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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K/A

Amendment No. 1

For the fiscal year ended December 31, 2001

of

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

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CompuCredit's
Common Stock, no par value per share, is registered pursuant to Section 12(g) of the Act.

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

CompuCredit
believes that during the 2001 fiscal year its executive officers, directors and 10% beneficial owners subject to Section 16(a) complied with all applicable filing
requirements, except that Nicholas B. Paumgarten, who is deemed not to own any shares of Common Stock, made a late filing of a Form 3 upon becoming a director of CompuCredit.

The
aggregate market value of the registrant's Common Stock (based upon the closing sales price quoted on the Nasdaq National Market) held by nonaffiliates as of March 15, 2002
was approximately $91,293,189. As of March 15, 2002, 46,559,165 shares of CompuCredit's Common Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of CompuCredit's Proxy Statement for the 2002 Annual Meeting of Shareholders are incorporated by reference into Part III.

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Table of Contents

|         |          |  |                                                                                       | 
|-------- | -------- |  | ------------------------------------------------------------------------------------- | 
|Part I   |          |  |                                                                                       | 
|         | Item 1.  |  | Business                                                                              | 
|         |          |  | Risk Factors                                                                          | 
|         | Item 2.  |  | Properties                                                                            | 
|         | Item 3.  |  | Legal Proceedings                                                                     | 
|         | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   | 
|Part II  |          |  |                                                                                       | 
|         | Item 5.  |  | Market for Registrant's Common Stock and Related Shareholder Matters                  | 
|         | Item 6.  |  | Selected Financial Data                                                               | 
|         | Item 7.  |  | Management's Discussion and Analysis of Financial Condition and Results of Operations | 
|         | Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk                            | 
|         | Item 8.  |  | Financial Statements and Supplementary Data                                           | 
|         | Item 9.  |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure  | 
|Part III |          |  |                                                                                       | 
|         | Item 10. |  | Directors and Executive Officers of the Registrant                                    | 
|         | Item 11. |  | Executive Compensation                                                                | 
|         | Item 12. |  | Security Ownership of Beneficial Owners and Management                                | 
|         | Item 13. |  | Relationships and Related Transactions                                                | 
|Part IV  |          |  |                                                                                       | 
|         | Item 14. |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       | 

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Cautionary Notice Regarding Forward-Looking Statements

This Report includes forward-looking statements, including, in particular, forward-looking statements under the headings "Item 1. Business" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations." The words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" and similar expressions are
intended to identify such forward-looking statements; however, this Report also contains other forward-looking statements that may not be so identified. Forward-looking statements are subject to a
number of risks and uncertainties, many of which are beyond CompuCredit's control. Actual results may differ materially from those suggested by the forward-looking statements. Accordingly, there can
be no assurance that such indicated results will be realized. Among the important factors that could cause actual results to differ materially from those indicated by such forward-looking statements
are the factors set forth below in "Item 1. BusinessRisk Factors." By making these forward-looking statements, CompuCredit expressly disclaims any obligation to update them in any manner
except as may be required by its disclosure obligations in filings it makes with the Securities and Exchange Commission (the "Commission") under the Federal securities laws.

In
this Report, the words "Company," "CompuCredit," "we," "our," "ours," and "us" refer to CompuCredit and its subsidiaries and predecessors. CompuCredit owns the Aspire®,
CompuCredit® and other trademarks in the United States.

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PART I

ITEM 1. BUSINESS

General

CompuCredit is a credit card company that uses analytical techniques, including computer modeling, to target consumers who we believe are underserved by
traditional grantors of credit. Individuals in this market typically rely more heavily on finance companies and retail store credit cards to meet their credit needs and are less likely to have
general-purpose credit cards. Some of these consumers have had delinquencies, a default or a bankruptcy in their credit histories, but have, in our view, demonstrated recovery. Others in this market
are establishing or expanding their credit. Our predictive credit models analyze credit bureau data to determine if we believe someone has demonstrated recovery. The criteria are empirically derived
from hundreds of credit bureau attributes. Examples include months since last delinquency, months since bankruptcy, recent performance on current trade lines (including recent payment trends) and
total dollars of past due amounts. We have developed and enhanced our techniques by continually testing our products and operating practices and by continually analyzing credit bureau data and the
results of our lending experience. We believe that our analytical approach allows us to:



We
market unsecured general-purpose Visa and MasterCard credit cards, including our Aspire Visa credit card, through direct mail, television, telemarketing and the internet. We market
credit cards under an agreement with Columbus Bank and Trust Company, a state chartered banking subsidiary of Synovus Financial Corporation. Under this agreement, Columbus Bank and Trust, as the
issuer, owns the credit card accounts.

We
purchase the credit card receivables generated in the accounts on a daily basis. We in turn securitize all of the receivables each day by selling the receivables to trusts or into
multi-seller commercial paper conduits administered by national banking institutions. The receivables that are sold through securitizations are removed from our balance sheet for financial reporting
purposes. When we sell the receivables we receive cash proceeds and a seller's interest in the receivables. The cash proceeds that we receive from investors when we sell receivables in our
securitizations are less than the cash we use to initially purchase the credit card receivables. The seller's interest we receive equals the difference and is a use of our cash. Our seller's interests
are subordinate to the other investors' interests. The receivables that are sold in our securitizations generate future cash flows as cardholders remit payments on their accounts. These payments are
remitted to the securitization trusts and then disbursed in accordance with the securitization agreements. We receive all of the excess cash flows from the securitizations, which represent collections
on the accounts in excess of the interest paid to the investors, servicing fees, credit losses and required amortization payments. We use the cash proceeds that we receive when we sell the receivables
to help fund the new receivables generated in the

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accounts. We use cash flows generated from operations, as well as cash flows from the issuance of equity, to fund our seller's interests in the new receivables generated in the accounts.

The
timing and amount of cash flows received from the receivables that are sold to the securitizations are dependent upon the performance of our cardholders in the aggregate. Cardholders
make purchases or receive cash advances on their credit card accounts, which increase their receivable balances. Each cardholder is assessed the same combination of fees on their account based on the
terms of their cardholder agreement and based on their payment performance on the account. Examples include annual fees, interest, late fees, overlimit fees and cash advance fees. We determine what
fees to charge a cardholder using our Target Marketing System as more fully described later in this section. Cardholders are required to make monthly payments on their accounts, which decrease their
receivable balance. Cardholders who fail to make their required payments become delinquent. Receivables that
become more than 180 days delinquent or cardholders that file bankruptcy or become deceased are charged off.

We
develop criteria to determine who is issued a credit card, and the terms of the cardholder agreement for the credit card. The terms of the agreement include the size of the credit
line on the card, the fees that will be charged to the cardholder and the payment terms of the card. Although we securitize all of the credit card receivables, we are responsible for servicing the
portfolio of credit card receivables. We either perform the servicing ourselves or we outsource the services to other parties. We describe our material outsourced services in more detail in
"Outsourcing" under "Account and Portfolio Management" later in this section. We also market to our cardholders other fee-based products including card registration, memberships in
preferred buying clubs, magazines, travel services and credit life, disability and unemployment insurance. Our fee based products and services are described in more detail later in this section.

Since
we securitize the receivables, we own retained interests, which generate cash flow as the underlying receivables generate income. The receivables generate income when the total
interest and fees charged to cardholders exceeds the total of the interest paid to the investors, the cost of servicing the receivables and charge offs. Because we no longer own the credit card
receivables that have been sold, a large portion of our income is the cash that is generated by the receivables in the trust and is recorded in our income statement as Income from Retained Interests.
Further, because we securitize all of our credit card receivables, our financial statements reflect the amount of income from the securitization structures rather than many of the individual
components of income that would otherwise be reflected in our income statement separately if we owned the credit card receivables. These components would include net interest income, servicing expense
and charge offs. Servicing income, other credit card fees and interchange fees are part of the securitization structures and are disclosed separately or on our income statement. Our net income is
dependent on the performance of the underlying credit card receivables. Therefore, we provide selected credit card data including net interest income, servicing and charge offs in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations." This data reflects the underlying performance of the credit card receivables that have been sold under our
securitization program.

We
use securitization because it offers a cost of funding lower than other debt or equity financing sources. If our securitization facilities are not renewed, they begin to accumulate
cash to repay investors. If we are unable to obtain additional sources of liquidity such as other securitization facilities that are structurally subordinate to the facilities accumulating cash or
debt, or if we are unable to issue additional equity, we would begin to prohibit new purchases in some or all of our customers' credit card accounts and thus reduce our need for additional cash. Any
prohibition of new purchases is likely to negatively impact our ability to collect existing balances since card users, in making payments, tend to favor the card companies that are willing to extend
them additional credit. As of December 31, 2001, our current securitizations are scheduled to expire between April 2002 and July 2004. See "Item 1.
BusinessSecuritizations" and "Item 7. Management's Discussion and Analysis of Financial Condition

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and Results of OperationsCredit Card Securitizations" and "Liquidity, Funding and Capital Resources."

As
of December 31, 2001, there were $1.9 billion of credit card receivables outstanding in over 2.1 million credit card accounts, substantially all of which are
considered "subprime" based on guidance issued by the agencies that regulate the banking industry. We are not a bank and we are not directly regulated by any financial regulator, however, we have
adopted this guidance and we expect that other credit card companies will do the same. We grow our business by adding accounts and by increasing the credit card receivables outstanding in the
accounts. We add accounts through marketing campaigns or by purchasing portfolios. In either case, we use our same proprietary models and target marketing system to evaluate each individual customer
using credit bureau information and market information from a variety of sources.

The
balance of this section includes an overview of several aspects of our business as well as a discussion of recent business developments that we believe will assist you in
understanding our financial performance. These sections include:



CompuCredit
was formed in 1996 by David G. Hanna, Chairman and Chief Executive Officer, and Richard W. Gilbert, Vice Chairman and Chief Operating Officer, after completing almost two
years of research and development in the area of consumer finance.

CompuCredit
is incorporated in Georgia. Its principal executive offices are located at 245 Perimeter Center Parkway, Suite 600, Atlanta, Georgia 30346, its telephone number at that
address is (770) 206-6200, and its internet address iswww.CompuCredit.com.

Our Database System

We have developed a proprietary database management system which supports the decision-making functions, including target marketing, solicitation, application
processing, account management and

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collections activities. The database system is an information warehouse that maintains information regarding a customer throughout the customer's relationship with us. The system's purpose is to
gather, store and analyze the data necessary to facilitate our target marketing and risk management decisions.

[Insert graphic]

Our
database system captures combinations of customer information gathered in the target marketing and solicitation phases of the customer relationship and additional data gathered
throughout the remainder of the relationship, including customer behavior patterns. By combining this information, we have established an analytical database linking static historical data with actual
customer performance. Our intranet interface allows management to access the database management system.

[Insert graphic]

The
use of a single database system for all phases of the customer relationship enables us to continuously refine target marketing and portfolio management decisions on the basis of
continuous feedback. We believe that this capability has been critical in identifying underserved segments.

We
believe that the information that we collect in our database system, as well as the ability that we have to access, study and model this information, provides us with a more efficient
and complete process to effectively price our products. We believe that we have priced our products such that the income we earn from the cardholders who are not charged off is sufficient to cover our
marketing expense, our servicing expenses, our costs of funds and our losses from cardholders who fail to make their payments and are charged off.

Target Marketing System

Since 1996, we have worked with national credit bureaus to develop proprietary risk evaluation systems using credit bureau data. Initially, we developed the
systems using randomly selected historical data sets of payment history on all types of consumer loans. Since March 1997, these proprietary risk evaluation systems have included the specific
behavior of our customers. Our systems enable us to segment customers into narrower ranges within each FICO score range. The FICO score, developed by Fair, Issac & Co., Inc., is the most
commonly used credit risk score in the consumer credit industry. The purpose of the FICO score is to rank-order consumers relative to their probability of non-payment on a
consumer loan. We believe that sub-segmenting our market within FICO score ranges enables us to better evaluate credit risk and to price our products effectively.

Within
each FICO score range, we evaluate potential customers using credit and marketing segmentation methods derived from a variety of data sources. We place potential customers into
product offering segments based upon combinations of factors reflecting our assessment of credit risk, bankruptcy risk, supply of revolving credit, demand for revolving credit, payment capacity and
revenue potential, among other factors. These product-offering segments are chosen to meet the following primary target marketing strategies:



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We
focus our marketing programs on those customer segments which appear to have high income potential when compared to other segments and demonstrate acceptable credit and bankruptcy
risk. We seek to accomplish this by establishing, for each customer segment, the appropriate risk-based pricing level that will maintain an acceptable response rate to our direct mail,
internet and telemarketing campaigns. The key to our efforts is the use of our systems to evaluate credit risk more effectively than the use of FICO scores alone.

Our
customer solicitation strategy is to test several differently priced products against pools of potential customers with similar risk characteristics. The results of direct mail,
internet and telemarketing campaigns are continuously monitored and analyzed using our proprietary database system.

Product
offerings for a particular customer are determined by examining a number of factors in the customer's credit file based upon the criteria described above. We offer our Classic,
Gold, Platinum and Diamond cards in a variety of product offerings varying by the amount of the credit line, the interest rate and the annual fee:

|Characteristic |  | Range of Initial Offerings                |  | Average as of
December 31, 2001 |       | Average as of
December 31, 2000 |  
|-------------- |  | ----------------------------------------- |  | ------------------------------- | ----- | ------------------------------- | -
|Credit Line    |  | $300 to $10,000                           |  | $                               | 2,314 |                                 | $
|APR            |  | Prime rate + 3.90% to Prime rate + 30.25% |  |                                 | 26.7  | %                               |  
|Annual Fee     |  | $0 to $150                                |  | $                               | 18    |                                 | $

The
average credit line increased during 2001 due primarily to the maturity of our cardholder's accounts. The average APR decreased due to the significant decreases in the prime rate
during 2001 as well as a shift in our product offerings during 2001. We use our target marketing strategies to assess the type of product offering to be made to each potential customer. In our
marketing campaigns we continually test combinations of interest rates, fees, and credit limits directed at specific customer segments in order to evaluate response rates and further refine our
pricing strategies. During 2001, we expanded our product offerings to include lower interest rate and slightly higher fee products resulting in the decrease in our average APR and an increase in our
average annual fee noted above.

Target Marketing in Portfolio Acquisitions

We anticipate increasing our receivables portfolio through the use of our target marketing system to originate customers through direct mail, television,
telemarketing and internet campaigns. We also add accounts by purchasing portfolios of credit card receivables. We did not acquire any portfolios in 1999, 2000, or 2001. We may use either or both of
these methods of account growth to varying degrees, depending on our assessment of the relative cost of each method.

Our
strategy for our purchased portfolios is to use our credit and marketing segmentation methods to select those accounts to which our credit card will be issued and to use our
proprietary account management systems to enhance the performance of the portfolio and to market fee-based ancillary products and services to the new customers. As with the account
origination process, each customer is evaluated using credit and marketing segmentation methods derived from a variety of data sources. Customers are placed into product offering segments based upon
combinations of factors reflecting
their credit risk, bankruptcy risk, supply of revolving credit, demand for revolving credit, payment capacity and revenue potential, among other factors. We expect that we will regularly evaluate
potential portfolio acquisitions.

Our
target marketing system is intended to provide the same competitive advantage when evaluating portfolios as when originating customers through our marketing campaigns. We believe
that our ability to evaluate credit risk within FICO score ranges enables us to more accurately determine

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the portfolio's overall credit risk than many portfolio sellers and many other companies that may bid on portfolio purchases. This risk evaluation expertise is designed to enable us to avoid
portfolio purchases in which the final purchase premium or discount does not accurately reflect the credit risk of the portfolio. Conversely, we may bid more aggressively for portfolios in which the
perceived credit risk, as reflected by the FICO scores, is significantly higher than our forecast of credit risk.

Our
target marketing system, which combines our proprietary risk evaluation system with sophisticated techniques for estimating supply of revolving credit, demand for revolving credit
and bankruptcy risk, is designed to provide us with a competitive advantage in evaluating the potential profitability of target customers, whether originated by us or purchased. We continuously seek
to refine our target marketing system through the development of new analytical segmentation tools and the evaluation of the system's effectiveness on previous marketing campaigns and portfolio
acquisitions.

Direct Mail and Telemarketing Solicitation

We use our target marketing strategies to identify potential customers and to assess the type of product offering to be made to each potential customer. In our
direct mail or telemarketing campaigns, we have experimented with several combinations of rates, fees and credit limits directed at specific customer segments in order to evaluate response rates and
further refine our pricing strategies within each customer segment and for all customer segments as a group. Third party print production facilities produce our direct mail campaigns, and we contract
with third party telemarketing providers for our telemarketing campaigns. Responses to both direct mail and telemarketing campaigns are then forwarded to us for application processing. The response
data received is also integrated into our database system for future analysis and response modeling. To date, almost all of our marketing has consisted of direct mail and telemarketing.

The Internet

AspireCard.com, Inc., our wholly-owned subsidiary, promotes the Aspire credit card and various other value-added products and services on the internet
using real-time approval of credit card applications on-line. Applications are received by AspireCard.com on its own web site, www.aspirecard.comandwww.aspireyes.com.In addition, we have developed two Spanish-language internet
web sites, www.aspireamas.comandwww.aspireahora.comto help market our credit cards to consumers of Hispanic
origin. Atwww.aspirecard.comandwww.aspireamas.com, a consumer can learn more about our Aspire Visa
card and complete and submit an on-line application. Atwww.aspireyes.comand www.aspireahora.com, a consumer can respond to a pre-qualified direct mail or
email offer for an Aspire Visa card. Applications received via
the internet are electronically processed on a real-time basis using the same credit and target marketing strategies that are applied to our direct mail and telemarketing campaigns. Once
the application has been transmitted, consumers are informed as to their approval status and the applicable terms of the offer, including the interest rate, annual fee and credit limit. At any point
in time, we may or may not originate accounts via the internet. To date, we have had very limited approvals of credit from Internet applications and we believe our direct mail and telemarketing
solicitations are much more efficient channels for us.

Application Processing

We contract with third party providers for the data entry of credit card applications resulting from our direct mail solicitations. We also use telemarketing
vendors to input application data for customers who respond to solicitations via the telephone. Entered application data is electronically transmitted in batches to us for processing by our
application processing system.

We
have developed proprietary methods of evaluating applications using an application processing system that automates the evaluation of customer application data. The system utilizes
pre-defined

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criteria to review applicant-provided information and to compare the information to the applicant's original solicitation data and to data from an online credit file that is automatically requested
for each applicant. The system performs a series of comparisons of identification information, such as name, address, and social security number, from the three data sources to verify that
customer-supplied information is complete and accurate. Potentially fraudulent applications are declined or held for further review.

The
applicant's online credit file that is obtained after the receipt of his or her response is further evaluated by the system to ensure that the applicant still meets the
creditworthiness criteria applied during the original prescreen process. The same credit criteria, proprietary custom models and credit bureau data items used during the initial prescreen selection
process are recalculated for each applicant. Applicants still meeting our creditworthiness criteria are designated as "approvals" and assigned a final credit offer.

Statistics
related to response rates and final offers and terms are captured daily for all processed applications and are transferred to our proprietary database for ongoing tracking and
analysis.

Fee-Based Products and Services

We offer fee-based products and services to our customers, including memberships, card registration, insurance products and subscription services.
Memberships include preferred buying clubs, travel services and credit monitoring programs. Insurance products feature supplemental, non-compulsory products, such as credit life,
unemployment insurance and disability policies. Subscription services include recurring consumer products such as magazine subscriptions, telephone service, and internet service provider access. These
fee-based products and services are offered throughout our relationship with a customer. Our three largest providers of fee based products are American Consumer Alliance, which provides
most membership products, the Assurant Group and Union Fidelity Life Insurance Company, an affiliate of General Electric, both of which provide supplemental insurance products to our customers. These
third party providers and other entities through which we provide fee based products are compensated based upon the services they provide and/or the quantity of products sold. These third party
providers are fully responsible for the fulfillment of the products they offer. Our responsibility is to ensure that enrollment and cancellation of the products purchased by our customers are properly
processed and billed to the customers at the rates established by the provider.

The
success of our fee-based business is a function of optimizing the number and efficiency of the fee-based products offered, the marketing channels leveraged to
sell fee-based products and the customers to whom we market our products. Profitability for fee-based products and services is affected by new credit card account growth, the
response rates to product solicitations, the volume and frequency of the marketing programs, the commission rates received from the product providers, the claim rates and claims servicing costs for
products and the operating expenses associated with the programs. Although a wide-range of our customers purchase fee-based products and services, fee-based product
and service sales generally are higher to new customers and tend to diminish throughout our relationship with our cardholders. As a result, we anticipate that during periods of low new account growth
our profitability from fee-based products and services will either grow at a reduced rate or decline.

Account and Portfolio Management

Ongoing Account Management.Our management strategy is to manage account activity using behavioral scoring, credit file data
and our proprietary risk evaluation systems. These strategies include the management of transaction authorizations, account renewals, over-limit accounts and credit line modifications. We
use an adaptive control system to translate our strategies into the account

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management processes. The system enables us to develop and test multiple strategies simultaneously, which allows us to continually refine our account management activities. We have incorporated our
proprietary risk scores into the control system, in addition to standard behavior scores used widely in the industry, in order to segment, evaluate and manage the accounts. We believe that by
combining
external credit file data along with historical and current customer activity, we are able to better predict the true risk associated with current and delinquent accounts.

We
monitor authorizations for all accounts. Customer credit availability is limited for transaction types which we believe are higher risks such as foreign transactions and cash
advances. We manage credit lines to reward underserved customers who are performing well and to mitigate losses from delinquent customer segments. Accounts exhibiting favorable credit characteristics
are periodically reviewed for credit line increases, and strategies are in place to reduce credit lines for customers demonstrating indicators of increased credit or bankruptcy risk. Data relating to
account performance is captured and loaded into our proprietary database for ongoing analysis. We adjust account management strategies as necessary, based on the results of such analyses.
Additionally, we use industry-standard fraud detection software to manage the portfolio. We route accounts to manual work queues, and suspend charging privileges if the transaction-based fraud models
indicate a high probability of fraudulent card use.

Client Advisory Services.We have implemented an advisory program to assist our customers in understanding the prudent use of
general purpose credit cards. We use our proprietary systems to identify customers who are not delinquent but are exhibiting credit behavior likely to result in delinquency in the future. We assign
these accounts to our credit advisors who actively review all account activity and, if necessary, contact the customer via letter or telephone. Actions taken by us may include customer-friendly advice
concerning the prudent use of credit, temporary or permanent reduction in credit line availability, review of the customer's full credit report, debts and income, and establishing repayment terms to
assist the customer in avoiding becoming over-extended.

Management
believes that this customer advisory strategy is not widely practiced in the credit card industry. Our advisory program allows us to enhance our relationship with our
customers by providing valuable and meaningful assistance while simultaneously contributing to prudent risk management strategies to reduce bad debt losses.

Client Satisfaction Initiative.We have a formal customer satisfaction program. Each quarter, members of management,
including members of executive management, survey hundreds of our customers about their level of satisfaction with our products and services. The results are used to continually improve service levels
and minimize attrition of profitable accounts.

Outsourcing.Account functions including card embossing/mailing, cycle billing/payment processing and transaction
processing/authorization are performed by third parties, including Columbus Bank and Trust and Total Systems. In January 1997, we entered into an Affinity Card Agreement with Columbus Bank and
Trust, a subsidiary of Synovus Financial Corporation, that provides for the issuance of our credit cards and the performance of the outsourced functions noted above. This agreement expires in
December 2003, and we will need to either renew this agreement or contract with an alternative credit card provider. Synovus Financial Corporation and its affiliates are our largest service
provider, and during 2001, we paid them approximately $47.4 million.

Data
processing and development services, services related to the evaluation of customer application data and marketing services are outsourced to Visionary Systems, Inc. Pursuant
to agreements with Visionary Systems that will expire in July, 2004, we pay Visionary Systems on a monthly basis for those services. During 2001, we paid approximately $20.1 million to
Visionary Systems and its subsidiaries for software development, loan origination, consulting services, intellectual property and two patents. Two of our officers have an indirect investment in
Visionary Systems. For more

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information regarding this relationship with Visionary Systems, see "Item 13. Relationships and Related Transactions."

Collections and Delinquency Management

Management considers its prior experience in operating professional collection agencies, coupled with our proprietary systems, to be a competitive advantage in
minimizing delinquencies, bad debt losses and operating expenses associated with the collection process. We use our systems to develop proprietary collection strategies and techniques to be employed
in our operations. We analyze the output from these systems to identify the collection activity that we believe is most likely to result in curing the delinquency cost-effectively rather
than treating all accounts the same based on the mere passage of time.

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

We
have three collection facilities, two in metro Atlanta, Georgia totaling approximately 36,000 square feet and one in North Wilkesboro, North Carolina totaling approximately 19,000
square feet. Management has instituted collector incentive compensation plans similar to those it successfully employed in its prior experience operating professional collection agencies. In addition
to our full-time staff, we outsource some of our collection activities. We continuously monitor the performance of our third party providers against that of our staff to determine which,
in our view, is more effective.

Securitizations

We began marketing and servicing credit card accounts in February 1997. Under our agreement with Columbus Bank and Trust Company ("CB&T"), CB&T originates
VISA and MasterCard revolving credit card accounts. On a daily basis, CB&T sells us an interest in the receivables created that day.
We, in turn, each day sell our interest in the receivables to trusts or to multi-seller commercial paper conduits administered by national banking institutions ("conduits"). Our sales meet all of the
criteria of Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("Statement No. 140").
The receivables that are sold through securitization are removed from our balance sheet for financial reporting purposes.

The
trusts or the conduits purchase receivables from us by raising proceeds from investors. The proceeds raised are part of series of notes issued by the trust or issued by the conduits.
These notes are similar to bank loan agreements as they have a note balance, a maturity date, an interest rate and contain standard representations, warranties and performance covenants that are
contained in most loan agreements. The proceeds from the investors are then remitted to us as part of the purchase price of the receivables. We had the following total commitments and outstanding
notes in our securitizations for each year presented:

For the year ended December 31,2001

2000

1999(In thousands)Total commitments from investors

$
2,046

$
1,847

$
884Total outstanding amounts


1,524


1,229


724


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As
indicated in the table below, as of December 31, 2001, our securitization facilities totaled approximately $2.0 billion with maturity dates ranging from
April 2002 to July 2004:

Maturity Date

Facility Limit(in millions)April 2002

$
221.2May 2002


200.0October 2002


306.0March 2003


250.0September 2003


627.4July 2004


441.5$
2,046.1


We
renewed $96.2 million of the April 2002 securitization facility with the renewed portion set to expire in February 2003. We also renewed the
entire October 2002 facility and under the terms of the renewal it will expire in October 2003. The remaining $325 million of combined facilities that expired in 2002 were
replaced with a $300 million facility. This equated to a net decline of $25 million, or 1.2% of our outstanding securitization facilities. We feel that this securitization level is
adequate for our business purposes and has no material impact on our business strategy.

We
try to structure our securitization funding source by having commitments in excess of our current growth plans so that we have investors who will purchase notes from the trusts, which
in turn allows the trusts to purchase the receivables from us. We believe we have structured our securitization program to reduce our reliance on any one series of notes by staggering the maturity
dates of the notes issued by the trust and by also having excess capacity if one particular series of notes is not renewed at its maturity date. One of the reasons we have slowed our growth plans for
2002 is because we do not have any assurance that when any series of notes mature, they will be renewed on terms that are favorable to us, or at all. This is more fully discussed in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity, Funding and Capital Resources."

When
we sell the receivables, we receive cash proceeds and a seller's interest in the receivables. Our seller's interests are subordinate to the other investors in the trusts or the
investors in the commercial paper conduits. The receivables that are sold in our securitizations generate future cash flows as cardholders remit payments on their accounts. These payments are remitted
to the securitization trusts and then disbursed in accordance with the securitization agreements. We receive all of the excess cash flows from the securitizations, which represent collections on the
accounts in excess of the interest paid to the investors, servicing fees, credit losses and required amortization payments. We use the cash proceeds that we receive when we sell the receivables as
well as the future cash flows we receive from the performance of the receivables to fund our operations and to purchase new receivables generated in the accounts.

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

We
further detail our securitization program in Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCredit Card Securitizations.

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Consumer and Debtor Protection Laws and Regulations

Our business is regulated directly and indirectly under various federal and state consumer protection and other laws, rules and regulations, including the federal
Truth-In-Lending Act, the federal Equal Credit Opportunity Act, the federal Fair Credit Reporting Act, the federal Fair Debt Collection Practices Act and the federal
Telemarketing and Consumer Fraud and Abuse Prevention Act. These statutes and their enabling regulations, among other things, impose disclosure requirements when a consumer credit loan is advertised,
when the account is opened and when monthly billing statements are sent. In addition, various statutes limit the liability of credit cardholders for unauthorized use, prohibit discriminatory practices
in extending credit and impose limitations on the types of charges that may be assessed and restrict the use of consumer credit reports and other account-related information.

Changes
in any of these laws or regulations, or in their interpretation or application, could significantly impact our operations. Various proposals which could affect our business have
been introduced in Congress in recent years, including, among others, proposals relating to imposing a statutory cap on credit card interest rates, substantially revising the laws governing consumer
bankruptcy, limiting the use of social security numbers and regulating the internet. There have also been proposals in state legislatures in recent years to restrict telemarketing and internet
activities, impose statutory caps on consumer interest rates, limit the use of social security numbers and expand consumer protection laws. It is impossible to determine whether any of these proposals
will become law and, if so, what impact they will have on us.

In
1999 Congress enacted the Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act creates a new type of bank holding company, a "financial holding company," that may engage in a range of
activities that are financial in nature, including insurance and securities underwriting, insurance sales, merchant
banking and real estate development and investment. The Gramm-Leach-Bliley Act also establishes new privacy requirements applicable to all financial institutions. Financial institutions are required
to establish a privacy policy and to disclose the policy at the start of a customer relationship and once a year thereafter. Additionally, financial institutions must give a customer the opportunity
to block the sharing of the customer's nonpublic personal information with unaffiliated third parties, except in limited circumstances. Further, financial institutions are barred from sharing credit
card numbers, account numbers or access numbers of customers with third-party marketers. State laws that provide a greater degree of privacy protection are not preempted by federal law.

Although
we believe that we and Columbus Bank and Trust are currently in compliance with applicable statutes and regulations, there can be no assurance that we or Columbus Bank and Trust
will be able to maintain such compliance. The failure to comply with applicable statutes or regulations could significantly harm our results of operations or financial condition. In addition, because
of the consumer-oriented nature of the credit card industry, there is a risk that we or other industry participants may be named as defendants in litigation involving alleged violations of federal and
state laws and regulations, including consumer protection laws, and consumer law torts, including fraud. The institution of any material litigation or a significant judgment against us or Columbus
Bank and Trust or within the industry in connection with any such litigation could have a material adverse effect on our results of operations or financial condition.

The
National Bank Act of 1864 authorizes national banks to charge customers interest at the rates allowed by the laws of the state in which the bank is located, regardless of any
inconsistent law of the state in which the bank's customers are located. A similar right is granted to state institutions such as Columbus Bank and Trust in the Depository Institutions Deregulation
and Monetary Control Act of 1980. In 1996, the United States Supreme Court held that late payment fees are "interest" and therefore can be "exported" under the National Bank Act, deferring to the
Comptroller of the Currency's interpretation that interest includes late payment fees, insufficient funds fees, over-limit fees and other fees and charges associated with credit card
accounts. This decision does not directly apply to state institutions such as Columbus Bank and Trust. Although several courts have upheld the ability of

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state institutions to export some types of fees, a number of lawsuits have been filed alleging that the laws of some states prohibit the imposition of late fees. If the courts do not follow existing
precedents, Columbus Bank and Trust's ability to impose some fees could be adversely affected, which could significantly harm our results of operations or financial condition.

We
do not currently own a bank. In October 1998, we applied for a bank charter, but we withdrew the application in June 2001, because we then believed, and still believe,
that it would be difficult for us to charter a bank in the current regulatory environment given the recent failure of a significant sub-prime lender. However, if we were able to charter a
bank, we expect that the bank would become the issuer of a portion of the credit cards we market. Any bank we charter would be subject to the various state and federal regulations generally applicable
to such institutions.

Competition

We face intense competition from other consumer lenders. In particular, our credit card business competes with national, regional and local bank card issuers, and
with other general-purpose credit card issuers, including American Express®, Discover® and issuers of Visa® and MasterCard®. We also compete with retail
credit card issuers, such as department stores and oil companies, and other providers of unsecured credit. Large credit card issuers, including but not limited to, Providian, Metris and Capital One,
may compete with us for customers by offering lower interest rates and fees. Many of these competitors are substantially larger than we are and have greater financial resources. Customers choose
credit card issuers largely on the basis of price, including interest rates and fees, credit limit and other product features. For this reason, customer loyalty is often limited. We may lose entire
accounts, or may lose account balances, to competing credit card issuers.

Our
competitors are continually introducing new strategies to attract customers and increase their market share. The most heavily used techniques are advertising, target marketing,
balance transfers, price competition, incentive programs and using the name of a sports team or a professional association on their credit cards, known as "co-branding." In response to
competition, some issuers of credit cards have lowered interest rates and offered incentives to retain existing customers and attract new ones. These competitive practices, as well as competition that
may develop in the future, could harm our ability to obtain customers and maintain profitability.

The
Gramm-Leach-Bliley Act repeals the Glass-Steagall Act of 1933, which separated commercial and investment banking, and eliminates the Bank Holding Company Act's prohibition on
insurance underwriting activities by bank holding companies. As a result, the Gramm-Leach-Bliley Act permits the affiliation of commercial banks, insurance companies and securities firms. This change
may increase the ability of insurance companies and securities firms to acquire, or otherwise affiliate with, commercial banks and likely will increase the number of competitors in the banking
industry and the level of competition for banking products, including credit cards.

Business Developments

We began marketing credit cards issued by Columbus Bank and Trust in 1997. During 1997, 1998, 1999 and early 2000 we saw very robust growth rates and surpassed
two million cardholders. We believe that in the latter part of 2000 the national economy began to slow and that traditional credit card companies began to increase their marketing to our same target
market. We believe the economy further slid into a recession in the first quarter of 2001 and that consumer spending in general slowed. During 2001, we still increased our managed receivables
portfolio by 24%; however, this was a much lower rate than the rate of 70% we experienced in 2000 and the rate of 78% we experienced in 1999.

We
face intense competition and we believe the drop in the usage of our credit card is due in part to increased competition from other credit card companies including Metris, Providian,
NextCard and
Capital One. Although we cannot measure the impact of competitors to our business specifically, we believe that many of our competitors were offering lower fees for their credit card products and were

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possibly offering larger credit lines on their credit card products. We also believe that our competitors may have been offering teaser rates to induce cardholders to accept and use their products.

In
addition to the decrease in the usage of our cards based upon competition, decreases in our receivables are a result of our cardholders charging less on average. The impact of the
competition and the impact of changes in consumer spending cannot be separately quantified by us in terms of the impact to our business. We believe, however, that these two factors did decrease our
account growth during the end of 2000, throughout 2001 and will continue to decrease our account growth into 2002. The associated receivables growth and our net income, is dependent upon the size and
profitability of our managed portfolio. It is this managed portfolio that generates income to us through our ownership of the retained interests in the securitizations of these same credit card
receivables.

In
response to the decrease in the average usage of our cards, our perception of the competitive landscape, and external events such as those of September 11, 2001, the
receivership of NextCard and the effect of Providian's performance on our industry, we decided to decrease our marketing of new credit card accounts during late 2001 and into 2002. As a result, new
accounts decreased from 1.3 million accounts in 2000 to 670,000 accounts in 2001. We anticipate adding fewer than 200,000 accounts during 2002 absent any portfolio acquisitions. While
decreasing the number of new accounts decreases our marketing expense for these same years, it also reduces the growth of our average managed loans. We are reducing our marketing of new accounts and
we believe that this may result in a decrease in our average managed loans during 2002.

Although
we securitize all of our credit card receivables, our financial performance is a function of the performance of the aggregate amount of credit card receivables that are
outstanding. This aggregate amount is a function of many factors including purchase rates, payment rates, interest rates, charge off rates, seasonality, general economic conditions, competition from
other credit card companies and other sources of consumer financing, access to funding including access to securitizations and the success of our marketing efforts, including our fee based products.
We cannot precisely estimate the future performance of these individual factors or the impact of the factors working in combination although they directly impact the size or growth of the credit card
receivables and our future performance. We continually study and monitor these factors to determine the day-to-day business decisions we make in running our business. Given the
uncertainty in these factors that we have seen during the latter part of 2000 and during 2001, we have slowed our growth and are waiting to increase our growth until we believe we have more clarity as
to these factors and their impact on the performance of credit card receivables.

We
required additional liquidity during the second half of 2001 to fund our operations, to repay our revolving credit facility (which was scheduled to expire in January 2002) and
to fund the growth in our seller's interests in our securitizations. We had a difficult time obtaining the needed funds. We were not able to issue common stock at a price we deemed acceptable due to a
variety of different factors, including a general economic slowdown, the repercussions from the events of September 11, 2001,
uncertainty in the liquidity markets in general, concerns surrounding the poor performance of our competitors and our failure to meet analysts' expectations given the slowdown in the growth of our
managed receivables. As a result, we sold $40.0 million of preferred stock and approximately $36.3 million of our seller's interests at a discount netting in aggregate approximately
$66.2 million in cash.

As
noted above, we have decreased our growth plans for 2002, which will reduce our need for any additional liquidity to fund our existing operations. We continue, however, to explore a
wide range of options for liquidity to prepare us for growth, as well as, for adverse changes in the securitization marketplace. These options include revolving lines of credit, selling a subordinate
interest in one or more of our securitizations, and the issuance of debt or equity.

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We
discuss the performance of the credit card receivables underlying our securitizations in more detail in "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations-Selected Credit Card Data."

As
we wait to see how the economy, and consumers will work through the challenges of 2002, we will concentrate on objectives that are more in our control such as reducing our operating
expenses, and providing excellent customer service to our consumers. Additionally, in 1998 we successfully purchased portfolios of credit card receivables and we believe there will be new
opportunities to grow through the use of portfolio acquisitions during 2002.

Employees

As of December 31, 2001, we had approximately 885 employees, substantially all of whom are located in Georgia, Florida and North Carolina. No collective
bargaining agreement exists for any of our employees. We consider our relations with our employees to be good. In January 2002, we reduced our staff by approximately 70 employees. Also, in
2002, we sold furniture and fixtures in a customer service center located in Florida to a third party. In conjunction with the sale, approximately 65 employees in that customer service center went to
work for the buyer.

Trademarks

CompuCredit, Aspire, Aspire A Mas, Aspire Diamond, Aspire Rapid Miles, For Everything You Aspire To Be, Get On Get Yours, Para Todo Lo Que Aspira A' Ser and
Transforming Information into Value are registered trademarks of CompuCredit. AspireCard, Aspire Ahora, Emerge, InCharge, Its Your
Credit Take Charge of It and One Screen are common law trademarks of CompuCredit. We consider these trademarks to be readily identifiable with, and valuable to, our business. This Annual Report on
Form 10-K also contains trade names and trademarks of other companies that are the property of their respective owners.

Proprietary Rights and Licenses

We regard our database management system and our customer selection and risk evaluation criteria as confidential and proprietary. We initially developed our
pre-screen customer selection criteria under a contract with a national credit bureau; however, we own all intellectual property rights in the resulting model. Our database management
system was developed by Visionary Systems, Inc. and VSx Corporation under a contract pursuant to which we held an exclusive, perpetual license to use, copy, execute, display and reproduce the
software constituting our database management system. In May 2001, we purchased from VSx Corporation the components of the data management system known as the "Brain," and entered into a
license agreement with Visionary Systems, which continues to own one component of the software known as the "Switch." Pursuant to our agreement with Visionary Systems, we were granted a nonexclusive
license to use, copy, execute or display for internal use the Switch, a system that automates the evaluation of customer application data and, among other things, provides us with
real-time access to credit information concerning our target market and our customers. In addition, Visionary Systems continues to provide substantially all of the computer software design
and implementation services we require in the continuing refinement and use of our computer software systems. Visionary Systems has granted to us a right of first refusal during the term of the
agreement in the event the developer wishes to sell or otherwise transfer any of its ownership rights in the Switch. During 2001, we paid approximately $20.1 million to Visionary Systems and
its subsidiaries for software development, loan origination, consulting services, intellectual property and two patents. Two of our officers have an indirect investment in Visionary Systems. For more
information regarding our relationship with Visionary Systems, see "Item 13. Relationships and Related Transactions."

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RISK FACTORS

In addition to other factors and matters discussed elsewhere in this Annual Report on Form 10-K, set forth below are
factors that we believe may affect our performance or cause actual results to differ materially from forward-looking statements that we have made or may make in the future. The risks and uncertainties
described below are not the only risks we face. These risks are the ones we consider to be the most significant at this time. We might be wrong. There may be risks that you in particular view
differently than we do, and there are other risks and uncertainties that are not presently known to us or that we currently consider less significant, but that may in fact impair our business
operations. If any of the following risks actually occur, our business, results of operations and financial condition could be seriously harmed and the trading price of our common stock could
decline.

The cash flows we receive from our retained interests drive our financial performance and are dependent upon the cash flows received on the credit card receivables underlying
our securitizations.

The collectibility of the receivables underlying our securitizations is a function of many factors including the criteria used to select who is issued a credit
card, the pricing of the credit products, the length of the relationship with each cardholder, general economic conditions, the rate at which cardholders repay their accounts, and the rate at which
cardholders change or become delinquent. To the extent we have over estimated collectibility, in all likelihood we have over estimated our financial performance. Some of these concerns are discussed
more fully below.

We may not successfully evaluate the creditworthiness of our customers and may not price our credit products so as to remain
profitable.The creditworthiness of our target market is generally considered "sub-prime," based on guidance issued by the agencies that regulate the
banking industry. Thus, our customers generally have a higher risk of nonpayment, higher frequencies of delinquencies and higher credit losses than consumers who are served by more traditional
providers of consumer credit. Some of the consumers included in our target market are consumers who are dependent upon finance companies, consumers with only retail store credit cards and/or lacking
general purpose credit cards, consumers who are establishing or expanding their credit and consumers who may have had a delinquency, a default or, in some instances, a bankruptcy in their credit
histories, but have, in our view, demonstrated recovery. We price our credit products taking into account the risk level of our target customers. If our estimates are incorrect,customer default rates
will be higher, we will receive less cash from our securitizations which will result in a decrease in the value of our retained interests (which are based on expected future cash flows) and we will
experience reduced levels of net income.

The performance of our competitors may impact the costs of our securitization.Investors in our
securitizations compare us to Providian and other sub-prime credit card issuers and, to a degree, our performance is tied to their performance. Generally speaking, our securitizations
investors also invest in our competitors' securitizations. These investors broadly invest in the credit card industry, and when they evaluate their investments, they typically do so on the basis of
overall industry performance. Thus, when our competitors perform poorly, we typically experience negative investor sentiment, and the investors in our securitizations require greater returns,
particularly with respect to subordinated interests. In the fourth quarter of 2001, for instance, investors demanded unprecedented returns. In the event that investors unexpectedly require higher
returns and we sell our retained interests at that time, the total return to the buyer may be greater than the discount rate we are using to value the retained interests in our financial statements.
This would result in a loss for us at the time of the sale as the total proceeds from the sale would be less than the carrying amount of the retained interests in our financial statements. We would
also potentially increase the discount rate used to value all of our other retained interests which would also result in further losses. Conversely, if we sold our retained interests for a total
return to the investor that was less than our current discount rate, we would record income from the sale, and we would potentially decrease the discount rate used to value all of our other retained
interests which would result in additional income.

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The lack of seasoning of our credit card portfolio makes it difficult to predict the performance of our business.A portfolio of older accounts generally behaves more predictably than a newly originated portfolio. As of December 31, 2001, 94% of our total portfolio was comprised of originated
receivables and most of these originated receivables were less than two years old. In general, as the average age of an originated credit card receivables portfolio increases, delinquency and charge
off rates can be expected to increase and then stabilize. Any increases in delinquencies and charge offs beyond our expectations will decrease the value of our retained interests in securitization
transactions resulting in a decrease in our net income. This also may reduce the funds available for our future growth and may hinder our ability to complete other securitizations in the future. Our
delinquency rates (the percentage of our accounts more than 60 days past due) have increased over the last several years from 6.4% at December 31, 1999 to 9.5% at December 31,
2000 to 11.1% at December 31, 2001. The majority of our charge offs occur when the account becomes contractually 180 days delinquent. Thus, increased charge offs would generally follow
increased delinquencies, absent significant changes in collection activities. As recently as the fourth quarter of 2000 and throughout 2001 a greater than expected charge off ratio adversely impacted
our business and stock price.

An economic slowdown could increase credit losses and/or decrease our growth.Because our business is
directly related to consumer spending, any period of economic slowdown or recession could make it more difficult for us to add or retain accounts or account balances. In addition, during periods of
economic slowdown or recession, we expect to experience an increase in rates of delinquencies and the frequency and severity of credit losses. Our actual rates of delinquencies and frequency and
severity of credit losses may be higher under adverse economic conditions than those experienced in the consumer finance industry generally because of our focus on the underserved market. Moreover,
because we have experienced only limited adverse general economic conditions since we began originating accounts, we may not accurately anticipate the effect of an economic slowdown or a recession.

Because a significant portion of our reported income is based on our management's estimates of the performance of securitized receivables,
differences between actual and expected performance of the receivables may cause fluctuations in net income.Income from the sale of receivables in securitization
transactions and income from retained interests in credit card receivables securitized have constituted, and are likely to continue to constitute, a significant portion of our income. Portions of this
income are based primarily on management's estimates of cash flows we expect to receive from the interests that we retain when we securitize receivables. Differences between actual and expected
performance of the receivables may cause fluctuations in our net income. The expected cash flows are based on management's estimates of interest rates, default rates, payment rates, new purchases,
costs of funds paid to investors in the securitizations, servicing costs, discount rates and required amortization payments. These estimates are based on a variety of factors, many of which are not
within our control. As a result, these estimates will differ from actual performance. During the fourth quarter of 2001, we increased the discount rate used to value our retained interests from 14.2%
used at September 30, 2001 to 34.9%. This resulted in a substantial loss. We increased our discount rate primarily to reflect the higher rate of return required by investors. We sold retained
interests in two transactions during the fourth quarter of 2001. The first was during November, and the internal rate of return required by the purchaser was approximately 22%. The second transaction
was in December, and the internal rate of return required by the purchaser was approximately 35%. We attribute the increase to a general economic slowdown, the repercussions from the events of
September 11, 2001, uncertainty in the liquidity markets in general, concerns surrounding the poor performance of our competitors, and our failure to meet analysts' expectations given the
slowdown in the growth of our managed receivables. Please see "Year Ended December 31, 2001 Compared to Year Ended December 31, 2000" in "Results of Operations" of our MD&A section of
our Annual Report on Form 10-K for the year ended
December 31, 2001. During the second quarter of 2002, we hired an independent financial advisory firm to evaluate our discount rate. That firm concluded that an appropriate discount rate was
22.5%. During the second quarter of 2002, we adopted this recommendation and revised the discount rate that

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we use to 22.5%, from 34.9% at March 31, 2002. This resulted in an increase in the value of our retained interests of approximately $22.8 million and a corresponding increase in pretax
income of approximately $22.8 million. We attribute the change to a lessening of market place concern regarding the performance of other credit card issuers and general improvement in market
conditions. This change emphasizes, however, that the discount rate may be volatile.

Increases in expected losses and delinquencies may prevent us from continuing to securitize receivables in the future on similar
terms.Greater than expected delinquencies and losses could also impact our ability to complete other securitization transactions on acceptable terms or at all,
thereby decreasing our liquidity and forcing us to either decrease or stop our growth or rely on alternative, and potentially more expensive funding sources to the extent available.

Increased utilization of existing credit lines by cardholders would require us to establish additional securitization facilities or
curtail credit lines.Our existing commitments to extend credit to cardholders exceed our commitments for securitizations by over 2 to 1. If all of our cardholders
were to use their entire lines of credit at the same time, we would not have sufficient capacity to fund card use. However, in that event, we could either reduce our cardholders' available credit
lines or establish additional securitization facilities. This would subject us to several of the other risks that we have described in this section of the prospectus.

Increases in expected losses and delinquencies may cause us to incur losses on our retained
interests.If the actual amounts of delinquencies and losses that occur in our securitized receivables are greater than our expectations, the value of our retained
interests in the securitization transactions will be decreased. Since we derive a portion of our income from these retained interests, higher than expected rates of delinquency and loss could cause
our net income to be lower than expected. In addition, under the terms of our securitizations agreements, levels of loss and delinquency could result in us being required to repay our securitizations
investors earlier than expected, reducing funds available to us for future growth.

Our portfolio of credit card receivables is not diversified and originates from cardholders whose creditworthiness is considered
sub-prime.We obtain the receivables that we securitize in one of two wayswe either issue credit cards (through our agreement with
Columbus Bank and Trust) or purchase receivables from other credit card issuers. In either case, substantially all of our securitized receivables originate from sub-prime borrowers. Our
reliance on sub-prime receivables has in the past (and may in the future) negatively impacted our performance. For example, in the fourth quarter of 2001, we suffered a substantial loss
after we increased our discount rate to reflect the higher rate of return required by investors. Because our receivables portfolios are all of substantially the same character (i.e.,
sub-prime), the increased discount rate resulted in a decrease in the value of our various receivables portfolios. These losses may have been mitigated if our portfolios consisted of
higher grade receivables in addition to our sub-prime receivables. Since our portfolios are undiversified, negative market forces
have the potential to cause a widespread adverse impact, and we have no immediate plans to issue or acquire receivables of a higher quality.

Seasonal consumer spending may result in fluctuations in our net income.Our quarterly income may
substantially fluctuate as a result of seasonal consumer spending. In particular, our customers may charge more and carry higher balances during the year-end holiday season and before the
beginning of the school year, resulting in corresponding increases in managed loans and receivables securitized during those periods.

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Increases in interest rates may increase our cost of funds and may reduce the payment performance of our
customers.Increases in interest rates may increase our cost of funds, which could significantly affect our results of operations and financial condition. Our
credit card accounts have variable interest rates. Significant increases in these variable interest rates may reduce the payment performance of our customers.

Due to the lack of historical experience with internet customers, we may not be able to successfully target these customers or evaluate
their creditworthiness.There is less historical experience with respect to the credit risk and performance of credit card customers acquired over the internet. As
part of our growth strategy, we may expand our origination of credit card accounts over the internet; however, we may not be able to successfully target and evaluate the creditworthiness of these
potential customers. Therefore, we may encounter difficulties managing the expected delinquencies and losses and appropriately pricing our products.

We are substantially dependent upon securitizations and other borrowed funds in order to fund the credit card receivables that we originate or purchase.

All of our securitization facilities are of finite duration (and ultimately will need to be extended or replaced) and contain conditions that must be fulfilled in
order for funding to be available. In the event that advance rates for securitizations are reduced, investors in securitizations require a greater rate of return, we fail to meet the requirements for
continued funding, or securitizations otherwise become unavailable to us, we may not be able to maintain or grow our base of credit card receivables or it may be more expensive for us to do so. In
addition, because of advance rate limitations, we maintain retained interests in our securitizations that must be funded through profitable operations, equity raised from third parties, or funds
borrowed elsewhere. The cost and availability of equity and borrowed funds is dependent upon our financial performance, the performance of our industry generally, and general economic and market
conditions, and recently has been both expensive and difficult to obtain. Some of these concerns are discussed more fully below.

Our growth is dependent on our ability to add new securitization facilities.We finance all of our
receivables through securitizations. To the extent we grow our receivables significantly, our cash requirements are likely to exceed the amount of cash we generate from operations, thus requiring us
to add new securitization facilities. Our historic and projected performance impact whether, on what terms and at what cost we can sell interests in our securitizations. If additional securitization
facilities are not available on terms we consider acceptable, or if existing securitization facilities are not renewed on terms as favorable as we have now or are not renewed at all, we may not be
able to grow. One of the
reasons that we have slowed our growth plans is because a significant portion of our securitizations have or will mature in the near future, and we do not have any assurances that we will be able to
obtain new securitizations on satisfactory terms.

As our securitization facilities mature, they will be required to accumulate cash that therefore will not be available for
operations.Repayment for our securitization facilities begins as early as one year prior to their maturity dates. Once repayment begins and until the facility is
paid, payments from customers on credit card receivables are accumulated to repay the investors and are no longer reinvested in new credit card receivables. At that time, our funding requirements for
new credit card receivables increase accordingly. If our securitization facilities begin to accumulate cash and we also are unable to obtain additional sources of liquidity, such as debt, equity or
new securitization facilities that are structurally subordinate to the facilities accumulating cash, we may be forced to prohibit new purchases in some or all of our credit card accounts in order to
significantly reduce our need for any additional cash.

We may be unable to obtain capital from third parties needed to fund our existing securitizations or may be forced to rely on more
expensive funding sources.We need equity or debt capital to fund our retained interests in our securitizations. Investors should be aware of our dependence on
third parties for

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funding and our exposure to increases in costs for that funding. External factors, including the general economy, impact our ability to obtain funds. In late 2001, we needed additional liquidity to
fund our operations as well as the growth in the retained interests in our securitizations, and we had a difficult time obtaining those needed funds. We were not able to issue common stock at a price
we deemed acceptable due to a variety of different factors, including a general economic slowdown, the repercussions from the events of September 11, 2001, uncertainty in the liquidity markets
in general, concerns surrounding the poor performance of our competitors and our failure to meet analysts' expectations given the slowdown in the growth of our managed receivables. At the same time,
due to many of these factors, we were able to sell our retained interests in our securitization only at a dramatically increased rate of return to the investors. During the fourth quarter of 2001, we
utilized our revolving credit facility to fund the portion of our receivables growth that could not be funded through securitization. To date, we have not replaced our revolving credit facility, which
expired in January 2002. If in the future we need to replace that facility or otherwise raise cash by issuing additional debt or equity or by selling a portion of our retained interests, there
is no certainty that we will be able to do so or that we will be able to do so on favorable terms. Our ability to replace our credit facility or otherwise raise cash will depend on factors such as our
performance and creditworthiness, the performance of our industry, the performance of issuers of other non-credit card based asset backed securities, and the general economy.

The timing and size of securitizations may cause fluctuations in quarterly income.Substantial
fluctuations in the timing or the volume of receivables securitized will cause fluctuations in our quarterly income. Factors that affect the timing or volume of securitizations include the growth in
our receivables, market conditions and the approval by all parties of the terms of the securitization.

We may be required to pay to investors in our securitizations an amount equal to the amount of securitized receivables if representations
and warranties made to us by sellers of the receivables are inaccurate.The
representations and warranties made to us by sellers of receivables we purchased may be inaccurate. We rely on these representations and warranties when we securitize these purchased receivables. Our
securitization transactions involve us making representations and warranties to investors and, generally speaking, if there is a breach of our representations and warranties, then under the terms of
the applicable investment agreement, we could be required to pay the investors a sum equal to the amount of the securitized receivables. Thus, our reliance on a representation or warranty of a
receivables seller, which proves to be false and causes a breach of one of our representations or warranties, could subject us to a potentially costly liability.

Our financial performance is, in part, a function of the aggregate amount of credit card receivables that are outstanding.

This aggregate amount is a function of many factors including purchase rates, payment rates, interest rates, seasonality, general economic conditions, competition
from other credit card issuers and other sources of consumer financing, access to funding as noted above, and the success of our marketing efforts. To the extent that we have over estimated the size
or growth of our credit card receivables, in all likelihood we have over estimated our future performance.

Intense competition for credit card customers may cause us to lose accounts or account balances to
competitors.We may lose entire accounts, or may lose account balances, to competing card issuers that offer lower interest rates and fees or other more attractive
terms or features. We believe that customers choose credit card issuers largely on the basis of interest rates, fees, credit limits and other product features. For this reason, customer loyalty is
often limited. Our future growth depends largely upon the success of our marketing programs and strategies. Our credit card business competes with national, regional and local bank card issuers and
with other general purpose credit card issuers, including American Express®, Discover® and issuers of Visa® and MasterCard® credit cards. Some of these

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competitors may already use or may begin using many of the programs and strategies that we have used to attract new accounts. In addition, many of our competitors are substantially larger than we are
and have greater financial resources. Further, the Gramm-Leach-Bliley Act of 1999, which permits the affiliation of commercial banks, insurance companies and securities firms, may increase the level
of competition in the financial services market, including the credit card business.

We may be unable to sustain and manage our growth.We may experience fluctuations in net income or
sustain net losses if we are not able to sustain or effectively manage our growth. Growth is a product of a combination of factors, many of which are not in our control. Factors include:



Our decisions regarding marketing can have a significant impact on our growth.We can increase or
decrease, as the case may be, the size of our outstanding receivables balances by increasing or decreasing our marketing efforts. Marketing is expensive, and during periods when we have less liquidity
than we like or when prospects for continued liquidity in the future do not look promising, we may decide to limit our marketing and thereby our growth. A decline in size of our receivables would
reduce our net income in future periods. We have reduced our marketing growth plans for 2002 as compared to 2001 due to concerns relating to the availability of financing, general economic conditions
and uncertainty regarding the credit quality of accounts we historically have targeted. We expect that our current marketing plans will result in a decline in our receivables and, consequently, will
reduce our net income as compared to earlier periods.

Our operating expenses and our ability to effectively service our credit card accounts is dependent on our ability to estimate the future size and general growth rate of the
portfolio.

One of our servicing agreements causes us to make additional payments if we overestimate the size or growth of our business. These additional payments are to
compensate the servicer for increased staffing expenses it incurs in anticipation of our growth. If we grow slower than anticipated, we may still have higher servicing expenses than we actually need,
thus reducing our net income.

We operate in a heavily regulated industry.

Changes in bankruptcy, privacy or other consumer protection laws may adversely affect our ability to collect credit card account balances or otherwise adversely
affect our business or expose us to litigation. Similarly, regulatory changes could adversely affect our ability to market credit cards and other products and services to our customers. The accounting
rules that govern our business are

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exceedingly complex, difficult to apply, and in a state of flux. As a result, how we value our credit card receivables and otherwise account for our business (including whether we consolidate our
securitizations) is subject to change depending upon the interpretation of, and changes in, those rules. Some of these issues are discussed more fully below.

Consumer protection laws may make collection of credit card account balances more difficult or may expose us to the risk of
litigation.Any failure to comply with legal requirements by Columbus Bank and Trust, as the issuer of our credit cards, or by us or Columbus Bank and Trust, as
the servicer of our credit card accounts, could significantly impair our ability or the ability of Columbus Bank and Trust to collect the full amount of the credit card account balances. Further, any
such failure to comply with the law could expose us or Columbus Bank and Trust to the risk of litigation under state and federal consumer protection statutes, rules and regulations. Our operations and
the operations of Columbus Bank and Trust are regulated by federal, state and local government authorities and are subject to various laws, rules and regulations, as well as judicial and
administrative decisions imposing requirements and restrictions on our business. Due to the consumer-oriented nature of the credit industry, there is a risk that we or other industry participants may
be named as defendants in litigation involving alleged violations of federal and state laws and regulations, including consumer protection laws. There is always a risk that new legislation or
regulations could place additional requirements and restrictions on our business. However, this risk is amplified since our target market consists almost entirely of "sub-prime" borrowers
and lawmakers, and regulators have recently shown an interest in increasing the regulation of this segment in order to protect the customers of and investors in sub-prime lenders. The
institution of any litigation of this nature or any judgment against us or any other industry participant in any litigation of this nature could adversely affect our business and financial condition
in a variety of ways. For more information regarding consumer and debtor protection laws applicable to us and Columbus Bank and Trust, see "Item 1. BusinessConsumer and Debtor Protection
Laws and Regulations."

Changes in law may increase our credit losses and administrative expenses, restrict the amount of interest and other charges imposed on
the credit card accounts or limit our ability to make changes to existing accounts.Numerous legislative and regulatory proposals are advanced each year which, if
adopted, could harm our profitability or limit the manner in which we conduct our activities. Changes in federal and state bankruptcy and debtor relief laws may increase our credit losses and
administrative expenses. More restrictive laws, rules and regulations may be adopted in the future which could make compliance more difficult or expensive, further restrict the amount of interest and
other charges we can impose on the credit card accounts we originate or market, target sub-prime lenders, limit our ability to make changes to the terms on existing accounts or otherwise
significantly harm our business.

Negative publicity may impair acceptance of our products.Critics of the credit card industry have in
the past focused on marketing practices that they claim encourage consumers to borrow more money than they should, as well as on pricing practices that they claim are either confusing or result in
prices that are too high. Increased criticism of the industry or criticism of us in the future could hurt customer acceptance of our products or lead to changes in the law or regulatory environment,
either of which would significantly harm our business.

Internet security breaches could damage our reputation and business.Internet security breaches could
damage our reputation and business. As part of our growth strategy, we may expand our origination of credit card accounts over the internet. The secure transmission of confidential information over
the internet is essential to maintaining consumer confidence in our products and services offered online. Advances in computer capabilities, new discoveries or other developments could result in a
compromise or breach of the technology used by us to protect customer application and transaction data transmitted over the internet. Security breaches could damage our reputation and expose us to a
risk of loss or litigation. Moreover, consumers generally are concerned with security and privacy on the internet, and

23

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any publicized security problems could inhibit the growth of the internet as a means of conducting commercial transactions. Our ability to solicit new account holders over the internet would be
severely impeded if consumers become unwilling to transmit confidential information online.

We routinely explore various opportunities to grow our business, including the purchase of credit card receivable portfolios and other businesses.

There are a number of risks attendant to any acquisition, including the possibility that we will overvalue the assets to be purchased, that we will not be able to
successfully integrate the acquired business or assets, and that we will not be able to produce the expected level of profitability from the acquired business or assets. As a result, the impact of any
acquisition on our future performance may not be as favorable as expected and actually may be adverse.

Our
portfolio purchases may cause fluctuations in reported managed loan data, which may reduce the usefulness of historical managed loan data in evaluating our business. Our reported
managed loan data may fluctuate substantially from quarter to quarter as a result of recent and future portfolio
acquisitions. As of December 31, 2001, portfolio acquisitions account for 6% of our total portfolio and may account for a significant portion of our credit card receivables in the future.

Credit
card receivables included in purchased portfolios may have been originated using credit criteria different from our criteria. As a result, some of these receivables have a
different credit quality than receivables we originated. Receivables included in any particular purchased portfolio may have significantly different delinquency rates and charge off rates than the
receivables previously originated and purchased by us. These receivables may also earn different interest rates and fees as compared to other similar receivables in our receivables portfolio. These
variables could cause our reported managed loan data to fluctuate substantially in future periods making the evaluation of our business more difficult.

Other Risks.

We also face a number of other uncertainties. These include:

The existence of the preferred stock could adversely impact holders of common stock.The
Series A Preferred Stock and Series B Preferred Stock in the aggregate could be converted into approximately 4,483,000 shares of common stock, or 9.4% of the number of shares that would
be outstanding immediately following conversion. Additionally, dividends on the Preferred Stock will generally be paid in additional shares of Preferred Stock on a quarterly basis, which means that
over time the holders of the Preferred Stock will be entitled to convert their shares into an even greater percentage of our Common Stock. For example, assuming no dividends are paid in cash and the
antidilution rights of the preferred stockholders are not triggered, one year after issuance; the preferred stock could have converted into approximately 10.4% of the common stock outstanding at the
time of issuance; and five years after issuance the preferred stock could be converted into approximately 15.4% of the common stock outstanding at the time of issuance.

In
addition, the holders of the preferred stock have the right to vote separately on various itemsincluding material corporate transactionsand may not vote in a manner
beneficial to the interests of the common stock where the interests of the two classes are different.

Unless we obtain a bank charter, we cannot issue credit cards other than through an agreement with a bank.Because we do not have a bank charter, we currently cannot issue credit cards other than through an agreement with a bank. We issue our credit cards under an agreement with Columbus Bank
and Trust. In October 1998, we applied for a bank charter, but we withdrew the application in June 2001, because, given the failure of a significant sub-prime lender, we believed that it
would be difficult for us to charter a bank in the regulatory environment which existed at that time. However, we

24

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are open to obtaining a bank charter (including through the acquisition of a bank), but if we pursue these options there is a possibility that our status as a sub-prime lender may have an adverse
effect on our efforts. Unless we obtain a bank charter, we will continue to rely upon Columbus Bank and Trust to issue credit cards to our customers. If our agreement with Columbus Bank and Trust were
terminated or otherwise disrupted, there is a risk that we would not be able to enter into an agreement with an alternate provider on terms that we consider favorable or in a timely manner without
disruption of our business. Additionally, any bank we charter would be subject to the various state and federal regulations and restrictions generally applicable to such institutions.

Because we outsource account processing functions that are integral to our business, any disruption or termination of that outsourcing
relationship could harm our business.We outsource account and payment processing pursuant to agreements with Columbus Bank and Trust and its affiliates. In 2001
we paid Columbus Bank and Trust and its affiliates approximately $47.4 million for these services. If these agreements were terminated or the services provided to us otherwise disrupted, we
would have to obtain these services from an alternative provider. There is a risk that we would not be able to enter into a similar agreement with an alternate provider on terms that we consider
favorable or in a timely manner without disruption of our business.

We rely on Visionary Systems, Inc. for software design and support, and any disruption of our relationship with Visionary Systems
would negatively impact our business.Visionary Systems is a privately owned designer of computer software and provider of processing and other computer services.
Two of our officers, Richard R. House, Jr. and Richard W. Gilbert, each indirectly own 13.7% of its stock. During 2001 we paid Visionary Systems approximately $20.1 million for software
development, loan origination, consulting services, intellectual property and two patents. In the event that Visionary Systems no longer provides us with software and support, our business would be
negatively impacted until we retained replacement vendors. We believe that a number of vendors are qualified to perform the services performed by Visionary Systems and believe that this impact would
only be temporary.

If we obtain a bank charter, any changes in applicable state or federal laws could adversely affect our
business.In the future, we may apply for a bank charter. If we obtain a bank charter, we will be subject to the various state and federal regulations generally
applicable to similar institutions, including restrictions on the ability of the banking subsidiary to pay dividends to us. We are unable to predict the effect of any future changes of applicable
state and federal laws or regulations, but such changes could adversely affect the bank's business and operations.

In the event that our stock price does not increase, we may be required to pay the dividends on our preferred stock in
cash.The terms of the Series A Preferred Stock and Series B Preferred Stock initially permit us, at our election, to pay the required dividends in
either additional shares of preferred stock or in cash. However, commencing in September 2003, in the event that our stock price does not increase by 6% per quarter thereafter, the holders may
require that we pay dividends in cash. If we assume dividends are paid through increasing the redemption price (called the "accreted value") of the preferred stock until September 2003, the
cash dividends at that time would initially be approximately $1.2 million per quarter.

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

ITEM 2. PROPERTIES

Our principal executive offices, comprising approximately 137,000 square feet, and our operations centers and collection facilities, comprising approximately
86,000 square feet, are located in leased premises in Atlanta, Georgia and North Wilkesboro, North Carolina. Our fee-based business, comprising approximately 10,500 square feet, is located
in leased premises in Daytona Beach, Florida.

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We believe that our facilities are suitable to our businesses and that we will be able to lease or purchase additional facilities as our needs require.

ITEM 3. LEGAL PROCEEDINGS

CompuCredit, David Hanna, our Chief Executive Officer, and Brett Samsky, our Chief Financial Officer from our inception until January 2001, are defendants
in a class action lawsuit pending in the Federal District Court for the Northern District of Georgia, Case No. 1:00-CV-2930-BBM. This lawsuit arose from the
decline in the market value of our common stock on October 25, 2000, and alleges that prior to that date CompuCredit, Mr. Hanna and Mr. Samsky made false and misleading statements
in violation of Federal securities laws. The lawsuit seeks compensatory monetary damages and legal fees. In July 2001, we filed a motion to dismiss the lawsuit. On February 19, 2002, the
court granted our motion to dismiss, but allowed the plaintiffs to file a motion seeking leave to amend their complaint. On March 22, 2002, the plaintiffs filed a motion requesting
additional time to amend their complaint. That motion is pending. We still maintain our position that we do not believe that this lawsuit has any merit, and we intend to continue to defend it
vigorously. We do not believe that the lawsuit is reasonably likely to have a material adverse effect on our financial position or results of operations. In addition, we could become involved in
litigation from time to time relating to claims arising in the ordinary course of our business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the quarter ended December 31, 2001.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

Our common stock has traded on the Nasdaq National Market under the symbol "CCRT" since our initial public offering in April 1999. The following table sets
forth, for the periods indicated, the high and low sales prices per share of our common stock as reported on the Nasdaq National Market. As of February 25, 2002, there were approximately 88
holders of our common stock, not including persons whose stock is held in nominee or "street name" accounts through brokers.

2001

High

Low1st Quarter 2001

$
25.88

$
6.532nd Quarter 2001


13.50


7.093rd Quarter 2001


15.39


5.854th Quarter 2001


11.78


5.67


2000

High

Low1st Quarter 2000

$
44.00

$
27.502nd Quarter 2000


36.88


27.383rd Quarter 2000


60.31


28.004th Quarter 2000


66.06


14.50


The
closing price of our common stock on the Nasdaq National Market on March 15, 2002 was $6.50. We have never declared or paid cash dividends on our common stock and do not
anticipate paying a cash dividend on our common stock in the foreseeable future. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of
OperationsLiquidity, Funding and Capital Resources."

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth, for the periods indicated, selected consolidated financial and other data for CompuCredit. You should read the selected
consolidated financial and other data below in conjunction with our consolidated financial statements and the related notes and with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Form 10-K. We have derived the following selected financial data, except for the selected credit card data, for the
years ended December 31, 2001, 2000, 1999, 1998 and 1997, which have been audited by Ernst & Young LLP, independent auditors. In April 2000, we acquired Citadel Group, Inc.
of Daytona Beach, Florida. The transaction was accounted for as a pooling of interests. All amounts have been restated to reflect the financial position, results of operations and cash flows of the
respective companies as though the companies were combined for all periods presented.

In
August 1997, we began securitizing our credit card receivables. In each securitization, we receive cash, retain an interest in the receivables that are securitized, retain the
rights to receive cash in the future and service the accounts. Securitizations are treated as sales under Generally Accepted
Accounting Principles. As such, we remove the securitized loans from our Consolidated Balance Sheet. The performance of the underlying credit card receivables will affect the future cash flows we
actually

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receive. The information in the following table under "Selected Credit Card Data" is presented for the credit card receivables that we have securitized.

|                                                                      |                                   | Year Ended December 31, |        
|--------------------------------------------------------------------- | --------------------------------- | ----------------------- | -------
|
|
|Statement of Operations Data:                                         |                                   |                         |        
|Interest income                                                       |                                   | $                       | 2,347  
|Interest expense                                                      |                                   |                         | 317    
|                                                                      |                                   |                         |        
|                                                                      | Net interest income (expense)     |                         |        
|Provision for loan losses                                             |                                   |                         |       
|                                                                      |                                   |                         |        
|Net interest income (expense) after provision for loan losses         |                                   |                         | 2,030  
|Securitization income (loss)                                          |                                   |                         | (8,400 
|Income from retained interests in credit card receivables securitized |                                   |                         | 11,328 
|Servicing income                                                      |                                   |                         | 6,018  
|Other credit card fee income                                          |                                   |                         | 89,553 
|Interchange fee income                                                |                                   |                         | 22,780 
|Ancillary product fee income                                          |                                   |                         | 30,592 
|Other income                                                          |                                   |                         |       
|Other operating expense                                               |                                   |                         | 149,489
|                                                                      |                                   |                         |        
|                                                                      | Income (loss) before income taxes |                         |        
|Income taxes                                                          |                                   |                         | (1,545 
|                                                                      |                                   |                         |        
|Net income (loss)                                                     |                                   | $                       | 2,867  
|                                                                      |                                   |                         |        
|Net income (loss) attributable to common shareholders                 |                                   | $                       | 2,723  
|                                                                      |                                   |                         |        
|Net income (loss) per diluted share                                   |                                   | $                       | 0.06   
|                                                                      |                                   |                         |        

|                                                          |  | At December 31,
|--------------------------------------------------------- |  | ---------------
|
|
|Balance Sheet Data:                                       |  |                
|Retained interests in credit card receivables securitized |  | $              
|Total assets                                              |  |                
|Shareholders' equity                                      |  |                

|                             |  | At or for the Year Ended December 31, |          
|---------------------------- |  | ------------------------------------- | ---------
|
|
|Selected Credit Card Data:   |  |                                       |          
|Average managed loans        |  | $                                     | 1,695,573
|Period-end managed loans     |  | $                                     | 1,891,842
|Period-end managed accounts  |  |                                       | 2,185    
|Net interest margin          |  |                                       | 21.0     
|Operating ratio              |  |                                       | 9.0      
|Net charge off ratio         |  |                                       | 14.9     
|Adjusted charge off ratio(1) |  |                                       | 14.8     
|Delinquency ratio            |  |                                       | 11.1     

---

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The
following tables contain unaudited quarterly results for the years ended December 31, 2001 and 2000.

Selected Quarterly Financial Data

|                                                                             |  | At or for the Three Months Ended |        
|---------------------------------------------------------------------------- |  | -------------------------------- | -------
|
|
|
|Summary of operations:                                                       |  |                                  |        
|Net interest income                                                          |  | $                                | 114    
|Securitization (loss) income, net                                            |  |                                  | (9,475 
|(Loss) income from retained interests in credit card receivables securitized |  |                                  | (44,554
|Other operating income                                                       |  |                                  | 40,053 
|Other operating expense                                                      |  |                                  | 37,160 
|(Loss) income before income taxes                                            |  |                                  | (51,022
|Income taxes                                                                 |  |                                  | 17,860 
|Net (loss) income                                                            |  | $                                | (33,162

|                  |  | At or for the Three Months Ended
|----------------- |  | --------------------------------
|
|
|
|Per common share: |  |                                 
|Basic             |  | $                               
|Diluted           |  |                                 

|                                                          |  | At or for the Three Months Ended
|--------------------------------------------------------- |  | --------------------------------
|
|
|
|Balance sheet data:                                       |  |                                 
|Retained interests in credit card receivables securitized |  | $                               
|Total assets                                              |  |                                 
|Shareholders' equity                                      |  |                                 

During the fourth quarter of 2001, our net income decreased by approximately $48.1 million due to a decrease in securitization income of
approximately $10.0 million and a decrease in income from retained interests in credit card receivables securitized of approximately $63.7 million. The decrease in the
securitization income (loss) resulted from selling approximately $36.3 million of our retained interests in credit card receivables securitized for net proceeds of approximately
$26.7 million during the fourth quarter of 2001. As a result of these transactions we recognized a loss of approximately $49.7 million when we revalued our retained interests with a
discount rate assumption implicit in these fourth quarter transactions. The loss associated with the change in fair market value of our retained interests was recorded in income (loss) from retained
interests in credit card receivables securitized. Prior to the fourth quarter of 2001, we had not sold any retained interests in credit card receivables securitized at a discount.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with "Item 6. Selected Financial Data" and our consolidated financial statements
and the related notes included herein.

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

General

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

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

Securitization
income (loss) is gain or loss we recognize at the time of each sale. Income from retained interests in credit card receivables securitized is the income we receive from
the credit card receivables
we have securitized. See "Credit Card Securitization and-Results of Operations" for additional information. Servicing income consists of the gross fees we receive from our
securitization structures for servicing the various portfolios. Other credit card fee income includes annual fees, over-limit fees, cash advance fees and other fees assessed to our
cardholders. These fees have increased as our managed loans have grown. Interchange fees are the portion of the merchant fees assessed by Visa and MasterCard and passed on to us and are a function of
the purchase volume of our cardholders. Ancillary products revenue consists of the fees earned by selling various fee-based products including various memberships, insurance, subscription
and other products. See "Results of Operations" and "Other Operating Income" for additional information on these revenues. Our primary expenses are the costs of funding our
receivables, credit losses, and operating expenses, including employee compensation, account solicitation and marketing expenses, data processing, servicing expenses and income taxes.

In
April 2000, we acquired Citadel Group, Inc. of Daytona Beach, Florida. The transaction was accounted for as a pooling of interests. All amounts have been restated to
reflect the financial position, results of operations and cash flows of the respective companies as though the companies were combined for all periods presented.

We
have increased our receivables portfolio through the use of our target marketing system to originate customers through direct mail, television, telemarketing and internet campaigns.
We also added accounts during 1998 by purchasing portfolios of credit card receivables. Absent portfolio acquisitions, the size of our receivables depends in part on the timing, size and success of
our marketing campaigns. During periods of reduced marketing our receivables portfolio may not grow and may even decline. We have reduced our marketing growth plans for 2002 as compared to 2001. We
believe this is prudent for us given our concerns relating to the availability of financing, general economic conditions and uncertainty regarding credit quality of accounts we historically have
targeted. During 2001 we added between 125,000 and 200,000 accounts per quarter while in 2002 we intend to add approximately 25,000 to 50,000 accounts per quarter, excluding any portfolio
acquisitions.

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

We
have decreased our expectation of growth in credit card receivables during 2002 as a result of the decrease in our marketing plans. We believe that our managed loan portfolio, absent
any portfolio acquisitions, will not grow during 2002 and at the end of 2002 will be fairly comparable to the balance at the end of 2001. We believe our managed loan portfolio may also decrease in the
first six months of 2002 as payments may exceed purchases on the accounts. This decrease in the growth of our portfolio
reflects a combination of a decrease in the number of new accounts added and spending and payment patterns by our customers, which appears to be impacting the credit card industry as a whole. Our
experience is that typically during the first quarter of the year, consumers spend less and make higher payments, possibly due to bonuses or tax refunds. We have found that consumers spend more in the
fall, prior to the start of the school year and during the holidays.

Reducing
our marketing plans also allowed us to make staff reductions in our marketing and professional services departments in January 2002 as we focused on reducing our
operating expenses. We intend to pursue portfolio acquisitions that have appropriate returns for our business and we intend to grow our existing portfolio through marketing campaigns during 2002,
although at a much slower rate than 2001.

Credit Card Securitizations

We began marketing and servicing credit card accounts in February 1997. CB&T originates VISA and MasterCard revolving credit card accounts under an
agreement with us. On a daily basis, CB&T sells us an interest in the receivables created that day. Each day, we in turn sell our interest in the receivables to trusts or to multi-seller commercial
paper conduits administered by national banking institutions. The trust or conduits issue notes to investors in order to obtain the cash to pay us for the receivables.

After
an initial purchase of notes by the investors, there is usually a period during which collections from the receivables are used to purchase new receivables. This is referred to as
a revolving period. The revolving period typically begins on the closing date of any particular series of notes and ends at the beginning of the amortization period. At the end of the revolving
period, the investment of collections in new receivables ends and collections are instead used to repay the investors. The period during which investors are being repaid is referred to as an
amortization period. As of December 31, 2001, none of our securitizations were in an amortization period. The revolving periods have coincided with the maturity dates of each series which are
either 364 days for series issued to commercial paper conduits or three years for our series placed with other investors. The maturity date for each series is included in our "Liquidity,
Funding and Capital Resources" section.

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

31

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In
each securitization transaction, we retain the risk of compliance with federal and state laws and regulations regarding the securitized accounts and any fraudulent activity with
regard to the accounts. The fraud that we are responsible for includes the unauthorized use of the credit cards including identity theft or purchases on lost or stolen cards or account numbers. These
fraud losses are expensed by us in Other Operating Expenses. To date, we have experienced very little fraud for unauthorized use of the credit cards and the total expense has been less than 0.15% of
the average managed receivables for any year.

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

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

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

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

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

Securitizations
are accounted for under Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
("Statement No. 140"), and, prior to April 1, 2001, were accounted for under Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" ("Statement No. 125"). Under these statements, gains or losses are recognized at the time of each sale and as they are recorded as securitization income or
loss in our income statement. Gains or losses on

32

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the sales of receivables depend in part on the previous carrying amount of the financial assets sold as well as the fair value of the assets and cash proceeds received.

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

The
securitization transactions do not affect the relationship we have with our customers and we continue to service the credit card receivables. We either perform the servicing or
contract with third party service providers. As of December 31, 2001, 2000 and 1999, respectively, we received servicing fees equal to either 0.1% per year of the securitized principal
receivables or 5% of cash collected, depending on the securitization. We recognize a servicing liability when the compensation for a portfolio is not adequate compensation for the costs of servicing
the porfolio. The amount of servicing revenue we receive is dictated by the trust agreements in our securitizations. We accept servicing revenue that is less than the anticipated servicing costs
because, during the revolving period, we receive all of the excess cash flows from the securitizations; these excess cash flows represent collections on the accounts in excess of the interest paid to
the investors, the servicing fees paid to us as servicer and required amortization payments. Because we receive the residual or excess cashflows during the revolving period, we expect that the total
cash received, inclusive of both the servicing revenue and the excess cashflows, will exceed our servicing costs. Although separately accounted for and valued from our interest-only strip,
this amount is reported with our interest-only strip on our balance sheet for financial reporting purposes. See "Net Securitization Income (Loss) and Income from Retained
Interests in Credit Card Receivables Securitized" for the assumptions used and the servicing liability amounts.

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

The
table below summarizes our securitization activity.

Year Ended December 31,2001

2000

1999(In thousands)Proceeds from securitizations

$
344,784

$
591,946

$
448,230Excess cash flows received on retained interests


202,350


155,000


92,804Pretax securitization income (loss)


(8,400
)

11,778


12,470Proceeds from collections reinvested in revolving-period securitizations


1,208,413


903,397


326,360Gross proceeds from Servicing Fees


5,749


7,220


18,015


33

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

For the Year Ended December 31,2001

2000

1999(In millions)Total commitments from investors

2,046

$
1,847

$
884Total outstanding amounts

1,524


1,229


724


The
maturities of these notes vary and are more fully detailed in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity,
Funding and Capital Resources." We try to structure our securitization funding source by having commitments in excess of our current growth plans so that we have investors who will purchase notes from
the trusts, which in turn allows the trusts to purchase the receivables from us. We believe we have structured our securitization program to reduce our reliance on any one series of notes by
staggering the maturity dates of the notes and by also having excess capacity if one particular series of notes is not renewed at its maturity date. One of the reasons we have slowed our growth plans
for 2002 is because we do not have any assurance that when any series of notes mature, they will be renewed on terms that are favorable to us, or at all. This is more fully discussed in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity, Funding and Capital Resources."

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

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

34

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

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

In
our securitization structure associated with the portfolios we purchased in 1998, each month a percentage of the excess cash collected from the cardholders is paid to the investors to
decrease their remaining invested amount. This excess cash totaled $13.0 million for the year ended December 31, 2001, and $15.6 million for the year ended December 31,
2000. Under the terms of the securitization, the investors are paid with the percentage of the cash collected less servicing fees that we receive to service the accounts and less collections used to
fund new purchases. The percentage has varied each month and has ranged from 0% to 75% and is determined by a contractual formula. Since the inception of the structure, a percentage of the cashflows
has been used to pay down the amounts outstanding. This percentage is anticipated to increase to 100% during the first quarter of 2002 and each quarter thereafter. The structure was negotiated in this
manner with the investors since the portfolio was decreasing very rapidly as most of the accounts were making payments in excess of purchases at the time we acquired the portfolio and no new accounts
were being added to the portfolio. As of December 31, 2001, the total due to the investors in our securitization structure associated with the portfolios that were purchased in 1998 was
approximately $96.2 million and the retained interest was $19.1 million. As of December 31, 2000, the total due to the investors in our securitization structure associated with
the portfolios that were purchased in 1998 was approximately $141.3 million and the retained interest was $18.4 million. Once the investors are repaid, all cash collected on any
remaining receivables is payable to us.

Results of Operations

Year Ended December 31, 2001, Compared to Year Ended December 31, 2000

Net income for the year ended December 31, 2001 was $2.9 million, or $0.06 per diluted share, a decrease of $79.5 million from net income of
$82.4 million for the year ended December 31, 2000. The decrease was due to a loss on the sale of two retained interests during our fourth quarter of 2001 of $9.6 million and a
reduction in the fair market value of our retained interests in the fourth quarter of $49.7 million. The decrease in our income was also due to the seasoning of the receivables underlying our
securitizations, as the average growth rate during 2001 decreased as compared to 2000, resulting in a larger percentage of our receivables portfolio being more than 12 months old. While the
receivables age through their peak charge-off period, as described below, they produce less income. Receivables generated in accounts that are new typically will have much lower charge
offs over the next 12 to 15 months than receivables generated in accounts that are between one and two years old. Between one and two years is considered a peak charge-off period.
Receivables generated in accounts greater than two years typically have reduced charge off rates.

During
2001, as in prior years, we securitized all of our receivables; however, our income for 2001 was dependent upon the performance of the receivables underlying the securitizations.
During 2001, our managed receivables grew approximately 24% from $1.5 billion at December 31, 2000 to

35

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$1.9 billion at December 31, 2001. This growth rate was substantially less than the growth rate we experienced during 2000 of approximately 70%.

Our
receivables growth rate decreased from 2000 to 2001 because we added fewer accounts. During 2001, our charge off rate increased and our net interest margins decreased because a
larger percentage of the accounts were more than 12 months old. When credit card receivables are first originated, they tend to have artificially low charge off rates in their first twelve
months. The charge off rate then dramatically increases during year two and then moderates in year three and beyond. We have seen this trend in the performance of our receivables and believe that it
is typical in other credit card portfolios in the industry. We further describe the receivables portfolio in "Selected Credit Card Data" including further discussion of the asset quality of the
receivables. As our income is dependent upon the performance of the receivables underlying our securitizations, we believe the reduction in our growth rate in receivables during 2001, as compared to
2000, resulted in a reduction in our income for 2001 as compared to 2000.

During
the fourth quarter, we sold approximately $36.3 million of our retained interests in credit card receivables securitized for net proceeds of approximately
$26.7 million. Approximately $27.0 million of our retained interests sold were to a related party, which is more fully described in "Item 13. Relationships and Related Transactions." The
$9.6 million difference is a loss on sale under the provisions of Statement No. 140 and is included in our securitization loss for 2001. We sold the retained interests to raise
additional liquidity without selling additional common stock at what we believed was a low price. The retained interests were sold at a discount because the stated interest rates on the interests were
less than the interest rate required by investors in the marketplace. The first retained interest that we sold at a discount had a stated interest rate of LIBOR +7.5%, while the investor
required a total return of 22%. The second retained interest that we sold had a stated interest rate of 15%, while the investor required a total return of 35%. We believe the pricing was a function of
the uncertainty in the economy resulting from a general economic slowdown and from events that took place on September 11, 2001. We also believe the pricing was a function of uncertainty in the
liquidity markets and issues surrounding other credit card issuers such as NextCard and Providian, both of which were having financial difficulties at the time we accessed the capital markets. The
investor that required the 35% return also purchased Series A Preferred Stock from us. Prior to the fourth quarter of 2001, we did not sell any retained interests in credit card receivables
securitized at a discount to face value.

Income
from retained interests in credit card receivables securitized decreased to $11.3 million in 2001 when compared to $113.9 million in 2000 due primarily to a decrease
in the fair market value of our retained interests in credit card receivables securitized at December 31, 2001. Additionally, the income earned on the retained interest during 2001 was less
than the income earned during 2000 due primarily to an increase in our charge off rates of our securitized receivables. See our discussion under "Net Securitization Income (Loss) and Income from
Retained Interests in Credit Card Receivables Securitized."

The
fair market value of our retained interests in credit card receivables securitized decreased at December 31, 2001 due primarily to a substantial increase in the market
interest rate (or discount rate) used to discount the associated cash flows and an increase in the charge off rate used in valuing our retained interests. The discount rate increased to 34.9% at
December 31, 2001 from 16.7% at December 31, 2000 and the charge off rate increased to 16.7% at December 31, 2001 from 10.9% at December 31, 2000. The increase in the
market interest rate reflects the interest rate implicit in sales of retained interests that occurred during the fourth quarter of 2001. We sold a retained interest in November 2001 with a
total return to the investor of 22% and a retained interest in December 2001 with a total return to the investor of 35%.

The
largest component of our income is derived from profit generated from the managed receivables underlying our securitizations. The components of our income that the managed
receivables

36

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impact are securitization income, income from retained interests in credit card receivables securitized, servicing income, other credit card fees and interchange fees. These items are more fully
discussed below in this MD&A. Growth in managed receivables cannot be predicted with certainty, but, in general, is a product of (1) the growth in the number of accounts, and (2) the
amount of usagebalanceson accounts. Overall, our managed receivables grew from $0.9 billion in 1999 to $1.5 billion in 2000 (a 67% growth rate) to
$1.9 billion in 2001 (a 27% growth rate). At the same time, the number of accounts grew from 1.18 million in 1999 to 2.18 million in 2000 (84.4%) to 2.19 million in 2001
(0.3%). During the third quarter of 2001, we closed 182,000 inactive accounts which reduced our ending accounts at year end 2001.

Growth
in the number of accounts is a product of several factors, primarily the level of our marketing efforts, our competition and the general economy. Our marketing and solicitation
expenses increased from $33.2 million in 1999 to $59.5 million in 2000, and declined to $29.9 million in 2001. We decreased our marketing in 2001 because we believed that
(1) the profitability of the accounts that we could add
given the economic circumstances of late 2001 did not justify the marketing expense, and (2) we had limited access to liquidity and we did not want our portfolio to grow beyond what we could
fund.

During
2001, our competition also was active. We face intense competition, and we believe that the drop in the usage of our credit cards during 2000 and 2001 was due in part to increased
competition from other credit card companies during the same period, including Metris, Providian, NextCard and Capital One. Although we cannot measure the impact of competitors to our business
specifically, we believe that many of our competitors were offering lower fees during 2000 and 2001 for their credit card products and were possibly offering larger credit lines on their credit card
products. We also believe that our competitors may have been offering teaser rates to induce cardholders to accept and use their products.

During
2001, we believe that the average usage of accounts also declined due to both general economic and, particularly after September 11, broader uncertainty. A decrease in the
usage of the accounts directly impacts the amount of outstanding receivables.

Other
operating income, excluding securitization income and income from retained interests in credit card receivables securitized, increased to $148.9 million for the year ended
December 31, 2001 from $109.2 million for the year ended December 31, 2000. This increase is due primarily to the increase in other credit card fees. Our interchange income and
our income from ancillary products did not materially change from 2000.

Our
managed loans grew by approximately 24% during 2001 as compared to 2000. The growth resulted from us adding over 600,000 new accounts during 2001. Each cardholder is assessed fees on
their account based on the terms of their cardholder agreement and on their payment performance on the account. Other credit card fees include over-limit, annual membership, cash advance,
insufficient funds, maintenance and other miscellaneous fees. The revenue associated with these fees increased as a result of the growth of our managed loans.

Year Ended December 31, 2000, Compared to Year Ended December 31, 1999

Net income for the year ended December 31, 2000 was $82.4 million, or $1.79 per diluted share, an increase of $18.3 million over net income
of $64.1 million for the year ended December 31, 1999. The increase in our income was due primarily to the substantial growth of the receivables in 2000.

During
2000, we securitized all of our receivables. However, our income for 2000 was dependent upon the performance of the receivables underlying the securitizations. During 2000, our
managed receivables grew approximately 70% from $0.9 billion at December 31, 1999 to $1.5 billion at December 31, 2000.

37

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In
2000, we increased our marketing costs by 70%, which resulted in over 990,000 net new accounts. As our portfolio seasoned, our net interest margins decreased during 2000 as a larger
percentage of the accounts were more than 12 months old. We further describe the receivables portfolio in "Selected Credit Card Data" including a further discussion of the asset quality of the
receivables.

Other
operating income, excluding securitization income and income from retained interests in credit card receivables securitized, increased to $109.2 million for the year ended
December 31, 2000 from $55.3 million for the year ended December 31, 1999. The increase is due to an increase in our managed loans and the number of accounts, which grew from
1.2 million at December 31, 1999 to 2.2 million as of December 31, 2000. Strong growth in new customers, an increase in the number of customers purchasing our fee based
products and an increase in credit card fees, such as annual, membership, late, over-limit and cash advance fees resulted in the increase in other operating income.

Other
operating expenses increased to $117.9 million for the year ended December 31, 2000 from $60.4 million for the year ended December 31, 1999. Our managed
receivables increased approximately 70% and our number of managed accounts increased approximately 84%. A large portion of our operating expense is a function of the number of accounts and thus this
expense significantly increased during 2000. These expenses include the cost of collectors, customer service representatives, sending cardholders monthly statements and other direct servicing
functions. Additionally, we incurred $59.5 million in marketing and solicitation expenses while adding 1.4 million new accounts.

Net Interest Income and Interest Expense

Net interest income consists of interest income earned on cash and cash equivalents less interest expense. Net interest income totaled $2.0 million for the
year ended December 31, 2001, $7.1 million for the year ended December 31, 2000 and $2.2 million for the year ended December 31, 1999. The decrease in net interest
income of $5.1 million during 2001 is attributable to the usage of the cash proceeds we received from our first quarter 2000 follow-on public offering as well as an increase in
interest expense associated with amounts outstanding under our revolving credit facility. The increase in net interest income of $4.9 million in 2000 as compared to 1999 is attributable to the
investing of the cash proceeds we received from our first quarter 2000 follow-on public offering.

During
2001, we utilized our $25.0 million one-year revolving credit facility. As of December, 2001, $15.0 million was outstanding under this facility and
$10.0 million was reserved for a letter of credit in favor of a third party servicer. The revolving credit facility expired in January 2002 and was paid in full.

Net Securitization Income (Loss) and Income from Retained Interests in Credit Card Receivables Securitized

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

Net
securitization income (loss) is recognized under Statement No. 140 at the time the receivables are securitized. Gains or losses on sales of receivables depend in part on the
previous carrying amount of the financial assets sold as well as the fair value of the assets and cash proceeds received. In a sale, we receive cash, retain an interest in the receivables sold
(Seller's Interest) and retain rights to receive cash in the future (the I/O strip). Net securitization loss for the year ended December 31, 2001 was $8.4 million, compared to net
securitization income of $11.8 million for the year ended December 31, 2000 and $12.5 million of securitization income for the year ended December 31, 1999. The
securitization loss in 2001 as compared to securitization income in 2000 is due primarily to sales of

38

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retained interests at a loss during the fourth quarter of 2001. During the fourth quarter, we sold approximately $36.3 million of our retained interest in credit card receivables securitized
for net proceeds of approximately $26.7 million. The $9.6 million difference is a loss under Statement No. 140 and is included in our securitization loss for 2001. Prior to the
fourth quarter 2001, we did not sell any retained interests in credit card receivables securitized at a discount to face value. Net securitization income decreased slightly in 2000 compared to 1999
due primarily to an increase in the charge off rate of the portfolio. Approximately $27.0 million of our retained interests sold were to a related party, which is more fully described in "Item
13. Relationships and Related Transactions."

As
a result of the fourth quarter transactions, we increased our discount rate used to value our retained interest. The increase in the discount rate during the fourth quarter of 2001 to
34.9% compared to the 14.2% discount rate used during the third quarter of 2001 resulted in a decrease during the fourth quarter in the value of the interest-only strip of approximately
$7.5 million. We increased the discount rate during the fourth quarter because we closed two transactions during the fourth quarter and the rate of return the investor received on the
transaction closest to year-end was approximately 35%. The fourth quarter transactions were the first time we sold any of our retained interests at a discount. We also believe the
significant increase in the total return required from investors during the fourth quarter of 2001, as compared to the second and third quarters of 2001, was a function of several different factors,
including a general economic slowdown, the repercussions from the events of September 11, 2001, uncertainty in the liquidity markets in general, concerns surrounding the poor performance of our
competitors and our failure to meet analysts' expectations given the slowdown in the growth of our managed receivables. The increase in the discount rate used to value the interest-only
strip did not affect the discount rate used to value the servicing liability because the transactions did not affect the servicing discount rate. The discount rate for the servicing liability is what
we believe is reflective of what market participants would use for servicing valuation. Had we increased the discount rate of the servicing liability, it would have decreased the servicing liability
and
thus increased our income. See below for the assumptions used to value the interest-only strip and servicing liability.

Income
from retained interests in credit card receivables securitized includes the income earned on the retained interests and any changes in the fair value of the retained interest in
credit card receivables securitized in accordance with Statement No. 115. Income from retained interests in credit card receivables securitized for the year ended December 31, 2001 was
$11.3 million, compared to $113.9 million for the year ended December 31, 2000 and $88.8 million for the year ended December 31, 1999. The significant decrease in
our income from retained interests in credit card receivables securitized is due to a decrease in the fair value of the retained interests at December 31, 2001. This decrease attributable to
the change in the fair value was approximately $49.7 million and is due primarily to the increase in our discount rate from 16.7% at December 31, 2000 to 34.9% at December 31,
2001. The increase in the discount rate reflects the interest rate implicit in sales of retained interests that occurred during the fourth quarter of 2001. Additionally, the change in fair value was
also due to the increase in the estimated expected credit loss rate from 10.9% at December 31, 2000 to 16.7% at December 31, 2001. Substantially all of our cardholders as of
December 31, 2000, and December 31, 2001, are considered "subprime" according to the guidance provided by the agencies that regulate the banking industry. This reflects the fact that, as
a whole, the accounts underlying our securitizations generally experience higher losses than prime accounts. We factor these higher expected losses into our projected loss assumptions which are used
to value our retained interests under Statement No. 140. See Note 4 (Securitizations) to our consolidated financial statements. See below for the other key assumptions used to value our
retained interest. The increase in the charge off assumption is due primarily to the seasoning of the portfolio and general economic conditions. The remainder of the decrease in income from retained
interests in credit card receivables securitized is due to an increase in charges offs, offset in part by an increase in APR and Late Fees.

39

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The
fair value of our retained interests in credit card receivables securitized is estimated by discounting the expected future cash flows from the receivables that have been securitized
at rates which we believe are consistent with those that would be used by an independent third party. These rates have historically been reflective of (i) average rates disclosed by our peers
and (ii) average rates we have reviewed from transactions where the total interest rate to the investor has been disclosed. We also sold two retained interests during the fourth quarter of
2001. The sale in November 2001 provided a total return of 22% and the December 2001 sale provided a total return of 35%. The increase in our residual cash flows discount rate is
reflective of the higher rate of return of the transaction that we closed in December 2001. Because quoted market prices are generally not available, the fair value is based on the estimated
present value of future cash flows using management's best estimates of finance charges and late fees, servicing fees, costs of funds paid to investors, payment rates, credit losses, discount rates
and required amortization payments to investors. The weighted average key assumptions used as of the end of each period are presented below. Changes in any of these assumptions could impact the
estimates of the fair value of our retained interest as well as the realization of expected future cash flows:

At December 31,2001

2000

1999Payment rate (monthly)

8.0
%
8.8
%
7.9
%Expected credit loss rate (annualized)

16.7

10.9

11.0Residual cash flows discount rate

34.9

16.7

18.7Servicing liability discount rate

14.0

16.7

18.7


The
change in the weighted average assumption for the residual cash flow discount rate as of December 31, 2001 from December 31, 2000 is reflective of the higher implicit
return on the sale of the retained interests that occurred in December 2001. Estimated default and payment rates are based on historical results, adjusted for expected changes based on our
credit risk models. The discount rate decreased from December 31, 1999, to December 31, 2000, due to the change in the mix of our originated and purchased receivables as described above.
In addition, we increased the discount rate as of December 31, 2001 compared to December 31, 2000 because we closed two transactions during the fourth quarter and the rate of return the
investor received on the transaction closest to year-end was approximately 35%. When we initially record a securitization transaction, and each quarter thereafter, we compare historical
loss rates on each vintage of our portfolio at comparable points in their lives to project our expected credit loss rate over the expected life of the receivables. The life of credit card receivables
is typically very short as compared to other asset types and is typically only 12 to 15 months. The life of the account relationship however is typically much longer and can span many years.
Receivables generated in accounts that are new typically will have much lower charge offs over the next 12 to 15 months than receivables generated in accounts that are between one and two years
old. Between one and two years is considered a peak charge-off period. Receivables generated in accounts greater than two years typically have reduced charge off rates. Our loss
assumptions reflect the expected losses over the life of the receivables, based in part on the age of the account for which they were generated, and our assumptions reflect known trends. The increase
in the expected credit loss rate is due primarily to the seasoning of the portfolio. During 2001, we had significantly less growth than we had during 2000. This resulted in more of our receivables
being greater than twelve months old. When credit card receivables are first originated, they tend to have an artificially low charge off rate in their first twelve months. The charge off rate then
sharply increases during year two and then moderates in year three and beyond. We have seen this trend in the performance of our receivables and believe that it is typical in other credit card
portfolios in the industry. The changes in the weighted average assumptions as of December 31, 2000 from December 31, 1999 are due primarily to the change in the
mix of our originated and purchased receivables. The receivables we originated have historically performed better than the purchased portfolio. The discount rates are based on management's

40

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estimates of returns that would be required by investors in an investment with similar terms and credit quality. Interest rates received on the credit card receivables are estimated based on the
stated annual percentage rates in the credit card agreements. Estimated default and payment rates are based on historical results, adjusted for expected changes based on our credit risk models. The
returns to the investors in the securitizations are based on management's estimates.

We
securitize all of our receivables each day by selling the receivables to trusts or to multi-seller commercial paper conduits administered by national banking institutions. The
receivables that are sold through securitizations are removed from our balance sheet for financial reporting purposes. When we sell the receivables we receive cash proceeds and a retained interest in
the receivables. Our seller's interests are subordinate to the other investors. We receive all of the excess cash flows from the securitizations, which represent collections on the accounts in excess
of the interest paid to the investors, servicing fees, credit losses and required amortization payments.

The
following table summarizes our securitization activity for the periods presented:

|                                                                           |  | 2001 |           | 2000 |   | 1999      |   | 1998 |         | 1997 |  
|-------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | - | ---- | ------- | ---- | -
|
|Securitization Activity:                                                   |  |      |           |      |   |           |   |      |         |      |  
|Gross amounts of receivables securitized at year end (total managed loans) |  | $    | 1,891,842 |      | $ | 1,528,372 |   | $    | 898,691 |      | $
|Principal securitized                                                      |  |      | 1,711,755 |      |   | 1,416,009 |   |      | 871,116 |      |  
|Total outstanding amounts securitized                                      |  |      | 1,524,000 |      |   | 1,229,000 |   |      | 724,000 |      |  
|Over-collateralization                                                     |  |      | 187,755   |      |   | 187,009   |   |      | 147,116 |      |  
|Proceeds from securitizations                                              |  |      | 344,784   |      |   | 591,946   |   |      | 448,230 |      |  
|Excess cash flows received on retained interests                           |  |      | 202,350   |      |   | 155,000   |   |      | 92,804  |      |  
|Pretax securitization income (loss)                                        |  |      | (8,400    | )    |   | 11,778    |   |      | 12,470  |      |  
|Income from retained interests in credit card receivables securitized      |  |      | 11,328    |      |   | 113,944   |   |      | 88,800  |      |  
|I/O strip                                                                  |  |      | 84,390    |      |   | 52,249    |   |      | 28,557  |      |  
|Servicing liability                                                        |  |      | (38,123   | )    |   | (21,807   | ) |      | (11,397 | )    |  
|                                                                           |  |      |           |      |   |           |   |      |         |      |  
|Net I/O strip                                                              |  |      | 46,267    |      |   | 30,442    |   |      | 17,160  |      |  

The
Gross amounts of receivables securitized at year end has increased year by year as we have grown our business. The principal portion securitized has increased accordingly as have our
total outstandings of our securitizations. Prior to 2001, we had seen a steady decrease in the amount of over-collateralization required by our investors in our securitizations as a
percentage of the total principal securitized. This decrease was due in part to the seasoning of the portfolio and the fact that we continue to have longer periods of historical data that the
investors in the securitizations can review in order to determine the amount of over-collaterization they require. The percentage decreased from 2000 to 2001 due to the two sales of our
retained interests that occurred during the fourth quarter of 2001. The proceeds from securitizations are the result of purchases of receivables by third party investors. These proceeds fluctuate
based on the growth of the principal portion of the receivables. The proceeds from securitization increased from 1999 to 2000 due to the increase in managed loans and then decreased during 2001 as our
growth slowed and we did not securitize the volume of receivables that we did during 2000. The excess cash flows received on our retained interests are a function of the size and average age of the
managed portfolio. Our pretax securitization income (loss) is gain or loss recognized when the receivables are securitized. This amount remained fairly constant from 1999 to 2000 and decreased from
2000 to 2001 due to the loss associated with the sale of two pieces of our retained interest in the fourth quarter of 2001 and the lower volume of receivables securitized during

41

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the period. See "Item 6. Selected Financial Data-Selected Quarterly Financial Data" for more information concerning these transactions. Our interest-only strip is the present
value of the projected excess cash flows we expect to receive on the securitized receivables. These cash flows are dependent upon the size and performance of the gross amount of receivables
securitized. Our interest-only strip increased from 1999 to 2000 and from 2000 to 2001 as the aggregate amount of receivables securitized increased.

The
Company initially records a servicing liability with respect to a securitization structure when the servicing fees the Company expects to receive do not provide adequate compensation
for servicing the receivables. The initial servicing liability is recorded at estimated fair market value. The servicing liability is then evaluated each quarter and carried at estimated fair market
value with changes in fair value included in income. Because quoted market prices are generally not available, the Company estimates fair value based on the estimated present value of future cash
flows using management's best estimates of key assumptions as outlined in Note 4. The servicing liability is netted against the value of the I/O strip and included in Retained interests in
credit card receivables securitized on our Balance Sheet. These servicing costs are also a function of the gross amount of receivables securitized and increased during 2000 and 2001 as the receivables
increased.

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

At December 31,2001

2000

1999(In thousands)I/O strip

$
84,390

$
52,249

$
28,557Servicing liability


(38,123
)

(21,807
)

(11,397
)Net I/O strip


46,267


30,442


17,160Fair value of Seller's Interest


312,622


295,141


148,412Retained interests in credit card receivables securitized

$
358,889

$
325,583

$
165,572


Our
net I/O strip is comprised of the I/O strip and the related servicing liability. The I/O strip reflects the fair value of our rights to future income from the portfolio. The
servicing liability is recorded because the compensation for servicing certain portfolios is not expected to adequately compensate us for the costs of servicing certain portfolios. The change in the
servicing liability is included in income from retained interests in credit card receivables securitized. The increase in our retained interests from 2000 to 2001 and from 1999 to 2000 is a function
of the increase in the total receivables securitized at the end of each of the stated years.

Other Operating Income

Other operating income, excluding securitization income and income from retained interests in credit card receivables securitized, consists of the following for
the periods indicated:

Year Ended December 31,2001

2000

1999(In thousands)Gross servicing income

$
6,018

$
7,705

$
8,893Other credit card fees


89,553


53,165


19,506Interchange fees


22,780


19,880


9,202Ancillary products


30,592


28,497


17,731Total other operating income

$
148,943

$
109,247

$
55,332


42

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The
increase in other operating income to $148.9 million for the year ended December 31, 2001 from $109.2 million for the year ended December 31, 2000 relates
to the increase in our managed receivables, which increased to $1.9 billion at December 31, 2001 from $1.5 billion at December 31, 2000. A substantial portion of the
servicing income relates to the portfolios purchased in 1998. As the size of these purchased portfolios decreases, there is a corresponding decrease in servicing income. Other credit card fees
increased to $89.6 million from $53.2 million due to annual, late, over-limit and cash advance fees. The increase in these fees was primarily due to the increase in our
managed receivables noted above and not due to any significant change in the type or composition of the fees that are charged on the credit card accounts. Interchange fees are the portion of the
merchant fee assessed by Visa and passed on to us on the purchase volume on our credit card receivables. Interchange fees grew to $22.8 million from $19.9 million due to an increase in
the purchase volume on our managed receivables. Ancillary product revenue increased to $30.6 million from $28.5 million due to more customers purchasing our products. During 2001, we
added several fee-based products; we developed and implemented several new fee-based response models; and we continued to enhance our marketing reach by refining our internet
promotions, increasing promotions offered to our card holders on their monthly account statements, and refining our most significant cross selling promotions. These efforts increased our ancillary
product income during 2001. Substantially all of our ancillary product income for the past three years consist of commissions paid directly to us from vendors whose products we market.

Our
total other operating income is primarily a function of the size of our average credit card receivables portfolio. We have decreased our growth projections for 2002 and as a result
our other operating income may decline in 2002 as compared to 2001. Additionally, our ancillary product income is very sensitive to our new account growth as sales of our fee-based
products are higher to new customers than to existing cardholders. As we have decreased our growth plans for new accounts in 2002, our ancillary product income may decline during 2002.

The
increase in other operating income to $109.2 million for the year ended December 31, 2000 from $55.3 million for the year ended December 31, 1999 is due
to the increase in our managed receivables, which grew to $898.7 million at December 31, 1999 from $504 million at December 31, 1998 and the number of accounts, which grew
to 2.2 million as of December 31, 2000 from 1.2 million at December 31, 1999. Strong growth in new customers, an increase in the number of customers purchasing our
fee-based products and an increase in credit card fees, such as annual, membership, late, over-limit and cash advance fees resulted in the increase in other operating income.

Other Operating Expense

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

Year Ended December 31,2001

2000

1999(In thousands)Salaries and benefits

$
12,161

$
5,833

$
3,094Credit card servicing


62,374


28,320


9,009Marketing and solicitation


29,931


59,509


33,234Professional fees


3,659


2,255


1,660Data processing


10,558


4,519


2,745Net occupancy


3,875


1,160


737Ancillary product expense


10,121


8,501


6,758Other


16,810


7,808


3,147Total other operating expense

$
149,489

$
117,905

$
60,384


43

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Other
operating expense for year ended December 31, 2001 increased to $149.5 million from $117.9 million for the year ended December 31, 2000. This increase
is due primarily to increases in credit card servicing, salaries and benefits, data processing expenses, and other expenses, offset by a decrease in marketing and solicitation expenses. Credit card
servicing costs, including collections and customer service, increased due to the increase in our managed receivables. Based on anticipated growth in our managed receivables, we increased our
infrastructure, customer service and collection personnel. Salaries and benefits, professional fees, data processing, net occupancy and other expenses increased as our operations expanded to service
the increase in managed loans. We reduced our marketing and solicitation efforts during the second half of 2001 as a result of concerns relating to the availability of financing, general economic
conditions and uncertainty regarding credit quality of accounts we historically have targeted. Our growth rate in 2001 was, and our expected growth rate in 2002 will be, negatively impacted by this
reduction in marketing. Ancillary product expense increased due to the additional sales of products and services that took place during 2001, including insurance products and memberships.

Other
operating expense for the year ended December 31, 2000 increased to $117.9 million from $60.4 million for the year ended December 31, 1999. The increase
was due primarily to the increased marketing and solicitation expense and due to the increase in servicing costs. Servicing costs increased due to the increase in our managed receivables. Salaries and
benefits, professional fees, data processing, net occupancy and other expenses increased as our operations expanded to service the increased number of accounts. Ancillary product expense increased due
to the additional sales of products and services that took place during 2000, including insurance products and memberships.

Other
expenses include depreciation, fraud, travel and entertainment, insurance, hiring expense, corporate communications, leased equipment expenses, office supplies and other
miscellaneous expenses. Expenses in this category other than fraud increased incrementally as we added infrastructure to support the growth in managed receivables. Our fraud expense includes the
expense of unauthorized use of the credit cards including identity theft or purchases on lost or stolen cards. To date, we have experienced very little fraud for unauthorized use and the total expense
has been less than 0.15% of the average managed receivables for any year.

Income Taxes

Income taxes were $1.5 million for the year ended December 31, 2001, $41.8 million for the year ended December 31, 2000 and
$34.3 million for the year ended December 31, 1999. Our effective tax rate was 35.0% for 2001, 33.7% for 2000 and 36.5% for 1999. See Notes to Consolidated Financial Statements included
elsewhere herein for further explanation of the income tax expense and a reconciliation of reported income taxes to the amount utilizing the statutory rate.

Selected Credit Card Data

In August 1997, we began securitizing our credit card receivables. In each securitization, we receive cash, retain an interest in the receivables that are
securitized, retain the rights to receive cash in the future and service the accounts. Securitizations are treated as sales under GAAP. As such, we remove the securitized loans from our Consolidated
Balance Sheet. The performance of the underlying credit

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card receivables will affect the future cash flows we actually receive. The information in the following table is presented for the credit card receivables that we have securitized.

|                            |  | At or for the Three Months Ended |          
|--------------------------- |  | -------------------------------- | ---------
|
|
|
|Period-end managed loans    |  | $                                | 1,891,842
|Period-end managed accounts |  |                                  | 2,185    
|Average managed loans       |  | $                                | 1,838,873
|Net interest margin         |  |                                  | 19.0     
|Operating ratio             |  |                                  | 9.8      

The net interest margin includes all net interest and late fee income on all outstanding loans, less the interest expense paid to the investors.
Our operating ratio includes all expenses associated with our business, other than marketing and solicitation and ancillary product expenses, and is expressed as a percentage of average managed loans.

Our
net interest margins are influenced by a number of factors, including the level of finance charges and late fees billed, the weighted average cost of funds and the level of our
finance charge offs. Our net interest margin for the three months ended December 31, 2001 was 19.0% as compared to 21.5% for the three months ended September 30, 2001. The decrease in
our net interest margin is due to a decrease in the finance charge and late fee income billed to our cardholders, the waiver of late fees associated with delayed mail due to the events which occurred
on September 11, 2001 and an increase
in the finance charge charge-offs on the portfolio. These decreases were slightly offset by a reduction in the average cost of funds of the portfolio.

During
1998, we purchased two portfolios of credit card receivables with outstanding receivables balances at the time of purchase of $579.7 million. The presented credit card data
excludes some of these receivables and the related accounts which at the time of purchase were closed accounts in a late delinquency status. Management believed that these accounts were either in the
process of being charged off by the seller due to delinquency or were likely to be charged off in the near term. As a result, management believed that it would have had very little opportunity to
influence the delinquency or default rates of these accounts prior to charge off. We therefore excluded these accounts, the receivables and any activity in the accounts since the date of purchase from
any credit card data presented. At the time of the purchases, there were approximately 52,000 such accounts, representing 25.9% of the accounts purchased and $137.2 million of the
$579.7 million outstanding receivables purchased.

We
purchased these accounts and the receivables as part of the entire portfolio purchase as the seller desired to sell everything up to but not including charged off accounts and related
receivables. We did not ascribe any value to these receivables because they were so close to charge off, which is why we have excluded them from our selected credit card data. We received the same
representations and warranties from the sellers on these receivables that we received on the entire portfolio; however, the seller did not provide any representations or warranties as to the ability
or willingness of the cardholders to pay their accounts. We do not have any recourse to the seller in the event the cardholders simply do not pay on the accounts that we acquired.

The
portfolios acquired during 1998 were purchased at substantial discounts. The total discount was approximately $284.5 million, of which $137.2 million of the discount
was described above. An additional $87.5 million of the discount related to the credit quality of the remaining receivables and was calculated as the difference between the face amount of the
receivables purchased, less the $137.2 million in receivables described above, and the expected future cash flows that management estimated would be collected. The balance of the discount of
approximately $59.8 million is not needed for credit quality of the purchased loans. This $59.8 million is referred to as the accretable yield. The

45

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accretable yield is being amortized, using the interest method, as additional interest over the life of the portfolio for purposes of reporting our Selected Credit Card Data. As of
December 31, 2001, approximately $7.5 million of the accretable yield remained.

Each
quarter, we re-underwrite our portfolio to price our products to appropriately reflect the level of our customer's credit risks. As part of this underwriting process,
existing customers may be offered increased or decreased pricing depending on their credit risk as well as their supply and demand for credit. Increases in pricing may increase our net interest
margin, while decreases in pricing may reduce our net interest margin. We expect our net interest margin to continue to decrease during the first half of 2002 due primarily to expected increases in
finance charge offs during the first half of the year. The increase in finance charge offs is based on the current economic environment as well as the expected seasoning of the credit card accounts.
We believe that our net interest margin may also decline in 2002
if the finance charges and late fees billed on our portfolio continue to decline, or if our weighted average cost of funds increases. We expect to mitigate part of the expected decline in our net
interest margin by actively repricing some accounts as part of our underwriting process mentioned above.

Our
operating ratio includes all costs of operating our business, other than marketing expenses and ancillary product expenses. Our operating ratio fluctuates based on our rate of loan
growth and the level of our expenditures on our infrastructure, our personnel, our collections and customer service operations, our internet technology and our database management system. The
operating ratio increased in 2001 as compared to 2000. During 2001, we continued to build our internal infrastructure to accommodate anticipated growth in our receivables. Our actual growth in
receivables was much lower than we anticipated. The expenses incurred were therefore a larger percentage as stated as a percentage of average managed loans. We expect our operating ratio to decline in
2002 as we implement cost cutting initiatives.

Asset Quality

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

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

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

46

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The
following table presents the delinquency trends of our credit card receivables portfolio on a managed loan portfolio basis, by year from inception.

|                                           |  | Year Ended December 31, |        
|------------------------------------------ |  | ----------------------- | -------
|
|Total                                      |  |                         |        
|Loans delinquent:                          |  |                         |        
|30 to 59 days                              |  | $                       | 86,501 
|60 to 89 days                              |  |                         | 62,975 
|90 or more                                 |  |                         | 147,407
|                                           |  |                         |        
|Total 30 or more                           |  | $                       | 296,883
|Total 60 or more                           |  | $                       | 210,382
|Loans delinquent as % of period-end loans: |  |                         |        
|30 to 59 days                              |  |                         | 4.6    
|60 to 89 days                              |  |                         | 3.3    
|90 or more                                 |  |                         | 7.8    
|                                           |  |                         |        
|Total 30 or more                           |  |                         | 15.7   
|Total 60 or more                           |  |                         | 11.1   

The following table separately reports our loan delinquency trends for our originated portfolio and for the portfolios we purchased in 1998:

|                     |  | At or for the Three Months Ended |  
|-------------------- |  | -------------------------------- | -
|
|
|
|Originated Portfolio |  |                                  |  
|Loans Delinquent:    |  |                                  |  
|30 to 59 days        |  | 4.5                              | %
|60 to 89 days        |  | 3.4                              |  
|90 or more           |  | 7.9                              |  
|                     |  |                                  |  
|Total 30 or more     |  | 15.8                             | %
|Total 60 or more     |  | 11.3                             | %
|Purchased Portfolio  |  |                                  |  
|Loans Delinquent:    |  |                                  |  
|30 to 59 days        |  | 5.9                              | %
|60 to 89 days        |  | 3.0                              |  
|90 or more           |  | 5.5                              |  
|                     |  |                                  |  
|Total 30 or more     |  | 14.4                             | %
|Total 60 or more     |  | 8.5                              | %

In general, as the average age of an originated credit card receivables portfolio increases, delinquency rates can be expected to first be
artificially low during the first six months of their life; dramatically increase and peak towards the rest of the first year and during the second year; and then decrease and stabilize after year
two. We have observed this trend in the industry as well as within our own originated portfolio. Our delinquency rates have increased due primarily to the seasoning of significant growth in new
receivables that occurred during 2000 and 1999 and the general economic conditions that prevailed during 2001. We believe our delinquency rates have been impacted by the worsening economy; however, it
would be speculative to quantify.

We
are using our account management strategies on our portfolio, which are intended to reduce the expected increase in delinquency rates as our portfolio continues to mature. Examples of
management strategies include conservative credit line management, purging of inactive accounts and

47

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collection strategies intended to optimize the effective account to collector ratio across delinquency buckets. We measure the success of these efforts by measuring delinquency rates.

Net Charge offs.Net charge offs include the principal amount of losses from customers unwilling or unable to pay their loan
balance, as well as bankrupt and deceased customers, less current period recoveries. Net charge offs exclude accrued finance charges and fees, which are charged against the related income at the time
of charge off. Losses from fraudulent activity in accounts are also excluded from net charge offs and are included separately in other operating expenses. We generally charge off loans when the loan
becomes contractually 180 days past due. However, bankrupt accounts and the accounts of deceased customers without a surviving, contractually liable individual or an estate large enough to pay
the debt in full are charged off within 30 days of notification of the customer's bankruptcy or death and subsequent confirmation, if applicable.

Approximately
$87.5 million of the discount on our portfolio purchases during 1998 related to the credit quality of the remaining loans in the portfolio and reflected the
difference between the purchased face amount and the future cash collections management expected to receive with respect to the purchased face amount. For purposes of reporting adjusted charge off
ratios on managed loans below, this discount related to credit quality and was utilized to offset a portion of actual net charge offs. This amount was fully amortized as of June 30, 2001 and
therefore, beginning with the quarter ended September 30, 2001, the actual and adjusted charge off ratios will be the same. The following table presents our net charge offs for the periods
indicated on a managed loan portfolio basis:

|                           |  | For the Three Months Ended |          
|-------------------------- |  | -------------------------- | ---------
|
|
|
|Selected Credit Card Data: |  |                            |          
|Average managed loans      |  | $                          | 1,838,873
|Net charge offs            |  |                            | 70,207   
|Adjusted net charge offs   |  |                            | 70,207   
|Net charge off ratio       |  |                            | 15.3     
|Adjusted charge off ratio  |  |                            | 15.3     

As described above under delinquencies, as our portfolio matures, we expect charge off rates to also increase and then stabilize. Our adjusted
charge off ratio increased during 2001 and 2000 due primarily to seasoning of our portfolio and a general slowing of the economy. Typically, as our accounts mature, there are very few charge offs
during the first 180 days, then the charge offs are expected to increase and peak in the second year and then stabilize in the third year. We expect our charge off rates to continue to increase
as our portfolio seasons. We plan to continue to focus our resources on refining our credit underwriting standards for new accounts and to increase our focus on collection and post charge off recovery
efforts to minimize losses.

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

Interest Rate Sensitivity and Market Risk

Interest rate sensitivity is comprised of basis risk, gap risk and market risk. Basis risk is caused by the difference in the interest rate indices used to price
assets and liabilities. Gap risk is caused by the

48

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difference in repricing intervals between assets and liabilities. Market risk is the risk of loss from adverse changes in market prices and rates. Our principal market risk is related to changes in
interest rates. This affects us directly in our lending and borrowing activities, as well as indirectly as interest rates may impact the payment performance of our customer.

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

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

At
December 31, 2001, all of our credit card receivables and other interest-earning assets had variable rate pricing, with receivables carrying annual percentage rates at a spread
over the prime rate, subject to interest rate floors. At December 31, 2001, our securitizations had $1.5 billion in variable rate, interest-bearing liabilities, payable to investors
compared to $1.2 billion as of December 31, 2000. Since both our managed interest- earning assets and our managed interest-bearing liabilities reprice approximately every 30 days,
we believe that the impact of a change in interest rates would not be material to our financial performance.

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

Liquidity, Funding and Capital Resources

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

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



49

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Maturity Date

Facility Limit(in millions)April 2002

$
221.2May 2002


200.0October 2002


306.0March 2003(1)


250.0September 2003(2)


627.4July 2004(3)


441.5$
2,046.1


---



50

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During
the fourth quarter of 2001, we needed additional liquidity to fund our operations, potentially pay off our revolving credit facility if it was not renewed in January 2002,
and to fund the growth in our retained interests in our securitizations. As previously noted, we sold $40.0 million of preferred stock and we also sold approximately $36.3 million of our
retained interest in our securitizations at a substantial discount. We utilized our revolving credit facility to fund the portion of our receivables growth that could not be funded through
securitization. We continue to explore a wide range of options for liquidity in order for us to maintain our growth and to be prepared for adverse changes in the securitization marketplace. These
options may include revolving lines of credit, selling a subordinated interest in one or more of our securitizations, or the issuance of debt or equity. We expect to explore other options as well.
There cannot, however, be any assurances that we will be able to obtain liquidity on satisfactory terms. Should we not obtain additional liquidity, we will need to significantly limit our growth and
will be more susceptible to adverse changes in the securitization marketplace.

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

51

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"Management's Discussion and Analysis of Financial Condition and OperationsCredit Card Securitizations."

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

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

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

Recent Accounting Pronouncements

In September 2000, the FASB issued Statement No. 140, accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
that replaces, in its entirety, Statement No. 125. Although Statement No. 140 has changed many of the rules regarding securitizations, it continues to require an entity to recognize the
financial and servicing assets it controls and the liabilities it has incurred and to derecognize financial assets when control has been surrendered in accordance with the criteria provided in the
statement. As required, the Company has applied the new rules prospectively to transactions beginning after March 31, 2001.

In
July 2001, the FASB issued Statement No. 141, "Business Combinations," effective for business combinations initiated after June 30, 2001, and Statement
No. 142, "Goodwill and Other Intangible Assets," effective for fiscal years beginning after December 15, 2001. Under Statement No. 141, the pooling of interests method of
accounting for business combinations is eliminated. Under Statement No. 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to
annual impairment tests. Other intangible assets will continue to be amortized over their useful lives. We do not believe that implementation of either Statement No. 141 or 142 will have a
material impact on our financial statements.

52

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Critical Accounting Policies

Our financial statements are prepared in accordance with Generally Accepted Accounting Principles. These principles are numerous and complex. Our significant
accounting policies are summarized in the footnotes to our financial statements. In many instances, the application of GAAP requires management to make estimates or to apply subjective principles to
particular facts and circumstances. A variance in the estimates used or a variance in the application, or interpretation of GAAP could yield a materially different accounting result. It is
impracticable for us to summarize every accounting principle that requires us to use judgment or estimates in its application. However, described below are the two areas where we believe that the
estimations, judgments or interpretations that we have made, if different, would have yielded the most significant differences in our financial statements.

Valuation of Retained Interests.By far, the most significant aspect of our business is the credit card receivables that we
originate, purchase and manage. As of December 31, 2001, there were approximately $1.9 billion of credit card receivables underlying our securitization program. We reflect our retained
interest in the credit card receivables as an asset in our financial statements. The value of this asset is critical to our financial performance and condition. In valuing this asset, we have to
estimate several key factors with respect to the underlying credit card receivables, including payment rate, credit loss rate and, more generally, have to estimate an appropriate discount rate. Some
of these factors and the hypothetical impact of our having used other amounts for these factors are summarized in Note 4 to our consolidated financial statements, and we urge you to carefully
consider that note.

Non-Consolidation of Qualifying Special Purpose Entities.As described above, we securitize all of our credit
card receivables. In general these securitizations involve the sale of credit card receivables by CompuCredit to "qualified special purpose entities" ("QSPE") and to multi-seller commercial paper
conduits administered by national banking institutions. QSPEs are governed by complex documentation, and we have filed the significant documentation for the QSPEs that we have established as exhibits
to our SEC filings. Statement No. 140, governs how we account for the QSPEs that we have established. In general, Statement No. 140 requires an entity to recognize the financial and
servicing assets it controls and the liabilities it has incurredi.e., it is required to "consolidate" those assets and liabilities and any related transactionsand to
derecognize financial assets when control has been surrendered in accordance with the criteria provided in the statement. Although Statement No. 140 provides guidance as to whether control has
been surrendered, the ultimate determination is subjective in nature and requires considerable judgment.

We
have reviewed the criteria provided in Statement No. 140 and believe that we have surrendered control with respect to the receivables. Statement No. 140 states that the
transferor has surrendered control over transferred assets if and only if all of the following conditions are met:



We
believe control has been surrendered with regard to receivables that we have sold within our securitizations, including our commercial paper conduits, and therefore the transferred
assets are treated as sales under Statement No. 140.

53

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Since
the application of Statement No. 140 requires subjective judgments, it is possible, although we believe it is unlikely, that someone viewing our facts and circumstances
might conclude that we had not surrendered control, and as such not qualify as a sale. In that event, the credit card receivables that we have transferred to QSPEs (approximately $1.9 billion)
would be treated as assets on our financial statements, the securities issued (proceeds raised totaling approximately $1.5 billion) would be treated as liabilities on our balance sheet (as
secured borrowings), and no gain or loss would be recognized on the sale of the receivables. In addition, the credit card receivables would be subject to potential reserves and would be classified as
restricted assets for the repayment of the securities that were issued. This would result in a substantially different capital structure for us, although barring unforeseen diminution in the value of
the credit card receivables in the QSPEs, it should not materially impact our cash flow.

The
Financial Accounting Standards Board and the SEC are both examining whether changes to Statement No. 140 and related accounting principles are appropriate in light of recent
well-publicized abuses of SPEs. As a result, it is possible that these principles will be modified in the future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required under this item is provided under the caption "Interest Rate Sensitivity and Market Risk" under "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Statements in "Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K."

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Previously reported on Form 8-K filed with the SEC on March 19, 2002, as amended by Form 8-K/A filed with the SEC on
March 20, 2002.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding directors appearing under the caption "Proposal OneElection of Directors" in CompuCredit's Proxy Statement for the 2002 Annual
Meeting of Shareholders is hereby incorporated by reference. Information regarding executive officers appearing under the caption "Executive Officers of CompuCredit" in CompuCredit's Proxy Statement
for the 2002 Annual Meeting of Shareholders is hereby incorporated by reference. Information set forth under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in
CompuCredit's Proxy Statement for the 2002 Annual Meeting of Shareholders is hereby incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information appearing under the caption "Executive and Director Compensation," including the "Summary Compensation Table" and the "Option Grants Table," in
CompuCredit's Proxy Statement for the 2002 Annual Meeting of Shareholders is hereby incorporated by reference.

54

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ITEM 12. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

Information setting forth the security ownership of beneficial owners and management appearing under the caption "Security Ownership of Beneficial Owners and
Management" in CompuCredit's Proxy Statement for the 2002 Annual Meeting of Shareholders is hereby incorporated by reference.

ITEM 13. RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding related transactions appearing under the caption "Related Party Transactions" in CompuCredit's Proxy Statement for the 2002 Annual Meeting
of Shareholders is hereby incorporated by reference.

55

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

The following documents are filed as a part of this Report.

INDEX TO FINANCIAL STATEMENTS

PageReport of Independent Auditors
F-2Consolidated Balance Sheets as of December 31, 2001 and 2000
F-3Consolidated Statements of Operations for the Years ended December 31, 2001, 2000 and 1999
F-4Consolidated Statements of Shareholders' Equity for the Years ended December 31, 2001, 2000 and 1999
F-5Consolidated Statements of Cash Flows for the Years ended December 31, 2001, 2000 and 1999
F-6Notes to Consolidated Financial Statements for the Years ended December 31, 2001 and 2000
F-7






|Exhibit
Number |      | Description of Exhibit                                                                                                                                                                                                                                           |  | Incorporated by reference from CompuCredit's SEC filings unless otherwise indicated:
|-------------- | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------
|3.1            |      | Amended and Restated Articles of Incorporation of CompuCredit Corporation.                                                                                                                                                                                       |  | August 27, 1998, Form S-1, exhibit 3.1                                              
|3.1            | (a)  | Amendment to Amended and Restated Articles of Incorporation of CompuCredit Corporation.                                                                                                                                                                          |  | August 14, 2000, Form 10-Q, exhibit 3.1(a)                                          
|3.1            | (b)  | Articles of Amendment creating Series A Preferred Stock and Series B Preferred Stock                                                                                                                                                                             |  | December 28, 2001, Form 8-K, exhibit 3.3                                            
|3.2            |      | Second Amended and Restated Bylaws of CompuCredit Corporation.                                                                                                                                                                                                   |  | September 30, 2000, Form 10-Q, exhibit 3.2                                          
|4.1            |      | Form of certificate representing shares of the Registrant's common stock.                                                                                                                                                                                        |  | August 27, 1998, Form S-1, exhibit 4.1                                              
|10.1           |      | Stockholders Agreement, dated as of April 28, 1999, by and among CompuCredit, Frank J. Hanna, III, individually and as Trustee of Bravo Trust One, David G. Hanna, individually and as Trustee of Bravo Trust Two, Richard W. Gilbert and Richard R. House,
 Jr. |  | August 27, 1998, Form S-1, exhibit 10.1                                             
|10.2           |     | Amended and Restated 1998 Stock Option Plan.                                                                                                                                                                                                                     |  | August 27, 1998, Form S-1, exhibit 10.2                                             
|10.2           | (a) | CompuCredit Corporation's 2000 Stock Option Plan                                                                                                                                                                                                                 |  | March 30, 2001, Form DEF 14A, Appendix A                                            
|               |      |                                                                                                                                                                                                                                                                  |  |                                                                                     

56

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|10.3 |     | CompuCredit Employee Stock Purchase Plan.                                                                                                                                                                                                            |  | December 16, 1999, Form S-8, exhibit 4.3  
|---- | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------
|10.4 |     | Employment Agreement between CompuCredit Corporation and Richard R. House, Jr.                                                                                                                                                                       |  | March 30, 2001, Form 10-K, exhibit 10.3(a)
|10.5 |     | Employment Agreement between CompuCredit Corporation and Ashley L. Johnson.                                                                                                                                                                          |  | March 30, 2001, Form 10-K, exhibit 10.3(b)
|10.6 |     | Employment Agreement between CompuCredit Corporation and David G. Hanna.                                                                                                                                                                             |  | March 30, 2001, Form 10-K, exhibit 10.3(c)
|10.7 |     | Employment Agreement between CompuCredit Corporation and Richard W. Gilbert.                                                                                                                                                                         |  | March 30, 2001, Form 10-K, exhibit 10.3(d)
|10.8 |      | Asset purchase agreement, dated as of May 11, 2001 by and among CompuCredit Corporation, VSx, Corporation and James A. Eckstein.                                                                                                                     |  | Previously filed                          
|10.8 | (a)  | Agreement, dated as of May 11, 2001, by and among CompuCredit Corporation, Visionary Systems, Inc. and James A. Eckstein.                                                                                                                            |  | Previously filed                          
|10.9 | *    | Affinity Card Agreement, dated as of January 6, 1997, between Columbus Bank and Trust Company and CompuCredit, L.P.                                                                                                                                  |  | August 27, 1998, Form S-1, exhibit 10.7.1 
|10.9 | (a)  | Amendment to Affinity Card Agreement, dated as of March 26, 1998, between Columbus Bank and Trust Company and CompuCredit Corporation, as successor to CompuCredit, L.P.                                                                             |  | August 27, 1998, Form S-1, exhibit 10.7.2 
|10.9 | (b)  | Amendment to Affinity Card Agreement, dated as of August 1, 1998, by and among Columbus Bank and Trust Company and CompuCredit Corporation, as successor to CompuCredit, L.P., and CompuCredit Acquisition Corp.                                     |  | August 27, 1998, Form S-1, exhibit 10.7.3 
|10.9 | (c)* | Facilities Management Services Agreement, dated as of August 1, 1998, between Columbus Bank and Trust Company and CompuCredit Corporation, as successor to CompuCredit, L.P.                                                                         |  | August 27, 1998, Form S-1, exhibit 10.7.4 
|10.9 | (d)  | Amendment to Affinity Card Agreement and Facilities Management Agreement, dated as of November 11, 1998, by and among Columbus Bank and Trust Company, CompuCredit Corporation, as successor to CompuCredit, L.P., and CompuCredit Acquisition
Corp. |  | August 27, 1998, Form S-1, exhibit 10.7.5 
|10.9 | (e)  | Amendments to Affinity Card Agreement among Columbus Bank and Trust Company, CompuCredit Corporation, as successor to CompuCredit, L.P., and CompuCredit Acquisition Corporation.                                                                    |  | March 30, 2001, Form 10-K, exhibit 10.5.6 
|     |      |                                                                                                                                                                                                                                                      |  |                                           

57

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|10.9  | (f) | Amendments to Facilities Management Services Agreement between Columbus Bank and Trust Company and CompuCredit Corporation, as successor to CompuCredit, L.P.                                                                                                              |  | March 30, 2001, Form 10-K, exhibit 10.5.7       
|----- | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------
|10.10 |     | Master Indenture, dated as of July 14, 2000, among CompuCredit Credit Card Master Note Business Trust, as Issuer, The Bank of New York, as Indenture Trustee, and CompuCredit Corporation, as Servicer.                                                                    |  | September 30, 2000, Form 10-Q, exhibit 10.1     
|10.10 | (a) | First Amendment to Master Indenture, dated as of September 7, 2000, among CompuCredit Credit Card Master Note Business Trust, The Bank of New York, and CompuCredit Corporation.                                                                                           |  | September 30, 2000, Form 10-Q, exhibit 10.1(a)  
|10.10 | (b) | Form of Indenture Supplement.                                                                                                                                                                                                                                              |  | September 30, 2000, Form 10-Q/A, exhibit 10.1(b)
|10.11 |     | Transfer and Servicing Agreement, dated as of July 14, 2000, among CompuCredit Funding Corp., as Transferor, CompuCredit Corporation, as Servicer, CompuCredit Credit Card Master Note Business Trust, as Issuer, and The Bank of New York, as Indenture
Trustee.          |  | September 30, 2000, Form 10-Q, exhibit 10.2     
|10.11 | (a) | First Amendment to Transfer and Servicing Agreement, dated as of September 7, 2000, among CompuCredit Funding Corporation, CompuCredit Corporation, CompuCredit Credit Card Master Note Business Trust and The Bank of New York.                                           |  | September 30, 2000, Form 10-Q, exhibit 10.2(a)  
|10.11 | (b) | Second Amendment to Transfer and Servicing Agreement, dated as of December 28, 2000, among CompuCredit Funding Corporation, CompuCredit Corporation, CompuCredit Credit Card Master Note Business Trust and The Bank of New York.                                          |  | March 30, 2001, Form 10-K, exhibit 10.8(b)      
|10.12 |     | Master Indenture, dated as of December 28, 2000, among CompuCredit Credit Card Master Note Business Trust II, as Issuer, The Bank of New York, as Indenture Trustee, and CompuCredit Corporation, as Servicer.                                                             |  | March 30, 2001, Form 10-K, exhibit 10.9         
|10.12 | (a) | Form of Indenture Supplement to the Master Indenture, dated as of December 28, 2000                                                                                                                                                                                        |  | March 30, 2001, Form 10-K, exhibit 10.10        
|10.13 |     | Transfer and Servicing Agreement, dated as of October 20, 2000, among CompuCredit Funding Corp. II, as Transferor, CompuCredit Corporation, as Servicer, CompuCredit Credit Card Master Note Business Trust II, as Issuer, and The Bank of New York, as
Indenture Trustee. |  | March 30, 2001, Form 10-K, exhibit 10.11        
|      |     |                                                                                                                                                                                                                                                                            |  |                                                 

58

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|10.14 |  | Securities Purchase Agreement (J.P. Morgan Corsair II Capital Partners, L.P., J.P. Morgan Capital, L.P., Winding Creek, L.P. and Paladin Capital Partners Fund, L.P.) dated as of December 17, 2001. |  | December 28, 2001, Form 8-K, exhibit 10.12
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------
|10.15 |  | Securities Purchase Agreement (Rainbow Trust One and Rainbow Trust Two) dated as of December 17, 2001.                                                                                               |  | December 28, 2001, Form 8-K, exhibit 10.13
|10.16 |  | Shareholders Agreement dated as of December 17, 2001.                                                                                                                                                |  | December 28, 2001, Form 8-K, exhibit 10.14
|21.1  |  | Subsidiaries of the Registrant.                                                                                                                                                                      |  | Filed herewith                            
|23.1  |  | Consent of Ernst & Young LLP.                                                                                                                                                                        |  | Filed herewith                            

---

Current
Report on Form 8-K dated December 28, 2001, relating to issuance of Series A Preferred Stock and Series B Preferred Stock.

59

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COMPUCREDIT CORPORATION  INDEX TO FINANCIAL STATEMENTS

|                                                                                                     |  | Page
|---------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Auditors                                                                       |  | F-2 
|Consolidated Balance Sheets as of December 31, 2001 and 2000                                         |  | F-3 
|Consolidated Statements of Operations for the Years ended December 31, 2001, 2000 and 1999           |  | F-4 
|Consolidated Statements of Shareholders' Equity for the Years ended December 31, 2001, 2000 and 1999 |  | F-5 
|Consolidated Statements of Cash Flows for the Years ended December 31, 2001, 2000 and 1999           |  | F-6 
|Notes to Consolidated Financial Statements for the Years ended December 31, 2001 and 2000            |  | F-7 

F-1

---



Report of Independent Auditors

The
Board of Directors
CompuCredit Corporation

We
have audited the accompanying consolidated balance sheets of CompuCredit Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements
of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of CompuCredit Corporation and subsidiaries at
December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.

| |  | /s/ERNST & YOUNG LLP
| |  | --------------------

Atlanta,
Georgia
March 26, 2002

F-2

---



CompuCredit Corporation and Subsidiaries  Consolidated Balance Sheets

|                                                                                                                            |  | December 31,
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------
|
|
|Assets                                                                                                                      |  |             
|Cash and cash equivalents                                                                                                   |  | $           
|Retained interests in credit card receivables securitized                                                                   |  |             
|Accrued interest and fees                                                                                                   |  |             
|                                                                                                                            |  |             
|Net credit card receivables                                                                                                 |  |             
|Amounts due from securitization                                                                                             |  |             
|Deferred costs, net                                                                                                         |  |             
|Software, furniture, fixtures and equipment, net                                                                            |  |             
|Prepaid expenses                                                                                                            |  |             
|Other assets                                                                                                                |  |             
|                                                                                                                            |  |             
|Total assets                                                                                                                |  | $           
|                                                                                                                            |  |             
|Liabilities                                                                                                                 |  |             
|Accounts payable and accrued expenses                                                                                       |  | $           
|Notes payable                                                                                                               |  |             
|Deferred revenue                                                                                                            |  |             
|Income tax liability                                                                                                        |  |             
|                                                                                                                            |  |             
|Total liabilities                                                                                                           |  |             
|Shareholders' equity                                                                                                        |  |             
|Preferred stock, no par value, 10,000,000 shares authorized:                                                                |  |             
|Series A preferred stock, 30,000 and 0 shares issued and outstanding at December 31, 2001 and 2000, respectively            |  |             
|Series B preferred stock, 10,000 and 0 shares issued and outstanding at December 31, 2001 and 2000, respectively            |  |             
|Common stock, no par value:                                                                                                 |  |             
|150,000,000 shares authorized, 46,559,165 and 46,514,639 issued and outstanding at December 31, 2001 and 2000, respectively |  |             
|Additional paid-in capital                                                                                                  |  |             
|Note issued to purchase stock                                                                                               |  |             
|Retained earnings                                                                                                           |  |             
|                                                                                                                            |  |             
|Total shareholders' equity                                                                                                  |  |             
|                                                                                                                            |  |             
|Total liabilities and shareholders' equity                                                                                  |  | $           
|                                                                                                                            |  |             

See
accompanying notes.

F-3

---

CompuCredit Corporation and Subsidiaries  Consolidated Statements of Operations

|                                                                      |  | For the year ended December 31, |        
|--------------------------------------------------------------------- |  | ------------------------------- | -------
|
|
|Interest income                                                       |  | $                               | 2,347  
|Interest expense                                                      |  |                                 | 317    
|                                                                      |  |                                 |        
|Net interest income                                                   |  |                                 | 2,030  
|                                                                      |  |                                 |        
|Other operating income:                                               |  |                                 |        
|Securitization (loss) income, net                                     |  |                                 | (8,400 
|Income from retained interests in credit card receivables securitized |  |                                 | 11,328 
|Servicing income                                                      |  |                                 | 6,018  
|Other credit card fees                                                |  |                                 | 89,553 
|Interchange fees                                                      |  |                                 | 22,780 
|Ancillary products                                                    |  |                                 | 30,592 
|                                                                      |  |                                 |        
|Total other operating income                                          |  |                                 | 151,871
|Other operating expense:                                              |  |                                 |        
|Salaries and benefits                                                 |  |                                 | 12,161 
|Credit card servicing                                                 |  |                                 | 62,374 
|Marketing and solicitation                                            |  |                                 | 29,931 
|Professional fees                                                     |  |                                 | 3,659  
|Data processing                                                       |  |                                 | 10,558 
|Net occupancy                                                         |  |                                 | 3,875  
|Ancillary product expense                                             |  |                                 | 10,121 
|Other                                                                 |  |                                 | 16,810 
|                                                                      |  |                                 |        
|Total other operating expense                                         |  |                                 | 149,489
|Income before income taxes                                            |  |                                 | 4,412  
|                                                                      |  |                                 |        
|Income taxes                                                          |  |                                 | (1,545 
|Net income                                                            |  | $                               | 2,867  
|                                                                      |  |                                 |        
|Net income attributable to common shareholders                        |  | $                               | 2,723  
|                                                                      |  |                                 |        
|Net income per common share-basic(1)                                  |  | $                               | 0.06   
|Net income per common share-assuming dilution(1)                      |  | $                               | 0.06   

---

See
accompanying notes.

F-4

---



CompuCredit Corporation and Subsidiaries  Consolidated Statements of Shareholders' Equity  For the years ended December 31, 2001, 2000 and 1999

|                             |                                      | Common Stock |           |   |   |   |   |         |         |   |        |         |  
|---------------------------- | ------------------------------------ | ------------ | --------- | - | - | - | - | ------- | ------- | - | ------ | ------- | -
|
|
|
|Balance at December 31, 1998 |                                      | 34,168,193   |           |   |  |   |   | 10,532  |         |   | 20,000 |         |  
|                             | Conversion of preferred stock        |              | 1,916,532 |   |   |  |   |         | 20,000  |   |        | (20,000 | )
|                             | Issuance of common stock             |              | 5,750,000 |   |   |  |   |         | 62,842  |   |        |        |  
|                             | Cash dividend paid by pooled company |              |          |   |   |  |   |         |        |   |        |        |  
|                             | Net income                           |              |          |   |   |  |   |         |        |   |        |        |  
|                             |                                      |              |           |   |   |   |   |         |         |   |        |         |  
|Balance at December 31, 1999 |                                      | 41,834,725   |           | $ |  |   | $ | 93,374  |         | $ |       |         |  
|                             | Issuance of common stock             |              | 4,600,000 |   |   |  |   |         | 145,242 |   |        |        |  
|                             | Stock options exercised              |              | 79,914    |   |   |  |   |         | 1,173   |   |        |        |  
|                             | Cash dividend paid by pooled company |              |          |   |   |  |   |         |        |   |        |        |  
|                             | Net income                           |              |          |   |   |  |   |         |        |   |        |        |  
|                             |                                      |              |           |   |   |   |   |         |         |   |        |         |  
|Balance at December 31, 2000 |                                      | 46,514,639   |           | $ |  |   | $ | 239,789 |         | $ |       |         |  
|                             | Issuance of Series A preferred stock |              |          |   |   |  |   |         |        |   |        | 29,512  |  
|                             | Issuance of Series B preferred stock |              |          |   |   |  |   |         |        |   |        | 10,000  |  
|                             | Preferred dividends                  |              |          |   |   |  |   |         |        |   |        |        |  
|                             | Issuance of common stock             |              | 44,526    |   |   |  |   |         | 563     |   |        |        |  
|                             | Note issued to purchase stock        |              |          |   |   |  |   |         |        |   |        |        |  
|                             | Net income                           |              |          |   |   |  |   |         |        |   |        |        |  
|                             |                                      |              |           |   |   |   |   |         |         |   |        |         |  
|Balance at December 31, 2001 |                                      | 46,559,165   |           | $ |  |   | $ | 240,352 |         | $ | 39,512 |         | $
|                             |                                      |              |           |   |   |   |   |         |         |   |        |         |  

---

See accompanying notes.

F-5

---

CompuCredit Corporation and Subsidiaries  Consolidated Statements of Cash Flows

|                                                                                  |                                           | For the year ended December 31,                        |         
|--------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------------------ | --------
|
|
|Operating activities                                                              |                                           |                                                        |         
|Net income                                                                        |                                           | $                                                      | 2,867   
|Adjustments to reconcile net income to net cash provided by operating activities: |                                           |                                                        |         
|                                                                                  | Depreciation expense                      |                                                        |         
|                                                                                  | Amortization expense                      |                                                        |         
|                                                                                  | Securitization (income) loss              |                                                        |         
|                                                                                  | Retained interests income adjustment, net |                                                        |         
|                                                                                  | Changes in assets and liabilities:        |                                                        |         
|                                                                                  |                                           | Decrease (increase) in restricted cash                 |         
|                                                                                  |                                           | Increase in accrued interest and fees                  |         
|                                                                                  |                                           | Decrease (increase) in amounts due from securitization |         
|                                                                                  |                                           | Increase in deferred costs                             |         
|                                                                                  |                                           | (Increase) decrease in prepaid expenses                |         
|                                                                                  |                                           | (Decrease) increase in amounts due to securitization   |         
|                                                                                  |                                           | Increase in accrued expenses                           |         
|                                                                                  |                                           | Increase in deferred revenue                           |         
|                                                                                  |                                           | Increase (decrease) in income tax liability            |         
|                                                                                  |                                           | Other                                                  |         
|                                                                                  |                                           |                                                        |         
|Net cash provided by operating activities                                         |                                           |                                                        | 63,375  
|Investing activities                                                              |                                           |                                                        |         
|Net loans originated or purchased                                                 |                                           |                                                        | (471,764
|Recoveries of loans previously charged off                                        |                                           |                                                        | 25,995  
|Net proceeds from securitization of loans                                         |                                           |                                                        | 331,765 
|Proceeds from retained interests in credit card receivables securitized           |                                           |                                                        | 13,019  
|Purchases of and development of software, furniture, fixtures and equipment       |                                           |                                                        | (30,055 
|                                                                                  |                                           |                                                        |         
|Net cash used in investing activities                                             |                                           |                                                        | (131,040
|Financing activities                                                              |                                           |                                                        |         
|Proceeds from issuance of preferred stock                                         |                                           |                                                        | 39,512  
|Preferred dividends                                                               |                                           |                                                        | (144    
|Proceeds from issuance of common stock and capital contributions                  |                                           |                                                        | 563     
|Cash dividend paid by pooled company                                              |                                           |                                                        |        
|Note issued to purchase stock                                                     |                                           |                                                        | (500    
|Proceeds from exercise of stock options                                           |                                           |                                                        |        
|Proceeds from revolving credit facility                                           |                                           |                                                        | 15,000  
|                                                                                  |                                           |                                                        |         
|Net cash provided by financing activities                                         |                                           |                                                        | 54,431  
|Net (decrease) increase in cash                                                   |                                           | $                                                      | (13,234 
|                                                                                  |                                           |                                                        |         
|Cash and cash equivalents at beginning of year                                    |                                           |                                                        | 68,980  
|Cash and cash equivalents at end of year                                          |                                           | $                                                      | 55,746  
|                                                                                  |                                           |                                                        |         
|Supplemental cash flow information                                                |                                           |                                                        |         
|Cash paid for interest                                                            |                                           | $                                                      | 200     
|Cash paid for income taxes                                                        |                                           | $                                                      | 5,800   

See
accompanying notes.

F-6

---



CompuCredit Corporation and Subsidiaries  Notes to Consolidated Financial Statements  December 31, 2001 and 2000

1. Organization and Basis of Presentation

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

The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States that require management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements as well as
the reported amount of revenues and expenses during the reporting period. These estimates are based on information available to the Company as of the date of the financial statements. Actual results
could differ materially from these estimates. Certain estimates such as credit losses, payment and discount rates have a significant impact on the gains recorded on securitizations and the value of
retained interests in credit card receivables securitized.

Certain
amounts in prior period financial statements have been reclassified to conform to the current period presentation.

2. Significant Accounting Policies

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

Cash and Cash Equivalents

Cash and cash equivalents consist of cash, money market investments, and overnight deposits. The Company considers all other highly liquid cash investments with
low interest rate risk and maturities of three months or less to be cash equivalents. Cash equivalents are valued at cost, which approximates market.

Asset Securitization

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

Under
Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("Statement
No. 140"), gains and

F-7

---

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

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

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

Deferred Costs

The principal components of deferred costs include certain costs paid to third parties related to its credit card receivables securitizations and direct loan
origination costs. Deferred securitization costs include legal fees and fees incurred for services provided for establishing securitization facilities that have ongoing benefit to the Company, such as
the master trust used for future securitizations, which result in ongoing securitization income to the Company. These capitalized securitization costs are amortized over the estimated life of the
securitization, which is one to three years. Under Statement of Financial Accounting Standards No. 91, "Accounting for Non refundable Fees and Costs Associated with Originating or Acquiring
Loans and Initial Direct Costs of Leases" and Emerging Issues Task Force 93-1, "Accounting for Individual Credit Card Acquisitions" direct loan origination costs are deferred and amortized
against credit card fee income on a straight-line basis over the privilege period, which is typically a one-year period.

Software Development, Furniture, Fixtures, and Equipment

The Company capitalizes certain costs related to internal development and implementation of software used in operating activities of the Company in accordance
with AICPA Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." Software development, furniture, fixtures and equipment are
stated at cost less accumulated depreciation. Depreciation and amortization expenses are computed using the straight-line method over the estimated useful lives of the assets, which is
approximately 3 years for software and 5 years for furniture and fixtures, and the shorter of the estimated life or terms of the lease for leasehold improvements.

F-8

---

Servicing Income

As of December 31, 2001, 2000, and 1999, respectively, the Company received servicing fees equal to either 0.1% per year of the securitized principal
receivables or 5% of cash collected, depending on the securitization structure. The Company either performs the servicing or contracts with third party service providers. Gross servicing revenue is
recognized as income on a monthly basis during the same period in which the servicing is performed and is included as servicing income in the Company's Consolidated Statement of Operations.

Credit Card Fees

Credit card fees include annual membership, overlimit, returned check, cash advance transaction fees and other fees. Annual fees are amortized into revenue on a
straight-line basis over the privilege period, which is twelve months. These fees are assessed according to the terms of the related cardholder agreements and, except for annual fees, are
recognized as revenue when charged to the cardholder's account. Accrued interest and late fees as well as the credit card portion of charged off loan balances are deducted from current income. As
noted above in "Deferred Costs," direct loan origination costs are amortized against credit card fee income.

Ancillary Product Revenue

The Company offers various fee-based products and services to its customers, including memberships, insurance products and subscription services. When
the Company markets its own products, the fees are recorded as deferred revenue upon the customer's acceptance of the product and amortized on a straight-line basis over the life of the
product (which ranges from one to twelve months), net of estimated cancellations. When the Company markets products for third parties, the revenue is recognized when earned which is generally during
the same month the product is sold to the customer. We consider revenue to be earned once delivery has occurred (i.e., we have no further performance obligation), our commission is fixed, and
collectibility is reasonably assured. Once these conditions are satisfied, we recognize our commission as ancillary product revenue.

Solicitation Expenses

Credit card account and other product solicitation costs, including printing, credit bureaus, list processing costs, telemarketing and postage, are expensed as
the solicitation occurs.

Income Taxes

The Company accounts for income taxes based on the liability method required by Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("Statement No. 109").

Under
the liability method, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.

Recent Accounting Pronouncements

In September 2000, the FASB issued Statement No. 140, accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
that replaces, in its entirety, Statement No. 125. Although Statement No. 140 has changed many of the rules regarding securitizations, it continues to require an entity to recognize the
financial and servicing assets it controls and the liabilities it has incurred and to derecognize financial assets when control has been surrendered in accordance with the criteria provided in the
statement. The Company has applied the new rules prospectively to transactions beginning after March 31, 2001. The effect of adoption of this statement was immaterial.

F-9

---

In
July 2001, the FASB issued Statement No. 141, "Business Combinations," effective for business combinations initiated after June 30, 2001, and Statement
No. 142, "Goodwill and Other Intangible Assets," effective for fiscal years beginning after December 15, 2001. Under Statement No. 141, the pooling of interests method of
accounting for business combinations is eliminated. Under Statement No. 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to
annual impairment tests. Other intangible assets will continue to be amortized over their useful lives. The effect of adoption of these statements was immaterial.

3. Shareholders' Equity

In April and May of 1999, the Company completed its initial public offering and received net proceeds of $62.8 million. In connection with the offering,
all of the outstanding preferred stock, including accrued dividends, was exchanged for 1,916,532 shares of common stock. In February 2000, the Company completed a follow-on public
offering and received net proceeds of $145.2 million.

In
April of 2000, the Company acquired Citadel Group, Inc. of Daytona Beach, Florida. Citadel currently markets fee-based products and services to the Company's
cardholders. The transaction was accounted for as a pooling of interests through the exchange of 1,783,333 shares of the Company's common stock for all of the outstanding stock of Citadel. The
consolidated financial statements of the Company have been restated to reflect the financial position, results of operations and cash flows of the respective companies as though the companies were
combined for all periods presented.

On
May 21, 2001, in connection with the Company's entry into a consulting agreement, we loaned the consultant $500,000 to purchase 39,526 shares of CompuCredit common stock.

In
December 2001, the Company issued 30,000 shares (aggregate initial liquidation preference $30 million) of its Series A Preferred Stock and 10,000 shares
(aggregate initial liquidation preference $10 million) of its Series B Preferred Stock in a private placement. Net proceeds were $39.5 million. Dividends on the preferred stock
accumulate at the rate of 10% per annum and are payable quarterly, in arrears, in cash or, at the Company's option, by an increase in the accretive value of the preferred stock. The dividend rate will
increase if the shares are still outstanding after five years. In general, each outstanding share of preferred stock entitles the holder to that number of votes equal to the number of shares of common
stock into which the holder's shares of preferred stock could be converted at the time of the vote, subject (solely for purposes of determining the number of votes) to a floor on the conversion price
of $9.01 per share. The preferred stock is convertible into common stock at the holders option. The holders are entitled to traditional weighted average anti-dilution rights (i.e. for
stock splits, the issuance or sale of equity securities, etc.). The Company can require the conversion of the preferred stock commencing December 2004 if the market price per common share is at
least 200% of the initial conversion price ($9.14 per share, subject to anti-dilution adjustment). The Company can redeem the Series A Preferred Stock for cash after 5 years,
or upon a change of control, provided all accrued dividends are paid; the Series B Preferred Stock does not have a cash redemption feature.

4. Securitizations

The Company securitizes a substantial portion of its Company issued credit card receivables through the CompuCredit Credit Card Master Note Business Trust and the
CompuCredit Credit Card Master Note Business Trust II (collectively, the "Master Trust"). Credit card receivables are transferred to the Master Trust, which issues notes representing undivided
ownership interests in the assets of the Master Trust. The Company also securitized two purchased portfolios, which were acquired in 1998, of credit card receivables through securitization structures
with third party commercial paper conduits. Generally Accepted Accounting Principles require the Company to treat the transfers as sales and the receivables are removed from the consolidated balance
sheet. Under Statement No. 140, an entity recognizes the assets it controls and liabilities it has incurred, and derecognizes the financial assets for

F-10

---

which control has been surrendered and all liabilities that have been extinguished. An entity is considered to have surrendered control over the transferred assets and, therefore, to have sold the
assets if the following conditions are met:



The
securitization transactions do not affect the relationship the Company has with its customers and the Company continues to service the credit card receivables. The Company either
performs the servicing or contracts with third party service providers.

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

For the year ended
December 31,2001

2000(In thousands)Proceeds from securitizations

$
344,784

$
591,946Excess cash flows received on retained interests


202,350


155,000Pretax securitization income (loss)


(8,400
)

11,778Proceeds from collections reinvested in revolving-period securitizations


1,208,413


903,397Gross proceeds from Servicing Fees


5,749


7,220


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

In
the securitization structure associated with the Company's purchase portfolios, each month a percentage of the excess cash collected from the card holders is paid to the investors to
decrease their remaining invested amount. This excess cash that the Company paid to the investors totaled $13.0 million and $15.6 million for the years ended December 31, 2001 and
2000, respectively. Once the investors are repaid, any remaining receivables and funds held in the securitization structure will be payable to the Company.

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

F-11

---

deceased customers. Bankrupt and deceased customers' accounts are typically charged off within 30 days of verification.

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

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

At December 31,2001

2000

1999(In thousands)I/O strip

$
84,390

$
52,249

$
28,557Servicing liability


(38,123
)

(21,807
)

(11,397
)Net I/O strip


46,267


30,442


17,160Fair value of Seller's Interest


312,622


295,141


148,412Retained interests in credit card receivables securitized

$
358,889

$
325,583

$
165,572


The
Company's net I/O strip is comprised of the I/O strip and the related servicing liability. The I/O strip reflects the fair value of the Company's rights to future income from the
portfolio. The servicing liability is recorded because the compensation for servicing certain portfolios is not expected to adequately compensate the Company for the costs of servicing certain
portfolios. The change in the servicing liability is included in income from retained interests in credit card receivables securitized. The increase in the Company's retained interests from 2000 to
2001 and from 1999 to 2000 is a function of the increase in the total receivables securitized at the end of each of the stated years.

Changes
in any of these assumptions used to value our retained interests could impact the fair value estimates and the realization of future cash flows. The weighted average key
assumptions used to estimate the fair value of the Company's retained interests as of the end of each year are presented below:

December 31,2001

2000Payment rate (monthly)

8.0
%
8.8
%Expected credit loss rate (annualized)

16.7

10.9Residual cashflows discount rate

34.9

16.7Servicing liability discount rate

14.0

16.7


The
changes in the weighted average discount rate assumptions from December 31, 2000 to December 31, 2001 are reflective of the characteristics of the sales of retained
interests that occurred during the fourth quarter of 2001. During the fourth quarter of 2001, the Company sold approximately $36.3 million of its retained interests in credit card receivables
securitized for net proceeds of approximately $26.7 million in two transactions. The $9.6 million difference is a loss on sale under the provision of Statement No. 140 and is
included in our securitizations loss for 2001. As a result of these transactions, the Company increased its residual cash flow discount rate from 16.7% in December 31, 2000 to 34.9% in 2001.
The increase in the residual discount cash flow discount rate approximates the Company's estimates of the interest rate implicit in these transactions and reflects the general economic environment
during the fourth quarter of 2001. The increase in the expected credit loss rate is primarily due to the seasoning of the portfolio. In estimating the expected credit loss rate, the Company segments
its our managed loans according to vintage pools (based on when the account was

F-12

---

originated) and the risk profile of the various cardholders. Additionally, the Company considers delinquencies and evaluates the most recent quarters' activities, with additional consideration given
to the last six months performance to estimate the influence of general economic and seasonal trends. The return to the investors in the securitizations is based on management's estimates of forward
yield curves.

At
December 31, 2001, the following illustrates the hypothetical effect an adverse 5 and 10 percent change in key economic assumptions has on the retained interests in
credit card receivables securitized ($ in thousands):

Credit card
loansPayment rate (monthly)


8.0
%Impact on fair value of 5% adverse change

$
(627
)Impact on fair value of 10% adverse change

$
(1,532
)Expected credit loss rate (annualized)


16.7
%Impact on fair value of 5% adverse change

$
(5,775
)Impact on fair value of 10% adverse change

$
(11,516
)Residual cashflows discount rate


34.9
%Impact on fair value of 5% adverse change

$
(2,018
)Impact on fair value of 10% adverse change

$
(4,056
)Servicing discount rate


14.0
%Impact on fair value of 5% adverse change

$
(67
)Impact on fair value of 10% adverse change

$
(134
)


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

The
Company's managed loan portfolio is comprised of retained interests in loans securitized and the investors share of securitized credit card loans. The investors share of securitized
credit card loans is not an asset of the Company. Therefore, they are not included in the Company's consolidated balance sheets. The principal balances outstanding as of December 31, 2001 and
2000, were $1.7 billion and $1.4 billion, respectively. The following table summarizes the balances included in the CompuCredit's managed loan portfolio.

December 31,2001

2000(In thousands)Total managed principal balance

$
1,711,755

$
1,416,009Total managed finance charge balance


180,087


112,273Total managed loans

$
1,891,842

$
1,528,372Loans delinquent60 or more days

$
210,382

$
145,686Net charge offs

$
252,002

$
132,137


F-13

---

5. Software, Furniture, Fixtures, and Equipment

Software, furniture, fixtures and equipment consist of the following:

December 31,2001

2000(In thousands)Software

$
28,922

$
11,364Furniture and fixtures


3,619


1,860Data processing and telephone equipment


13,368


6,980Leasehold improvements


4,821


577Total cost


50,730


20,781Less accumulated depreciation


(16,208
)

(6,513
)Software, furniture, fixtures, and equipment, net

$
34,522

$
14,268


6. Leases

The Company leases premises and equipment under cancelable and noncancelable leases, some of which contain renewal options under various terms. Total rental
expense was $3,858,000 and $1,238,000 for the years ended December 31, 2001 and 2000, respectively. As of December 31, 2001, the future minimum rental commitments for all noncancelable
leases with initial or remaining terms of more than one year are as follows (in thousands):

2002

$
4,5362003


4,6732004


4,7312005


4,3522006


3,612Thereafter


17,607$
39,511


7. Borrowings

Until January 2002, the Company had a $25.0 million one-year revolving credit facility. As of December 31, 2001,
$15.0 million was outstanding under this facility at a rate of 4.75% and $10.0 million was reserved for a letter of credit in favor of a third party servicer. As of December 31,
2000, the revolving credit facility was unused; however, $5 million was reserved for a letter of credit in favor of a third party servicer. This agreement expired in January 2002 and was
paid in full.

8. Commitments and Contingencies

The Company enters into financial instruments with off balance sheet risk in the normal course of business through the origination of unsecured credit card
receivables. These financial instruments consist of commitments to extend credit totaling approximately $4.4 billion and $4.1 billion, at December 31, 2001 and 2000, respectively.
These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheets. The principal amount of these instruments reflects the maximum exposure
the Company has in the instruments. The Company has not experienced and does not anticipate that all of its customers will exercise their entire available line of credit at any given point in time.
The Company has the right to reduce or cancel these available lines of credit at any time.

F-14

---

CompuCredit,
David Hanna, our Chief Executive Officer, and Brett Samsky, our Chief Financial Officer from our inception until January 2001, are defendants in a class action
lawsuit pending in the Federal District Court for the Northern District of Georgia, Case No. 1:00-CV-2930-BBM. This lawsuit arose from the decline in the
market value of our common stock on October 25, 2000, and alleges that prior to that date CompuCredit, Mr. Hanna and Mr. Samsky made false and misleading statements in violation
of Federal securities laws. The lawsuit seeks compensatory monetary damages and legal fees. In July 2001, we filed a motion to dismiss the lawsuit. On February 19, 2002, the court
granted our motion to dismiss, but allowed the plaintiffs to file a motion seeking leave to amend their complaint. On March 22, 2002, the plaintiffs filed a motion requesting additional
time to amend their complaint. That motion is pending. We still maintain our position that we do not believe that this lawsuit has any merit, and we intend to continue to defend it vigorously. We do
not believe that the lawsuit is reasonably likely to have a material adverse effect on our financial position, cashflows or results of operations. In addition, we could become involved in litigation
from time to time relating to claims arising in the ordinary course of our business.

9. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities, which represent the difference
between the amounts reported for financial reporting purposes and amounts used for income tax purposes. Statement No. 109 requires that the deferred tax effects of a change in tax status be
included in income from continuing operations at the date the change in tax status occurs.

The
current and deferred portions of federal and state income tax expense are as follows:

For the year ended December 31,2001

2000

1999(In thousands)Federal income tax expense:Current tax expense

$
15,430

$
31,292

$
12,698Deferred tax expense


(13,885
)

10,489


21,569Total federal income tax expense


1,545


41,781


34,267State income tax expense:Current tax expense








Deferred tax expense








Total state income tax expense








Total income tax expense

$
1,545

$
41,781

$
34,267


Income
tax expense in 2000 differed from amounts computed by applying the statutory U.S. Federal income tax rate to pretax income from operations as a result of the following permanent
differences: option expense, the stub period for the purchase of Citadel Group, Inc., tax exempt interest and meals and entertainment. Income tax expense in 1999 differed from amounts computed
by applying the statutory U.S. Federal income tax rate to pretax income from operations as a result of

F-15

---

including temporary state income taxes, which were reversed in 2000, and permanent meals and entertainment differences.

For the year ended December 31,2001

2000

1999(In thousands)Taxes at statutory rate

$
1,545

$
43,454

$
32,647Increase (decrease) in income taxes resulting from:Other differences, net





(1,673
)

1,620Total income tax expense

$
1,545

$
41,781

$
34,267


The
tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2001 and 2000 are presented
below:

December 31,2001

2000(In thousands)Deferred tax liabilities:Prepaid expenses

$
(267
)
$
(1,647
)Cash advance fees


(5,184
)

(4,358
)Software development costs


(5,654
)

(2,310
)Deferred costs


(3,501
)

(1,366
)Gain on securitization


(8,194
)

(27,033
)Net deferred tax liability

$
(22,800
)
$
(36,714
)


F-16

---

The current and deferred portions of federal and state income tax expense are as follows:

For the year ended December 31,2001

2000

1999(In thousands)Federal income tax expense:Current tax expense

$
15,430

$
31,292

$
12,698Deferred tax expense


(13,885
)

10,489


21,569Total federal income tax expense


1,545


41,781


34,267State income tax expense:Current tax expense








Deferred tax expense








Total state income tax expense








Total income tax expense

$
1,545

$
41,781

$
34,267


Income
tax expense differed from amounts computed by applying the statutory U.S. Federal income tax rate to pretax income from operations as a result of the following:

For the year ended December 31,2001

2000

1999(In thousands)Taxes at statutory rate

$
1,545

$
43,454

$
32,647Increase in income taxes resulting from:Miscellaneous permanent differences





(1,673
)

1,620Total income tax expense

$
1,545

$
41,781

$
34,267


The
tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2001 and 2000 are presented
below:

December 31,2001

2000(In thousands)Deferred tax liabilities:Prepaid expenses

$
(267
)
$
(1,647
)Cash advance fees


(5,184
)

(4,358
)Software development costs


(5,654
)

(2,310
)Deferred costs


(3,501
)

(1,366
)Gain on securitization


(8,194
)

(27,033
)Net deferred tax liability

$
(22,800
)
$
(36,714
)


F-17

---

10. Earnings Per Share

The following table sets forth the computation of basic earnings per share:

For the year ended December 31,2001

2000

1999(In thousands, except per share data)Numerator:Net income

$
2,867

$
82,374

$
64,103Preferred stock dividends


(144
)




(582
)Income attributable to common shareholders

$
2,723

$
82,374

$
63,521Denominator:Denominator for basic earnings per shareweighted-average shares outstanding


46,542


45,886


39,363Effect of dilutive stock options


79


184


76Denominator for diluted earnings per shareadjusted weighted-average shares


46,621


46,070


39,439Basic earnings per share

$
0.06

$
1.80

$
1.61Diluted earnings per share

$
0.06

$
1.79

$
1.61


The
$40,000,000 preferred stock investment was convertible into 4,376,368 shares of common stock at $9.14 per share as of December 31, 2001. These shares are not included in the
computation of diluted EPS for the year ended December 31, 2001, because including these shares would have been anti-dilutive.

11. Stock Options

The Company has two Stock Option Plans, the 1998 Stock Option Plan ("1998 Plan") and the 2000 Stock Option Plan ("2000 Plan"). The 2000 Plan was approved by the
Board of Directors in October 2000 and ratified by shareholders at the 2001 annual meeting. Under the 1998 and the 2000 Plans, the Company may grant shares of the Company's common stock to
members of the Board of Directors, employees, consultants and advisors of the Company. The exercise price per share of the options may be less than, equal to or greater than the market price on the
date the option is granted. The option period is not to exceed 10 years from the date of grant. The vesting requirements for options granted by the Company are determined by management and
range from immediate to 3 years. The majority of the options vest 331/3% in the 1st year, 331/3% in the 2nd year, and
331/3% in the 3rd year. The maximum number of shares of common stock that may be granted under the 1998 plan is 1,200,000 shares. A total of 1,058,101 options have been issued under the
1998 Option plan. The maximum number of shares of common stock that may be granted under the 2000 plan is 1,200,000 shares. A total of 828,650 options have been issued under the 2000 Option plan. The
total number of options outstanding under both plans is 1,886,751. The 2000 Option plan was adopted by the Board of

F-18

---

Directors on October 11, 2000, was subject to approval by the shareholders and became effective on the date of its adoption. Information related to options outstanding under the Plans are as
follows:

|                                 |  | For the year ended December 31,
|-------------------------------- |  | -------------------------------
|
|
|Outstanding at beginning of year |  | 1,320,260                      
|Granted                          |  | 633,150                        
|Exercised                        |  |                               
|Cancelled/Forfeited              |  | (66,659                        
|                                 |  |                                
|Outstanding at end of year       |  | 1,886,751                      
|                                 |  |                                

The
following table summarizes information about stock options outstanding as of December 31, 2001:

|              |  | Options Outstanding |  | Options Exercisable
|------------- |  | ------------------- |  | -------------------
|
|$0.00-$12.00  |  | 607,850             |  | 4.80               
|$12.00-$25.00 |  | 307,610             |  | 3.25               
|$25.01-$38.00 |  | 227,791             |  | 3.16               
|$38.01-$50.00 |  | 735,000             |  | 3.75               
|$50.01-$62.00 |  | 8,500               |  | 3.75               
|              |  |                     |  |                    
|              |  | 1,886,751           |  | 3.94               
|              |  |                     |  |                    

As
permitted by FASB Statement No. 123, "Accounting for Stock-Based Compensation" ("Statement 123"), the Company recognizes compensation cost for stock-based employee compensation
awards in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." As permitted by FASB Statement No. 123, "Accounting for Stock-Based Compensation" ("Statement 123"), the Company recognizes compensation cost for stock-based employee compensation
awards in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company did not recognize any compensation expense for stock-based employee
compensation awards or independent board members compensation awards nor did the Company issue any options to non-employees who were not directors for the years ended December 31,
2001, 2000 and 1999.

If
the Company had recognized compensation expense in accordance with Statement 123, net income (loss) and net income (loss) per share would have been $(5,069,000) and $(0.11) per share
basic and diluted, for the year ended December 31, 2001, $79,235,000 and $1.72 on a diluted basis or $1.73 per share on a basic basis, for the year ended December 31, 2000 and
$63,728,000 and $1.60 per share basic and diluted, for the year ended December 31, 1999. Since adjusted compensation costs relate to all periods over which the grants vest, the initial impact
on the Company's adjusted net income may not be representative of compensation costs in subsequent years, when the effect of the amortization of multiple awards would be reflected. The per share
weighted average fair value of stock options granted during 2001 was $6.15, using the Black-Scholes option pricing model. The fair value of the options granted during the year was based upon the
discounted value of future cash flows of the options using the following assumptions for 2001: Risk free interest rate4.2%, expected life of the options5.0 years,
expected volatility85% and expected dividends (as a percent of the fair value of the

F-19

---

stock)0%. The December 31, 1999 amounts have been restated to reflect the pooling of interests with Citadel Group Inc.

12. Employee Benefit Plans

The Company has a 401(k) plan and an Employee Stock Purchase Plan. All employees on that date and persons who become full-time employees after that
date who have completed one year of employment and at least 1,000 hours of service are eligible to participate in the 401(k) plan. The 401(k) plan provides for a matching contribution by the
Company, which amounted to approximately $136,000 in 2001 and $70,000 in 2000.

The
Company has an Employee Stock Purchase Plan ("ESPP"). All employees, excluding executive officers, are eligible to participate in the ESPP. Under the ESPP, substantially all
employees can elect to have up to 10% of their annual wages withheld to purchase CompuCredit common stock. The amounts deducted and accumulated by each participant are used to purchase shares of
common stock at the end of each one-month offering period. The price of stock purchased under the purchase plan is approximately 85% of the fair market value per share of the Company's
common stock on the last day of the offering period. Employees contributed approximately $318,000 to purchase 44,790 shares of common stock under the ESPP during 2001 and approximately $200,000 to
purchase 8,500 shares of common stock under the ESPP during 2000. The ESPP covers up to 150,000 shares of common stock. The Company's charge to expense associated with the Employee Stock Purchase Plan
for 2001 was approximately $50,000 in 2001 and $35,000 in 2000.

13. Related Party Transactions

The Series A Preferred Stock that was issued in December 2001 was issued to a group of investors that includes J.P. Morgan Corsair II Capital
Partners, L.P. and Paladin Capital Partners Fund, L.P. ("Paladin"). J.P. Morgan Corsair II Capital Partners is a holder of greater than 5% of the Company's outstanding common stock. CompuCredit issued
4,808 shares of its Series A Preferred Stock to Paladin for an aggregate purchase price of approximately $4.8 million. In addition to the preferred stock investment noted above, during
the fourth quarter of 2001 Paladin purchased approximately $27 million of our retained interests in credit card receivables securitized for approximately $20 million. Paladin is an
affiliate of an entity controlled by Mr. Frank J. Hanna, Jr., who is the father of the Company's Chairman and Chief Executive Officer, David G. Hanna, and one of our directors, Frank J. Hanna,
III.

In
December 2001 the Company also issued 10,000 shares of Series B Preferred Stock, in a private placement, for an aggregate purchase price of $10 million. The
Series B Preferred Stock was issued to entities controlled by David G. Hanna and Frank J. Hanna, III.

The
holders of the Series A Preferred Stock, Series B Preferred Stock, certain holders of common stock and the Company, entered into a Shareholders Agreement whereby (in
addition to the provisions described in Note 3) (i) the holders of the Series A Preferred Stock are entitled to participate in a sale or transfer of securities of CompuCredit by
Frank J. Hanna, III, David G. Hanna (being the holders of the Series B Preferred Stock), and certain other Common Stock holders that in the aggregate are equal to 25% or more of the outstanding
shares of common stock, on a fully diluted basis and (ii) the holders of the Preferred Stock are entitled to registration rights, such that their converted shares of common stock may be
registered by CompuCredit on a registration statement filed with the SEC.

Under
a shareholders agreement that the Company entered into with David G. Hanna, a trust of which David G. Hanna is the sole trustee, Frank J. Hanna, III, a trust of which Frank J.
Hanna, III is the sole trustee, Richard R. House, Jr. (the Company's President) and Richard W. Gilbert (the Company's Chief Operating Officer and Vice Chairman), following the Company's initial public
offering, (1) if one or more of the shareholders accepts a bona fide offer from a third party to purchase more than 50% of the outstanding common stock, each of the other shareholders that are
a

F-20

---

party to the agreement may elect to sell their shares to the purchaser on the same terms and conditions, and (2) if shareholders that are a party to the agreement owning more than 50% of the
common stock propose to transfer all of their shares to a third party, then such transferring shareholders may require the other shareholders that are a party to the agreement to sell all of the
shares owned by them to the proposed transferee on the same terms and conditions.

Richard
R. House, Jr. and Richard W. Gilbert each indirectly own 13.7% of Visionary Systems, Inc., or VSI, the third party developer of the Company's database management system.
During 2001, the
Company paid approximately $20.1 million to VSI and its subsidiaries for software development, loan origination, consulting services, intellectual property and two patents. In connection with
the purchase of intellectual property, the Company entered into a promissory note of $1.4 million, due in January 2002. This promissory note was paid off in January 2002. During
2001, the Company loaned a subsidiary of VSI $1.0 million for working capital and general corporate purposes. This loan bears interest at the prime rate, is due in January 2005 and
approximately $1.0 million was outstanding as of December 31, 2001. During 2000, the Company paid approximately $6.8 million to VSI for software development and consulting
services.

During
2001, the Company began subleasing 7,316 square feet of excess office space to Frank J. Hanna, Jr., for $21.50 per square foot. The sublease rate is the same as the rate that
CompuCredit pays on the prime lease. Total rent for 2001 was approximately $26,000.

F-21

---

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, as amended, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia, on March 24, 2003.

| |  | COMPUCREDIT CORPORATION
| |  | -----------------------
| |  | By:                    
| |  |                        

---

CERTIFICATIONS

I,
David G. Hanna, certify that:

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

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

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

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

---

I,
J. Paul Whitehead, certify that:

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

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

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

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

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