Federal and state
bankruptcy and debtor relief laws also affect Direct Merchants Bank's ability to
collect outstanding balances owed by cardholders who seek relief under these
statutes.

     The OCC's CRA regulations subject limited purpose banks, including Direct
Merchants Bank, to a "community development" test for evaluating required CRA
compliance. The community development performance of a limited purpose bank is
evaluated pursuant to various criteria involving community development lending,
qualified investments and community development services.

     Legislation

     Congress recently passed a financial services modernization law that
includes statutes to protect consumer privacy. Regulations to implement these
privacy provisions could adversely affect us if these changes result in limits
on sharing information.

     From time to time legislation has been proposed in Congress to limit
interest rates and fees that could be charged on credit card accounts or
otherwise restrict practices of credit card issuers. If this or similar
legislation is proposed and adopted, our ability to collect on account balances
or maintain previous levels of finance charges and other fees could be adversely
affected.

     Additionally, the U.S. Senate and House of Representatives each have passed
legislation that would amend the federal bankruptcy laws. Changes in federal
bankruptcy laws and any changes to state debtor relief and collection laws could
adversely affect us if such changes result in, among other things, accounts
being charged off as uncollectible and additional administrative expenses. It is
unclear at this time whether and in what form any legislation will be adopted
or, if adopted, what its impact on us would be. Congress may in the future
consider other legislation that would materially affect the credit card and
related fee-based services industries.

     Consumer and Debtor Protection Laws

     Various federal and state consumer protection laws limit our ability to
offer and extend credit. In addition, the U.S. Congress and the States may
decide to regulate further the credit card industry by enacting laws or
amendments to existing laws to reduce finance charges or other fees or charges
applicable to credit card and other consumer revolving loan accounts. These laws
may adversely affect our ability to collect on account balances or maintain
established levels of periodic rate finance charges and other fees and charges
with respect to the accounts. Similarly, Congress and the States may decide to
regulate further our fee-based services.

     Investment in the Company and Direct Merchants Bank

     Certain acquisitions of capital stock may be subject to regulatory approval
or notice under federal law. Investors are responsible for insuring that they do
not directly or indirectly acquire shares of our capital stock in excess of the
amount which can be acquired without regulatory approval.

     Interstate Taxation

     Several states have passed legislation which attempts to tax the income
from interstate financial activities, including credit cards, derived from
accounts held by local state residents. We believe that this legislation will
not materially affect us. Our belief is based upon the following: current
interpretations of the enforceability of legislation; prior court decisions; and
the volume of business in states that have passed legislation.

     Licensing Requirements

     Several state and local government regulators require our subsidiaries to
be licensed in order to offer our fee-based insurance and warranty products in
these states. We are in the process of obtaining licenses for these products in
the remainder of states. Our captive insurance subsidiary, ICOM Limited, is
licensed in Bermuda under The Insurance Act of 1978 as a Class 2 Insurer. We are
restricted from writing any long-term policies or pursuing any unrelated
business in excess of certain limits under Bermuda law.

     Fair Credit Reporting Act

     The Fair Credit Reporting Act ("FCRA") regulates "consumer reporting
agencies." Under the FCRA, an entity risks becoming a consumer reporting agency
if it furnishes "consumer reports" to third parties. A consumer report is a
communication of information which bears on a consumer's creditworthiness,
credit capacity, credit standing or certain other characteristics and which is
collected or used or expected to be used to determine the consumer's eligibility
for credit, insurance, employment or certain other purposes. The FCRA explicitly
excludes from the definition of consumer report a report containing information
solely as to transactions or experiences between the consumer and the entity
making the report. An entity may share consumer reports with any of its
affiliates so long as that entity provides consumers with an appropriate
disclosure and an opportunity to opt out of such "affiliate sharing."

     Our objective is to conduct our operations in a manner that would fall
outside the definition of consumer reporting agency under the FCRA. If we were
to become a consumer reporting agency, however, we would be subject to a number
of complex and burdensome regulatory requirements and restrictions. Such
restrictions could have a significant adverse economic impact on us. Our
agreements with Fingerhut provide that neither of us will provide information
that causes either of us to become a consumer reporting agency. Failure to
comply with this limitation could result in termination of the agreements and
have an adverse impact us.


Employees

     As of December 31, 1999, we had approximately 3,100 employees, located in
Arizona, Florida, Illinois, Maryland, Minnesota, and Oklahoma. None of our
employees are represented by a collective bargaining agreement. We consider our
relations with our employees to be good.

Trademarks, Tradenames and Service Marks

     Metris Companies Inc. and its subsidiaries have registered and continue to
register, when appropriate, various trademarks, tradenames and service marks
used in connection with its business and for private label marketing of certain
of its products. We consider these trademarks and service marks to be readily
identifiable with, and valuable to, our business.

Executive Officers of the Registrant

     The following table sets forth certain information concerning the persons
who currently serve as our executive officers. Each executive officer serves at
the discretion of our Board of Directors.

     Name               Age               Position
     ----               ---               --------

     Ronald N. Zebeck    45    President, Chief Executive Officer and Director

     Z. Jill Barclift    42    Executive Vice President, General Counsel and
                               Secretary

     Joseph A. Hoffman   42    Executive Vice President, Consumer Credit Card
                               Marketing

     Douglas B. McCoy    52    Executive Vice President, Operations

     David R. Reak       41    Executive Vice President, Risk
                               Management/Recovery

     Douglas L. Scaliti  42    Executive Vice President, Fee-Based Products

     David D. Wesselink  57    Executive Vice President, Chief Financial Officer

     Jean C. Benson      32    Senior Vice President, Finance, Corporate
                               Controller

     Patrick J. Fox      44    Senior Vice President, Business Development

     Paul T. Runice      40    Senior Vice President, Treasurer

     Benson Woo          45    Senior Vice President, Finance

     Ronald N. Zebeck has been our President and Chief Executive Officer and a
director of the Company since our incorporation in August 1996. Mr. Zebeck has
been President of Metris Direct, Inc. since March 1994 and has served as
Chairman of the Board of Direct Merchants Bank since August 1995. Prior to
joining us, Mr. Zebeck was Managing Director, GM Card Operations of General
Motors Corporation from 1991 to 1993, Vice President, Marketing and Strategic
Planning of Advanta Corporation (Colonial National Bank USA) from 1987 to 1991,
Director of Strategic Planning of TSO Financial (later Advanta Corporation) from
1986 to 1987 and held various credit card and credit-related positions at
Citibank affiliates from 1976 to 1986.

     Z. Jill Barclift has been our Executive Vice President, General Counsel and
Secretary since November 1998. Ms. Barclift was appointed Vice President,
General Counsel in December 1996 and served as Assistant General Counsel from
April 1996 to December 1996. Prior to joining us, Ms. Barclift held various
positions at Household International, Inc. and Household Credit Services, Inc.
from October 1989 to April 1996, most recently as Associate General Counsel.
Prior to that, she was Senior Counsel at Dean Witter Financial Services, Inc.
from January 1984 to October 1989.

     Joseph A. Hoffman has been Executive Vice President, Consumer Credit Card
Marketing since October 1999. Mr. Hoffman previously served as Senior Vice
President, Consumer Credit Marketing from April 1998. Prior to joining us, Mr.
Hoffman was Vice President of Marketing at Advanta Corporation from June 1994 to
April 1998, where he held a variety of positions including Directors of Brand
Management and Affinity and Co-Brand Marketing. Before that, Mr. Hoffman was
Vice President, Area Director, in Citibank's Card Product Group, which he joined
in 1980. During his fourteen-year tenure with Citibank, Mr. Hoffman held a
variety of Marketing and Operations positions with Citibank's Bankcard and
Private Label businesses.

     Douglas B. McCoy has been Executive Vice President, Operations since
November 1998. Mr. McCoy was appointed Senior Vice President, Operations in
December 1996. He served as Vice President, Operations of Metris Direct, Inc.
from January 1995 to November 1996. In addition, Mr. McCoy has been President of
Direct Merchants Bank since July 1995. Prior to joining us, he was Vice
President, Credit Administration of USAA Federal Savings Bank from September
1984 to January 1995, Assistant Vice President, Credit Administration of Bank of
Oklahoma from July 1984 to September 1984, Assistant Vice President, Operations
of First National Bank of Tulsa from May 1982 to July 1984 and Assistant Vice
President, Credit Card Marketing of The Bank of New Orleans from April 1978 to
April 1982.

     David R. Reak has been Executive Vice President, Risk Management/Recovery
since October 1999. Mr. Reak previously served as Senior Vice President, Credit
Risk since November 1998. Mr. Reak was appointed Vice President, Credit Risk in
October 1996 and previously served as Senior Director, Credit Risk of Metris
Direct, Inc. from December 1995 to October 1996. Prior to joining us, he had
several positions at American Express Travel Related Services Company, including
Senior Manager, Credit Risk Management Europe and Middle East from 1994 to
December 1995, Senior Manager, Credit Risk Management U.S. Consulting Group from
1992 to 1994, and Project Manager, Credit Research and Analysis from 1990 to
1992.

     Douglas L. Scaliti has been Executive Vice President, Fee-Based Products
since November 1998. Mr. Scaliti previously held the position of Senior Vice
President, Fee-Based Services from March 1998. Mr. Scaliti was appointed Senior
Vice President, Marketing in December 1996 and served as Vice President,
Marketing from August 1996 to November 1996. He held that same position at
Metris Direct, Inc. since September 1994. Prior to joining us, he held several
positions at Advanta Corporation in its marketing and operations area, including
Senior Marketing Manager, Credit Cards from 1987 to 1994, Operations Consultant,
Profit Improvement from 1985 to 1987 and Credit Operations Manager from 1982 to
1985. Mr. Scaliti also serves on the First Data Resources Market Area Advisory
Group.

     David D. Wesselink has been Executive Vice President, Chief Financial
Officer since December 1998. Prior to joining us, Mr. Wesselink was Senior Vice
President and Chief Financial Officer of Advanta Corporation from 1993 to 1998.
Prior to Advanta Corporation, he held several positions at Household Finance
Corp. and Household International, Inc. from 1971 to 1993, including Senior Vice
President from 1986 to 1993 and Chief Financial Officer from 1982 to 1993.

     Jean C. Benson has been Senior Vice President, Finance, Corporate
Controller since March 1999. Ms. Benson previously was Vice President, Finance,
Corporate Controller from May 1998 to February 1999 and has been Corporate
Controller since August 1996. In addition, Ms. Benson held various finance
positions at the Company since October 1994. Prior to that, she held various
positions at Deloitte & Touche LLP (public accounting), specializing in the
financial services industry from 1990 to 1994.

     Patrick J. Fox has been Senior Vice President, Business Development since
March 1998. Prior to joining us, Mr. Fox held executive positions in the credit
card group of Bank of America from September 1994 to March 1998, Where most
recently he was the Director of Product Management and Business Development.
Prior to Bank of America, Mr. Fox held various marketing and sales management
positions with Bank One, which he joined in 1990, Comerica Bank and Citibank.

     Paul T. Runice has been Senior Vice President, Treasurer since November
1998. Mr. Runice previously was Vice President, Treasurer from January 1998 to
October 1998. Prior to joining us, Mr. Runice was with the Bank of America for
nine years, most recently as Vice President in the U.S. Corporate Finance Group.
Prior to Bank of America, he was employed by Grand Metropolitan, Inc. and The
Pillsbury Company as Manager of Treasury Operations, as well as in corporate
development and financial analysis roles.

     Benson Woo has been Senior Vice President, Finance since joining the
Company in October of 1999. Prior to joining us, Mr. Woo was Vice President and
Chief Financial Officer of York International Corporation from 1998 to 1999.
Prior to York International Corporation, he was Vice President and Treasurer of
Case Corporation from 1994 to 1998. Prior to that, he held several positions at
General Motors Corporation from 1979 to 1994, including Finance Director, GM
Credit Card Operations from 1992 to 1994.

     Our officers are elected by, and hold office at the will of, our Board of
Directors and do not serve a "term of office" as such.


Risk Factors

     This annual report on Form 10-K contains certain forward-looking statements
and information relating to the Company that are based on the beliefs of our
management as well as assumptions made by, and information currently available
to, our management. These forward-looking statements involve risks and
uncertainties that could cause our actual results to differ materially from such
statements. You should not place undue reliance on these forward-looking
statements as they speak only of our views as of the date the statement was made
and are not a guarantee of future performance.

     Forward-looking statements include statements and information as to our
strategies and objectives, growth in earnings per share, return on equity,
growth in our managed loan portfolio, net interest margins, funding costs,
operating costs and marketing expenses, delinquencies and charge-offs and
industry comparisons or projections. Forward-looking statements may be
identified by the use of terminology such as "may," "will," "believes," "does
not believe," "no reason to believe," "expects," "plans," "intends,"
"estimates," "anticipated," or "anticipates" and similar expressions, as they
relate to the Company or our management. These statements reflect management's
current views with respect to future events and are subject to certain risks,
uncertainties and assumptions.

     The factors discussed below, among others, could cause our actual results
to differ materially from those expressed in any forward-looking statements.
Although we have attempted to list comprehensively these important factors, we
caution you that other factors may in the future prove to be important in
affecting our results of operations. New factors emerge from time to time and it
is not possible for us to predict all of these factors, nor can we assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statement.

     Our Target Market for Consumer Credit Products Has Higher Default and
        Bankruptcy Rates

     The primary risk associated with secured and unsecured lending to moderate
income consumers is higher default rates than other income classes of consumers,
resulting in more accounts being charged-off as uncollectible. In addition,
general economic factors, such as the rate of inflation, unemployment levels and
interest rates, may result in greater delinquencies and credit losses among
moderate-income consumers than among other income classes of consumers. A
recession or economic downturn may cause an increase in default rates and
delinquencies. We may be unable to successfully identify and evaluate the
creditworthiness of our target customers to minimize the expected higher
delinquencies and losses. We also cannot assure you that our risk-based pricing
system can offset the negative impact on profitability that the expected greater
delinquencies and losses may have.

     The Lack of Seasoning of Our Credit Card Portfolio Creates a Risk of
        Increasing Loss Levels

     Our growth strategy is likely to produce a continued flow of unseasoned
accounts into our portfolio. The average age of a credit card issuer's portfolio
of accounts generally affects the level and stability of delinquency and loss
rates of that portfolio. For example, a portfolio containing mostly older
accounts generally behaves more predictably than a newly originated portfolio.
At December 31, 1999, 58% of our credit card accounts were less than 36 months
old. The delinquency and charge-off ratios for the following periods do not
reflect the favorable impact of purchase accounting related to the portfolio
acquisitions. At December 31, 1999, 7.8% of our managed credit card loans were
30 days or more delinquent, compared to 7.4% at December 31, 1998, and 7.1% at
December 31, 1997. Any material increases in delinquencies and losses beyond our
expectations could have a material adverse impact on us and the value of our net
retained interests in loans securitized, which are subordinated to the interests
sold in such securitizations.

     We May Not be Able to Sustain and Manage Growth

     In order to meet our strategic objectives, we plan to continue to expand
our credit card loan portfolio. Continued growth in this area depends largely
on:

*    our ability to attract new cardholders;

*    growth in both existing and new account balances;

*    the degree to which we lose accounts and account balances to
     competing card issuers;

*    levels of delinquencies and losses;

*    the availability of funding, including securitizations, on favorable
     terms;

*    general economic and other factors such as the rate of inflation,
     unemployment levels and interest rates, which are beyond our control;

*    our ability to acquire and integrate portfolios; and

*    stability and growth in management.

     Our continued growth also depends on our ability to manage this growth
effectively. Factors that affect our ability to successfully manage growth
include:

*    retaining and recruiting experienced management personnel;

*    finding and adequately training new employees;

*    cost-effectively expanding our facilities;

*    growing and updating our management systems; and

*    obtaining capital when needed.


<PAGE>


     We May Not be Able to Successfully Market Our Fee-Based Services or Sign
        Additional Marketing Alliances

     We target our fee-based services to our credit card customers and customers
of third parties. Because of the variety of offers provided and the diversity of
the customers targeted, we are uncertain about how many customers will respond
to our offers for these fee-based services. We may experience higher than
anticipated costs in connection with the internal administration and
underwriting of these fee-based services and lower than anticipated response or
retention rates.

     Furthermore, we may be unable to expand the fee-based services business or
maintain historical growth and stability levels if:

*    we cannot successfully market credit cards to new customers;

*    existing credit card customers close accounts voluntarily or
     involuntarily;

*    existing fee-based services customers cancel their services;

*    we cannot form marketing alliances with other third parties; or

*    new or restrictive state regulations limit our ability to market
     or sell fee-based services.

     Our Profitability and Ability to Grow is Dependent on Our Funding Sources

     Securitization Markets. We depend heavily upon the securitization of our
credit card loans to fund our operations and growth. As recently as the fourth
quarter of 1998, these markets have undergone disruptions which adversely
affected the ability of companies like us to raise money from these sources.
Furthermore, our ability to securitize our assets depends on the continued
availability of credit enhancements on acceptable terms and the continued
favorable legal, regulatory and tax environment for such transactions.

     In addition, even if we are able to securitize our assets consistent with
past practice, poor performance of our securitized assets, including increased
delinquencies and credit losses, could result in a downgrade or withdrawal of
the ratings on the outstanding securities issued in our securitization
transactions, cause early amortization of such securities or result in higher
required credit enhancement levels. As a result, poor performance of our
securitized assets could divert significant amounts of cash that would otherwise
be available to us. This could jeopardize our ability to complete other
securitization transactions on acceptable terms, decrease our liquidity and
force us to rely on other potentially more expensive funding sources, to the
extent available. We cannot assure you that the securitization market will
continue to offer suitable funding alternatives.

     Credit Facility. We rely on our credit facilities to fund our operations
and growth. If we breach any of our covenants under our credit facilities,
including various financial covenants, the lenders may terminate the facilities.
Disruptions in the securitization market could negatively affect our ability to
comply with these covenants, and therefore our ability to borrow or replace
these facilities could be adversely affected.

     CD Program. Beginning in the first quarter of 1999, Direct Merchants Bank
began issuing certificates of deposit in increments of $100,000. We expect to
use the proceeds of these deposits to fund our operations and growth. To
maintain our current level of access to the certificate of deposit market,
Direct Merchants Bank must maintain a "well-capitalized" rating, as that rating
is defined by the Office of the Comptroller of the Currency. If it does not do
so, Direct Merchants Bank may be required to modify the program and may not be
able to accept additional deposits.

     Other Funding Sources. We also expect to obtain financing by selling debt
and equity securities. Our ability to obtain such financing is dependent upon
many factors, including general market conditions. We cannot assure you that we
will be able to obtain this financing on favorable terms or at all. In addition,
restrictions contained in our debt agreements may adversely affect our ability
to finance future operations or capital needs or to engage in other business
activities.

     Our ability to obtain financing from the various sources available to us is
dependent upon many factors, including those outside of our control. In
addition, disruptions or unfavorable conditions related to one financing source
may negatively affect our ability to access other financing sources, or may
increase our financing costs.

     We Require a High Degree of Liquidity to Operate Our Business

     We depend on asset securitization, subsidiary bank deposit program, bank
loans, long-term debt issuance, cash flow from operations, and equity issuance
to fund our operations and growth. The loss or interruption of any of these
sources of funding could adversely affect our ability to operate.

     Key elements of our strategy are dependent upon us having adequate
available cash. These cash needs include:

*    funding receivable growth through marketing campaigns;

*    additional credit enhancement in the case of poor performance of our
     securitized assets;

*    interest and principal payments under our securitizations, our credit
     agreement, our existing senior notes and other indebtedness;

*    ongoing operating expenses;

*    maintenance of the "well-capitalized" status of our subsidiary, Direct
     Merchants Bank, which is necessary to maintain the CD program;

*    portfolio and business acquisitions;

*    fees and expenses incurred in connection with the securitization of
     receivables and the servicing of them; and

*    tax payments due on receipt of excess cash flow from securitization trusts.

     Given these cash needs, we anticipate that we will need to enter into
financing transactions on a regular basis. We cannot assure you that we will be
able to secure funds to support our cash needs on terms as favorable as past
transactions. Any adverse change in the funding sources we use could force us to
rely on other potentially more expensive funding sources, to the extent
available, and could have other adverse consequences. If any of our funding
sources become limited it may require us to use more expensive sources of
funding. Any material increase in our costs of financing beyond our expectations
could negatively impact us.

     Interest Rate Fluctuations Impact the Yield on Our Assets and Funding
        Expense

     An increase or decrease in market interest rates could have a negative
impact on the net interest spread between the yield on our assets and our cost
of funding. A rise in market interest rates may indirectly impact the payment
performance of our customers. We try to minimize the impact of changes in market
interest rates on our cash flow, asset value and net income primarily by funding
variable-rate assets with variable-rate funding sources and by using interest
rate derivatives to match asset and liability repricings. However, changes in
market interest rates may have a negative impact on us.

     We May Not be Able to Successfully Integrate Portfolio Acquisitions

     As previously mentioned, our growth depends in part on our ability to
acquire and successfully integrate new portfolios of credit card customers.
Since our risk-based pricing system depends on information regarding customers,
limited or unreliable historical information on customers within an acquired
portfolio may have an impact on our ability to successfully and profitably
integrate that portfolio. Our success also depends on whether the desirable
customers of an acquired portfolio close their accounts after transfer of the
portfolio. A large attrition rate would result in a lower borrowing base upon
which to assess fees, higher costs relating to closing accounts and less
potential for marketing fee-based services. In addition, if customers reduce
their borrowings after the transfer of accounts, the acquired portfolio may be
less profitable than originally expected.

     Current and Proposed Regulation and Legislation Limit Our Business
        Activities, Product Offerings and Fees Charged

     Various federal and state laws and regulations significantly limit the
activities in which we and Direct Merchants Bank are permitted to engage. Such
laws and regulations, among other things, limit the fees and other charges that
we are allowed to charge, limit or prescribe certain other terms of our products
and services, require specified disclosures to consumers, govern the sale and
terms of products and services we offer and require that we maintain certain
licenses, qualifications, or capital requirements (see "Business -
Regulations"). In some cases, the precise application of these statutes and
regulations is not clear. In addition, the regulatory framework at the state and
federal level regarding some of our fee-based products is evolving. The
regulatory framework affects the design or profitability of such products and
our ability to sell certain products. In addition, numerous legislative and
regulatory proposals are advanced each year which, if adopted, could adversely
affect our profitability or further restrict the manner in which we conduct our
activities. The failure to comply with, or adverse changes in, the laws or
regulations to which our business is subject, or adverse changes in the
interpretation thereof, could adversely affect our ability to collect our
receivables and generate fees on the receivables which could have a material
adverse effect on our business.

     Other Industry Risks Related to Consumer Credit Products and Fee-Based
        Services Could Negatively Impact Us

     We face a number of risks associated with unsecured lending. These include
the risk that delinquencies and credit losses will increase because of future
economic downturns; the risk that an increasing number of customers will default
on the payment of their outstanding balances or seek protection under bankruptcy
laws; and the risk that fraud by cardholders and third parties will increase. We
also face the risk that increased criticism from consumer advocates and the
media could hurt consumer acceptance of our products, as well as the risk of
litigation, including class action litigation, challenging our product terms,
rates, disclosures, collections or other practices, under state and federal
consumer protection statutes and other laws.

     Due to Intense Competition in Our Consumer Credit Products and Fee-Based
        Services Businesses, We May Not be Able to Compete Successfully

     We face intense and increasing competition from numerous financial services
providers, many of which have greater resources than we do. In particular, our
credit card business competes with national, regional and local bank card
issuers, as well as other general purpose and private label credit card issuers.
There has been a recent increase in solicitations to moderate income consumers,
as competitors have increasingly focused on this market. Customers are attracted
to credit card issuers largely on the basis of price, credit limit and other
product features; as a result, customer loyalty is often limited. According to
published reports, as of December 1999, the 20 largest issuers accounted for
approximately 90% (based on receivables outstanding) of the market for general
purpose credit cards. Many of these issuers are substantially larger, have more
seasoned credit card portfolios and often compete for customers by offering
lower interest rates and/or fee levels than we do. We cannot assure you that we
will be able to compete successfully in this environment.

     We also face competition from numerous fee-based services providers,
including insurance companies, financial services institutions and other
membership-based or consumer services providers, many of which are larger,
better capitalized and more experienced than us. As we continue to expand our
extended service plan business to the customers of third-party retailers, we
compete with manufacturers, financial institutions, insurance companies and a
number of independent administrators, many of which have greater operating
experience and financial resources than we do.

     Changes in Our Relationship with Fingerhut Could Materially Impact Our
        Business

     We have entered into a number of agreements with Fingerhut for the purpose
of defining the ongoing relationship between us, some of which are material to
our business. We rely on our access to the Fingerhut database, including the
Fingerhut suppression and bad debt file, to market financial services products.
As of December 31, 1999, Fingerhut customers in the Fingerhut database
represented approximately 30% of our credit card accounts and all of the
purchasers of our extended service plans. Fingerhut can terminate our
contractual rights to this access in the event a third party acquires control of
our company and, upon termination of the agreement, Fingerhut has the right to
repurchase any then outstanding general purpose credit cards bearing the
Fingerhut name and logo. Any denial or delay of this access or any such
repurchase could have a significant economic impact on us.

     Each of the agreements between us and Fingerhut may terminate early due to
a change of control of the Company, as defined below. The spin off itself did
not constitute a change of control. However, now that Fingerhut does not own the
stock of the Company, it is possible for a change of control to occur, thus
causing early terminations of these agreements. Specifically, we have a contract
with Fingerhut to use the information in the Fingerhut database for marketing
our financial services products, including general purpose credit cards. This
contract expires October 2003 and is renewable thereafter upon mutual agreement
between us and Fingerhut unless there has been a change in control of the
Company. A change of control shall be deemed to have occurred if:

*    any person or group (within the meaning of Rule 13d-5 of the Securities
     Exchange Act of 1934), other than Fingerhut,  shall own beneficially or
     of record,  shares representing more than 25% of the aggregate ordinary
     voting power represented by the issued and outstanding capital stock of
     the Company;

*    a  majority  of the seats  (other  than  vacant  seats) on the Board of
     Directors  of the  Company  shall at anytime be occupied by persons who
     were neither  nominated by  Fingerhut,  or by the Board of Directors of
     the Company, nor appointed by directors so nominated; or

*    any person or group other than Fingerhut  shall  otherwise  directly or
     indirectly  have the power to  exercise a  controlling  influence  over
     management or policies of the Company.

     Potential Volatility in the Stock Market May Negatively Affect Our Stock
        Price

     The Company, which began as a subsidiary of Fingerhut, was incorporated in
1996 and prior to the spin off was 83% owned by Fingerhut. Factors such as
actual or anticipated fluctuations in our operating results, regulatory
developments, conditions and trends in the consumer credit industry, general
market conditions and other factors beyond our control may significantly affect
the market price of our common stock. In addition, the market has, from time to
time, experienced significant price and volume fluctuations that often have been
unrelated to the operating performance of particular companies. These broad
fluctuations may adversely affect the market price of our common stock.


<PAGE>


Item 2.  Properties

     We currently lease our principal executive office space in St. Louis Park,
Minnesota, consisting of leases for approximately 75,000, 18,000, and 13,000
square feet. These leases expire in November 2000, May 2001, and August 2000,
respectively. We have also entered into leases for our new corporate office
space in Minnetonka, Minnesota, consisting of approximately 300,000 and 19,000
square feet effective September 2000 and March 2000 and terminating December
2006 and March 2006, respectively. Direct Merchants Bank leases office space in
Phoenix, Arizona, consisting of approximately 26,000 square feet. This lease
expires in June 2004, and may be terminated by us after June 2001. In addition,
Direct Merchants Bank purchased a new 130,000 square foot building in
Scottsdale, Arizona, during the third quarter of 1999 in anticipation of moving
into the new facility in March 2000. The new building serves as western regional
headquarters for us and Direct Merchants Bank's operation center. In addition,
we lease facilities in Tulsa, Oklahoma, White Marsh, Maryland, Jacksonville,
Florida, and Champaign, Illinois, consisting of approximately 100,000, 115,000,
160,000, and 10,000 square feet, respectively. These leases expire in November
2009, September 2007, June 2005, and November 2002, respectively. The leased
properties in Oklahoma, Maryland, and Florida support our collections, customer
service and back office operations. We believe our facilities are suitable to
our businesses and that we will be able to lease or purchase additional
facilities as needed.

Item 3.  Legal Proceedings

     We are a party to various legal proceedings resulting from the ordinary
business activities relating to our operations. We do not believe that any such
legal proceedings will have a material adverse effect on our financial position
or our operations.

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

     No matter was submitted to a vote of security holders during the fourth
quarter of our fiscal year ended December 31, 1999.

PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

     The information required by Item 201 of Regulation S-K is set forth in the
"Summary of Consolidated Quarterly Financial Information and Stock Data" on
pages 69 and 70 of our Annual Report to Shareholders as of and for the year
ended December 31, 1999, (the "1999 Annual Report"), and is incorporated herein
by reference.

     During the period covered by this report, we issued securities that were
not registered under the Securities Act of 1933 (the "1933 Act"), in reliance on
Section 4(2) of the 1933 Act. We exchanged $200 million of Series B Perpetual
Preferred Stock, $100 million Senior Notes and ten year warrants for $300
million of Series C Perpetual Convertible Preferred Stock on June 1, 1999. The
additional information required by this item is set forth in "Note 6 - Private
Equity Placement" on pages 49 of this Form 10-K for the year ended December 31,
1999 and is incorporated herein by reference.

Item 6.   Selected Financial Data

     The information required by this item is set forth under the caption
"Selected Financial Data" on pages 25 and 26 of the 1999 Annual Report and is
incorporated herein by reference.

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

     The information required by this item is set forth under the captions
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Forward Looking Statements" on pages 27 to 43 of the 1999
Annual Report and is incorporated herein by reference.

Item 7a.  Quantitative And Qualitative Disclosures About Market Risk

     The information required by this item is set forth under the captions
"Management's Discussion and Analysis-Market Risk" on page 39 of the 1999 Annual
Report and is incorporated herein by reference.


<PAGE>


Item 8.  Financial Statements and Supplementary Data
<TABLE>

                                       METRIS COMPANIES INC. AND SUBSIDIARIES
                                            Consolidated Balance Sheets
                                    (Dollars in thousands, except per-share data)

                                                                                       December 31,
                                                                                     1999         1998
                                                                                     ----         ----
Assets:
<S>                                                                               <C>           <C>
Cash and due from banks ........................................................  $   28,505    $ 22,114
Federal funds sold .............................................................     118,962      15,060
Short-term investments .........................................................      46,966         173
                                                                                  ----------    --------
   Cash and cash equivalents ...................................................     194,433      37,347
                                                                                  ----------    --------
Retained interests in loans securitized ........................................   1,617,226     753,469
   Less: Allowance for loan losses .............................................     606,853     393,283
                                                                                  ----------    --------
Net retained interests in loans securitized ....................................   1,010,373     360,186
                                                                                  ----------    --------
Credit card loans (net of allowance for loan losses of $12,175)                      131,038          --
Loans held for securitization ..................................................       2,570       3,430
Property and equipment, net ....................................................      56,914      21,982
Accrued interest and fees receivable ...........................................      17,704       6,009
Prepaid expenses and deferred charges ..........................................      57,371      59,104
Deferred income taxes ..........................................................     185,613     153,021
Customer base intangible .......................................................      83,809      81,892
Other receivables due from credit card securitizations, net ...................      243,978     185,935
Other assets ...................................................................      61,279      36,813
                                                                                  ----------    --------
      Total assets .............................................................  $2,045,082    $945,719
                                                                                  ==========    ========

Liabilities:

Deposits .......................................................................  $  775,381  $       --
Debt ...........................................................................     345,012     310,896
Accounts payable ...............................................................      45,850      19,091
Current income taxes payable ...................................................      22,969      31,783
Deferred income ................................................................     171,666     124,892
Accrued expenses and other liabilities .........................................      60,403      26,075
                                                                                  ----------    --------
   Total liabilities ...........................................................  $1,421,281    $512,737
                                                                                  ----------    --------

Stockholders' Equity:

Preferred  stock -  Series  B,  par  value  $.01 per  share;  10,000,000  shares
   authorized, 539,866 shares issued and outstanding                              $       --    $201,100
Convertible  preferred  stock - Series C, par value $.01 per  share;  10,000,000
   shares authorized, 885,178 shares issued and outstanding                          329,729          --
Common  stock,  par  value  $.01  per  share; 100,000,000 shares authorized,
   38,612,955 and 38,519,500 shares issued and outstanding, respectively                 386         193
Paid-in capital ................................................................     130,772     107,615
Retained earnings ..............................................................     162,914     124,074
                                                                                  ----------    --------
   Total stockholders' equity ..................................................  $  623,801    $432,982
                                                                                  ----------    --------
   Total liabilities and stockholders' equity ..................................  $2,045,082    $945,719
                                                                                  ==========    ========


                            See accompanying Notes to Consolidated Financial Statements.

</TABLE>
<PAGE>


<TABLE>

                     METRIS COMPANIES INC. AND SUBSIDIARIES
                        Consolidated Statements of Income
                  (Dollars in thousands, except per-share data)

                                                   Year Ended December 31,
                                                   -----------------------
                                                 1999         1998        1997
                                                 ----         ----        ----
Interest Income:
<S>                                           <C>          <C>         <C>
Credit card loans and retained
     interests in loans securitized .......   $ 229,394    $ 111,118   $  66,695
Federal funds sold ........................       4,477        1,065       1,636
Other .....................................       2,298        1,028         863
                                              ---------    ---------   ---------
     Total interest income ................     236,169      113,211      69,194
Interest expense ..........................      55,841       30,513      11,951
                                              ---------    ---------   ---------
Net Interest Income .......................     180,328       82,698      57,243
Provision for loan losses .................     174,800       77,770      43,989
                                              ---------    ---------   ---------
Net Interest Income
     After Provision for Loan Losses ......       5,528        4,928      13,254
                                              ---------    ---------   ---------
Other Operating Income:
Net securitization and credit card
     servicing income .....................     318,873      138,221      79,533
Credit card fees, interchange
     and other credit card income .........     129,808       68,136      43,731
Fee-based services revenues ...............     175,091      109,123      64,532
                                              ---------    ---------   ---------
                                                623,772      315,480     187,796
                                              ---------    ---------   ---------

Other Operating Expense:
Credit card account and other product
     solicitation and marketing expenses ..     107,726       43,471      31,622
Employee compensation .....................     122,417       62,627      35,200
Data processing services and
     communications .......................      52,355       35,445      20,087
Third-party servicing expense .............      13,615       11,074      12,711
Warranty and debt waiver underwriting
     and claims servicing expense .........      21,091       12,279       6,053
Credit card fraud losses ..................       7,384        4,436       3,240
Customer base intangible amortization .....      31,752       10,051       2,467
Other .....................................      81,644       47,777      27,787
                                              ---------    ---------   ---------
                                                437,984      227,160     139,167
                                              ---------    ---------   ---------
Income Before Income Taxes and
     Extraordinary Loss ...................     191,316       93,248      61,883
Income taxes ..............................      75,953       35,900      23,825
                                              ---------    ---------   ---------
Income Before Extraordinary Loss ..........     115,363       57,348      38,058
Extraordinary loss from early
     extinguishment of debt ...............      50,808           --          --
                                              ---------    ---------   ---------
Net Income ................................      64,555       57,348      38,058
Preferred stock dividends-Series B ........       7,506        1,100          --
Convertible preferred stock
     dividends-Series C....................      17,080           --          --
Adjustment for the retirement of
     Series B preferred stock..............     101,615           --          --
                                              ---------    ---------   ---------
Net (Loss) Income Applicable to
   Common Stockholders ....................   $ (61,646)   $  56,248   $  38,058
                                              =========    =========   =========
</TABLE>



<PAGE>



Earnings per share:
     Basic-(loss) income before
         extraordinary loss ..........       $   (0.28)    $   1.46    $    0.99
     Basic-extraordinary loss ........           (1.32)          --           --
     Basic-net (loss) income .........           (1.60)        1.46         0.99
     Diluted-(loss) income before
         extraordinary loss ..........           (0.28)        1.41         0.94
     Diluted-extraordinary loss ......           (1.32)          --           --
     Diluted-net (loss) income .......           (1.60)        1.41         0.94
Shares used to compute earnings
     per share:
Basic ................................          38,570       38,464       38,450
Diluted ..............................          38,570       39,937       40,476

     See accompanying Notes to Consolidated Financial Statements.







<PAGE>
<TABLE>

                                       METRIS COMPANIES INC. AND SUBSIDIARIES
                             Consolidated Statements of Changes in Stockholders' Equity
                                               (Dollars in thousands)

                                                                                                   Total
                                              Preferred     Common      Paid-In      Retained   Stockholders'
                                                Stock       Stock       Capital      Earnings      Equity
                                                -----       -----       -------      --------      ------

<S>                                          <C>          <C>          <C>          <C>          <C>
BALANCE, DECEMBER 31, 1996 ...............   $      --    $     192    $ 107,220    $  31,306    $ 138,718
   Net income ............................          --           --           --       38,058       38,058
   Common stock dividends and other - cash          --           --         (161)        (577)        (738)
                                             ---------    ---------    ---------    ---------    ---------
BALANCE, DECEMBER 31, 1997 ...............   $      --    $     192    $ 107,059    $  68,787    $ 176,038
                                             =========    =========    =========    =========    =========
   Net income ............................          --           --           --       57,348       57,348
   Issuance of preferred stock ...........     200,000           --           --           --      200,000
   Common stock dividends and
    other - cash .........................          --           --           --         (961)        (961)
   Preferred dividends in kind
    - Series B ...........................       1,100           --           --       (1,100)          --
   Issuance of common stock
     under employee benefit
      plans ..............................          --            1          556         --            557
                                             ---------    ---------    ---------    ---------    ---------
BALANCE, DECEMBER 31, 1998 ...............   $ 201,100    $     193    $ 107,615    $ 124,074    $ 432,982
                                             =========    =========    =========    =========    =========
     Net income ..........................          --           --           --       64,555       64,555
     Retirement of preferred
         stock - Series B ................    (208,606)          --     (101,615)          --     (310,221)
     Issuance of preferred
         stock - Series C ................     312,910           --      122,369           --      435,279
     Cash dividends ......................          --           --           --       (1,390)      (1,390)
     June 1999 two-for-one
         stock split .....................          --          193         (193)          --           --
     Preferred dividends in
        kind - Series B ..................       7,506           --           --       (7,506)          --
     Preferred dividends in
         kind - Series C .................      16,819           --           --      (16,819)          --
     Issuance of common stock
         under employee benefit
         plans ...........................          --           --        2,596           --        2,596
                                             ---------    ---------    ---------    ---------    ---------
BALANCE, DECEMBER 31, 1999 ...............   $ 329,729    $     386    $ 130,772    $ 162,914    $ 623,801
                                             =========    =========    =========    =========    =========

                            See accompanying Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>

<TABLE>
                                       METRIS COMPANIES INC. AND SUBSIDIARIES
                                        Consolidated Statements of Cash Flows
                                               (Dollars in thousands)

                                                                             Year Ended December 31,
                                                                             -----------------------

                                                                        1999           1998           1997
                                                                        ----           ----           ----
Operating Activities:
<S>                                                                 <C>            <C>             <C>
Net income ......................................................   $    64,555    $    57,348     $    38,058
Adjustments to reconcile net income to net cash provided by
   operating activities:
   Extraordinary loss from early extinguishment of debt..........        50,808             --              --
   Depreciation and amortization ................................        75,341         48,678          15,942
   Change in allowance for loan losses ..........................       225,745        149,199         148,415
   Changes in operating assets and liabilities:
      Accrued interest and fees receivable ......................       (11,695)        (1,699)         (1,368)
      Prepaid expenses and deferred charges .....................       (46,448)       (61,163)        (23,150)
      Deferred income taxes .....................................       (32,592)       (72,234)        (49,259)
      Other receivables due from credit card securitizations, net       (61,144)      (112,170)        (31,911)
      Accounts payable and accrued expenses .....................        65,337        (14,553)         28,246
      Current income taxes payable ..............................        (8,814)        22,082           8,241
      Deferred income ...........................................        46,774         75,688          26,021
      Other .....................................................       (39,983)       (26,264)        (16,022)
                                                                    -----------    -----------     -----------
Net cash provided by operating activities .......................       327,884         64,912         143,213
                                                                    -----------    -----------     -----------
Investing Activities:
Proceeds from repayments of securitized loans...................        960,170      1,491,832       1,665,700
Net loans originated or collected ...............................      (843,274)      (901,740)     (1,231,223)
Credit card portfolio acquisitions ..............................    (1,156,673)      (921,558)       (738,104)
Additions to premises and equipment .............................       (41,724)       (10,814)        (11,705)
                                                                    -----------    -----------     -----------
Net cash used in investing activities ...........................    (1,081,501)      (342,280)       (315,332)
                                                                    -----------    -----------     -----------
Financing Activities:
Net (decrease)/increase in short-term borrowings.................       (10,000)       (34,000)         88,837
Proceeds from the issuance of long-term debt.....................       144,116        100,896         100,000
Net increase in deposits ........................................       775,381             --              --
Cash dividends paid .............................................        (1,390)          (961)           (577)
(Decrease)/Increase in preferred equity .........................          (124)       200,000              --
Increase in common equity .......................................         2,720            557              --
                                                                    -----------    -----------     -----------
Net cash provided by financing activities .......................       910,703        266,492         188,260
                                                                    -----------    -----------     -----------
Net increase (decrease) in cash and cash equivalents.............       157,086        (10,876)         16,141
Cash and cash equivalents at beginning of year...................        37,347         48,223          32,082
                                                                    -----------    -----------     -----------
Cash and cash equivalents at end of year ........................   $   194,433    $    37,347     $    48,223
                                                                    ===========    ===========     ===========


                                     See accompanying Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>



                     METRIS COMPANIES INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                     (Dollars in thousands, except as noted)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of Metris
Companies Inc. ("MCI") and its subsidiaries (collectively, the "Company")
including Direct Merchants Credit Card Bank, N.A. ("Direct Merchants Bank")
which may be referred to as "we," "us" and "our." The Company is an
information-based direct marketer of consumer credit products and fee-based
services primarily to moderate-income consumers.

     Prior to September 25, 1998, Fingerhut Companies, Inc. owned 83% of the
Company. On September 25, 1998, Fingerhut distributed its remaining shares of
the Company to Fingerhut shareholders in a tax free distribution (the "spin
off").

     All significant intercompany balances and transactions have been eliminated
in consolidation. Certain prior year amounts have been reclassified to conform
with the current year's presentation.

Pervasiveness of Estimates

     We have prepared the consolidated financial statements in accordance with
generally accepted accounting principles, which require us to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements as well as the reported amount of revenues and expenses
during the reporting periods. Actual results could differ from these estimates.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

     The following is a summary of the significant accounting and reporting
policies used in preparing the consolidated financial statements.

Federal Funds Sold and Short-term Investments

     Federal funds sold are short-term loans made to banks through the Federal
Reserve System. It is the Company's policy to make such loans only to banks that
are considered to be in compliance with their regulatory capital requirements.
Short-term investments are investments in commercial paper, money market mutual
funds and certificates of deposits with maturities less than three months.

Loans Held for Securitization and Credit Card Loans

     Loans held for securitization are credit card loans we intend to
securitize, generally no later than three months from origination and are
recorded at the lower of aggregate cost or market value. Credit card loans are
receivables from consumers that we do not intend to securitize.


<PAGE>


 Securitization, Retained Interests in Loans Securitized and
     Securitization Income

     We securitize and sell a significant portion of our credit card loans to
both public and private investors through the Metris Master Trust and
third-party bank-sponsored, multi-seller receivables conduits. We retain
participating interests in the credit card loans under "Retained interests in
loans securitized" on the consolidated balance sheets. Our retained interests in
loans securitized are subordinate to the interests of investors in the trust and
conduit portfolios. Although we continue to service the securitized credit card
accounts and maintain the customer relationships, these transactions are treated
as sales for financial reporting purposes and the associated loans are not
reflected on the consolidated balance sheets.

     The sales of these loans have been recorded in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." Upon sale,
the sold credit card loans are removed from the balance sheet and the related
financial and servicing assets controlled and liabilities incurred are initially
measured at fair value, if practicable. SFAS 125 also requires that servicing
assets and other retained interests in the transferred assets be measured by
allocating the previous carrying amount between the assets sold, if any, and
retained interests, if any, based on their relative fair values at the date of
the transfer.

     The securitization and sale of credit card loans changes our interest in
such loans from lender to servicer, with a corresponding change in how revenue
is reported in the statements of income. For securitized and sold credit card
loans, amounts that otherwise would have been recorded as interest income,
interest expense, fee income and provision for loan losses are instead reported
in other operating income as "Net securitization and credit card servicing
income." We have various receivables from the trust or conduits and other assets
as a result of securitizations, including: amounts deposited in accounts held by
the trust for the benefit of the trust's security holders; amounts due from
interest rate caps, swaps and floors; accrued interest and fees on the
securitized receivables; servicing fee receivables and various other
receivables. These amounts are reported as "Other receivables due from credit
card securitizations, net" on the consolidated balance sheets. The provision for
loan losses reflected on the statements of income in "Net securitization and
credit card servicing income" was $567.7 million, $456.4 million and $275.3
million for the years ended December 31, 1999, 1998 and 1997, respectively.

Allowance for Loan Losses

     Provisions for loan losses are made in amounts necessary to maintain the
allowance at a level estimated to be sufficient to absorb probable future losses
of principal and earned interest, net of recoveries, inherent in the existing
managed loan portfolio, effectively reducing our retained interests in loans
securitized to fair value. In evaluating the adequacy of the allowance for loan
losses, we consider several factors, including: historical charge-off and
recovery activity by age (vintage) of each loan portfolio (noting any particular
trends over recent periods); recent delinquency and collection trends by
vintage; current economic conditions and the impact such conditions might have
on borrowers' ability to repay; the risk characteristics of the portfolios; and
other factors. Significant changes in these factors could affect the adequacy of
the allowance for loan losses in the near term. Credit card accounts are
generally charged off at the end of the month during which the loan becomes
contractually 180 days past due, with the exception of bankrupt accounts, which
are charged off immediately upon formal notification of bankruptcy, and accounts
of deceased cardholders without a surviving, contractually liable individual, or
an estate large enough to pay the debt in full, which are also charged off
immediately upon notification.

Property and Equipment

     Property and equipment, and computer hardware and software are stated at
cost and depreciated on a straight-line basis over their estimated economic
useful lives. We capitalize software developed for internal use that represents
major enhancements or replacements of operating and management information
systems. Amortization of such capitalized software begins when the systems are
fully developed and ready for implementation. Repairs and maintenance are
charged to expense as incurred.

Customer Base Intangible

     The customer base intangible represents the excess of amounts paid for
portfolio acquisitions over the related credit card loan balances net of
reserves and discounts. The intangible assets are amortized over the estimated
periods of benefit, generally five to seven years, in proportion to the expected
benefits to be recognized. The amounts amortized for 1999, 1998 and 1997 were
$31.8 million, $10.1 million, and $2.5 million, respectively.

Interest Income on Credit Card Loans

     Interest income on credit card loans is accrued and earned based on the
principal amount of the loans outstanding using the effective-yield method.
Accrued interest which has been billed to the customer but not yet received is
classified on the balance sheet with the related credit card loans. Accrued
interest which has not yet been billed to the customer is estimated and
classified on the balance sheet separate from the loan balance. Interest income
is generally recognized until a loan is charged off. At that time, the accrued
interest portion of the charged off balance is deducted from current period
interest income.

Fee-Based Services

     Debt Waiver Products

     Direct Merchants Bank offers various debt waiver products to its credit
card customers for which it retains the claims risk. Revenue for such products
is recognized ratably over the coverage period, generally one month, and
reserves are provided for pending claims based on Direct Merchants Bank's
historical experience with settlement of such claims. Revenues recorded for debt
waiver products are included in the consolidated statements of income under
"Fee-based services revenues" and were $106.0 million, $73.8 million and $47.6
million for the years ended December 31, 1999, 1998 and 1997, respectively.
Unearned revenues and reserves for pending claims are recorded in the
consolidated balance sheets in "Deferred income" and "Accrued expenses and other
liabilities" and combined amounted to $7.1 million and $4.8 million as of
December 31, 1999 and 1998, respectively.

     Membership Programs

     Membership fees for fee-based product sales are generally billed through
financial institutions, including Direct Merchants Bank, and other
cardholder-based institutions and are recorded as deferred membership income
upon acceptance of membership and pro-rated over the membership period beginning
after the contractual cancellation period is complete. Deferred fee-based
revenues totaled $127.5 million and $72.9 million at December 31, 1999 and 1998,
respectively.

     In accordance with the provisions of Statement of Position 93-7, "Reporting
on Advertising Costs," qualifying membership acquisition costs are deferred and
charged to expense as membership fees are recognized. These costs, which relate
directly to membership solicitations (direct response advertising costs),
principally include: postage, printing, mailings and telemarketing costs. Such
costs are amortized on a straight-line basis as revenues are realized over the
membership period. Amortization of membership acquisition costs amounted to $9.9
million, $8.9 million and $2.3 million for the years ended December 31, 1999,
1998 and 1997, respectively. If deferred membership acquisition costs were to
exceed the membership fee, an appropriate adjustment would be made for
impairment. Deferred fee-based membership acquisition costs amounted to $30.6
million and $22.4 million as of December 31, 1999 and 1998, respectively.

     During the quarter ended September 30, 1998, we changed our method of
recognizing revenue for certain fee-based services for which a cancellation
period with a full refund exists. This change was made to be consistent with
revenue recognition policy changes made by others in our industry. Previously,
we had recognized a portion of the revenue, net of estimated cancellations,
associated with such services during the refund period. We now defer the
recognition of revenue until the expiration of the cancellation period, at which
time revenue relating to the full refund period is recognized. The remaining
revenue is recognized over the remaining term of the membership. We continue to
defer qualifying direct-response advertising costs and amortize these expenses
in proportion to revenue recognized. This change resulted in a cumulative
one-time reduction in revenues of approximately $3.0 million and a corresponding
reduction in expenses of approximately $3.1 million, or a $68,000 increase in
net income. This cumulative impact is reflected in the consolidated statement of
income for the year ended December 31, 1998.

     Extended Service Plans

     We coordinate the marketing activities for Fingerhut's sales of extended
service plans. We perform administrative services and retain the claims risk for
all extended service plans sold. As a result, extended service plan revenues and
the incremental direct acquisition costs are deferred and recognized on a
straight-line basis over the life of the related extended service plan contracts
beginning after the expiration of any manufacturers' warranty coverage. The
provision for service contract returns charged against deferred income for the
years ended December 31, 1999, 1998 and 1997, amounted to $5.0 million, $4.8
million and $4.6 million, respectively. Additionally, prior to 1999, we
reimbursed Fingerhut for the cost of its marketing media and other services
utilized in the sales of extended service plans, based on contracts sold and on
media utilization costs as agreed to by us and Fingerhut. Beginning in 1999,
Fingerhut was responsible for paying a majority of the marketing expense and
therefore retained a larger portion of the related revenue.

Credit Card Fees and Origination Costs

     Credit card fees include annual membership, late payment, overlimit,
returned check, cash advance transaction fees and other miscellaneous fees.
These fees are assessed according to the terms of the related cardholder
agreements.

     We defer direct credit card origination costs associated with successful
credit card solicitations that we incur in transactions with independent third
parties, and certain other costs that we incur in connection with loan
underwriting and the preparation and processing of loan documents. These
deferred credit card origination costs are netted against the related credit
card annual fee, if any, and amortized on a straight-line basis over the
cardholder's privilege period, generally 12 months. Net deferred fees were $11.8
million and $9.6 million as of December 31, 1999 and 1998, respectively.

Solicitation Expenses

     Credit card account costs, including printing, credit bureaus, list
processing costs, telemarketing and postage, are generally expensed as incurred
over the two to three month period during which the related responses to such
solicitation are received.

Credit Card Fraud Losses

     We experience credit card fraud losses from the unauthorized use of credit
cards. These fraudulent transactions are expensed when identified, through the
establishment of a reserve for the transactions. These amounts are charged off
after 90 days, after all attempts to recover the amounts from such transactions,
including chargebacks to merchants and claims against cardholders, are
exhausted.

Interest Rate Risk Management Contracts

     The nature and composition of our assets and liabilities and securitized
loans expose us to interest rate risk. We enter into a variety of interest rate
risk management contracts such as interest rate swap, floor and cap agreements
with highly rated counterparties in order to hedge our interest rate exposure.
The monthly interest rate differential to be paid or received on these contracts
is accrued and included in "Net securitization and credit card servicing income"
on the consolidated statements of income. Premiums paid for such contracts and
the related interest payable or receivable under such contracts are classified
under "Other receivables due from credit card securitization, net," on the
consolidated balance sheets. Premiums paid for interest rate contracts are
recorded at cost and amortized on a straight-line basis over the life of the
contract.

Debt Issuance Costs

     Debt issuance costs are the costs related to issuing new debt securities
and establishing new securitizations under the trust or conduits. The costs are
capitalized as incurred and amortized to expense over the term of the new debt
security.

Income Taxes

     We determine deferred taxes based on the temporary differences between the
financial statement and the tax bases of assets and liabilities that will result
in future taxable or deductible amounts. The deferred taxes are based on the
enacted rate that is expected to apply when the temporary differences reverse.
For periods prior to the spin off, we were included in the consolidated federal
and certain state income tax returns of Fingerhut Companies, Inc. Based on a tax
sharing agreement between us and Fingerhut Companies, Inc., the provision and
deferred income taxes are computed based only on our financial results as if we
filed our own federal and state tax returns.

Statements of Cash Flows

     We prepare our consolidated statements of cash flows using the indirect
method, which requires a reconciliation of net income to net cash from operating
activities. In addition, we net certain cash receipts and cash payments from
credit card loans made to customers, including principal collections on those
loans. For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash and due from banks, federal funds sold, short-term
investments (mainly commercial paper and money market funds), and all other
highly liquid investments with original maturities of three months or less.

     Cash paid for interest during the years ended December 31, 1999, 1998 and
1997, was $29.5 million, $28.4 million and $9.4 million, respectively. Cash paid
for income taxes for the same periods was $117.0 million, $86.1 million and
$64.8 million, respectively.

     The statement of cash flows for the year ended December 31, 1999, reflects
the non-cash adjustments related to the conversion of the Series B Perpetual
Preferred Stock and 12% Senior Notes and the cancellation of warrants (see Note
6). The conversion to Series C Perpetual Convertible Preferred Stock resulted in
non-cash reductions in debt and accrued interest of $100 million and $4.3
million, respectively, offset by an increase of $104.3 million in equity.

Earnings Per Share

     Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income applicable to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue


<PAGE>


common stock were exercised or converted into common stock. The following table
presents the  computation of basic and diluted  weighted  average shares used in
the per-share calculations:

                                                  Year Ended December 31,
                                               1999         1998        1997
                                               ----         ----        ----
(In thousands, except per-share amounts)
Income before extraordinary loss ........   $ 115,363    $  57,348   $  38,058
Preferred dividends - Series B ..........       7,506        1,100          --
Preferred dividends - Series C ..........      17,080           --          --
Adjustment for the retirement of Series B
     preferred stock ....................     101,615           --          --
                                            ---------    ---------   ---------
Net (loss) income applicable to common
     stockholders before extraordinary
     items ..............................     (10,838)      56,248      38,058
Extraordinary loss from the early
     extinguishment of debt .............      50,808           --          --
                                            ---------    ---------   ---------
Net (loss) income applicable to common
     stockholders .......................   $ (61,646)   $  56,248   $  38,058
                                            =========    =========   =========

Weighted average common shares
     outstanding ........................      38,570       38,464      38,450
Adjustments for dilutive securities:
Assumed exercise of outstanding stock
   options(1) ...........................        --          1,473       2,026
                                            ---------    ---------   ---------
Diluted common shares ...................      38,570       39,937      40,476
                                            =========    =========   =========

Earnings per share:
     Basic - (loss) income  before
         extraordinary loss .............   $   (0.28)   $    1.46   $    0.99
     Basic - extraordinary loss .........       (1.32)          --          --
     Basic - net (loss) income ..........       (1.60)        1.46        0.99
     Diluted - (loss) income  before
         extraordinary loss .............       (0.28)        1.41        0.94
     Diluted - extraordinary loss .......       (1.32)          --          --
     Diluted - net (loss) income ........       (1.60)        1.41        0.94

(1) For the year ended  December  31, 1999,  there were options and  convertible
preferred  stock  outstanding  to purchase 2.1 million and 10.2  million  common
shares. These potential common shares have been excluded from the computation of
diluted   earnings  per  share   because   their   inclusion   would  have  been
anti-dilutive.

Comprehensive Income

     During 1998, we adopted SFAS 130, "Reporting Comprehensive Income." This
statement does not apply to our current financial results and therefore, net
income equals comprehensive income.


NOTE 3 - ALLOWANCE FOR LOAN LOSSES

     We maintain an allowance for loan losses for both owned loans and the
retained interests in loans securitized. The portion allocated to the retained
interest in loans securitized represents our estimated valuation adjustment to
report this asset in accordance with SFAS 125. For securitized loans,
anticipated losses and related provisions for loan losses are reflected in the
calculations of net securitization and credit card servicing income. We make
provisions for loan losses in amounts necessary to maintain the allowance at a
level estimated to be sufficient to absorb probable future losses of principal
and earned interest, net of recoveries, inherent in the existing loan portfolio.

     The activity in the allowance for loan losses is as follows:

                                                    Year Ended December 31,

                                               1999         1998         1997
                                               ----         ----         ----

Balance at beginning of year ............   $ 393,283    $ 244,084    $  95,669
Allowance related to assets acquired, net      26,293       20,152       20,246
Provision for loan losses ...............     174,800       77,770       43,989
Provision for loan losses (1) ...........     567,737      456,354      275,310
Loans charged off .......................    (582,637)    (420,875)    (195,535)
Recoveries ..............................      39,552       15,798        4,405
                                            ---------    ---------    ---------
Net loans charged off ...................    (543,085)    (405,077)    (191,130)
                                            ---------    ---------    ---------
Balance at end of year ..................   $ 619,028    $ 393,283    $ 244,084
                                            =========    =========    =========

(1) Amounts are included in "Net securitizations and credit card servicing
    income."


NOTE 4 - PROPERTY AND EQUIPMENT

     The carrying value of property and equipment is as follows:

                                                     December 31,

                                                    1999      1998
                                                    ----      ----
Furniture and equipment .......................   $12,186   $10,974
Computer software and equipment ...............    24,675     9,077
Construction in progress ......................    24,500     2,013
Leasehold improvements ........................     8,631     6,204
                                                  -------   -------
Total .........................................   $69,992   $28,268
Less: Accumulated depreciation and amortization    13,078     6,286
                                                  -------   -------
Balance at end of year ........................   $56,914   $21,982
                                                  =======   =======

     Depreciation and amortization expense for the years ended December 31,
1999, 1998 and 1997, was $6.8 million, $4.4 million and $1.4 million,
respectively.


NOTE 5 - PORTFOLIO ACQUISITIONS

     On June 30, 1999, Direct Merchants Bank purchased a portion of the consumer
bank card portfolio of GE Capital Consumer Card Co., a unit of General Electric
Company. The acquired credit card portfolio had approximately 485,000 active
accounts, which were converted to the Direct Merchants Bank platform in October
1999, and approximately $1.2 billion in receivables. In December 1998, the
Company acquired an $800 million credit card portfolio from PNC Bank Corp.
representing loans from customers outside of PNC's normal banking relationship.
In October 1997, the Company acquired a $405 million credit card portfolio from
Mercantile Bank National Association. In September 1997, the Company acquired a
$317 million credit card portfolio from Key Bank USA, National Association.

NOTE 6 - PRIVATE EQUITY PLACEMENT

     On November 13, 1998, we entered into agreements with affiliates of the
Thomas H. Lee Company, a private equity firm, to make a total private equity
investment of $300 million in the Company. The Lee Company agreed to purchase
0.8 million shares of Series C Perpetual Convertible Preferred Stock, which are
convertible into common shares at a conversion price of $18.63 per common share
subject to adjustment in certain circumstances. The Series C Preferred has a 9%
dividend payable in additional shares of Series C Preferred and will also
receive any dividends paid on our common stock on an as converted basis. The
cumulative payment-in-kind dividends are effectively guaranteed for a seven-year
period. Assuming conversion of the Series C Preferred into common stock, the Lee
Company would own over 30% of the Company on a diluted basis at December 31,
1999. The Series C Preferred entitles the holders to elect four members to our
Board of Directors. The Series C Preferred may be redeemed by us in certain
circumstances after December 31, 2001 by paying 103% of the redemption price of
$372.50 and any accrued dividends at the time of redemption. We also have the
option to redeem the Series C Preferred after December 9, 2008, without
restriction by paying the redemption price of $372.50 and any accrued dividends
at the time of redemption. The conversion to the Series C Preferred would have
resulted in a "change in control" in certain of our agreements with Fingerhut
and our credit facilities. Therefore, prior to closing the transaction, we
increased the change in control ownership percentage from 30 to 35 or otherwise
exempted the Lee Company from the change in control provision in its agreements.

     Prior to shareholder approval and the receipt of notice that there was no
regulatory objection to the Series C Preferred investment, the Lee Company
agreed to purchase $200 million in Series B Perpetual Preferred Stock and $100
million in 12% Senior Notes due 2006. We also issued the Lee Company 7.5 million
ten-year warrants to purchase shares of our common stock.

     On March 12, 1999, shareholders approved the conversion of the Series B
Preferred and 12% Senior Notes into Series C Preferred. Notice was received on
May 28, 1999, that there was no regulatory objection to the conversion to the
Series C Preferred. On June 1, 1999, the Series B Preferred and the 12% Senior
Notes were extinguished, and the warrants were canceled causing a one-time,
non-cash, accounting adjustment. The excess of the fair value of the Series C
Preferred over the carrying value of the Series B Preferred and the 12% Senior
Notes at the time of the conversion was allocated to the 12% Senior Notes and
the Series B Preferred based upon their initial fair values. To arrive at net
income applicable to common stockholders in the calculation of earnings per
share, the amount allocated to the 12% Senior Notes was recognized as an
extraordinary loss from the early extinguishment of debt in the amount of $50.8
million and the amount allocated to the Series B Preferred was recognized as a
reduction of net income applicable to common stockholders in the amount of
$101.6 million. The extraordinary loss attributable to the 12% Senior Notes is
not recorded net of taxes. These adjustments did not have an impact on total
stockholders' equity.


NOTE 7  - STOCK OPTIONS

     We offer the Metris Companies Inc. Long-Term Incentive and Stock Option
Plan, which permits a variety of stock-based grants and awards and gives us
flexibility in tailoring our long-term compensation programs. Originally, this
stock option plan permitted up to 3.7 million shares of common stock for awards
of options, subject to certain adjustments in certain circumstances. In 1998,
the Board of Directors amended the plan to provide 8.0 million shares of common
stock for awards of stock options or other stock-based awards, subject to
adjustment in certain circumstances. As of December 31, 1999 and 1998, 1.5
million and 3.0 million shares, respectively, were available for grant. There
were 0.6 million shares available for grant at December 31, 1997, prior to the
amendment which increased the total number of shares available for awards under
the plan to 8.0 million.

     The Compensation Committee has the authority to determine the exercise
prices, vesting dates or conditions, expiration dates and other material
conditions upon which options or awards may be exercised, except that the option
price for Incentive Stock Options ("ISOs") may not be less than 100% of the fair
market value of the common stock on the date of grant (and not less than 110% of
the fair market value in the case of an ISO granted to any employee owning more
than 10% of the common stock) and the terms of nonqualified stock options may
not exceed 15 years from the date of grant (not more than 10 years for ISOs and
five years for ISOs granted to any employee owning more than 10% of the common
stock). Full- or part-time employees, consultants or independent contractors are
eligible to receive nonqualified options and awards. Only full- or part-time
employees are eligible to receive ISOs.

     During 1999, 1998 and 1997, we granted 1.8 million, 2.1 million and 0.6
million options, respectively, to officers and employees. Restricted stock
grants are also issued under the stock option plan to our executive officers. A
total of 0.2 million common shares were granted in 1999, with an approximate
aggregate market value of $4.0 million at the time of the grant. The market
value of these restricted shares at the date of grant is amortized into expense
over a period not less than the restriction period. We recognized $0.6 million
in 1999 for these restricted shares. If the restrictions have been removed,
generally upon death, disability or retirement, the remaining unamortized market
value of the restricted shares is expensed.

     We also offer the Metris Companies Inc. Non-Employee Director Stock Option
Plan. Originally, such plan permitted up to 40,000 shares of common stock for
awards of options, subject to certain adjustments in certain circumstances. In
1997, the Board of Directors amended the plan to provide up to 200,000 shares of
common stock for awards of options, subject to adjustments in certain
circumstances. This Director Plan was approved by our stockholders at the 1998
annual meeting. In 1999, the Board of Directors amended the plan to provide up
to 500,000 shares of common stock for awards of options, subject to adjustments
in certain circumstances. During 1999, 1998 and 1997, we granted 85,000, 50,000
and 40,000 options, respectively. At December 31, 1999, 1998 and 1997, 305,000,
90,000 and 140,000 shares, respectively, were available for grant.

     We have adopted the disclosure-only provisions of SFAS No. 123 "Accounting
for Stock-Based Compensation." Accordingly, we continue to account for
stock-based compensation under the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." Under the guidelines
of Opinion 25, compensation cost for stock-based employee compensation plans is
recognized based on the difference, if any, between the quoted market price of
the stock on the date of grant and the amount an employee must pay to acquire
the stock. Had compensation cost for these plans been determined based on the
fair value methodology prescribed by SFAS 123, our net earnings and earnings per
share would have been reduced to the pro forma amounts indicated below:


                                                   Year Ended December 31,
                                                  1999        1998        1997
                                                  ----        ----        ----
Net income as reported ......................  $ 64,555    $  57,348   $  38,058
Net income pro forma ........................    59,733       47,264      36,819
Diluted (loss)/earnings per share as reported     (1.60)        1.41        0.94
Diluted (loss)/earnings per share pro forma .     (1.72)        1.18        0.91

     The above pro forma amounts may not be representative of the effects on
reported net earnings for future years. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model. The
following weighted-average assumptions were used for grants in 1999, 1998 and
1997, respectively: dividend yield of 0.10%, 0.10% and 0.11%; expected
volatility of 55.4%, 71.3% and 68.2%; risk-free interest rate of 5.30%, 4.72%
and 6.34%; and expected lives of six years, seven years, and seven years,
respectively.


<PAGE>


     Information regarding our stock option plans for 1999, 1998 and 1997, is as
follows:
<TABLE>

                                                           Year Ended December 31,

                                              1999                  1998               1997
                                              ----                  ----               ----
                                                Weighted-              Weighted-            Weighted-
                                                 Average                Average              Average
                                                Exercise               Exercise             Exercise
                                       Shares    Price       Shares     Price      Shares    Price
                                       ------    -----       ------     -----      ------    -----

<S>                                  <C>         <C>       <C>         <C>       <C>          <C>
Options outstanding, beginning of
   year ..........................   5,241,400   $12.84    3,364,400   $ 7.52    2,817,400    $ 4.47
Options exercised ................      74,500     9.60       69,500     8.00           --        --
Options granted ..................   1,907,276    20.20    2,161,000    21.78      677,000     20.29
Options canceled/forfeited.......      321,100    20.68      214,500    20.88      130,000      8.00
                                     ---------   ------    ---------   ------    ---------    ------
Options outstanding,
   end of year ...................   6,753,076   $14.58    5,241,400   $12.84    3,364,400    $ 7.52
                                     =========             =========             =========

Weighted-average fair value of
   options granted during the year               $ 9.80                $16.16                 $14.15
</TABLE>

     The following table summarizes information about stock options outstanding
at December 31, 1999:

<TABLE>
                                       Options Outstanding                      Options Exercisable
                                       -------------------                      -------------------
                                             Weighted-
                                              Average      Weighted-                          Weighted-
                                Number       Remaining      Average           Number           Average
                             Outstanding    Contractual    Exercise         Exercisable        Exercise
                             at 12/31/99       Life          Price          at 12/31/99         Price
                             -----------       ----          -----          -----------         -----
Exercise Price

<S>                           <C>               <C>        <C>               <C>                <C>
       $ 1.38 ..............  1,704,400         5.1        $ 1.22            1,504,400          $ 1.38
$ 8.00-$18.25 ..............  1,905,000         7.8         11.34            1,705,000           10.95
$18.26-$27.75 ..............  2,108,176         8.8         21.03              382,000           21.00
$27.76-$34.69 ..............  1,035,500         8.6         29.41              766,000           29.25
                              ---------         ---        ------            ---------          ------
                              6,753,076         7.5        $14.58            4,357,400          $11.74
                              =========                                      =========
</TABLE>


     Employee Stock Purchase Plan

     During the third quarter of 1999, we adopted an employee stock purchase
plan (ESPP), whereby eligible employees may authorize payroll deductions of up
to 15% of their salary to purchase shares of our common stock. Under the plan,
shares of our common stock may be purchased at the end of each monthly offering
period at 85% of the lower of the fair market value on the first or last day of
the monthly offering period. Employees contributed $0.7 million to purchase
26,681 shares of common stock under the ESPP for 1999. We are authorized to
issue up to 1.7 million shares of common stock to employees under the plan, and
as of December 31, 1999 there were approximately 1.7 million shares available
for future issuance.

     Management Stock Purchase Plan

     During the third quarter of 1999, effective January 1, 2000, we adopted a
management stock purchase plan (MSPP), whereby any employee who is a Senior Vice
President or higher and who participates in the Metris Management Incentive
Bonus Plan is eligible to participate in the MSPP. Participants may elect to
defer up to 50% of their bonus received under the Management Bonus Plan, which
is credited to a stock purchase account as restricted stock units. We will make
a match of $1 for every $3 contributed by the participant. The participant's
contributions are vested immediately and our matching contributions vest after
three years (two years for contributions made for the year of adoption). We are
authorized to issue up to 300,000 shares of common stock to employees under the
plan, and as of December 31, 1999, 100% of the authorized shares were available
for future issuance.

     Supplemental Executive Retirement Plan

     Our funded Supplemental Executive Retirement Plan ("SERP"), established
in 1999, provides officers and other members of senior management with
supplemental retirement benefits in excess of limits imposed on qualified plans
by federal tax law. The SERP is an account balance plan to which we will make
annual contributions targeted to provide 60% of the average of the participant's
final five years of salary and bonus with us. These benefits will be paid in 15
annual installments beginning the year after they become eligible to receive
benefits. Participants are eligible to receive benefits upon leaving our
employment if they are at least 65 years of age or at least age 55 with five
years of plan participation, if a change of control occurs or in the event of
death. We recognized $2.2 million dollars of expense in 1999 related to the SERP
plan. This expense was calculated based on actuarial assumptions regarding years
of participation, future investment returns and participants continuing in the
plan until age 65.


NOTE 8 - EMPLOYEE BENEFIT PLANS

     We offer a defined contribution plan that is intended to qualify under
section 401(k) of the Internal Revenue Code. The 401(k) Plan provides retirement
benefits for eligible employees. Eligible employees may elect to contribute to
the 401(k) Plan, and we match a portion of employee contributions and make
discretionary contributions based upon our financial performance. For the years
ended December 31, 1999, 1998 and 1997, we contributed $1.8 million, $0.9
million and $0.9 million to the 401(k), respectively.


<PAGE>


NOTE 9 - INCOME TAXES

     The components of the provision for income taxes consisted of the
following:

                                Year Ended December 31,

                           1999          1998           1997
                           ----          ----           ----

Current:
   Federal ..........   $ 94,309       $ 98,428       $ 66,496
   State ............     14,236          8,355          4,663
Deferred ............    (32,592)       (70,883)       (47,334)
                        --------       --------       --------
                        $ 75,953       $ 35,900       $ 23,825
                        ========       ========       ========

     A reconciliation of our effective income tax rate compared to the statutory
federal income tax rate is as follows:

                                                     Year Ended December 31,
                                                     1999      1998      1997
                                                     ----      ----      ----

Statutory federal income tax rate ...............    35.0%     35.0%     35.0%
State income taxes, net of federal benefit ......     3.2%      3.2%      3.2%
Other, net ......................................     1.5%      0.3%      0.3%
                                                     ----      ----      ----
Effective income tax rate .......................    39.7%     38.5%     38.5%
                                                     ----      ----      ----

     Our deferred tax assets and liabilities are as follows:

                                                                December 31,
                                                              1999       1998
                                                              ----       ----

Deferred  income  tax  assets   resulting  from
   future   deductible   temporary differences:
   Allowance for loan losses ............................   $196,840   $119,518
   Deferred revenues ....................................     48,200     32,334
   Other ................................................     19,378     18,199
                                                            --------   --------
Total deferred tax assets ...............................   $264,418   $170,051

Deferred  income tax  liabilities  resulting  from
   future  taxable  temporary differences:
   Accrued interest on credit card loans ................   $ 65,260   $  5,048
   Deferred costs .......................................     11,464     10,672
   Other ................................................      2,081      1,310
                                                            --------   --------
Total deferred tax liabilities ..........................   $ 78,805   $ 17,030
                                                            --------   --------
Net deferred tax assets .................................   $185,613   $153,021
                                                            ========   ========

     We believe, based on our history of operating earnings, expectations for
operating earnings in the future, and the expected reversal of taxable temporary
differences, earnings will be sufficient to fully utilize the deferred tax
assets.

NOTE 10 - RELATED PARTY TRANSACTIONS

     Prior to September 1998, Fingerhut owned approximately 83% of our
outstanding common shares. In September 1998, Fingerhut distributed the
remaining shares of the Company to shareholders of Fingerhut in a tax free
distribution.

     Information related to transactions with Fingerhut have not been presented
for the year ended December 31, 1999; as Fingerhut is no longer considered a
related party after distributing their remaining shares. Prior to the
distribution of the shares, Fingerhut and its various subsidiaries had
historically provided financial and operational support to us. We believe the
fees paid for the operational support reasonably approximate market rates for
the services performed. The direct and allocated expenses represent charges for
various administrative services. We have also entered into several other
agreements with Fingerhut that detail further business arrangements between the
companies. Each of these agreements was negotiated and we believe they
reasonably approximate contracts between unrelated third parties.

     The following table summarizes the amounts of revenues, direct expense
charges, cost allocations (including net interest income or expense), and our
costs of the agreements mentioned above for each of the years reflected in our
financial statements.

                                                      Year Ended December 31,

                                                           1998      1997
                                                           ----      ----
Revenues:
Fee-based services ...................................   $15,439   $ 9,030
Expenses:

Credit card account and other product solicitation and
   marketing expenses ................................    10,796     9,551
Data processing services and communications ..........     2,344     1,837
Other ................................................       659     1,336


     The Lee Company investment (see Note 6) would have resulted in a "Change of
Control" as defined in certain agreements between us and Fingerhut, which would
have permitted Fingerhut to terminate any or all of the agreements. On December
8, 1998, we obtained a waiver agreement from Fingerhut to waive their rights to
terminate the agreements if a change of control occurred as a result of the
conversion.

     Pursuant to the waiver agreement, the Company and Fingerhut amended certain
of their other agreements. The most significant change was made in the database
access agreement. Our exclusive license to use Fingerhut's customer database to
market financial service products will now become non-exclusive after October
31, 2001.

     In the ordinary course of business, our executive officers may have credit
card loans issued by us. Pursuant to our policy, such loans are issued on the
same terms as those prevailing at the time for comparable loans with unrelated
persons and do not involve more than the normal risk of collectibility.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

     Commitments to extend credit to consumers represent the unused credit
limits on open credit card accounts. These commitments amounted to $9.7 billion,
$5.9 billion and $4.1 billion as of December 31, 1999, 1998 and 1997,
respectively. While these amounts represent the total lines of credit available
to our customers, we have not experienced and do not anticipate all of our
customers will exercise their entire available line at any given point in time.
We also have the right to increase, reduce, cancel, alter or amend the terms of
these available lines of credit at any time.

     We lease certain office facilities and equipment under various cancelable
and non-cancelable operating lease agreements that provide for the payment of a
proportionate share of property taxes, insurance and other maintenance expenses.
These leases also may include scheduled rent increases and renewal options.
Rental expense for these operating leases for the years ended December 31, 1999,
1998 and 1997, was $11.1 million, $6.4 million and $3.9 million, respectively.

     Future minimum lease commitments at December 31, 1999, under cancelable and
non-cancelable operating leases are as follows:

2000                                                            $14,322
2001                                                             13,870
2002                                                             12,400
2003                                                             10,306
2004                                                              9,865
Thereafter                                                       20,353
                                                                -------
   Total minimum lease payments                                 $81,116
                                                                =======


NOTE 12 - CAPITAL REQUIREMENTS AND RESTRICTED PAYMENTS

     In the normal course of business, we enter into agreements, or are subject
to regulatory requirements, that result in cash, debt and dividend or other
capital restrictions.

     The Federal Reserve Act imposes various legal limitations on the extent to
which banks can finance or otherwise supply funds to their affiliates. In
particular, Direct Merchants Bank is subject to certain restrictions on any
extensions of credit to or other covered transactions, such as certain purchases
of assets, with us and our affiliates. Such restrictions limit Direct Merchants
Bank's ability to lend to us and our affiliates. Additionally, Direct Merchants
Bank is limited in its ability to declare dividends to us in accordance with the
national bank dividend provisions.

     Direct Merchants Bank is subject to certain capital adequacy guidelines
adopted by the OCC. At December 31, 1999 and 1998, Direct Merchants Bank's Tier
1 risk-based capital ratio, risk-based total capital ratio and Tier 1 leverage
ratio exceeded the minimum required capital levels, and Direct Merchants Bank
was considered a "well- capitalized" depository institution under regulations of
the OCC.

     We are also bound by restrictions set forth in the indentures related to
the Senior Notes dated November 7, 1997, and July 15, 1999. Pursuant to those
indentures, we may not make dividend payments in the event of a default or if
all such restricted payments would exceed 25% of our aggregate cumulative net
income.


NOTE 13 - CONCENTRATIONS OF CREDIT RISK

     A concentration of credit risk is defined as significant credit exposure
with an individual or group engaged in similar activities or affected similarly
by economic conditions. We are active in originating credit card loans
throughout the United States, and no individual or group had a significant
concentration of credit risk at December 31, 1999 or 1998. The following table
details the geographic distribution of our retained, sold and managed credit
card loans:

                                       Retained       Sold        Managed
                                       --------       ----        -------
December 31, 1999

California ........................   $  224,359   $  702,254   $  926,613
Texas .............................      158,760      496,927      655,687
New York ..........................      134,087      419,700      553,787
Florida ...........................      131,960      413,043      545,003
Ohio ..............................       73,313      229,473      302,786
Illinois ..........................       66,947      209,546      276,493
Pennsylvania ......................       56,025      175,363      231,388
All others ........................      917,558    2,872,007    3,789,565
                                      ----------   ----------   ----------
   Total ..........................   $1,763,009   $5,518,313   $7,281,322
                                      ==========   ==========   ==========



                                       Retained        Sold       Managed
                                       --------        ----       -------
December 31, 1998

California ........................   $   94,521   $  569,205   $  663,726
Texas .............................       76,542      460,937      537,479
Florida ...........................       57,138      344,084      401,222
New York ..........................       55,231      332,598      387,829
Ohio ..............................       31,936      192,320      224,256
Illinois ..........................       26,994      162,558      189,552
Pennsylvania ......................       22,795      137,274      160,069
All others ........................      391,742    2,359,167    2,750,909
                                      ----------   ----------   ----------
      Total .......................   $  756,899   $4,558,143   $5,315,042
                                      ==========   ==========   ==========

     We target our consumer credit products primarily to moderate-income
consumers. Primary risks associated with lending to this market are that they
may be more sensitive to future economic downturn, which may make them more
likely to default on their obligations.


<PAGE>


NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

     We have estimated the fair value of our financial instruments in accordance
with SFAS No. 107, "Disclosures About Fair Value of Financial Instruments."
Financial instruments include both assets and liabilities, whether or not
recognized in our consolidated balance sheets, for which it is practicable to
estimate fair value. Additionally, certain intangible assets recorded on the
consolidated balance sheets, such as purchased credit card relationships, and
other intangible assets not recorded on the consolidated balance sheets (such as
the value of the credit card relationships for originated loans and the
franchise values of our various lines of business) are not considered financial
instruments and, accordingly, are not valued for purposes of this disclosure. We
believe that there is substantial value associated with these assets based on
current market conditions, including the purchase and sale of such assets.
Accordingly, the aggregate estimated fair value amounts presented do not
represent the entire underlying value of the Company.

     Quoted market prices generally are not available for all of our financial
instruments. Accordingly, in cases where quoted market prices are not available,
fair values were estimated using present value and other valuation techniques
that are significantly affected by the assumptions used, including the discount
rate and estimated future cash flows. These assumptions are based on historical
experience and assessments regarding the ultimate collectibility of assets and
related interest, and estimates of product lives and repricing characteristics
used in our asset/liability management process. These assumptions involve
uncertainties and matters of judgment, and therefore, cannot be determined with
precision. Thus, changes in these assumptions could significantly affect the
fair-value estimates.

     A description of the methods and assumptions used to estimate the fair
value of each class of our financial instruments is as follows:

Cash and cash equivalents and accrued interest and fees receivable

     The carrying amounts approximate fair value due to the short-term nature of
these instruments.

Net retained interests in loans securitized, loans held for securitizations and
    credit card loans

     Currently, credit card loans are originated with variable rates of interest
that adjust with changing market interest rates. Thus, carrying value less the
allowance for loan losses, approximates fair value. However, this valuation does
not include the value that relates to estimated cash flows generated from new
loans from existing customers over the life of the cardholder relationship.
Accordingly, the aggregate fair value of the credit card loans does not
represent the underlying value of the established cardholder relationships.


<PAGE>


Other receivables due from credit card securitizations, net

     The following components of this net asset are as follows:

Interest-only strip

     The fair value of the interest-only strip is estimated by discounting the
expected future cash flows from the trust and each of the conduits at rates
which we believe to be consistent with those that would be used by an
independent third party. However, because there is no active market for this,
the fair values presented may not be indicative of the value negotiated in an
actual sale. The future cash flows used to estimate fair value are limited to
the securitized receivables that exist at year end and does not reflect the
value associated with future receivables generated by cardholder activity. The
significant assumptions used to estimate fair value include: (i) discount rates;
(ii) customer payment rates; and (iii) anticipated charge-offs over the life of
the loans:

                                       December 31,

                                1999                 1998
                                ----                 ----
Discount rate .........          12%                  10%
Payment rate ..........           7%                   6%
Default rate ..........          17%                  16%

Interest rate cap and floor agreements

     The fair values of interest rate cap and floor agreements were obtained
from dealer quoted prices. These values generally represent the estimated
amounts we would receive or pay to terminate the agreements at the reporting
dates, taking into consideration current interest rates and the current
creditworthiness of the counterparties.

Other amounts

     For the other components of other receivables due from credit card
securitizations, net, the carrying amount is a reasonable estimate of the fair
value.

Debt

     Short-term borrowings are made with variable rates of interest that adjust
with changing market interest rates. Thus, carrying value approximates fair
value.

     The fair value of long-term debt was obtained from quoted market prices,
when available.

Deposits

     The fair value for fixed rate certificates of deposit are estimated based
on quoted market prices of comparable instruments.


<PAGE>


     The estimated fair values of our financial instruments are summarized as
follows:
<TABLE>

                                                             December 31,

                                                  1999                       1998
                                                  ----                       ----
                                          Carrying     Estimated     Carrying   Estimated
                                           Amount     Fair Value      Amount    Fair Value
                                           ------     ----------      ------    ----------

<S>                                      <C>          <C>          <C>          <C>
Cash and cash equivalents ............   $  194,433   $  194,433   $   37,347   $   37,347
Retained interest in loans
   securitized, net ..................    1,010,373    1,010,373      360,186      360,186
Credit card loans ....................      131,038      131,038           --           --
Loans held for
   Securitization ....................        2,570        2,570        3,430        3,430
Other receivables due from credit card
   securitizations, net:
   Interest rate cap agreements ......       27,113       34,526        2,912        2,925
   Interest rate floor agreements ....           23            6          187        3,233
   Interest only strip ...............           --           --           --           --
   Other amounts .....................      216,842      216,842      182,836      182,836
Debt .................................      345,012      346,218      310,896      317,666
Deposits .............................      775,381      775,381           --           --
</TABLE>


NOTE 15 - DERIVATIVE FINANCIAL INSTRUMENTS

     We enter into interest rate floor, cap and swap agreements to hedge the
cash flow and earnings impact of fluctuating market interest rates on the spread
between the floating rate loans and the floating and fixed rate securities
issued to fund the loans. In connection with the issuance of term asset-backed
securities by the trust, we enter into term interest rate cap agreements with
highly rated bank counterparties to effectively cap the potentially negative
impact to us of increases in the floating interest rate of the securities. These
interest rate cap agreements are for original terms ranging from three to ten
years and will terminate between February 2002 and January 2010.


<PAGE>

<TABLE>


                              Notional Amounts of Interest Rate Swap,
                           Cap and Floor Agreements Purchased and Sold
                           -------------------------------------------


                                                  Weighted                           Weighted
Year Ended December 31,                            Average                            Average
(Dollars in thousands)                            Interest                           Interest
                                   1999             Rate               1998            Rate
                                   ----          ----------            ----         ----------
Interest rate swap
     agreements:
<S>                            <C>                   <C>         <C>                   <C>
     Beginning Balance .....   $       --             --         $1,328,000            6.5%
     Additions .............           --             --                 --             --
     Maturities/Terminations           --             --          1,328,000            6.5%
                               ----------                        ----------
     Ending Balance ........   $       --             --         $       --             --
                               ==========                        ==========

Interest rate caps:
     Beginning Balance .....   $2,393,021            8.7%        $       --             --
     Additions .............    2,460,000            9.5%         3,393,021            8.8%
     Maturities/Terminations      640,000            7.4%         1,000,000            9.3%
                               ----------                        ----------
     Ending Balance ........   $4,213,021            9.4%        $2,393,021            8.7%
                               ==========                        ==========

Interest rate floor:
     Beginning Balance .....   $  467,367            6.2%        $       --             --
     Additions .............           --             --          1,293,467            6.4%
     Maturities/Terminations      409,034            6.2%           826,100            6.5%
                               ----------                        ----------
     Ending Balance ........   $   58,333            6.2%        $  467,367            6.2%
                               ==========                        ==========
</TABLE>

     Interest rate risk management contracts are generally expressed in notional
principal or contract amounts that are much larger than the amounts potentially
at risk for nonpayment by counterparties. Therefore, in the event of
nonperformance by the counterparties, our credit exposure is limited to the
uncollected interest and contract market value related to the contracts that
have become favorable to us. We manage the credit risk of such contracts through
established risk limits and monitoring of the credit ratings of our
counterparties. We currently have no reason to anticipate nonperformance by any
counterparty.


NOTE 16 - SEGMENTS

     We operate in two principal areas: consumer credit products and fee-based
services. Our primary consumer credit products are unsecured and secured credit
cards, including the Direct Merchants Bank MasterCard(R) and Visa(R). Our credit
card accounts include customers obtained from third-party lists and other
customers for whom general credit bureau information is available.

     We market our fee-based services, including (i) debt waiver protection for
unemployment, disability and death, (ii) membership programs such as card
registration, purchase protection and other club memberships, and (iii)
third-party insurance, directly to our credit card customers and customers of
third parties. We currently administer our extended service plans sold through a
third-party retailer, and the customer pays the retailer directly. In addition,
we develop customized targeted mailing lists from information contained in our
databases for use by unaffiliated companies in their own product solicitation
efforts that do not directly compete with our efforts.

     The segment information reported below is presented on a managed basis. We
use this basis to review segment performance and to make operating decisions. To
do so, the income statement and balance sheet are adjusted to reverse the
effects of securitizations. Presentation on a managed basis is not in conformity
with generally accepted accounting principles. The elimination column in the
segment table includes adjustments to present the information on an owned basis
as reported in the financial statements of this annual report.

     The expenses, assets and liabilities attributable to corporate functions
are not allocated to the operating segments, such as employee compensation, data
processing services and communications, third-party servicing expenses, and
other expenses including occupancy, depreciation and amortization, professional
fees, and other general and administrative expenses. These expenses are included
in the reconciliation of the income before income taxes (and extraordinary loss)
for the reported segments to the consolidated total. We do not allocate capital
expenditures for leasehold improvements, capitalized software and furniture and
equipment to operating segments. There were no operating assets located outside
of the United States for the periods presented.

     The fee-based services operating segment pays a commission to the consumer
credit products segment for successful marketing efforts to the consumer credit
products segment's cardholders at a rate similar to those paid to our other
third parties. The fee-based services segment reports interest income and the
consumer credit products segment reports interest expense at our weighted
average borrowing rate for the excess cash flow generated by the fee-based
services segment and used by the consumer credit products segment to fund the
growth of cardholder balances.

<TABLE>
                                               1999
                                               ----

                         Consumer
                          Credit      Fee-Based
                         Products      Services     Reconciliation (a)    Consolidated
                         --------      --------     ------------------    ------------
<S>                     <C>          <C>            <C>                    <C>
Interest revenue ....   $1,163,663   $    4,649     $    (932,143) (b)     $  236,169
Interest expense ....      340,066           --          (284,225) (c)         55,841
                        ----------   ----------     -------------          ----------
Net interest income .      823,597        4,649          (647,918)            180,328

Other revenue .......      368,500      175,091            80,181             623,772
Total revenue .......    1,532,163      179,740          (851,962)            859,941

Income before income .
   taxes and extra- ..
    ordinary loss ....     392,453(d)   100,646 (d)      (301,783) (e)        191,316
Income taxes ........           --           --            75,953              75,953

Total assets ........   $7,190,903   $  116,106     $  (5,261,927) (f)     $2,045,082

</TABLE>

<TABLE>
                                                 1998
                                                 ----

                         Consumer
                          Credit       Fee-Based
                         Products       Services     Reconciliation (a)   Consolidated
                         --------       --------     ------------------   ------------
<S>                     <C>             <C>          <C>                  <C>
Interest revenue ....   $  740,768      $    2,754   $    (630,311) (b)   $   113,211
Interest expense ....      237,710              --        (207,197) (c)        30,513
                        ----------      ----------   -------------        -----------
Net interest income .      503,058           2,754        (423,114)            82,698

Other revenue .......      239,597         109,123         (33,240)           315,480
Total revenue .......      980,365         111,877        (663,551)           428,691

Income before
  income taxes ......      188,148(d)       73,279 (d)    (168,179) (e)        93,248
Income taxes ........           --              --          35,900             35,900

Total assets ........   $5,375,925      $   58,052    $ (4,488,258) (f)    $  945,719
</TABLE>




<PAGE>

<TABLE>
                                               1997
                                               ----

                         Consumer
                          Credit       Fee-Based
                         Products       Services     Reconciliation (a)   Consolidated
                         --------       --------     ------------------   ------------
<S>                     <C>            <C>           <C>                    <C>
Interest revenue ....   $  435,833     $    2,484    $    (369,123) (b)     $ 69,194
Interest expense ....      131,956             --         (120,005) (c)       11,951
                        ----------     ----------    -------------           --------
Net interest income .      303,877          2,484         (249,118)           57,243

Other revenue .......      149,456         64,532          (26,192)          187,796
Total revenue .......      585,289         67,016         (395,315)          256,990

Income before
  income taxes ......      110,973 (d)     49,162(d)       (98,252) (e)       61,883
Income taxes ........           --             --           23,825            23,825

Total assets ........   $3,505,165     $   30,488    $  (2,996,991) (f)     $538,662

</TABLE>

(a) The reconciliation column includes: intercompany eliminations; amounts
not allocated to segments; and adjustments to the amounts reported on a managed
basis to reflect the effects of securitization.

(b) The reconciliation to consolidated owned interest revenue includes the
elimination of $4.6 million, $2.8 million and $2.5 million of intercompany
interest received by the fee-based services segment from the consumer credit
products segment for 1999, 1998 and 1997, respectively.

(c) The reconciliation to consolidated owned interest expense includes the
elimination of $4.6 million, $2.8 million and $2.5 million of intercompany
interest paid by the consumer credit products segment to the fee-based services
segment for 1999, 1998 and 1997, respectively.

(d) Income before income taxes includes intercompany commissions paid by
the fee-based services segment to the consumer credit products segment for
successful marketing efforts to consumer credit products cardholders of $6.7
million, $3.3 million and $4.4 million for 1999, 1998 and 1997, respectively.

(e) The reconciliation to the owned income before income taxes includes:
unallocated costs related to employee compensation; data processing and
communications; third-party servicing expenses; and other expenses. The majority
of these expenses, although not allocated for the internal segment reporting
used by management, relate to the consumer credit products segment.

(f) Total assets include the assets attributable to corporate functions not
allocated to operating segments and the removal of investors interest in
securitized loans to present total assets on an owned basis.

NOTE 17 - DEBT AND DEPOSITS

     We have a $200 million, term revolving credit facility and a $100 million
term loan, (collectively, the "credit facilities"), with a syndicate of banks
and money market mutual funds. At December 31, 1999, we were in compliance with
all financial covenants under these agreements. At December 31, 1999 and 1998,
we had outstanding borrowings of $100 million and $110 million, respectively,
under the credit facilities. The weighted average interest rates on the
borrowings at December 31, 1999 and 1998, were 8.7% and 7.9%, respectively.

     On July 15, 1999, we privately issued and sold $150 million of 10.125%
Senior Notes due 2006 pursuant to an exemption from registration under rule
144(a) of the Securities Act of 1933. In October 1999, we commenced an exchange
offer for the Senior Notes pursuant to a registration statement. The exchange
offer was completed in November 1999. The terms of the new Senior Notes are
identical in all material respects to the original private issue. The Senior
Notes due 2006 are unconditionally guaranteed on a senior basis, jointly and
severally, by Metris Direct, Inc. (the "Guarantor"), and all of our future
subsidiaries that guarantee any of our indebtedness, including the credit
facilities. The guarantee is an unsecured obligation of the Guarantor and ranks
equally with all existing and future unsubordinated indebtedness. We also have
$100 million of 10% Senior Notes due 2004 outstanding with terms and conditions
substantially similar to the Senior Notes due 2006.

     Beginning in the first quarter of 1999, Direct Merchants Bank began issuing
certificates of deposit in increments of $100,000. As of December 31, 1999,
$758.5 million of CDs were outstanding with maturities ranging from three months
to two years with fixed interest rates ranging from 5.2% to 6.6%.


<PAGE>


     Our debt and CDs outstanding as of December 31, 1999, mature as follows:

                        Debt                   CDs                    Total
                        ----                   ---                    -----

2000            $            --       $       543,200         $       543,200
2001                         --               215,300                 215,300
2002                        800                    --                     800
2003                    100,000                    --                 100,000
2004                    100,000                    --                 100,000
Thereafter              144,212                    --                 144,212
                ---------------       ---------------         ---------------
Total           $       345,012       $       758,500         $     1,103,512
                ===============       ===============         ===============

     As part of the initial Lee Company investment, we issued the 12% Senior
Notes (see Note 6) which were similar in all material respects to the Senior
Notes due 2004. These notes were converted into Series C Preferred Stock in the
second quarter of 1999 after shareholders approved the conversion and the
Company received notice that there was no regulatory objection to the
conversion. We also have approximately $0.9 million of debt with local
governments to support growth in those areas.

     Metris Direct, Inc., our wholly-owned subsidiary and guarantor, has various
subsidiaries which have not guaranteed the Senior Notes. The following condensed
consolidating financial statements of (a) the Company; (b) the guarantor
subsidiaries; and (c) the non-guarantor subsidiaries are presented for purposes
of complying with SEC reporting requirements. Separate financial statements of
Metris Direct, Inc. and the non-guaranteeing subsidiaries are not presented
because management has determined that the subsidiaries financial statements
would not be material to investors.


<PAGE>


<TABLE>

                                                             METRIS COMPANIES INC.
                                                    Supplemental Consolidating Balance Sheets
                                                                December 31, 1999
                                                              (Dollars in thousands)

                                      Metris            Guarantor         Non-Guarantor
                                  Companies Inc.      Subsidiaries         Subsidiaries        Eliminations      Consolidated
                                  --------------      ------------         ------------        ------------      ------------

Assets:
<S>                                <C>                <C>                 <C>                  <C>                <C>
Cash and cash equivalents .....    $    43,619        $       309         $   150,505          $        --        $   194,433
Net retained interests in
   loans securitized ..........           (228)                --           1,010,601                   --          1,010,373
Loans held for securitization/
   credit card loans ..........          2,570                 --             131,038                   --            133,608
Property and equipment, net                 --             33,152              23,762                   --             56,914
Prepaid expenses and deferred
   charges ....................             --             26,441              30,930                   --             57,371
Deferred income taxes .........         (1,835)            25,241             162,207                   --            185,613
Customer base intangible                    --                 --              83,809                   --             83,809
Other receivables due from
   credit card securitizations,
   net ........................              5                 --             243,973                   --            243,978
Other assets ..................         12,951              8,488              57,544                   --             78,983
Investment in subsidiaries ....      1,184,006          1,105,992                  --           (2,289,998)                --
                                   -----------        -----------         -----------          -----------        -----------
Total assets ..................    $ 1,241,088        $ 1,199,623         $ 1,894,369          $(2,289,998)       $ 2,045,082
                                   ===========        ===========         ===========          ===========       ============


Liabilities:
Deposits ......................    $    (1,000)       $        --         $   776,381          $        --         $  775,381
Debt ..........................        569,956            (82,779)           (142,165)                  --            345,012
Accounts payable ..............            494             12,337              33,019                   --             45,850
Current income taxes payable ..         16,183            (10,985)             17,771                   --             22,969
Deferred income ...............         22,231             58,856              90,579                   --            171,666
Accrued expenses and other
   liabilities ................          9,423             38,188              12,792                   --             60,403
                                   -----------        -----------         -----------          -----------        -----------
Total liabilities .............        617,287             15,617             788,377                   --          1,421,281
                                   -----------        -----------         -----------          -----------        -----------
Total stockholders' equity ....        623,801          1,184,006           1,105,992           (2,289,998)           623,801
                                   -----------        -----------         -----------          -----------        -----------
Total liabilities and
   stockholders' equity .......    $ 1,241,088        $ 1,199,623         $ 1,894,369          $(2,289,998)      $  2,045,082
                                   ===========        ===========         ===========          ===========       ============

</TABLE>


<PAGE>

<TABLE>

                                                                  METRIS COMPANIES INC.
                                                        Supplemental Consolidating Balance Sheets
                                                                    December 31, 1998
                                                                 (Dollars in thousands)

                                           Metris       Guarantor    Non-Guarantor
                                       Companies Inc.  Subsidiaries  Subsidiaries    Eliminations     Consolidated
                                       --------------  ------------  ------------    ------------     ------------

Assets:
<S>                                     <C>            <C>            <C>            <C>              <C>
Cash and cash equivalents ...........   $    (5,007)   $      (156)   $    42,510    $        --      $    37,347
Net retained interests in loans
   securitized ......................           (97)            --        360,283             --          360,186
Loans held for securitization/credit
   card loans .......................         1,876             --          1,554             --            3,430
Property and equipment, net .........            --         18,243          3,739             --           21,982
Prepaid expenses and deferred charges        30,487         17,833         10,784             --           59,104
Deferred income taxes ...............         1,049         19,427        132,545             --          153,021
Customer base intangible ............            --             --         81,892             --           81,892
Other receivables due from credit
   card securitizations, net.........            --             --        185,935             --          185,935
Other assets ........................         5,989          6,989         29,844             --           42,822
Investment in subsidiaries ..........       756,455        774,986             --     (1,531,441)              --
                                        -----------    -----------    -----------    -----------      -----------
Total assets ........................   $   790,752    $   837,322    $   849,086    $(1,531,441)     $   945,719
                                        ===========    ===========    ===========    ===========      ===========

Liabilities:
Interest-bearing deposit from
   affiliate ........................   $    (1,000)   $        --      $   1,000    $        --      $        --
Debt ................................       318,298         15,021        (22,423)            --          310,896
Accounts payable ....................         3,140          3,786         12,165             --           19,091
Current income taxes payable ........         3,722         (5,692)        33,753             --           31,783
Deferred income .....................        31,753         47,515         45,624             --          124,892
Accrued expenses and other
   liabilities ......................         1,857         20,237          3,981             --           26,075
                                        -----------    -----------    -----------    -----------      -----------
Total liabilities ...................       357,770         80,867         74,100             --          512,737
                                        -----------    -----------    -----------    -----------      -----------
Total stockholders' equity ..........       432,982        756,455        774,986     (1,531,441)         432,982
                                        -----------    -----------    -----------    -----------      -----------
Total liabilities and stockholders'
   equity ...........................   $   790,752    $   837,322    $   849,086    $(1,531,441)     $   945,719
                                        ===========    ===========    ===========    ===========      ===========
</TABLE>


<PAGE>


<TABLE>
                                                       METRIS COMPANIES INC.
                                          Supplemental Consolidating Statements of Income
                                                   Year Ended December 31, 1999
                                                      (Dollars in thousands)

                                            Metris       Guarantor   Non-Guarantor
                                         Companies Inc. Subsidiaries  Subsidiaries    Eliminations    Consolidated
                                         -------------- ------------  ------------    ------------    ------------

<S>                                       <C>           <C>           <C>             <C>              <C>
Net Interest Income/(Expense) .........   $ (39,529)    $    (974)    $  220,831      $       --       $ 180,328
Provision for loan losses .............         248            --        174,552              --         174,800
                                          ---------     ---------      ---------       ---------       ---------
Net interest income/(expense) after
   provision for loan losses ..........     (39,777)         (974)        46,279              --           5,528
                                          ---------     ---------      ---------       ---------       ---------
Other Operating Income:
Net securitization and credit card
   servicing income ...................       5,601            (4)       313,276              --         318,873
Credit card fees, interchange and other
   credit card income .................         886        (4,088)       133,010              --         129,808
Fee-based services revenues ...........          --        51,341        123,750              --         175,091
                                          ---------     ---------      ---------       ---------       ---------
                                              6,487        47,249        570,036              --         623,772
                                          ---------     ---------      ---------       ---------       ---------
Other Operating Expense:
Credit card account and other product
   solicitation and marketing expenses           --        36,751         70,975              --         107,726
Employee compensation .................          --       110,886         11,531              --         122,417
Data processing services and
   communications .....................          --         8,726         43,629              --          52,355
Third-party servicing expense .........          --       (74,999)        88,614              --          13,615
Warranty and debt waiver underwriting
   and claims servicing expense .......          --         2,755         18,336              --          21,091
Credit card fraud losses ..............          17            --          7,367              --           7,384
Other .................................       1,071        32,997         79,328              --         113,396
                                          ---------     ---------      ---------       ---------       ---------
                                              1,088       117,116        319,780              --         437,984
                                          ---------     ---------      ---------       ---------       ---------
Income/(Loss) Before Income Taxes
   And Equity in Income of
   Subsidiaries .......................     (34,378)      (70,841)       296,535              --         191,316
Income taxes ..........................     (13,647)      (28,471)       118,071              --          75,953
Equity in income of subsidiaries ......     136,094       178,464             --        (314,558)             --
                                          ---------     ---------      ---------       ---------       ---------
Net Income/(Loss) .....................   $ 115,363     $ 136,094      $ 178,464       $(314,558)      $ 115,363
                                          =========     =========      =========       =========       =========
</TABLE>


<PAGE>


<TABLE>
                                                                    METRIS COMPANIES INC.
                                                      Supplemental Consolidating Statements of Income
                                                                Year Ended December 31, 1998
                                                                   (Dollars in thousands)

                                              Metris       Guarantor      Non-Guarantor
                                          Companies Inc.  Subsidiaries    Subsidiaries   Eliminations  Consolidated
                                          --------------  ------------    ------------   ------------  ------------

<S>                                        <C>             <C>             <C>            <C>             <C>
Net Interest Income/(Expense) ........     $  (6,553)      $ (24,444)      $ 113,695      $      --       $  82,698
Provision for loan losses ............           532              --          77,238             --          77,770
                                           ---------       ---------       ---------      ---------       ---------
Net interest income/(expense)
   after provision for loan
   losses ............................        (7,085)        (24,444)         36,457             --           4,928
                                           ---------       ---------       ---------      ---------       ---------
Other Operating Income:
Net securitization and credit
   card servicing income .............         9,668             (20)        128,573             --         138,221
Credit card fees, interchange
   and other credit card income ......           636              --          67,500             --          68,136
Fee-based services revenues ..........            --          28,425          80,698             --         109,123
                                           ---------       ---------       ---------      ---------       ---------
                                              10,304          28,405         276,771             --         315,480
                                           ---------       ---------       ---------      ---------       ---------
Other Operating Expense:
Credit card account and other
   product solicitation and
   marketing expenses ................            --          14,992          28,479             --          43,471
Employee compensation ................            --          55,980           6,647             --          62,627
Data processing services and
   communications ....................            --           5,276          30,169             --          35,445
Third-party servicing expense ........            --         (51,565)         62,639             --          11,074
Warranty and debt waiver
   underwriting and claims
   servicing expense .................            --           1,875          10,404             --          12,279
Credit card fraud losses .............            18              --           4,418             --           4,436
Other ................................           529          18,899          38,400             --          57,828
                                           ---------       ---------       ---------      ---------       ---------
                                                 547          45,457         181,156             --         227,160
                                           ---------       ---------       ---------      ---------       ---------
Income/(Loss) Before Income
   Taxes and Equity in Income
   of Subsidiaries ...................         2,672         (41,496)        132,072             --          93,248
Income taxes .........................         1,028         (16,768)         51,640             --          35,900
Equity in income of
   subsidiaries ......................        55,704          80,432              --       (136,136)             --
                                           ---------       ---------       ---------      ---------       ---------
Net Income/(Loss) ....................     $  57,348       $  55,704       $  80,432      $(136,136)      $  57,348
                                           =========       =========       =========      =========       =========
</TABLE>





<PAGE>



<TABLE>

                                                              METRIS COMPANIES INC.
                                                 Supplemental Consolidating Statements of Income
                                                          Year Ended December 31, 1997
                                                             (Dollars in thousands)


                                             Metris        Guarantor       Non-Guarantor
                                          Companies Inc.  Subsidiaries     Subsidiaries    Eliminations   Consolidated
                                          --------------  ------------     ------------    ------------   ------------
<S>                                         <C>            <C>             <C>              <C>            <C>
Net Interest Income/(Expense) ........      $ (12,690)     $    (432)      $  70,365        $      --      $  57,243
Provision for Loan Losses ............            682             --          43,307               --         43,989
                                            ---------      ---------       ---------      -----------       ---------
Net interest income/(expense)
   after provision for loan losses ...        (13,372)          (432)         27,058               --         13,254
                                            ---------      ---------       ---------      -----------       ---------
Other Operating Income:
Net securitization and credit card
   servicing income ..................         10,653             --          68,880               --         79,533
Credit card fees, interchange and
   other credit card income ..........            478            (21)         43,274               --         43,731
Fee-based services revenues ..........             --          9,655          54,877               --         64,532
                                            ---------      ---------       ---------      -----------      ---------
                                               11,131          9,634         167,031               --        187,796
                                            ---------      ---------       ---------      -----------      ---------
Other Operating Expense:
Credit card account and other
   product solicitation and
   marketing expenses ................             --          2,902          28,720               --         31,622
Employee compensation ................             --         32,735           2,465               --         35,200
Data processing services and
   communications ....................             --          2,883          17,204               --         20,087
Third-party servicing expense ........             51        (20,396)         33,056               --         12,711
Warranty and debt waiver
   underwriting and claims
   servicing expense .................             --            549           5,504               --          6,053
Credit card fraud losses .............             27             --           3,213               --          3,240
Other ................................            382         12,644          17,228               --         30,254
                                            ---------      ---------       ---------      -----------      ---------
                                                  460         31,317         107,390               --        139,167
                                            ---------      ---------       ---------      -----------      ---------
Income/(Loss) Before Income Taxes
   and Equity in Income of
   Subsidiaries ......................         (2,701)       (22,115)         86,699               --         61,883
Income taxes .........................         (1,040)        (8,475)         33,340               --         23,825
Equity in income of subsidiaries .....         39,719         53,359              --          (93,078)            --
                                            ---------      ---------       ---------      -----------      ---------
Net Income/(Loss) ....................      $  38,058      $  39,719       $  53,359      $   (93,078)     $  38,058
                                            =========      =========       =========      ===========      =========
</TABLE>





<PAGE>

<TABLE>

                                                         METRIS COMPANIES INC.
                                        Supplemental Condensed Consolidating Statements of Cash Flows
                                                        Year Ended December 31,
                                                        (Dollars in thousands)

1999
----
                                                          Metris       Guarantor    Non-Guarantor
                                                      Companies Inc.  Subsidiaries   Subsidiaries  Consolidated
                                                      --------------  ------------   ------------  ------------
Operating Activities:
<S>                                                    <C>            <C>            <C>            <C>
Net cash (used in) provided by
    operating activities ..........................    $   (12,089)   $   (19,710)   $   359,683    $   327,884
                                                       -----------    -----------    -----------    -----------
Investing Activities:
Proceeds from repayments of
    securitized loans ..............................            --             --        960,170        960,170
Net loans originated or collected ..................          (693)            --       (842,581)      (843,274)
Credit card portfolio acquisitions .................            --             --     (1,156,673)    (1,156,673)
Additions to premises and equipment ................            --        (20,944)       (20,780)       (41,724)
                                                       -----------    -----------    -----------    -----------
Net cash used in investing activities ..............          (693)       (20,944)    (1,059,864)    (1,081,501)
                                                       -----------    -----------    -----------    -----------
Financing Activities:
Net increase (decrease) in deposits ................            --             --        775,381        775,381
Net increase (decrease) in debt ....................       351,658        (97,800)      (119,742)       134,116
Cash dividends paid ................................        (1,390)          (804)           804         (1,390)
Net increase in equity .............................      (288,860)       139,723        151,733          2,596
                                                       -----------    -----------    -----------    -----------
Net cash provided by financing activities ..........        61,408         41,119        808,176        910,703
                                                       -----------    -----------    -----------    -----------
Net increase  in cash and cash equivalents .........        48,626            465        107,995        157,086
Cash and cash equivalents at beginning of year .....        (5,007)          (156)        42,510         37,347
                                                       -----------    -----------    -----------    -----------
Cash and cash equivalents at end of year ...........   $    43,619    $       309    $   150,505    $   194,433
                                                       ===========    ===========    ===========    ===========
</TABLE>



<TABLE>

1998
----

                                                          Metris       Guarantor    Non-Guarantor
                                                      Companies Inc.  Subsidiaries   Subsidiaries  Consolidated
                                                      --------------  ------------   ------------  ------------
Operating Activities:
<S>                                                   <C>            <C>            <C>            <C>
Net cash provided by (used in)
    operating activities ..........................   $    97,276    $   (22,625)   $    (9,739)   $    64,912
                                                      -----------    -----------    -----------    -----------
Investing Activities:
Proceeds from repayments of securitized loans .....            --             --      1,491,832      1,491,832
Net loans originated or collected .................         8,106             --       (909,846)      (901,740)
Credit card portfolio acquisitions ................            --             --       (921,558)      (921,558)
Additions to premises and equipment ...............            --         (8,414)        (2,400)       (10,814)
                                                      -----------    -----------    -----------    -----------
Net cash provided by (used in)
    investing activities ..........................         8,106         (8,414)      (341,972)      (342,280)
                                                      -----------    -----------    -----------    -----------
Financing Activities:
Net increase in debt ..............................        40,700          7,046         19,150         66,896
Cash dividends paid ...............................        20,039             --        (21,000)          (961)
Net increase in equity ............................      (171,464)        23,447        348,574        200,557
                                                      -----------    -----------    -----------    -----------
Net cash (used in) provided by
    financing activities ..........................      (110,725)        30,493        346,724        266,492
                                                      -----------    -----------    -----------    -----------
Net decrease in cash and cash equivalents .........        (5,343)          (546)        (4,987)       (10,876)
Cash and cash equivalents at beginning of year ....           336            390         47,497         48,223
                                                      -----------    -----------    -----------    -----------
Cash and cash equivalents at end of year ..........   $    (5,007)   $      (156)   $    42,510    $    37,347
                                                      ===========    ===========    ===========    ===========
</TABLE>

<PAGE>

<TABLE>
                                                             METRIS COMPANIES INC.
                                         Supplemental Condensed Consolidating Statements of Cash Flows
                                                        Year Ended December 31, 1997
                                                          (Dollars in thousands)


                                                          Metris       Guarantor    Non-Guarantor
                                                      Companies Inc.  Subsidiaries   Subsidiaries  Consolidated
                                                      --------------  ------------   ------------  ------------
Operating Activities:
<S>                                                    <C>            <C>            <C>            <C>
Net cash (used in) provided by
    operating activities ...........................   $   (51,357)   $      (526)   $   195,096    $   143,213
                                                       -----------    -----------    -----------    -----------
Investing Activities:
Proceeds from repayments of securitized loans ......            --             --      1,665,700      1,665,700
Net loans originated or collected ..................         3,357             --     (1,234,580)    (1,231,223)
Credit card portfolio acquisitions .................            --             --       (738,104)      (738,104)
Additions to premises and equipment ................            --        (10,515)        (1,190)       (11,705)
                                                       -----------    -----------    -----------    -----------
Net cash provided by (used in) investing activities          3,357        (10,515)      (308,174)      (315,332)
                                                       -----------    -----------    -----------    -----------
Financing Activities:
Net increase in debt ...............................       226,425         11,348        (48,936)       188,837
Cash dividends paid ................................        15,350             --        (15,927)          (577)
Net increase in equity .............................      (197,814)            --        197,814             --
                                                       -----------    -----------    -----------    -----------
Net cash provided by financing activities ..........        43,961         11,348        132,951        188,260
                                                       -----------    -----------    -----------    -----------
Net (decrease) increase in cash and
    cash equivalents ...............................        (4,039)           307         19,873         16,141
Cash and cash equivalents at beginning of year .....         4,375             83         27,624         32,082
                                                       -----------    -----------    -----------    -----------
Cash and cash equivalents at end of year ...........   $       336    $       390    $    47,497    $    48,223
                                                       ===========    ===========    ===========    ===========
</TABLE>



<PAGE>


INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Metris Companies Inc.:

     We have audited the accompanying consolidated balance sheets of Metris
Companies Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Metris
Companies Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.

/s/ KPMG LLP


KPMG LLP

Minneapolis, Minnesota
January 19, 2000


<PAGE>


Item 9.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure

          None

PART III

Item 10.  Directors and Executive Officers of the Registrant

     The information required by this item with respect to directors is set
forth under "Proposal One: Election of Directors," in the Company's proxy
statement for the annual meeting of shareholders to be held on May 9, 2000,
which will be filed within 120 days of December 31, 1999 (the "Proxy Statement")
and is incorporated herein by reference. The information required by this item
with respect to executive officers is, pursuant to instruction 3 of Item 401(b)
of Regulation S-K, set forth in Part I of this Form 10-K under "Executive
Officers of the Registrant." The information required by this item with respect
to reports required to be filed under Section 16(a) of the Securities Exchange
Act of 1934 is set forth under "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement and is incorporated herein by reference.

Item 11.  Executive Compensation

     The information required by this item is set forth under "Compensation
Tables and Compensation Matters" in the Proxy Statement and is incorporated
herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The information required by this item is set forth under "Company Stock
Owned by Officers and Directors" and "Persons Owning More Than Five Percent of
Company Common Stock" in the Proxy Statement and is incorporated herein by
reference.

Item 13.  Certain Relationships and Related Transactions

     The information required by this item is set forth under "Corporate
Governance" in the Proxy Statement and is incorporated herein by reference.

     With the exception of the information incorporated by reference in Items
10-13 above, the Proxy Statement is not to be deemed filed as part of this Form
10-K.


<PAGE>


PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

         (a)  The following documents are made part of this report:


                  1.     Consolidated Financial Statements - See Item 8 above.

                  2.     Financial Statement Schedules

                         All schedules to the consolidated financial statements
                         normally required by Form 10-K are omitted since they
                         are either not applicable or the required information
                         is shown in the financial statements or the notes
                         thereto.

         (b)  Reports on Form 8-K: On November 15, 1999, the Company filed a
              Current Report on Form 8-K to report the extension of its
              offer to exchange its 10.125% Senior Notes due 2006 which have
              been  registered  under the Securities Act of 1933 for any and
              all of its outstanding  unregistered  10.125% Senior Notes due
              2006.

         (c)  Exhibits:  See Exhibit Index on page 79 of this Report.


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 21st day of
March, 2000.

                                                         METRIS COMPANIES INC.
                                                         (Registrant)


                                                         By /s/ Ronald N. Zebeck
                                                         -----------------------

                                                         Ronald N. Zebeck
                                                         President and
                                                         Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Metris Companies
Inc., the Registrant, and in the capacities and on the dates indicated.

Signature                       Title                     Date

Principal executive             President,               March 21, 2000
officer and director:           Chief Executive Officer
                                and Director

/s/ Ronald N. Zebeck
--------------------
Ronald N. Zebeck


Principal financial officer:   Executive Vice            March 21, 2000
                               President,
                               Chief Financial Officer
/s/ David D. Wesselink
----------------------
David D. Wesselink


Principal accounting officer:  Senior Vice President,    March 21, 2000
                               Finance,
                               Corporate Controller
/s/ Jean C. Benson
------------------
Jean C. Benson


<PAGE>


Directors:

/s/ Theodore Deikel             Director                 March 21, 2000
---------------------------
Theodore Deikel

/s/ Lee R. Anderson, Sr.        Director                 March 21, 2000
---------------------------
Lee R. Anderson, Sr.

/s/ C. Hunter Boll              Director                 March 21, 2000
---------------------------
C. Hunter Boll

/s/ John A. Cleary              Director                 March 21, 2000
---------------------------
John A. Cleary

/s/ Thomas M. Hagerty           Director                 March 21, 2000
---------------------------
Thomas M. Hagerty

/s/ David V. Harkins            Director                 March 21, 2000
---------------------------
David V. Harkins

/s/ Walter M. Hoff              Director                 March 21, 2000
---------------------------
Walter M. Hoff

/s/ Thomas H. Lee               Director                 March 21, 2000
---------------------------
Thomas H. Lee

/s/ Derek V. Smith              Director                 March 21, 2000
---------------------------
Derek V. Smith

/s/ Frank D. Trestman           Director                 March 21, 2000
---------------------------
Frank D. Trestman


<PAGE>


                                  EXHIBIT INDEX

Exhibit

Number   Description of Exhibit

Charter Documents:
-----------------

3.1      Amended and Restated Certificate of Incorporation of the Company
         (incorporated by reference to Exhibit 3.1 to the Company's Registration
         Statement on Form 8-A (File No. 1-12351)).

3.2      Amended and Restated Bylaws of the Company (incorporated by reference
         to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q, filed on
         August 13, 1999 (File No. 1-12351)).

Instruments Defining Rights:
---------------------------

4.1      Indenture, dated as of November 7, 1997, among the Company, Metris
         Direct, Inc. as the Guarantor, and the First National Bank of Chicago,
         as Trustee, including form of 10% Senior Note due 2004 and form of
         Guarantee by Metris Direct, Inc. (incorporated by reference to
         Exhibit 4.a to the Company's Registration Statement on Form S-4
         (File No. 333-43771)).

        (i)  First Supplemental Indenture, dated as of June 25, 1999, among the
             Company, the Guarantors named therein and The First National Bank
             of Chicago (incorporated by reference to Exhibit 4.4 to the
             Companies Registration Statement on S-4 (File No. 333-86695)).

4.2       Certificate of Designation of Series B Perpetual Preferred Stock
          (incorporated by reference to Exhibit 4.1 of the Company's Current
          Report on Form 8-K dated December 22, 1998 (File No. 1-12351)).

4.3       Certificate of Designation of Series C Perpetual Preferred Stock
          (incorporated by reference to Exhibit 4.2 of the Company's Current
          Report on Form 8-K dated December 22, 1998 (File No. 1-12351)).

4.4       Certificate of Designation of Series D Junior Participating
          Convertible Preferred Stock (incorporated by reference to Exhibit
          4.3 of the Company's Current Report on Form 8-K dated
          December 22, 1998 (File No. 1-12351)).

4.5       Securities Purchase Agreement, dated as of November 13, 1998, among
          the Company, the Thomas H. Lee Equity Fund IV, L.P. (the "Lee Fund")
          and certain affiliates of the Lee Fund (incorporated by reference to
          Exhibit 10.2 to the Company's Current Report on Form 8-K dated
          December 22, 1998 (File No. 1-12351)).

4.6       Indenture, dated as of December 9, 1998, among the Company, the
          Guarantors named therein and The Bank of New York, as Trustee
          (incorporated by reference to Exhibit 4.4 to the Company's Current
          Report on Form 8-K dated December 22, 1998 (File No. 1-12351)).

4.7       Registration Rights Agreement, dated as of December 9, 1998, between
          the Company and the Investors named therein (incorporated by reference
          to Exhibit 10.3 to the Company's Current Report on Form 8-K dated
          December 22, 1998 (File No. 1-12351)).

4.8       Warrant Agreement, dated as of December 9, 1998, between the Company
          and the Purchasers named therein (incorporated by reference to
          Exhibit 4.5 to the Company's Current Report on Form 8-K dated
          December 22, 1998 (File No. 1-12351)).

4.9      Form of common stock certificate of the Company (incorporated by
         reference to Exhibit 4.3 to the Company's Registration Statement on
         Form S-8 (File No. 333-91917)).

4.10     Indenture, dated as of July 13, 1999, by and among the Company, Metris
         Direct, Inc. and The Bank of New York, including Form of 10 1/8% Senior
         Notes due 2006 and Form of Guarantee (incorporated by reference to
         Exhibit 4.1 to the Companies Registration Statement on S-4
         (File No. 333-86695)).

4.11     Exchange and Registration Rights Agreement, dated as of July 13, 1999,
         by and among the Company, Bear, Stearns & Co. Inc., Chase Securities
         Inc., Salomon Smith Barney Inc. and Barclays Capital Inc., relating to
         the new notes (incorporated by reference to Exhibit 4.2 to the
         Companies Registration Statement on S-4 (File No. 333-86695)).

4.12     Registration Rights Agreement dated as of December 9, 1998 between the
         Company and the investors named therein.  (Incorporated by reference to
         Exhibit 10.3 from the Company's Form 8-K, filed on December 22, 1998).

4.13     Registration Rights Agreement dated as of April 23, 1999 between the
         Company and Rakesh Kaul. (incorporated by reference to the Company's
         Registration Statement on Form S-3 (File No. 333-82007))


Material Contracts

10.1     Amended and Restated Pooling and Servicing Agreement, dated as of
         July 30, 1998, among Metris Receivables, Inc. ("MRI"), as Transferor,
         Direct Merchants Credit Card Bank, National Association ("DMCCB"),
         as Servicer, and The Bank of New York (Delaware), as Trustee
         (incorporated by reference to Exhibit 4(a) to MRI's Registration
         Statement on Form S-3 (File No. 333-61343)).

10.2     Amended and Restated Bank Receivables Purchase Agreement, dated as of
         July 30, 1998, between DMCCB and the Company (incorporated by reference
         to Exhibit 4(c) to MRI's Registration Statement on Form S-3
         (File No. 333-61343)).

10.3     Amended and Restated Bank Receivables Purchase Agreement, dated as of
         July 30, 1998, between the Company and MRI (incorporated by reference
         to Exhibit 4(d) to MRI's Registration Statement on Form S-3
         (File No. 333-61343)).

10.4     Owner Trust Agreement, dated as of July 30, 1998, among MRI and
         Wilmington Trust Company (incorporated by reference to Exhibit 10.1(ii)
         to the Company's Quarterly Report on Form 10-Q for the period ended
         September 30, 1998 (File No. 1-12351)).

10.5     Liquidity Agreements, each dated July 30, 1998, among Metris Owner
         Trust, the Lenders thereto and the Administrative Agent (pursuant to
         Instruction 2 to Item 601, only one such agreement has been filed)
         (incorporated by reference to Exhibit 10.1(iii) to the Company's
         Quarterly Report on Form 10-Q for the period ended September 30, 1998
         (File No. 1-12351)).

10.6*     Stock Option and Valuation Rights Agreement, dated as of March 21,
          1994, between Fingerhut Companies, Inc. and Ronald N. Zebeck
          (incorporated by reference to Exhibit 10.l to Fingerhut Companies,
          Inc.'s Annual Report on Form 10-K  for the fiscal year ended
          December 29, 1995 (File No. 1-8668)).

          (i)*   Amendment, dated October 25, 1996 (incorporated by reference to
                 Exhibit 10.4(i) to the Company's Annual Report on Form 10-K for
                 the year ended December 31, 1997 (File No. 1-12351)).

         (ii)*   Non-Qualified Stock Option Agreement pursuant to Metris
                 Companies Long-Term Incentive and Stock Option Plan, dated as
                 of October 25, 1996, by and between the Company and
                 Ronald N. Zebeck (incorporated by reference to Exhibit 10.4(ii)
                 to the Company's Annual Report on Form 10-K for the year ended
                 December 31, 1997 (File No. 1-12351)).

10.7      Change of Control Agreement, dated as of May 15, 1998, by and between
          the Company and Ronald Zebeck and a schedule of executive officers of
          the Company also having such an agreement with the Company,
          indicating the differences from the form of agreement filed (as
          permitted by Instruction 2 to Item 601 of regulation S-K)
          (incorporated by reference to Exhibit 10.2 to the Company's Quarterly
          Report on Form 10-Q for the quarter ended September 30, 1998
          (File No. 1-12351)).

          (i)      Amendment to Change in Control Severance Agreement, dated as
                   of December 9, 1998.

         (ii)      Amended Schedule of Officers with Change of Control.


10.8*     Co-Brand Credit Card Agreement, dated as of October 31, 1996, between
          the Company, Fingerhut Corporation, and Direct Merchants Credit Card
          Bank, N.A. (incorporated by reference to Exhibit 10.11 to the
          Company's Annual Report on Form 10-K for the year ended
          December 31, 1997 (File No. 1-12351)).

10.9*     Extended Service Plan Agreement, dated as of October 31, 1996, between
          the Company, Fingerhut Corporation, and InfoChoice USA, Inc.
          (incorporated by reference to Exhibit 10.12 to the Company's Annual
          Report on Form 10-K for the year ended December 31, 1997
          (File No. 1-12351)).

10.10     Database Access Agreement, dated as of October 31, 1996, between the
          Company and Fingerhut Corporation (incorporated by reference to
          Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year
          ended December 31, 1997 (File No. 1-12351)).

10.11     Tax Sharing Agreement, dated as of October 31, 1996, between the
          Company and Fingerhut Companies, Inc. (incorporated by reference to
          Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year
          ended December 31, 1997 (File No. 1-12351)).

          (i)      Amendment to Tax Sharing Agreement, dated January 1, 1998,
                   between the Company and Fingerhut Companies, Inc.

10.12     Waiver Agreement, dated as of December 8, 1998, between Fingerhut
          Corporation, Infochoice USA, Inc., Metris Direct, Inc., DMCCB and
          Metris Direct Services, Inc. (incorporated by reference to
          Exhibit 10.4 to the Company's Current Report on Form 8-K dated
          December 22, 1998 (File No. 1-12351)).

10.13     Data Sharing Agreement, dated as of October 31, 1996, between
          Fingerhut Corporation and DMCCB (incorporated by reference to
          Exhibit 10.17 to the Company's Annual Report on Form 10-K for the year
          ended December 31, 1997 (File No. 1-12351)).

10.14     Amended and Restated Credit Agreement, dated as of June 30, 1998 among
          the Company and the lenders named therein (incorporated by reference
          to Exhibit 10.18 (a) to the Company's Quarterly Report on Form 10-Q
          for the period ended June 30, 1998 (File No. 1-12351)).

          (i)     Amendment, dated as of December 3, 1998, to the Amended and
                  Restated Credit Agreement, dated as of June 30, 1998, among
                  the Company, the lenders named therein, NationsBank, N.A., as
                  syndication agent, Deutsche Bank, as documentation agent,
                  U.S. Bank National Association, as documentation agent,
                  Barclays Bank PLC, as co-agent, Bank of America National
                  Trust and Savings Association, as co-agent, and The Chase
                  Manhattan Bank, as administrative agent (incorporated by
                  reference to Exhibit 10.5 to the Company's Current Report on
                  Form 8-K dated December 22, 1998 (File No. 1-12351)).

          (ii)    Amendment, dated as of December 7, 1998, to the Amended and
                  Restated Credit Agreement, dated as of June 30, 1998, among
                  the Company, the lenders named therein, NationsBank, N.A., as
                  syndication agent, Deutsche Bank, as documentation agent,
                  U.S. Bank National Association, as documentation agent,
                  Barclays Bank PLC, as co-agent, Bank of America National
                  Trust and Savings Association, as co-agent, and The Chase
                  Manhattan Bank, as administrative agent.

         (iii)    Amendment dated as of May 7, 1999, to (a) the Amended and
                  Restated Credit Agreement, dated as of June 30, 1998, among
                  the Company and the lenders named therein, Nationsbank, N.A.,
                  as syndication agent, Deutsche Bank, as documentation agent,
                  U.S. Bank National Association, as documentation agent,
                  Barclays Bank PLC, as co-agent, Bank of America National
                  Trust and Savings Association, as co-agent, and The Chase
                  Manhattan Bank, as administrative agent and (b) the Amended
                  and Restated Pledge Agreement, dated as of June 30, 1998,
                  among the Company, Metris Direct Inc. and The Chase Manhattan
                  Bank (incorporated by reference to Exhibit 10.10 to the
                  Companies Registration Statement on S-4/A
                  (File No. 333-86695)).

         (iv)     Amendment dated as of June 10, 1999, to the Amended and
                  Restated Credit Agreement, dated as of June 30, 1998, among
                  the Company and the lenders named therein, Nationsbank, N.A.,
                  as syndication agent, Deutsche Bank, as documentation agent,
                  U.S. Bank National Association, as documentation agent,
                  Barclays Bank PLC, as co-agent, Bank of America National
                  Trust and Savings Association, as co-agent, and The Chase
                  Manhattan Bank, as administrative agent Bank (incorporated by
                  reference to Exhibit 10.11 to the Companies Registration
                  Statement on S-4/A (File No. 333-86695)).

10.15    Transfer and Administration Agreement, dated as of October 23, 1997,
         among Kitty Hawk Funding Corporation, Metris Funding Co., as
         Transferor, Direct Merchants Credit Card Bank, National Association as
         Collection Agent, and NationsBank, N.A., as Agent and Bank Investor
         (incorporated by reference to Exhibit 10.18(a) to the Company's
         Quarterly Report on Form 10-Q for the period ended September 30, 1998
         (File No. 1-12351)).

         (i)      Amendment No. 4, dated October 22, 1998, to the Transfer and
                  Administration Agreement, dated as of October 23, 1997, among
                  Kitty Hawk Funding Corporation, Metris Funding Co., as
                  Transferor, Direct Merchants Credit Card Bank, National
                  Association as Collection Agent, and NationsBank, N.A., as
                  Agent and Bank Investor (incorporated by reference to the
                  Company's Annual Report on Form 10-K for the year ended
                  December 31, 1998 (File No. 1-12351)).

10.16    Transfer and Administration Agreement, dated December 9, 1998, among
         Enterprise Funding Corporation, Park Avenue Receivables Corporation,
         Sheffield Receivables Corporation, Metris Asset Funding Co., Direct
         Merchants Credit Card Bank, National Association, N.A. (incorporated by
         reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K
         the year ended December 31, 1998 (File No. 1-12351)).

10.17*   Receivables Purchase Agreement, dated December 9, 1998, between the
         Company and Metris Asset Funding Co. (incorporated by reference to
         Exhibit 3.1 to the Company's Annual Report on Form 10-K the year ended
         December 31, 1998 (File No. 1-12351)).

10.18*   Metris Companies Inc. Non-Employee Director Stock Option Plan
         (incorporated by reference to Exhibit 10.3 to the Companies
         Registration Statement on S-4/A (File No. 333-86695)).

10.19*   Metris Companies Inc. Management Stock Purchase Plan (incorporated by
         reference to Exhibit 10.4 to the Companies Registration Statement on
         S-4/A (File No. 333-86695)).

10.20*   Metris Companies Inc. Amended and Restated Annual Incentive Plan for
         Designated Corporate Officers (incorporated by reference to
         Exhibit 10.5 to the Companies Registration Statement on S-4/A
         (File No. 333-86695)).

10.21*   Metris Companies Inc. Amended and Restated Long-Term Incentive and
         Stock Option Plan (incorporated by reference to Exhibit 10.6 to the
         Companies Registration Statement on S-4/A (File No. 333-86695)).

        (i)*      Form of Non-Qualified Stock Option Agreement (incorporated by
                  reference to Exhibit 10.8 to the Company's Annual Report on
                  Form 10-K for the year ended December 31, 1998
                  (File No. 1-12351)).

10.22*   Transfer and Administration Agreement, dated June 30, 1999, among
         Direct Merchants Credit Card Bank, N.A. as Transferor and Collection
         Agent, Enterprise Funding Corporation, Sheffield Receivables
         Corporation as Purchasers, Barclays Bank PLC as Agent and NationsBank,
         N.A. as Bank Investor and Agent Bank (incorporated by reference to
         Exhibit 10.12 to the Companies Registration Statement on S-4/A
         (File No. 333-86695)).


Other Exhibits

11        Computation of Earnings Per Share.

12 (a)    Computation of Ratio of Earnings to Fixed Charges.

12 (b)    Computation of Ratio of Earnings to Fixed Charges and Preferred
          Dividends.

13        Pages 25 to 71 of the 1999 Annual Report to Shareholders.  The 1999
          Annual Report shall not be deemed to be filed with the Commission
          except to the extent that information is specifically incorporated
          herein by reference.

21        Subsidiaries of the Company.

23        Independent Auditors' Consent.

27        Financial Data Schedule.

* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.