CREDIT MANAGEMENT SOLUTIONS INC, S-8, 1997-04-28

CREDIT MANAGEMENT SOLUTIONS INC
S-8, 1997-04-28
COMPUTER PROGRAMMING SERVICES

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<PAGE> 1
As filed with the Securities and Exchange Commission on April 28, 1997
Registration No.333-____________

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933

CREDIT MANAGEMENT SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 52-1549401
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

5950 SYMPHONY WOODS ROAD
COLUMBIA, MARYLAND 21044
(410) 740-1000
(Address of principal executive offices) (Zip Code)

CREDIT MANAGEMENT SOLUTIONS, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
1996 NON-QUALIFIED STOCK OPTION PLAN
(Full title of the Plans)

JAMES R. DEFRANCESCO
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD
CREDIT MANAGEMENT SOLUTIONS, INC.
5950 SYMPHONY WOODS ROAD
COLUMBIA, MARYLAND 21044

(Name and address, including zip code, of agent for service)
(410) 740-1000
(Phone number, including area code, of agent for service)

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share Price Fee
<S> <C> <C> <C> <C>
EMPLOYEE STOCK PURCHASE PLAN
Common Stock, $0.01 250,000 shares $8.7125-$9.75(2) $ 2,436,616.86 $738.36
par value

1996 NON-QUALIFIED STOCK OPTION PLAN
Options to purchase Common Stock
Common Stock, $0.01 par value 2,750,000 shares $9.75(3) $26,812,500(3) $ 8,125

Aggregate Filing Fee $8,864
</TABLE>

(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Employee Stock Purchase
Plan by reason of any stock dividend, stock split, recapitalization or
other similar transaction effected without the receipt of consideration
which results in an increase in the number of the outstanding shares of
Common Stock of Credit Management Solutions, Inc.

(2) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, on the basis of (i) the
purchase price per share on March 31, 1997 with respect to 5,550 shares
of Registrant's Common Stock and (ii) the average of the high and low
selling prices per share of Registrant's Common Stock on April 24,
1997, as reported on the Nasdaq National Market with respect to 244,950
Shares of Registrant's Common Stock.

(3) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, on the basis of the average of
the high and low selling prices per share of Registrant's Common Stock
on April 24, 1997, as reported by the Nasdaq National Market.

<PAGE> 2

PROSPECTUS

5,550 SHARES

Credit Management Solutions, Inc.

Common Stock
($0.01 PAR VALUE PER SHARE)
-----------------

This Prospectus relates to the offer and sale of up to 5,550 shares
of the Common Stock, $0.01 par value per share (the "Shares"), of Credit
Management Solutions, Inc., a Delaware corporation (the "Company"), by 60 of the
Company employees (the "Selling Stockholders"). The Selling Stockholders
purchased shares pursuant to the Company's Employee Stock Purchase Plan. None of
the Selling Stockholders is or has ever been an officer or director of the
Company. The Shares issued to the Selling Stockholders will be registered on a
Form S-8 Registration Statement filed by the Company under the Securities Act of
1933, as amended (the "1933 Act").

The Shares may be offered by the Selling Stockholders from time to time
in broker-dealer transactions effected on the Nasdaq National Market at market
prices prevailing at the time of the sale. For further information concerning
such sales, see the section below entitled "Plan of Distribution." The Company
will not receive any of the proceeds from the sale of the Shares offered hereby.

FOR INFORMATION CONCERNING THE PRINCIPAL RISK FACTORS ASSOCIATED WITH A
PURCHASE OF THE SHARES OFFERED HEREBY, SEE THE SECTION BELOW ENTITLED "RISK
FACTORS."

The Company's Common Stock is quoted on the Nasdaq National Market
under the symbol CMSS. On March 31, 1997, the closing price of the Common
Stock was $8.7125 per share.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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

THE DATE OF THIS PROSPECTUS IS APRIL 28, 1997

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AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and in
accordance therewith files reports, proxy statements, information statements and
other information with the Securities and Exchange Commission (the
"Commission"). Reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511, and at Seven World Trade Center, New York, New York 10048. Copies of
such material can be obtained by mail from the Public Reference Branch of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission also maintains a site on the World Wide Web
that contains reports, proxy and information statements and other information
regarding registrants that file electronically. The address for such site is
http://www.sec.gov.

The Company has filed with the Commission a registration statement on
Form S-8 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the 1933 Act with respect to the Common
Stock issuable under the Plan, including the Shares offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information regarding the Company,
the Common Stock offered hereby and the Plan, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and copies of all or
any part thereof may be obtained from such office upon payment of the prescribed
fees.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

Credit Management Solutions, Inc. (the "Registrant") hereby
incorporates by reference into this Registration Statement the following
documents previously filed with the Securities and Exchange Commission (the
"SEC"):

(a) The Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, filed with the SEC on March 31,
1996; and

(b) The Registrant's Registration Statement No. 00-21735 on Form
8-A filed with the SEC on November 15, 1996 pursuant to
Section 12 of the 1934 Act in which there is described the
terms, rights and provisions applicable to the Registrant's
outstanding Common Stock.

The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the request of such person, a copy of any
or all of the documents which are incorporated herein by reference (other than
exhibits to such information, unless such exhibits are specifically incorporated
by reference into the information this Prospectus incorporates). Requests should
be directed to Credit Management Solutions, Inc., 5950 Symphony Woods Road,
Columbia, Maryland 21044, telephone (410) 740-1000.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDER OR BY ANY OTHER PERSON. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES
COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO OR SOLICITATION
OF ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT
LAWFULLY BE MADE.

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THE COMPANY

Credit Management Solutions, Inc. (the "Company") is a developer and
provider of software solutions and services for automating the consumer and
small business credit analysis, decisioning and funding process. The Company is
organized and existing under the laws of the State of Delaware. The Company's
principal executive offices are located at 5950 Symphony Woods Road, Columbia,
Maryland 21044, and the Company's telephone number is (410) 740-1000.

RISK FACTORS

The discussion in this Prospectus regarding the Company and the credit
processing software and services industry contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such as "may,"
"expect," "anticipate," "estimate" or "continue" or the negative thereof or
other variations thereon or comparable terminology. The reader is cautioned that
all forward-looking statements are necessarily speculative and there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in such forward looking statements. The
discussion below highlights some of the more important risks regarding the
Company. The risks highlighted below should not be assumed to be the only things
that could affect future performance. The Company does not have a policy of
updating or revising forward-looking statements and thus it should not be
assumed that silence by management of the Company over time means that actual
events are bearing out as estimated in such forward looking statements.

Uncertainty of Future Results of Operations; Fluctuations in Quarterly Results
of Operations

Prior growth rates in the Company's revenue and net income should not be
considered indicative of future results of operations. Future results of
operations will depend upon many factors, including market acceptance of new
services, including the Company's Credit Connection and CreditRevue Service
Bureau, the demand for the Company's products and services, the successful
transition from predominantly license fee-based revenue to predominantly
transaction fee-based revenue, the timing of new product and service
introductions and software enhancements by the Company or its competitors, the
level of product, service and price competition, the length of the Company's
sales cycle, the size and timing of individual transactions, the delay or
deferral of customer implementations, the Company's success in expanding its
customer support organization, direct sales force and indirect distribution
channels, the nature and timing of significant marketing programs, the mix of
products and services sold, the timing of new hires, the ability of the Company
to develop and market new products and services and control costs, competitive
conditions in the industry and general economic conditions. In addition, the
decision to implement the Company's products or services typically involves a
significant commitment of customer resources and is subject to the budget cycles
of the Company's customers. Licenses of CreditRevue generally reflect a
relatively high amount of revenue per order. The loss or delay of individual
orders, therefore, would have a significant impact on the Company's revenue and
quarterly results of operations. The timing of revenue is difficult to predict
because of the length and variability of the Company's sales cycle, which has
ranged to date from two to 18 months from initial customer contact to the
execution of a license agreement. In addition, since a substantial portion of
the Company's revenue is recognized on a percentage-of-completion basis, the
timing of revenue recognition for its licenses may be materially and adversely
affected by delays or deferrals of customer implementations. Such delays or
deferrals may also increase expenses associated with such implementations which
would materially and adversely affect related operating margins. The Company's
operating expenses are based in part on planned product and service
introductions and anticipated revenue trends and, because a high percentage of
these expenses are relatively fixed, a delay in the recognition of revenue from
a limited number of transactions could cause significant variations in operating
results from quarter-to-quarter and could result in operating losses. To the
extent such expenses precede, or are not subsequently followed by, increased
revenues, the Company's results of operations would be materially and adversely
affected. As a result of these and other factors, revenues for any quarter are
subject to significant variation, and the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance. There can be no
assurance that the Company will be profitable in any future quarter or that such
fluctuations in results of operations will not result in volatility in the price
of

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the Company's Common Stock. Due to all of the foregoing factors, it is likely
that in some future quarter the Company's results of operations will be below
the expectations of public market analysts and investors. In such event, the
market price of the Company's Common Stock will be materially and adversely
affected.

Dependence on CreditRevue Product Line

License fees, maintenance fees and third-party computer hardware sales
associated with licenses and installations of CreditRevue accounted for
virtually all of the Company's revenues through December 31, 1996. Although the
Company has recently introduced its Credit Connection service, the Company
expects that revenues generated from licenses and installations of CreditRevue
will continue to account for a significant portion of the Company's revenues for
the foreseeable future. To date, Credit Connection has generated approximately
$48,500 in revenues. The life cycles of the Company's products and services are
difficult to predict due to the effect of new product and service introductions
or software enhancements by the Company or its competitors, market acceptance of
new and enhanced versions of the Company's products and services, and
competition in the Company's marketplace. A decline in the demand for
CreditRevue, whether as a result of competition, technological change, price
reductions or otherwise, would have a material adverse effect on the Company's
business, results of operations and financial condition.

Lengthy Sales and Implementation Cycle

The licensing of the Company's software products and services is often an
enterprise-wide decision by prospective customers and generally requires the
Company to provide a significant level of education to prospective customers
regarding the use and benefits of the Company's products and services. In
addition, the implementation of the Company's software products involves a
significant commitment of resources by prospective customers and is commonly
accompanied by substantial reengineering efforts and a review of the customer's
credit analysis, decisioning and funding processes. The cost to the customer of
the Company's products and services is typically only a portion of the related
hardware, software, development, training and integration costs associated with
implementing a large-scale automated credit origination information system. For
these and other reasons, the period between initial customer contact and the
implementation of the Company's products is often lengthy (ranging from between
two and 18 months) and is subject to a number of significant delays over which
the Company has little or no control. The Company's implementation cycle could
be lengthened by increases in the size and complexity of its license
transactions and by delays or deferrals in its customers' implementation of
appropriate interfaces and networking capabilities. Delays in the sale or
implementation of a limited number of license transactions could have a material
adverse effect on the Company's business, results of operations and financial
condition and cause the Company's results of operations to vary significantly
from quarter to quarter.

Market Acceptance of Credit Connection; Transition to Transaction-Based Revenue

The Company's Credit Connection service has recently been commercially
introduced and the Company's CreditRevue Service Bureau service is under
development and is expected to be introduced in late 1997. These services are
projected to account for a significant portion of the Company's revenues in the
future. As a result, demand and market acceptance for these services are subject
to a high level of uncertainty, and the Company will be heavily dependent on
their market acceptance. There can be no assurance that these services will be
commercially successful. The failure of the Company to generate demand for
Credit Connection or CreditRevue Service Bureau or the occurrence of any
significant technological problems with such services would have a material
adverse effect on the Company's business, results of operations and financial
condition. Historically, virtually all of the Company's revenues have been
derived from license fees, maintenance fees and hardware sales associated with
licenses and installations of CreditRevue. Under the terms of its license
agreements, a majority of the Company's revenues are realized during the
configuration and installation of CreditRevue. However, the Company anticipates
that a significant portion of the Company's future revenues will be derived from
per-usage transaction-based fees charged to credit originators and financial
institutions for transactions originated from the

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Credit Connection and CreditRevue Service Bureau services. There can be no
assurance that the Company will successfully manage the transition of a
significant portion of its revenues from license-based revenue to
transaction-based revenue. The failure of the Company to successfully manage the
transition to a transaction-based revenue stream would have a material adverse
effect on the Company's business, results of operations and financial condition.

Reliance on Certain Relationships

The Company has established relationships with a number of companies that it
believes are important to its sales, marketing and support activities, as well
as to its product, service and software development efforts. The Company has
relationships with automated scorecard companies, hardware vendors and credit
bureaus and has also formed a strategic alliance with ADP for remarketing Credit
Connection. There can be no assurance that these companies, most of which have
significantly greater financial and marketing resources than the Company, will
not develop or market products and services which will compete with the
Company's products and services in the future. Furthermore, since many of these
relationships are informal in nature, they are terminable by either party at
will. Other relationships are terminable by either party after a relatively
short notice period. There can be no assurance that these companies will not
otherwise discontinue their relationships with or support of the Company. The
failure by the Company to maintain its existing relationships or to establish
new relationships in the future, because of a divergence of interests,
acquisition of one or more of these third parties or other reasons, could have a
material adverse effect on the Company's business, results of operations and
financial condition.

Dependence on Large License Fee Contracts and Customer Concentration

A relatively small number of customers has accounted for a significant
percentage of the Company's revenues. License fees for CreditRevue are based on
a percentage-of-completion method on a cost-incurred basis with the final
installment being paid in full upon acceptance of the Company's software. The
Company receives continuing revenues on CreditRevue from annual maintenance
agreements which commence upon acceptance of the software by the customer.
Maintenance agreements are renewable annually by the customer, and the license
agreements are generally coterminous with the maintenance agreements. Although
the Company has experienced a high degree of customer loyalty, the Company
cannot predict how many maintenance agreements will be renewed or the number of
years of renewal. Revenues generated by the Company's 10 largest customers
accounted for 65.1% and 77.4% of total revenues in 1996 and 1995, respectively.
Two of the Company's customers accounted for 19.9% and 12.9% of total revenues,
respectively, in 1995. None of the Company's customers accounted for 10% or more
of total revenues in 1996. The Company expects that a limited number of
customers will continue to account for a significant percentage of revenue for
the foreseeable future. The loss of any major customer or any reduction or delay
in orders by any such customer, delay or deferral in configurations or
enhancements by such customers or the failure of the Company to successfully
market its products or services to new customers, could have a material adverse
effect on the Company's business, results of operations and financial condition.

Dependence on Consumer Retail Lending Industry; Cyclical Nature of Consumer
Lending

The Company's business is currently concentrated in the consumer lending
industry and is expected to be so concentrated for the foreseeable future,
thereby making the Company susceptible to a downturn in the consumer lending
industry. For example, a decrease in consumer lending could result in a smaller
overall market for the Company's products and services. Furthermore, banks in
the United States are continuing to consolidate, decreasing the overall
potential number of customers for the Company's products and services. In
addition, demand for consumer loans has been historically cyclical, in large
part based on general economic conditions and cycles in overall consumer
indebtedness levels. Changes in general economic conditions that adversely
affect the demand for consumer loans, the willingness of financial institutions
to provide funds for such loans, changes in interest rates and the overall
consumer indebtedness level, as well as other factors affecting the consumer
lending industry, could have a material adverse effect on the Company's
business, results of operations and financial condition.

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Management of Changing Business

The Company has experienced significant changes in its business, such as an
expansion in the Company's staff and customer base and the development of new
products, services and enhancements to its software, including the recent
commercial release of Credit Connection. Such changes have placed and may
continue to place a significant strain upon the Company's management, systems
and resources. As of December 31, 1996, the Company had grown to 139 employees
from 103 employees at December 31, 1995. The Company's ability to compete
effectively and to manage future changes will require the Company to continue to
improve its financial and management controls, reporting systems and procedures
and budgeting and forecasting capabilities on a timely basis and expand its
sales and marketing work force, and train and manage its employee work force.
There can be no assurance that the Company will be able to manage such changes
successfully. The Company's failure to do so could have a material adverse
effect upon the Company's business, results of operations and financial
condition.

Dependence on Key Personnel

The Company's future performance depends in significant part upon the continued
service of its key technical, sales and senior management personnel,
particularly James R. DeFrancesco, President and Chief Executive Officer, and
Scott L. Freiman, Executive Vice President. The Company has obtained key-person
life insurance on the lives of each of Messrs. DeFrancesco and Freiman. The loss
of the services of one or more of the Company's executive officers could have a
material adverse effect on the Company's business, results of operations and
financial condition. The Company retains its key employees through the use of
equity incentive programs, including stock option plans, employee stock purchase
plans, and competitive compensation packages. The Company has no employment
agreements and does not intend to enter into any such agreements in the
foreseeable future. The Company's future success also depends on its continuing
ability to attract and retain highly qualified technical, customer support,
sales and managerial personnel. In particular, the Company has encountered
difficulties in hiring sufficient numbers of programmers and technical
personnel. Competition for qualified personnel is intense, and there can be no
assurance that the Company will be able to retain its key technical, sales and
managerial employees or that it can attract, assimilate or retain other highly
qualified technical, sales and managerial personnel in the future.

Rapid Technological Change; Risk Associated with New Products, Services or
Enhancements

The credit processing software products and services industry in which the
Company competes is characterized by rapid technological change, frequent
introductions of new products and services, changes in customer demands and
evolving industry standards. The introduction or announcement of new products,
services or enhancements by the Company or one or more of its competitors
embodying new technologies or changes in industry standards or customer
requirements could render the Company's existing products or services obsolete
or unmarketable. Accordingly, the life cycles of the Company's products are
difficult to estimate. The Company's future results of operations will depend,
in part, upon its ability to enhance its products and services and to develop
and introduce new products and services on a timely and cost-effective basis
that will keep pace with technological developments and evolving industry
standards, as well as address the increasingly sophisticated needs of the
Company's customers. There can be no assurance that these new products and
services will gain market acceptance or that the Company will be successful in
developing and marketing new products or services that respond to technological
change, evolving industry standards and changing customer requirements, that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of these products or
services, or that its new products or services will adequately meet the
requirements of the marketplace and achieve any significant degree of market
acceptance. In addition, a majority of the Company's current products operate in
the UNIX operating system. Although the Company's software is designed to work
with other operating environments, a requirement to port to a different
operating system could be costly and time consuming and could have a material
adverse effect on the Company's business, results of operations and financial
condition. Failure of the Company to develop and introduce, for technological or
other reasons, new products and services in a timely and cost-effective manner
could have a material adverse effect on the Company's business, results of
operations and financial condition. Furthermore, the introduction or
announcement of new product or service offerings or enhancements by the Company
or the Company's

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competitors may cause customers to defer or forgo purchases of the Company's
products or services, which could have a material adverse effect on the
Company's business, results of operations and financial condition.

System Interruption and Security Risks; Potential Liability; Possible Lack of
Adequate Insurance; and System Inadequacy

The Company's operations are dependent, in part, on its ability to protect its
system from interruption by damage from fire, earthquake, power loss,
telecommunication failure, unauthorized entry or other events beyond the
Company's control. The Company's computer equipment constituting its central
computer system, including its processing operations, is located at a single
site. The Company is currently in the planning stages of acquiring and
implementing a back-up, off-site processing system capable of supporting its
operations in the event of system failure. The Company intends to have such
system operational by the second quarter of 1997. Prior to such implementation,
the Company's operations are subject to substantial risks, including temporary
interruptions resulting from damage caused by any one or more of the foregoing
factors or due to other causes including computer viruses, hackers or similar
disruptive problems. While the Company maintains $1.84 million of property
insurance policies, a business interruption insurance policy, a $3.0 million
errors and omissions insurance policy and a $10.0 million umbrella insurance
policy, such insurance may not be adequate to compensate the Company for all
losses that may occur or to provide for costs associated with system failure or
business interruption. Any damage or failure that causes interruptions in the
Company's operations could have a material adverse effect on the Company's
business, results of operations and financial condition. Persistent problems
continue to affect public and private data networks. For example, in a number of
networks, hackers have bypassed firewalls and have appropriated confidential
information. Such computer break-ins and other disruptions may jeopardize the
security of information stored in and transmitted through the computer systems
of the parties utilizing the Company's services, which may result in significant
liability to the Company and also may deter potential customers from using the
Company's services. In addition, while the Company attempts to be careful with
respect to the employees it hires and maintain controls through software design,
security systems and accounting procedures to prevent unauthorized employee
access, it is possible that, despite such safeguards, an employee of the Company
could obtain access, which would also expose the Company to a risk of loss or
litigation and possible liability to users. The Company attempts to limit its
liability to customers, including liability arising from the failure of the
security features contained in the Company's system and services, through
contractual provisions. However, there can be no assurance that such limitations
will be enforceable. There can be no guarantee that the growth of the Company's
customer base will not strain or exceed the capacity of its computer and
telecommunications systems and lead to degradations in performance or system
failure. Any damage, failure or delay that causes interruptions in the Company's
operations could have a material adverse effect on the Company's business,
results of operations and financial condition.

Risk of Defects, Development Delays and Lack of Market Acceptance

Software products and services as sophisticated as those offered by the Company
often encounter development delays and may contain defects or failures when
introduced or when new versions are released. The Company has in the past and
may in the future experience delays in the development of software and has
discovered, and may in the future discover, software defects in certain of its
products. Such delays and defects may result in lost revenues during the time
corrective measures are being taken. Although the Company has not experienced
material adverse effects resulting from any such defects to date, there can be
no assurance that, despite testing by the Company, errors will not be found in
its existing software in future releases or enhancements, or that the Company
will not experience development delays, resulting in delays in the commercial
release of new products and services, the loss of market share or the failure to
achieve market acceptance. Any such occurrence could have a material adverse
effect upon the Company's business, results of operations and financial
condition.

Future Capital Needs; Uncertainty of Additional Financing

The Company currently anticipates that its available cash resources combined
with anticipated funds from operations will be sufficient to meet its presently
anticipated working capital and capital expenditure requirements

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through 1997. Thereafter, the Company may need to raise additional funds. The
Company may need to raise additional funds sooner in order to fund more rapid
expansion, to develop new or enhanced products and services, to respond to
competitive pressures or to acquire complementary businesses or technologies. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the stockholders of the Company will be reduced,
stockholders may experience additional dilution, or such equity securities may
have rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. There can be no assurance that additional financing will
be available when needed on terms favorable to the Company or at all. If
adequate funds are not available or are not available on acceptable terms, the
Company may be unable to develop or enhance its products and services, take
advantage of future opportunities or respond to competitive pressures, which
could have a material adverse effect on the Company's business, results of
operations and financial condition.

Government Regulation and Uncertainties of Future Regulation

The Company's current and prospective customers, which consist of state and
federally chartered banks, savings and loan associations, credit unions,
consumer finance companies and other consumer lenders, as well as customers in
the industries that the Company may target in the future, operate in markets
that are subject to extensive and complex federal and state regulations. While
the Company is not itself directly subject to such regulations, the Company's
products and services must be designed to work within the extensive and evolving
regulatory constraints in which its customers operate. These constraints include
federal and state truth-in-lending disclosure rules, state usury laws, the Equal
Credit Opportunity Act, the Fair Credit Reporting Act and the Community
Reinvestment Act. Furthermore, some consumer groups have expressed concern
regarding the privacy and security of automated credit processing, the use of
automated credit scoring tools in credit underwriting, and whether electronic
lending is a desirable technological development in light of the current level
of consumer debt. The failure by the Company's products and services to support
customers' compliance with current regulations and to address changes in
customers' regulatory environment, or to adapt to such changes in an efficient
and cost-effective manner, could have a material adverse effect on the Company's
business, results of operations and financial condition.

Control by Existing Stockholders

Assuming no exercise of outstanding options, James R. DeFrancesco, the Company's
President and Chief Executive Officer, and Scott L. Freiman, the Company's
Executive Vice President, collectively beneficially own approximately 64% of the
outstanding shares of Common Stock. As a result, these stockholders will be able
to exercise control over matters requiring stockholder approval, including the
election of directors and the approval of mergers, consolidations and sales of
all or substantially all of the assets of the Company. This may prevent or
discourage tender offers for the Company's Common Stock unless the terms are
approved by such stockholders.

Possible Volatility of Stock Price

The trading price of the Company's Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results, the gain
or loss of significant orders, changes in earnings estimates by analysts,
announcements of technological innovations or new products by the Company or its
competitors, general conditions in the consumer lending and software industries,
credit processing software and services and other events or factors. In
addition, the stock market in general has experienced extreme price and volume
fluctuations which have affected the market price for many companies in
industries similar or related to that of the Company and which have been
unrelated to the operating performance of these companies. These market
fluctuations may adversely affect the market price of the Company's Common
Stock.

Effect of Certain Charter Provisions; Antitakeover Effects of Certificate of
Incorporation, Bylaws and Delaware Law

The Company's Board of Directors has the authority to issue up to 1,000,000
shares of Preferred Stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights of those shares without

8
<PAGE> 10

any further vote or action by the stockholders. The Preferred Stock could be
issued with voting, liquidation, dividend and other rights superior to those of
the Common Stock. The rights of the holders of Common Stock will be subject to,
and may be adversely affected by the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. Further, certain
provisions of the Company's Certificate of Incorporation, including provisions
that create a classified Board of Directors, and certain provisions of the
Company's Bylaws and of Delaware law could delay or make more difficult a
merger, tender offer or proxy contest involving the Company.

9
<PAGE> 11
SELLING STOCKHOLDERS

The table below sets forth the number of shares of Common Stock owned
by each of the Selling Stockholders as of March 31 , 1997, the number of Shares
to be sold pursuant to this offering, and the number of shares of Common Stock
to be retained by each of the Selling Stockholders if all the Shares offered
hereby are in fact sold. All of the Selling Stockholders are employees of the
Company who purchased shares of Common Stock under the Company's 1996 Employee
Stock Purchase Plan. None of the Selling Stockholders is or has ever been an
affiliate of the Company and no Selling Stockholder will sell an excess of 1,000
shares pursuant to the reoffer Prospectus.

The Shares subject to this Prospectus may be offered from time to time
for sale by the Selling Stockholders named below:

<TABLE>
<CAPTION>
Number of Percentage of
Shares of Number of Outstanding
Common Stock Number of Shares to be Common
Beneficially Shares Offered Owned after Stock to be
Owned prior for Sale Consummation Owned after
Name of Selling Stockholder to Sale(1) Hereby of the Sale the Sale
- --------------------------------------- ------------------- ------------------- ------------------- -------------
<S> <C> <C> <C> <C>
William J. Becker III.................. 217 217 * *
Richard C. Becker...................... 86 86 * *
Michael L. Berrio...................... 292 292 * *
Suzanne Bogatiuk....................... 14 14 * *
James V. Cain.......................... 96 96 * *
Hugo F. Cantu.......................... 33 33 * *
Reuven Chapman......................... 122 122 * *
Joseph M. Chiusano..................... 43 43 * *
Wayne R. Coffron....................... 47 47 * *
Kimberly A. Collins.................... 26 26 * *
Susan J. Collins....................... 131 131 * *
Kim Cramer............................. 103 103 * *
James C. Curtis........................ 91 91 * *
Jackie Daley........................... 92 92 * *
Michael C. Diclaudio................... 84 84 * *
Richard A. Ensminger, Jr............... 48 48 * *
Jenny Ewing............................ 11 11 * *
Michael J. Fitzsimmons................. 271 271 * *
Andrew Fletcher........................ 22 22 * *
Linda D. Fortuna....................... 35 35 * *
David C. Geelhaar, Jr.................. 19 19 * *
Mark D. Heistand....................... 193 193 * *
Linda C. Hogan......................... 32 32 * *
Daniel D. Honemann..................... 300 300 * *
James C. Houk.......................... 17 17 * *
Julio Jimenez.......................... 37 37 * *
Daniel Katz............................ 530 530 * *
Frances J. Kerr........................ 23 23 * *
Meena A. Khatri........................ 26 26 * *
Harsharaj S. Khinchi................... 188 188 * *
Richard D. Kirkwood.................... 142 142 * *
Nelly Kogan............................ 70 70 * *
Ray B. Kosby........................... 32 32 * *
Steven T. Langenfeld................... 34 34 * *
John R. Lowry.......................... 16 16 * *
</TABLE>

- ------------------
(1) Reflects shares acquired under the 1996 Employee Stock Purchase Plan.

10
<PAGE> 12

<TABLE>
<CAPTION>
Number of Percentage of
Shares of Number of Outstanding
Common Stock Number of Shares to be Common
Beneficially Shares Offered Owned after Stock to be
Owned prior for Sale Consummation Owned after
Name of Selling Stockholder to Sale Hereby of the Sale the Sale
- --------------------------------------- ------------------- ------------------- ------------------- -------------
<S> <C> <C> <C> <C>
Kevin I. Lutts......................... 78 78 * *
Barbara Maddox......................... 99 99 * *
Fred M. McHugh, Jr..................... 11 11 * *
Joseph J. McDonald..................... 69 69 * *
Julie M. McIntyre...................... 40 40 * *
Susan E. McKenna....................... 52 52 * *
Patricia B. Meehan..................... 43 43 * *
Mark P. Mongelluzzo.................... 63 63 * *
Jere C. Morrel......................... 200 200 * *
Edward T. Mullin....................... 124 124 * *
Duc Nguyen............................. 412 412 * *
Diana L. Norton........................ 70 70 * *
Paula Pennell ......................... 34 34 * *
James Riggs............................ 158 158 * *
Sherry D. Rock......................... 32 32 * *
John R. Saul........................... 41 41 * *
Stephen Short.......................... 85 85 * *
Patricia G. Strayer.................... 74 74 * *
Samuel A. Tawiah....................... 52 52 * *
Robert F. Telewicz..................... 116 116 * *
Kimberly A. Thornton................... 21 21 * *
Patricia Whitlock...................... 118 118 * *
Mary Y. Wood........................... 17 17 * *
Matthew Wood........................... 11 11 * *
Katherine A. Zdura..................... 7 7 * *
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL 5,550 5,550
- ------------------
</TABLE>

* less than one percent of outstanding Common Stock

PLAN OF DISTRIBUTION

The Company will receive no proceeds from the sale of the Shares
pursuant to this offering. The Shares offered hereby may be sold by the Selling
Stockholders from time to time through broker-dealer transactions effected on
the Nasdaq National Market at market prices prevailing at the time of sale. The
broker-dealers participating in such transactions may act as agent or may
acquire the Shares as principal. Any broker-dealer acting as agent may receive
commissions from the Selling Stockholders and/or the purchasers of the Shares
for whom such broker-dealers are acting as agent. Usual and customary brokerage
fees will be paid by the Selling Stockholders. Broker-dealers may agree with the
Selling Stockholders to sell a specified number of Shares at a stipulated price
per Share and, to the extent such broker-dealer is unable to do so as agent for
the Selling Stockholders, to purchase as principal any unsold Shares at the
price required to fulfill the broker-dealer commitment to the Selling
Stockholders. Broker-dealers who acquire the Shares as principal may
subsequently resell such Shares from time to time (including sales to or through
other broker-dealers) in transactions effected on the Nasdaq National Market or
through negotiated transactions or otherwise, at market prices prevailing at the
time of sale or at negotiated prices. In connection with such resales, the
broker-dealer may pay to or receive from the purchasers of the Shares
compensation in the form of discounts, concessions or commissions, which may, as
to a particular broker-dealer, be in excess of customary commissions.

11
<PAGE> 13

In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed broker-dealers. In addition, in certain states the Shares
may not be sold unless they have been registered or qualified for sale in the
applicable state or unless there has been compliance with an applicable
exemption from such registration or qualification requirements.

The Selling Stockholders and any broker-dealers who participate with
the Selling Stockholders in the distribution of the Shares may under certain
circumstances be deemed to be "underwriters" within the meaning of the
Securities Act. In such event, the Selling Stockholders may indemnify any such
broker-dealer against certain liabilities, including liabilities arising under
the 1933 Act. Any commissions received by the broker-dealers participating
in the distribution and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the 1933 Act.

Pursuant to applicable rules and regulations under the Exchange Act,
any person engaged in the distribution of the Shares may not simultaneously
engage in market making activities with respect to the Company's Common Stock
for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, each Selling
Stockholder will be subject to applicable provisions of the 1934 Act and the
rules and regulations thereunder, including (without limitation) Rules 10b-6 and
10b-7. Accordingly, each of the Selling Stockholders shall not, during the
period such Selling Stockholder may be engaged in a distribution of the Shares
offered hereby, (i) engage in any stabilization activity in connection with the
Company's securities or (ii) bid for or purchase any of the Company's securities
or any rights to acquire such securities or attempt to induce any person to
purchase any of the Company's securities or rights to acquire such securities,
other than as permitted under the 1934 Act.

Each of the Selling Stockholders shall furnish each broker-dealer
through whom the Shares offered hereby may be sold such copies of this
Prospectus as such person may require.

12
<PAGE> 14

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference

(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, filed with the SEC on March 31, 1996; and

(b) The Registrant's Registration Statement No. 00-21735 on Form 8-A
filed with the SEC on November 15, 1996 pursuant to Section 12 of
the 1934 Act in which there is described the terms, rights and
provisions applicable to the Registrant's outstanding Common Stock.

All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.

Item 4. Description of Securities

Not Applicable.

Item 5. Interests of Named Experts and Counsel

Not Applicable.

Item 6. Indemnification of Directors and Officers

The Registrant's Certificate of Incorporation, together with its
Bylaws, provide that the Registrant shall indemnify officers and directors, and
may indemnify other employees and agents, to the fullest extent permitted by
law. The laws of the State of Delaware permit, and in some cases require,
corporations to indemnify officers, directors, agents and employees who are or
have been a party to or are threatened to be made a party to litigation against
judgments, fines, settlements and reasonable expenses under certain
circumstances.

The Registrant's Certificate of Incorporation also limits the liability
of directors and officers to the fullest extent permitted by law. Under the
Registrant's Certificate of Incorporation, as permitted by the laws of the State
of Delaware, a director or officer will not be liable to the Registrant or its
stockholders for damages for breach of fiduciary duty. Such limitation of
liability does not affect liability for (i) breach of a director's duty of
loyalty to the corporation or its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of the
law, (iii) any transaction from which the director derived an improper personal
benefit, or (iv) the payment of any unlawful distribution.

II-1
<PAGE> 15

The Registrant has also purchased a general liability insurance policy
that covers certain liabilities of directors and officers arising out of claims
based on acts or omissions in their capacity as directors and officers.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "1933 Act") may be permitted to directors, officers or
controlling persons of the Corporation pursuant to the foregoing provisions,
Registrant has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
1933 Act and is therefore unenforceable.

Item 7. Exemption from Registration Claimed

Not Applicable.

Item 8. Exhibits

Exhibit Number Exhibit

4 Instruments Defining the Rights of Stockholders. Reference
is made to the Registrant's Registration Statement No.
00-21735 on Form 8-A which is incorporated herein by
reference pursuant to Item 3(b) of this Registration
Statement.

5 Opinion and consent of Brobeck, Phleger & Harrison LLP.

23.1 Consent of Ernst & Young LLP, Independent Accountants.

23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.

24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.

99.1 Credit Management Solutions, Inc. 1996 Employee Stock
Purchase Plan.

99.2 Form of Subscription Agreement.

99.3 1996 Non-Qualified Stock Option Plan.

99.4 Form of Non-Qualified Stock Option Agreement.

Item 9. Undertakings

A. The undersigned Registrant hereby undertakes: (1) to
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement (i) to include any
prospectus required by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the
prospectus any facts or events arising after the effective date of this
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement; provided, however, that clauses
(1)(i) and (1)(ii) shall not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act
that are incorporated by reference into this Registration Statement; (2) that
for the purpose of determining any liability under the 1933 Act each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
Registrant's 1996 Employee Stock Purchase Plan and/or 1996 Non-Qualified Stock
Option Plan.

B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-2
<PAGE> 16

C. Insofar as indemnification for liabilities arising
under the 1933 Act may be permitted to directors, officers, or controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the 1933 Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

II-3
<PAGE> 17

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Columbia, State of Maryland on this
25th day of April, 1997.

CREDIT MANAGEMENT SOLUTIONS, INC.

By: /s/ James R. DeFrancesco
--------------------------------------------------
James R. DeFrancesco
President, Chief Executive Officer and Chairman of
of the Board (Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned officers and directors of Credit
Management Solutions, Inc., a Delaware corporation, do hereby constitute and
appoint James R. DeFrancesco the lawful attorney-in-fact and agent with full
power and authority to do any and all acts and things and to execute any and all
instruments which said attorney and agent determine may be necessary or
advisable or required to enable said corporation to comply with the Securities
Act of 1933, as amended, and any rules or regulations or requirements of the
Securities and Exchange Commission in connection with this Registration
Statement. Without limiting the generality of the foregoing power and authority,
the powers granted include the power and authority to sign the names of the
undersigned officers and directors in the capacities indicated below to this
Registration Statement, to any and all amendments, both pre-effective and
post-effective, and supplements to this Registration Statement, and to any and
all instruments or documents filed as part of or in conjunction with this
Registration Statement or amendments or supplements thereof, and each of the
undersigned hereby ratifies and confirms that the said attorney and agent shall
do or cause to be done by virtue hereof. This Power of Attorney may be signed in
several counterparts.

IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ James R. DeFrancesco President, Chief Executive Officer April 25, 1997
- ------------------------- and Chairman of the Board
James R. DeFrancesco (Principal Executive Officer)

/s/ Robert P. Vollono Senior Vice President, Treasurer, April 25, 1997
- ------------------------- Chief Financial Officer and Director
Robert P. Vollono (Principal Financial and Accounting Officer)

/s/ Scott L. Freiman Executive Vice President and Director April 25, 1997
- -------------------------
Scott L. Freiman

/s/ Miles H. Grody Senior Vice President, Secretary, April 25, 1997
- ------------------------- General Counsel and Director
Miles H. Grody

/s/ Stephen X. Graham Director April 25, 1997
- -------------------------
Stephen X. Graham

/s/ John J. McDonnell, Jr. Director April 25, 1997
- -------------------------
John J. McDonnell, Jr.

Director
- -------------------------
Peter M. Leger
</TABLE>

II-4
<PAGE> 18

EXHIBIT INDEX

Exhibit
Number Exhibit
------ -------

5 Opinion and consent of Brobeck, Phleger & Harrison LLP.

23.1 Consent of Ernst & Young LLP, Independent Accountants.

23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.

24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.

99.1 Credit Management Solutions, Inc. 1996 Employee Stock
Purchase Plan.

99.2 Form of Subscription Agreement.

99.3 1996 Non-Qualified Stock Option Plan.

99.4 Form of Non-Qualified Stock Option Agreement.

<PAGE> 1
EXHIBIT 5

OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP

April 28, 1997

Credit Management Solutions, Inc.
5950 Symphony Woods Road
Columbia, Maryland 21044

Re: Registration Statement for Offering of an
Aggregate of 3,000,500 Shares of Common Stock

Ladies and Gentlemen:

We refer to your registration statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of (i) 244,950 shares
of the Common Stock of Credit Management Solutions, Inc. (the "Company") under
the Company's 1996 Employee Stock Purchase Plan currently held by certain
selling stockholders (the "Selling Stockholders"), and (iii) 2,750,000 shares
of Common Stock under the 1996 Non-Qualified Stock Option Plan (the "Option
Plan"). We advise you that, in our opinion, when such shares have been issued
and sold pursuant to the applicable provisions of the Purchase Plan and Option
Plan and in accordance with the Registration Statement, such shares will be
duly authorized, validly issued, fully paid and non-assessable shares of the
Company's Common Stock.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

Very truly yours,

/s/ Brobeck, Phleger & Harrison LLP

BROBECK, PHLEGER & HARRISON LLP

<PAGE> 1
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33- ) pertaining to the 1996 Credit Management Solutions,
Inc. Non-Qualified Stock Option Plan, Shares Sold by Selling Stockholders and
1996 Employee Stock Purchase Plan of our report dated January 24, 1997, with
respect to the consolidated financial statements of Credit Management
Solutions, Inc. included in its Annual Report (Form 10-K) for the year ended
December 31, 1996, filed with the Securities and Exchange Commission.

/s/ Ernst & Young LLP

Baltimore, Maryland
April 24, 1997

<PAGE> 1
Exhibit 99.1

1996 CREDIT MANAGEMENT SOLUTIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN

I. PURPOSE OF THE PLAN

This Employee Stock Purchase Plan is intended to promote the interests
of Credit Management Solutions, Inc., a Delaware corporation (the
"Corporation"), by providing eligible employees with the opportunity to acquire
a proprietary interest in the Corporation through participation in a
payroll-deduction based employee stock purchase plan designed to qualify under
Section 423 of the Code.

Capitalized terms herein shall have the meanings assigned to such terms
in the attached Appendix.

II. ADMINISTRATION OF THE PLAN

The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.

III. STOCK SUBJECT TO PLAN

A. Number of Shares Subject to Purchase. The stock purchasable
under the Plan shall be shares of the Corporation's authorized but unissued or
reacquired Common Stock, including shares of Common Stock purchased on the open
market. The maximum number of shares of Common Stock which may be issued over
the term of the Plan shall not exceed 250,000 shares.

B. Adjustments Upon Changes in Capitalization. Should any
change be made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
maximum number and class of securities issuable under the Plan, and (ii) the
number and class of securities and the price per share in effect under each
outstanding purchase right in order to prevent the dilution or enlargement of
benefits thereunder.

IV. PURCHASE PERIODS

A. General. Shares of Common Stock shall be offered for
purchase under the Plan through a series of successive purchase periods until
such time

<PAGE> 2

as (i) the maximum number of shares of Common Stock available for issuance under
the Plan shall have been purchased or (ii) the Plan shall have been sooner
terminated.

B. Quarterly Purchase Periods. Each purchase period shall have
a duration of three (3) months. Purchase periods shall run from the first day of
each calendar quarter to the last day of that calendar quarter. The first
purchase period shall begin on January 1, 1997, and end on the last business day
in March 31, 1997.

V. ELIGIBILITY

A. As of the Effective Date. Each individual who is an
Eligible Employee as of the Effective Date shall be eligible to participate in
the Plan for the initial purchase period.

B. Following Effective Date. Each individual who becomes an
Eligible Employee after the Effective Date shall be eligible to participate in
the Plan as of the purchase period beginning on January 1 or July 1 immediately
following the individual's completion of ninety (90) days of Service.

C. Enrollment Procedure. To participate in the Plan for a
particular purchase period, an Eligible Employee must complete the enrollment
forms prescribed by the Plan Administrator (including a stock subscription
agreement and a payroll deduction authorization form) and file such forms with
the Plan Administrator (or its designate) on or before the start date of the
purchase period.

VI. PAYROLL DEDUCTIONS

A. Maximum Deductions/Change in Rate of Deductions. The
payroll deduction authorized by the Participant for purposes of acquiring shares
of Common Stock under the Plan may be any multiple of one percent (1%) of the
Eligible Earnings paid to the Participant during each purchase period, up to a
maximum of fifteen percent (15%). Payroll deductions will be made in whole
percentages only. The deduction rate so authorized shall continue in effect for
the entire purchase period and each successive purchase period unless and until
terminated or changed by the Participant. The Participant may not increase his
or her rate of payroll deduction during a purchase period. However, the
Participant may, at any time during the purchase period, reduce his or her rate
of payroll deduction to become effective as soon as possible after filing the
appropriate form with the Plan Administrator. The Participant may not, however,
effect more than one (1) such reduction per purchase period.

B. Holding of Deductions. Payroll deductions shall begin on
the first pay day following the start date of the purchase period and shall
(unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of the purchase period. The
amounts so collected shall be credited

2.
<PAGE> 3

to the Participant's book account under the Plan, but no interest shall be paid
on the balance from time to time outstanding in such account. The amounts
collected from the Participant shall not be held in any segregated account or
trust fund and may be commingled with the general assets of the Corporation and
used for general corporate purposes. A Participant may not make any additional
payments into his account.

C. Cessation of Payroll Deductions. Payroll deductions shall
automatically cease upon the termination of the Participant's purchase right in
accordance with the provisions of the Plan.

D. Effect on Future Participation. The Participant's
acquisition of Common Stock under the Plan on any Purchase Date shall neither
limit nor require the Participant's acquisition of Common Stock on any
subsequent Purchase Date.

VII. PURCHASE RIGHTS

A. Grant of Purchase Right. A Participant shall be granted a
separate purchase right on the start date of each purchase period in which he or
she participates. The purchase right shall provide the Participant with the
right to purchase shares of Common Stock on the Purchase Date upon the terms set
forth below. The Participant shall execute a stock subscription agreement
embodying such terms and such other provisions (not inconsistent with the Plan)
as the Plan Administrator may deem advisable.

Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (taking into account stock owned by any person whose stock would be
attributed to such Eligible Employee within the meaning of Code Section 424(d))
or hold outstanding options or other rights to purchase, stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of stock of the Corporation or any Corporate Affiliate.

B. Exercise of Purchase Right. Each purchase right shall be
automatically exercised on the Purchase Date, and shares of Common Stock shall
accordingly be purchased on behalf of each Participant (other than any
Participant whose payroll deductions have previously been refunded in accordance
with the Termination of Purchase Right provisions below) on such date. The
purchase shall be effected by applying the Participant's payroll deductions for
the purchase period ending on such Purchase Date to the purchase of shares of
Common Stock at the purchase price in effect for that purchase period, and the
shares will be held by the Corporation for the benefit of the Participant,
unless delivery of the shares is requested by the Participant. No fractional
shares will be purchased.

3.
<PAGE> 4

C. Purchase Price. The purchase price per share at which
Common Stock will be purchased on the Participant's behalf on each Purchase Date
shall be equal to eighty-five percent (85%) of the lower of (i) the Fair Market
Value per share of Common Stock on the start date of the purchase period or (ii)
the Fair Market Value per share of Common Stock on that Purchase Date.

D. Delivery. Upon receipt of a request from a Participant
after each Purchase Date on which a purchase of shares occurs, the Corporation
shall arrange for the delivery to each Participant, as appropriate, of a
certificate representing the shares purchased on behalf of the Participant for
such purchase period. Shares to be delivered to a Participant under the Plan
shall be registered in the name of the Participant or in the name of the
Participant and the Participant's spouse.

E. Number of Purchasable Shares. The number of shares of
Common Stock purchasable by a Participant on each Purchase Date shall be the
number of shares obtained by dividing the amount collected from the Participant
through payroll deductions during the purchase period ending with that Purchase
Date by the purchase price in effect for that Purchase Date.

F. Excess Payroll Deductions. Any payroll deductions
accumulated in a Participant's account which are not sufficient to purchase a
full share shall be carried over to the next purchase period, if the Participant
elects to participate in the next purchase period, or returned to the
Participant if he terminates participation. Any amount remaining in the
Participant's account at the close of any Purchase Date caused by any reason
other than a surplus due to fractional shares shall be refunded to the
Participant in cash.

G. Exercise of Purchase Right During Participant's Life.
During a Participant's lifetime, the Participant's right to purchase shares
under the Plan is exercisable only by the Participant.

H. Termination of Purchase Right. The following provisions
shall govern the termination of outstanding purchase rights:

1. A Participant may, at any time prior to the last
day of the purchase period, terminate his or her outstanding purchase
right by filing the appropriate form with the Plan Administrator (or
its designate), and no further payroll deductions shall be collected
from the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the purchase period in which such
termination occurs shall be refunded as soon as practicable.

2. The termination of a purchase right shall be
irrevocable, and a Participant may not subsequently rejoin the purchase

4.
<PAGE> 5

period for which the terminated purchase right was granted. In order to
resume participation in any subsequent purchase period, such individual
must re-enroll in the Plan (by making a timely filing of the prescribed
enrollment forms) on or before the start date of the new purchase
period.

3. Should a Participant cease to remain an Eligible
Employee for any reason (other than death or disability) while his or
her purchase right remains outstanding, then that purchase right shall
immediately terminate, and all of the Participant's payroll deductions
for the purchase period in which the purchase right so terminates shall
be refunded to the Participant as soon as practicable. Should the
Participant cease to remain an Eligible Employee by reason of death or
disability while his or her purchase right remains outstanding, then
that purchase right shall immediately terminate and the Participant
(or, in the event of the Participant's death, the personal
representative of the Participant's estate) shall have the right to (a)
withdraw the payroll deductions collected during such purchase period
or (b) have such funds held for the purchase of shares at the next
scheduled Purchase Date. If no such election is made prior to the next
Purchase Date, then the payroll deductions collected with respect to
the terminating right shall be refunded to the Participant or to the
personal representative of the Participant's estate in the event of the
Participant's death as soon as practicable.

4. Should the Participant cease to remain in active
service by reason of an approved unpaid leave of absence, then the
Participant shall have the right, exercisable up until the last
business day of the purchase period in which such leave commences, to
(a) withdraw the payroll deductions collected during such purchase
period or (b) have such funds held for the purchase of shares at the
next scheduled Purchase Date. In no event, however, shall any
additional payroll deductions be collected on the Participant's behalf
during such leave. Upon the Participant's return to active service, his
or her payroll deductions under the Plan shall automatically resume at
the rate in effect at the time the leave began.

I. Corporate Transaction. Each outstanding purchase right
shall automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each Participant
for the purchase period in which such Corporate Transaction occurs to the
purchase of shares of Common Stock at a purchase price per share equal to
eighty-five percent (85%) of the lower of (i) the Fair Market Value per share of
Common Stock on the start date of the purchase period in which such Corporate
Transaction occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Corporate Transaction.

5.
<PAGE> 6

J. Proration of Purchase Rights. Should the total number of
shares of Common Stock which are to be purchased pursuant to the outstanding
purchase rights on any particular date exceed the number of shares then
available for issuance under the Plan, the Plan Administrator shall make a
pro-rata allocation of the available shares on a uniform and nondiscriminatory
basis, and the payroll deductions of each Participant, to the extent in excess
of the aggregate purchase price payable for the Common Stock pro-rated to such
individual, shall be refunded.

K. Assignability. The purchase right shall be exercisable only
by the Participant and shall not be assignable or transferable by the
Participant.

L. Stockholder Rights. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.

VIII. ACCRUAL LIMITATIONS

A. General Rule--$25,000 Limitation. No Participant shall be
entitled to accrue rights to acquire Common Stock pursuant to any purchase right
outstanding under this Plan if and to the extent such accrual, when aggregated
with (i) rights to purchase Common Stock accrued under any other purchase right
granted under this Plan and (ii) similar rights accrued under other employee
stock purchase plans (within the meaning of Code Section 423) of the Corporation
or any Corporate Affiliate, would otherwise permit such Participant to purchase
more than Twenty-Five Thousand Dollars ($25,000) worth of stock of the
Corporation or any Corporate Affiliate (determined on the basis of the Fair
Market Value of such stock on the date or dates such rights are granted) for
each calendar year such rights are at any time outstanding.

B. Specific Application. For purposes of applying such accrual
limitations, the following provisions shall be in effect:

(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue on the Purchase Date in effect
for the purchase period for which such right is granted.

(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent a Participant has
already accrued in the same calendar year the right to acquire Common
Stock under one (1) or more other purchase rights at a rate equal to
Twenty-Five Thousand Dollars ($25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the date
or dates of grant) for each calendar year such rights were at any time
outstanding.

6.
<PAGE> 7

C. Refund to Participant. If by reason of such accrual
limitations, any purchase right of a Participant does not accrue for a
particular purchase period, then the payroll deductions which the Participant
made during that purchase period with respect to such purchase right shall be
refunded to the Participant as soon as practicable.

D. Effect of Conflicting Terms in Plan. In the event there is
any conflict between the provisions of this Article and one or more provisions
of the Plan or any instrument issued thereunder, the provisions of this Article
shall be controlling.

IX. ADMINISTRATION

A. Administrative Body. The Plan shall be administered by the
Plan Administrator, which shall have full and exclusive discretionary authority
to construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding shall,
to the full extent permitted by law, be final and binding upon all parties.

X. DESIGNATION OF BENEFICIARY

A. General Rule. Each Participant will file a written
designation of a beneficiary who is to receive any shares and cash, if any, from
the Participant's account under the Plan in the event of such Participant's
death subsequent to a Purchase Date on which the purchase right is exercised but
prior to delivery to such Participant of such shares and cash. In addition, a
Participant may file a written designation of a beneficiary who is to receive
any cash from the Participant's account under the Plan in the event of such
Participant's death prior to a Purchase Date. If a Participant is married and
the designated beneficiary is not the spouse, written spousal consent shall be
required for such designation to be effective.

B. Change of Beneficiary. A Participant may change his or her
designation of beneficiary at any time by written notice, subject to the written
consent of the Participant's spouse if the new beneficiary is someone other than
the Participant's spouse. In the event of the death of a Participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such Participant's death, the Corporation shall deliver such shares
and/or cash to the executor or administrator of the estate of the Participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Corporation), the Corporation, in its discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to the Corporation,
then to such other person as the Corporation may designate.

7.
<PAGE> 8

XI. AMENDMENT OR TERMINATION

A. Termination. The Board of Directors may at any time and for
any reason terminate or amend the Plan. No such termination can affect purchase
rights previously granted, provided that a purchase period may be terminated by
the Board on any Purchase Date if the Board determines that the termination of
the Plan is in the best interests of the Corporation and its shareholders.
Except as provided in Section III.B, no amendment may make any change in any
purchase right theretofore granted which adversely affects the rights of any
Participant. To the extent necessary to comply with Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended ("Rule 16b-3") or Section 423 of
the Code (or any successor rule or provision or any other applicable law or
regulation), the Corporation shall obtain shareholder approval in such a manner
and to such a degree as required.

B. Amendment. Without shareholder consent and without regard
to whether any Participant rights may be considered to have been adversely
affected, the Board of Directors shall be entitled to change the purchase
periods, limit the frequency and/or number of changes in the amount withheld
during purchase periods, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a Participant in order to adjust for delays
or mistakes in the Corporation's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each Participant properly correspond with amounts withheld from
the Participant's Eligible Earnings, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion
advisable which are consistent with the Plan.

XII. GENERAL PROVISIONS

A. Transferability. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of a purchase
right or to receive shares under the Plan may be assigned, transferred, pledged
or otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section X hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Corporation may treat such act as an election to
terminate participation in accordance with Section VII.H.

B. Annual Statement. Individual accounts will be maintained
for each Participant in the Plan. Statements of account will be given to each
Participant at least annually, which statements will set forth the Purchase
Price, the number of shares purchased and the remaining cash balance, if any.

8.
<PAGE> 9

C. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to a purchase right unless the exercise of such right and
the issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the Corporation with
respect to such compliance. As a condition to the exercise of purchase rights,
the Corporation may require the person exercising such option to represent and
warrant at the time of any such exercise that the shares are being purchased
only for investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Corporation, such a representation
is required by any of the aforementioned applicable provisions of law.

D. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Corporation. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section XI.A.

E. Additional Restrictions of Rule 16b-3. The terms and
conditions of purchase rights granted hereunder to, and the purchase of shares
by, persons subject to Section 16 of the Exchange Act shall comply with the
applicable provisions of Rule 16b-3. This Plan shall be deemed to contain, and
such purchase rights shall contain, and the shares issued upon exercise thereof
shall be subject to, such additional conditions and restrictions as may be
required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of
the Exchange Act with respect to Plan transactions.

F. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Corporation within twelve (12)
months before or after the date the Plan is adopted. If such shareholder
approval is obtained at a duly held shareholders' meeting, the Plan must be
approved by a majority of the votes cast at such shareholders' meeting at which
a quorum representing a majority of all outstanding voting stock of the
Corporation is, either in person or by proxy, present and voting on the plan,
or, if such shareholder approval is obtained by written consent, it must be
obtained by the written consent of the holders of a majority of all outstanding
voting stock of the Corporation; provided, however, that approval at a meeting
or by written consent may be obtained by a lesser degree of shareholder approval
if the Board determines, in its discretion after consultation with the
Corporation's legal counsel, that such a lesser degree of shareholder approval
will comply with all applicable laws and will not adversely affect the
qualification of the Plan under Section 423 of the Code.

G. No Employment Rights. The Plan does not, directly or
indirectly, create any right for the benefit of any employee or class of
employees to

9.
<PAGE> 10

purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the
Corporation, and it shall not be deemed to interfere in any way with the
Corporation's right to terminate, or otherwise modify, an employee's employment
at any time.

H. Effect of Plan. The provisions of the Plan shall, in
accordance with its terms, be binding upon, and inure to the benefit of, all
successors of each employee participating in the Plan, including, without
limitation, such employee's estate and the executors, administrators or trustees
thereof, heirs and legatees, and any receiver, trustee in bankruptcy or
representative of creditors of such employee.

I. Notices. All notices or other communications by a
Participant to the Corporation under or in connection with the Plan shall be
deemed to have been duly given when received in the form specified by the
Corporation at the location, or by the person, designated by the Corporation for
the receipt thereof.

J. Expenses. All costs and expenses incurred in the
administration of the Plan shall be paid by the Corporation.

K. Governing Law. The laws of the State of Delaware will
govern all matters relating to this Plan.

10.
<PAGE> 11

APPENDIX

The following definitions shall be in effect under the Plan:

A. Board shall mean the Corporation's Board of Directors.

B. Code shall mean the Internal Revenue Code of 1986, as
amended.

C. Common Stock shall mean the Corporation's common stock.

D. Corporate Affiliate shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424, whether now existing or subsequently established).

E. Corporate Transaction shall mean either of the following
stockholder approved transactions to which the Corporation is a party;

(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or

(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation.

F. Corporation shall mean Credit Management Solutions, Inc., a
Delaware corporation, and any corporate successor to all or substantially all of
the assets or voting stock of Credit Management Solutions, Inc. which shall by
appropriate action adopt the Plan.

G. Effective Date shall mean the earlier to occur of the
Plan's adoption by the Corporation's Board of Directors or the Plan's approval
by the shareholders. Any Corporate Affiliate which becomes a Participating
Corporation after such Effective Date shall designate a subsequent Effective
Date with respect to its employee-Participants.

H. Eligible Earnings shall mean the (i) regular base salary
paid to a Participant by one or more Participating Corporations during such
individual's period of participation in the Plan, plus (ii) any pre-tax
contributions made by the Participant to any Code Section 401(k) salary deferral
plan or any Code Section 125 cafeteria benefit program now or hereafter
established by the Corporation or any Corporate Affiliate, plus (iii) all of the
following amounts to the extent paid in cash: overtime payments, bonuses,

A-1
<PAGE> 12

commissions, profit-sharing distributions and other incentive-type payments.
However, Eligible Earnings shall not include any contributions (other than Code
Section 401(k) or Code Section 125 contributions) made on the Participant's
behalf by the Corporation or any Corporate Affiliate to any deferred
compensation plan or welfare benefit program now or hereafter established.

I. Eligible Employee shall mean any person, including members
of the Board of Directors, who is employed by the Corporation or a Participating
Corporation on a basis under which he or she is regularly expected to render
more than twenty (20) hours of service per week for more than five (5) months
per calendar year for earnings considered wages under Code Section 3401(a).

J. Fair Market Value per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.

(iii) For purposes of the initial purchase period which
begins at the Effective Date, the Fair Market Value shall be deemed to
be equal to the price per share at which the Common Stock is sold in
the initial public offering pursuant to the Underwriting Agreement.

K. 1933 Act shall mean the Securities Act of 1933, as amended.

L. Participant shall mean any Eligible Employee of a
Participating Corporation who is actively participating in the Plan.

A-2
<PAGE> 13

M. Participating Corporation shall mean the Corporation and
such Corporate Affiliate or Affiliates as may be authorized from time to time by
the Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan as of the Effective Date are listed in
attached Schedule A.

N. Plan shall mean the Corporation's Employee Stock Purchase
Plan, as set forth in this document.

O. Plan Administrator shall mean shall mean the committee of
two (2) or more members of the Board of Directors appointed by the Board to
administer the Plan.

P. Purchase Date shall mean the last business day of each
purchase period.

Q. Reserves shall mean the number of shares of Common Stock
covered by each purchase right under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under purchase.

R. Service shall mean an individual's performance of services
for the Corporation or any Corporate Affiliate as an employee, subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance.

S. Stock Exchange shall mean either the American Stock
Exchange or the New York Stock Exchange.

A-3
<PAGE> 14

SCHEDULE A

CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE DATE

Credit Management Solutions, Inc.
Credit Connection, Inc.

<PAGE> 1
Exhibit 99.2

1996 CREDIT MANAGEMENT SOLUTIONS, INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT

______ Original Application Enrollment Date:________
______ Change in Payroll Deduction Rate
______ Change of Beneficiary(ies)

1. _______________________ hereby elects to Participate in the 1996 Credit
Management Solutions, Inc. Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock in accordance with this Subscription and the
Employee Stock Purchase Plan.

2. I hereby authorize deductions from each paycheck in the amount of
_____% of my Compensation on each payment (not to exceed fifteen 15%)
during the purchase periods in accordance with the Employee Stock
Purchase Plan. (Please note that no fractional percentages are
permitted.)

3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of the Company's Common Stock at the applicable
Purchase Price determined in accordance with the Employee Stock
Purchase Plan. I understand that if I do not terminate my participation
during a purchase period, any accumulated Payroll deductions will be
used to automatically exercise my option to purchase shares.

4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan.

5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of:

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

6. I understand that if I dispose of any shares received by me pursuant to
this Plan within 2 years after the Enrollment Date (the first day of
the purchase period during which I purchased such shares) or within 1
year after the Exercise Date (the date I purchased such shares), I will
be treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an

<PAGE> 2

amount equal to the excess of the fair market value of the shares at
the time such shares were delivered to me over the price which I paid
for the shares. I hereby agree to notify the Company in writing within
30 days after the date of any such disposition and i will make adequate
provision for Federal, State or other tax withholding obligations, if
any which arise upon the disposition of the Common Stock. The Company
may, but will not be obligated to, withhold from my compensation the
amount necessary to meet any applicable withholding obligation
including any withholding necessary to make available to the Company
any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any
time after the expiration of the 2-year and 1-year holding periods
described above, I understand that I will be treated for federal income
tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only
to the extent of an amount equal to the lesser of (1) the excess of the
fair market value of the shares at the time of such disposition over
the purchase price which I paid for the shares, or (2) 15% of the fair
market value of the shares on the first day of the Purchase Period. The
remainder of the gain, if any, recognized on such disposition will be
taxed as capital gain. I also understand that the foregoing income tax
consequences are based on current federal income tax law and that the
Company is not responsible for advising me of any changes in the
applicable tax rules.

7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.

8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan.

NAME: (Please print) ______________________________________________________
(First) (Middle) (Last)

Relationship ______________________________________________________

______________________________________________________
(Address)

Relationship ______________________________________________________

______________________________________________________
(Address)

Employee's Social
Security Number: ______________________________________________________

<PAGE> 3

Employee's Address: ______________________________________________________

______________________________________________________

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE PURCHASE PERIODS UNLESS TERMINATED BY ME.

Dated:_______________ _____________________________________________________
Signature of Employee

Dated:_______________ _____________________________________________________
Signature of spouse if beneficiary is
other than spouse

<PAGE> 1
EXHIBIT 99.3

1996 CREDIT MANAGEMENT SOLUTIONS, INC.
NON-QUALIFIED STOCK OPTION PLAN

GENERAL PLAN INFORMATION

This Prospectus relates to 2,650,000 shares of the common stock
("Common Stock"), par value $0.01 per share, of Credit Management Solutions,
Inc. (the "Company"), which will be offered upon exercise of options granted or
to be granted under the 1996 Credit Management Solutions, Inc. Non-Qualified
Stock Option Plan (the "Plan").

The Company was formed under the laws of the State of Delaware for the
purpose of reincorporating Credit Management Solutions, Inc., a Maryland
corporation ("CMSI-Md") on November 8, 1996. The Board of Directors of the
Company adopted the Plan at its meeting on November 15, 1996 in order to
exchange on a one for one basis stock options issued by CMSI-Md under an
identical predecessor plan upon consummation of the reincorporation. The Plan
was approved by the unanimous consent of the sole stockholder of the Company on
November 15, 1996 and the predecessor plan was approved by the Board of
Directors of CMSI-Md on June 27, 1996 (the "Effective Date") and ratified by the
unanimous consent of the stockholders of CMSI-Md on October 10, 1996. The Plan
is to continue in effect for a period of ten years from the Effective Date
(i.e., June 27, 2006), unless earlier terminated or extended by the Company.
Because the Company consummated its initial public offering on December 17,
1996, the Plan is subject to stockholder approval at the first annual meeting of
stockholders following the consummation of the offering.

Pursuant to the Plan, 2,750,000 shares of Common Stock were reserved
for issuance by the Company upon exercise of stock options (the "Options") to be
awarded to non-employee directors and employees who have significantly
contributed and will significantly contribute to the growth and earnings of the
Company. [100,000 shares of Common Stock issued pursuant to the Plan have
previously been registered.] Options granted under the Plan do not qualify as
Incentive Stock Options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").

The Board of Directors may from time to time amend the terms of the
Plan and, with respect to any shares at the time not subject to Options, suspend
or terminate the Plan. However, no amendment, suspension or termination of the
Plan shall, without the consent of any affected holders of an Option, alter or
impair any rights or obligations under any Option theretofore granted.

The Plan is not qualified under Section 401(a) of the Code and it is
exempt from the provisions of the Employee Retirement Income Security Act of
1974, as amended.

<PAGE> 2

The statements herein concerning the terms and provisions of the Plan
are summaries and do not purport to be complete. All such statements are
qualified in their entirety by reference to the full text of the Plan document
as filed as Exhibit 4.1 to the Registration Statement of which this Prospectus
is a part.

Additional updating and other information with respect to the Plan and
the Common Stock offered hereby may be provided in the future to Optionees by
means of one or more supplements or appendices to this Prospectus. Additional
information about the Plan (including a copy of the Plan), plan administration,
and the Company may be obtained at the Company's principal offices, which are
located at 5950 Symphony Woods Road, Columbia, Maryland 21044. The Company's
telephone number is (410) 740-1000.

ADMINISTRATION

The Plan is administered by a committee of the Company's Board of
Directors (the "Committee"). The Plan provides that the Committee will consist
of not less than two directors of the Company. The members of the Committee are
appointed by the Board and serve at the pleasure of the Board. Members of the
committee are "non-employee directors" within the meaning of Rule 16b-3
promulgated under Rule 16(b) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"). A majority of the entire Committee shall consist of a quorum,
and the action of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority of the Committee
without a meeting, shall be deemed the action of the Committee.

Subject to the express provisions of the Plan and resolutions adopted
by the Board, the Committee has sole and complete authority to select
participants and grant Options, to interpret the Plan, to prescribe, amend and
rescind the rules and regulations relating to the Plan, and to determine the
form and content of Options to be issued under the Plan. In addition, the
Committee is authorized to make all other determinations deemed necessary or
advisable for the administration of the Plan and shall have and may exercise
such other power and such authority as may be delegated to it by the Board from
time to time. All decisions, determinations and interpretations of the Committee
shall be final and conclusive to all persons affected thereby.

Additional information about the Plan and the Committee may be obtained
from the Company at the address of the Company listed under "General Plan
Information." For a list of the current members of the Committee, see
"Administration" at Appendix A.

PURPOSE

The purpose of the Plan is to promote the interests of the Company by
attracting and retaining non-employee directors and employees who have
significantly contributed

2.
<PAGE> 3

and will significantly contribute to the growth and earnings of the Company by
providing them with the opportunity to acquire Common Stock.

SECURITIES TO BE OFFERED

The aggregate number of shares of Common Stock which may be issued
pursuant to Options granted or to be granted under the Plan is 2,750,000 shares,
subject to certain adjustments for changes in the capital structure of the
Company, as described below. See "Recapitalization, Merger, Consolidation,
Reorganization and Similar Transactions." Any shares subject to an Option under
the Plan which expire, become unexercisable or are forfeited for any reason
without having been exercised will again be available for issuance under the
Plan.

ELIGIBILITY TO PARTICIPATE IN PLAN

Discretionary grants of Options to purchase Common Stock under the Plan
may be awarded to non-employee directors and employees of the Company or any
parent or subsidiary of the Company. Non-employee directors shall each receive
an Option to purchase 5,000 shares of Common Stock at the commencement of each
year of such person's directorship.

For a description of the number of persons currently eligible to
participate in the Plan and the number of persons actually participating in the
Plan, see "Participation in the Plan" at Appendix A.

PURCHASES OF SECURITIES PURSUANT TO THE PLAN AND PAYMENT FOR SECURITIES OFFERED

TERM OF THE PLAN. Unless previously terminated, the Plan shall continue
in effect for a term of ten years from the Effective Date, after which no
further Options may be granted. The future expiration of the Plan, or its
termination by the Board, will not affect any Option previously granted.

STOCK OPTION AGREEMENT. The Options granted under the Plan are
evidenced by a stock option agreement (the "Option Agreement") substantially in
the form of the Option Agreement filed as exhibits to the Registration Statement
of which this Prospectus is a part. Each Option Agreement, and any amendment
thereto, will contain terms and conditions consistent with the requirements of
the Plan as the Committee shall determine. The Option Agreement shall constitute
the only form of reports that Optionees shall receive related to the status of
Options granted or which are exercisable under the Plan. The Plan provides that
the Board of Directors of the Company may authorize the Committee to direct the
execution of an instrument providing for the modification of any outstanding
Option, provided that no such modification, extension or renewal shall confer on
the Optionee any right or benefit which could not be conferred by the grant of a
new Option at such time, and shall not alter or impair any rights or

3.
<PAGE> 4

obligations under the Option without the Optionee's consent.

OPTION PRICE. The exercise price for the purchase of shares subject to
an Option at the date of grant shall be less than 100 percent (100%) of the fair
market value of the shares covered by the Option on the date of grant. Options
shall vest as determined by the Committee. The exercise price of the Options
must be paid for in full in cash or in shares of Common Stock, or a combination
of both. In the sole discretion of the Committee, payment of the exercise price
may be made by promissory note.

If the Common Stock is listed on a national securities exchange
(including the Nasdaq National Market or Nasdaq SmallCap System) at the time of
granting an Option, then the exercise price per share shall not be less than the
average of the highest and lowest selling price on such exchange on the date
such Option is granted; or if there were no sales on said date, then the
exercise price shall be not less than the mean between the bid and asked price
on such date. If the Common Stock is traded otherwise than on a national
securities exchange at the time of the granting of an Option, then the exercise
price per share shall be not less than the mean between the bid and asked price
on the date the Option is granted or, if there is no bid and asked price on said
date, then on the immediately next business day on which there was a bid and
asked price. If no such bid and asked price is available, then the exercise
price per share shall be determined by the Committee.

OPTION PERIOD. The term of exercisability of an Option granted under
the Plan shall be established by the Committee, but may not be for more than ten
years from the date of grant of the Option.

In the event that an Optionee ceases to serve as an employee of the
Company for any reason other than permanent and total disability or death, an
exercisable Option will generally continue to be exercisable for three months
after termination of employment, but in no event after the expiration date of
the Option. In the event of the permanent and total disability or death of an
Optionee during such service, an exercisable Option, and Options that become
exercisable within two years, will continue to be exercisable for two years from
the date employment ceases, but in no event after the expiration date of such
Options. In the event the Optionee's employment is terminated for just cause,
the Option will expire on the date the employee is terminated.

Under the Plan, the Committee's determination regarding whether an
Optionee's employment has ceased, and the effective date thereof shall be final
and conclusive on all persons affected thereby. For a period of 180 days from
December 18, 1996, with certain exceptions, no Optionee may directly or
indirectly sell, offer, contract to sell, transfer the economic risk of
ownership in, make any short sale, pledge, or otherwise dispose of shares of
Common Stock acquired through the exercise of Options.

NON-TRANSFERABILITY. No Option granted under the Plan is transferable
other than

4.
<PAGE> 5

by will, the laws of descent and distribution, or pursuant to the terms of a
"qualified domestic relations order" as that term is defined by the Code.

CONDITIONS OF EXERCISE. Options may be exercised only during the
periods specified in the Plan or the Option Agreement, certain information as to
which is provided above (see "Option Period"). Except as described above and as
may be limited by an Option Agreement, there is no limitation upon the number of
Options that may be exercised in any one year, and Options not exercised in any
one year may be exercised in subsequent years over the term of the Option. The
Committee may impose additional conditions upon the rights of an Optionee to
exercise any Option which are not inconsistent with the terms of the Plan.

PAYMENT FOR OPTIONS. Under the Plan, full payment for each share of
Common Stock purchased upon the exercise of any Option shall be made at the time
of exercise of such Option and shall be paid in cash (in United States dollars),
Common Stock, or a combination of cash and Common Stock. In the sole discretion
of the Committee, full payment for each share may be made by the execution of a
promissory note by the Optionee. No shares of Common Stock shall be issued under
the Plan until full payment therefore has been received by the Company, and no
Optionee shall have any of the rights of a shareholder of the Company until the
shares of Common Stock are issued to him or her.

ISSUANCE OF COMMON STOCK. Shares issued to Optionees upon exercise of
Options may be either authorized but unissued shares or treasury shares. In
either case, the Optionee shall not pay any fees, commissions, or other charges
for such Common Stock other than the exercise price as stated in the Option
Agreement. Cash proceeds from the sale of Common Stock issued pursuant to the
exercise of Options will be added to the general funds of the Company to be used
for general corporate purposes. Shares of Common Stock shall not be issued with
respect to any Option granted under the Plan unless the issuance and delivery of
such Common Stock shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended (the "1933 Act"), the
rules and regulations promulgated thereunder, any applicable state securities
law, and the requirements of any stock exchange upon which the Common Stock may
then be listed.

The inability of the Company to obtain approval from any regulatory
body or authority deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Common Stock under the Plan shall relieve the Company
of any liability in respect of the non-issuance or sale of such Common Stock. As
a condition to the exercise of an Option, the Company may require the person
exercising the Option to make such representations and warranties as may be
necessary to assure the availability of an exemption from any additional
registration requirements of federal or state securities laws.

5.
<PAGE> 6

RECAPITALIZATION, MERGER, CONSOLIDATION, REORGANIZATION, AND SIMILAR
TRANSACTIONS

The number and kind of shares reserved for issuance under the Plan, and
the number and kind of shares subject to outstanding Options (and the exercise
price thereof) shall be proportionately adjusted for any increase, decrease,
change, or exchange of Common Stock for a different number or kind of shares or
other securities of the Company which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock dividend, stock split,
combination of shares, or similar event in which the number or kind of shares is
changed without the receipt or payment of consideration by the Company.

In the event of (i) the liquidation or dissolution of the Company, (ii)
a merger or consolidation in which the Company is not the surviving entity, or
(iii) the sale or disposition of all or substantially all of the assets of the
Company, all outstanding Options shall be surrendered. With respect to each
Option so surrendered as to which the holder has become vested, the Committee
shall in its discretion determine whether the holder of the vested Option shall
receive options for securities in which the Common Stock is exchanged or a cash
payment equal to the market value of the Common Stock on the date of the
transaction less the exercise price of the Option. If by reason of such an
adjustment, an Optionee becomes entitled to new, additional, or different shares
of stock or securities, the new, additional or different shares of stock or
securities shall be subject to all of the conditions and restrictions that were
applicable to the Options for the Common Stock before the adjustment was made.

AMENDMENT AND TERMINATION OF THE PLAN

The Board of Directors may amend the terms of the Plan, and with
respect to shares not subject to Options, suspend or discontinue the Plan,
except that stockholder approval must be obtained for any amendment of the Plan
that would change the number of shares subject to the Plan, change the category
of persons eligible to be participants, or materially increase the benefits
under the Plan.

RESTRICTIONS ON RESALE

Unless specifically included as a term and condition of any Option,
there are no restrictions on the resale of Common Stock acquired upon the
exercise of Options, other than that for a period of 180 days from December 18,
1996, with certain exceptions, no Optionee may directly or indirectly sell
shares of Common Stock acquired through the exercise of an Option. In addition,
shares of Common Stock may be resold only in compliance with the registration
requirements of the 1933 Act, and applicable state securities laws.

Under the 1933 Act, affiliates of the Company generally may resell
shares of Common Stock purchased pursuant to the Plan only (i) in accordance
with the provisions

6.
<PAGE> 7

of Rule 144 under the 1933 Act, or (ii) pursuant to an applicable current and
effective registration statement under the 1933 Act.

As defined in Rule 405 under the 1933 Act, an affiliate of the Company
is a person who directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with the Company. The
determination of whether a person is an affiliate of the Company is primarily a
factual one based upon whether he possesses, directly or indirectly,
individually or in concert with others, the power to direct or cause the
direction of the management or policies of the Company, whether through the
ownership of voting stock, by executive position, by membership on the Board, by
contract or otherwise. Therefore, each Optionee should consult his counsel
concerning whether he is an affiliate of the Company and the attendant
restrictions on the resale under the 1933 Act of Common Stock acquired pursuant
to the Plan.

FEDERAL INCOME TAX CONSEQUENCES

Under the Code, awards under the Plan will have the following
consequences:

1. The grant of an Option will not by itself result in the
recognition of taxable income to the Optionee nor entitle the Company to a
deduction at the time of such grant.

2. The exercise of an Option will result in the recognition of
ordinary income by the Optionee on the date of exercise in an amount equal to
the difference between the Option exercise price and the fair market value, on
the date of exercise, of the shares acquired pursuant to the exercise of such
Option.

3. The Company will be allowed a tax deduction for federal tax
purposes equal to the amount of ordinary income recognized by an Optionee at the
time the Optionee recognizes such ordinary income under an Option.

The foregoing provides only a general summary of the federal income tax
consequences applicable to Optionees under the Plan. Each Optionee is urged to
consult his or her own tax advisor for information regarding applicable federal
and state tax consequences.

ANNUAL REPORT TO SHAREHOLDERS

The Company's financial statements for the period ended December 31,
1995, as contained in the Company's Registration Statement on Form S-1 (file
number 333-14007) are incorporated herein by reference. In the future, the
Company's latest Annual Report to Stockholders, including financial statements,
will be mailed to all stockholders of record as of the close of business on such
record date. Any person wishing to receive a copy of the Annual Report to
Stockholders may obtain a copy by writing the Company at

7.
<PAGE> 8

the address set forth below under "Additional Information."

ADDITIONAL INFORMATION

Additional updating information with respect to the Common Stock and
the Plan covered herein may be provided in the future to Optionees by means of
appendices to this Prospectus. The nature and frequency of any reports to be
made to Optionees as to their participation in the Plan will be determined by
the Committee.

The Company upon written or oral request, will provide without charge
to any person to whom this Prospectus is delivered; a copy of the Plan, a copy
of its latest Annual Report to Stockholders (when available) and a copy of any
and all of the documents that have been incorporated by reference in Item 3 of
Part II of the Registration Statement of which this Prospectus is a part, and
that such documents are deemed incorporated by reference in this 1933 Act
Section 10(a) Prospectus. Further, other documents required to be delivered to
Optionees as specified in Item 9 of Part II of the Registration Statement are
available upon request. Any such request can be oral or in writing and should be
addressed to the Corporate Secretary, 5950 Symphony Woods Road, Columbia,
Maryland 21044. The Registrant's telephone number is (410) 740-1000.

LEGAL OPINION

The validity of the Common Stock offered hereby has been passed on for
the Company by Manatt, Phelps & Phillips, LLP, 1501 M Street, N.W., Suite 700,
Washington, D.C. 20005.

8.
<PAGE> 9

APPENDIX A

ADDITIONAL INFORMATION CONCERNING
THE
1996 CREDIT MANAGEMENT SOLUTIONS, INC.
NON-QUALIFIED STOCK OPTION PLAN
(As of December 31, 1996)

ADMINISTRATION

The Board has appointed Directors Graham and McDonnell as members of
the Committee responsible for administration of the 1996 Credit Management
Solutions, Inc. Non-Qualified Stock Option Plan (the "Plan"). Grants of Options
under the Plan may be made by the Committee.

NUMBER OF SHARES SUBJECT TO PLAN

On December 31, 1996, Options covering 2,462,800 shares of Common Stock
were outstanding, which were previously granted at an average exercise price of
$5.37 per share. As of the date of this Appendix A, previously issued Options
for 100,000 shares of Common Stock had been exercised and 187,200 shares of
Common Stock remain issuable under the Plan, which provides for the issuance of
Options for a total of 2,750,000 shares of Common Stock.

PARTICIPATION IN THE PLAN

As of December 31, 1996, the Company and its subsidiaries had
approximately ___ employees who, in the opinion of the Company's management, are
eligible to participate in the Plan. Of such persons, as of December 31, 1996,
___ non-executive employees held outstanding Options to purchase 517,900 shares
of Common Stock, five (5) executive officers held Options to purchase 1,929,900
shares of Common Stock. Additionally, Options to purchase 5,000 shares of Common
Stock each were held by three non-employee members of the Board of Directors of
the Company.

OUTSTANDING AWARDS

The following table presents information with respect to the
outstanding Options under the Plans as of the date of this Appendix A.

A-1
<PAGE> 10

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Number of Shares
Presently Subject to Number of Persons Average Exercise
Date of Award Options Holding Awards Price Per Share
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
June 27, 1996 2,262,540 58 $5.00
- -----------------------------------------------------------------------------------------------------------------------------
October 10, 1996 32,360 8 $9.60
- -----------------------------------------------------------------------------------------------------------------------------
November 4, 1996 157,900 45 $9.60
- -----------------------------------------------------------------------------------------------------------------------------
November 15, 1996 5,000 1 $9.60
- -----------------------------------------------------------------------------------------------------------------------------
December 4, 1996 5,000 1 $9.60
- -----------------------------------------------------------------------------------------------------------------------------
Total 2,462,800 113 $5.37
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>

A-2

<PAGE> 1
EXHIBIT 99.4

1996 CREDIT MANAGEMENT SOLUTIONS, INC.
NON-QUALIFIED STOCK OPTION PLAN AGREEMENT

_______________________, Optionee:

The option set forth herein is being granted by Credit Management
Solutions, Inc. (the "Company") pursuant to the 1996 Credit Management
Solutions, Inc. Non-Qualified Stock Option Plan (the "Plan").

The Company, has of the __th day of _________, 1996 (the "Effective
Date"), granted to you an option to purchase shares of the common stock of the
Company, par value $.01 per share ("Common Stock"). This option is not intended
to qualify as an "incentive stock option" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").

The details of your option are as follows:

1. (a) The total number of shares subject to this option is
___________________ (__________) (the "Option Shares").

(b) Subject to the foregoing and the limitations contained
herein, this option shall vest and be exercisable as follows:

(i) 10% or __________ of the Option Shares shall
vest and be exercisable immediately;

(ii) 20% or __________ of the Option Shares shall
vest and be on and after December 15, 1997;

(iii) 20% or __________ of the Option Shares shall
vest and be exercisable on and after December
15, 1998;

(iv) 20% or __________ of the Option Shares shall
vest and be exercisable on and after December
15, 1999;

(v) 20% or __________ of the Option Shares shall
vest and be exercisable on and after December
15, 2000; and

(vi) 10% or __________ of the Option Shares shall
vest and be exercisable on and after December
15, 2001.

(c) An appropriate and proportionate adjustment shall be
made in the number and kind of Option Shares and in the exercise price per share
in the event the outstanding shares of the Common Stock of the Company are
increased, decreased or changed into, or exchanged for, a different number or
kind of shares or securities of the Company, without receipt of consideration by
the Company, through merger, consolidation, recapitalization, reorganization,
reclassification, stock split, stock dividend, combination of shares or similar
event. Any such adjustment, however, in an outstanding option shall be made
without change in the total price applicable to the unexercised portion of this
option but with a corresponding adjustment in the price for each share subject
to the option. An appropriate adjustment shall be made in the exercise price per
share of Option Shares in the event such adjustment is deemed appropriate as a
result of the Securities and Exchange Commission's review of the Company's
initial Registration Statement covering shares of Common Stock filed under the
Securities Act of 1933.
<PAGE> 2
as amended. Adjustments under this section shall be made by the Board of
Directors whose determination as to what adjustments shall be made, and the
extent thereof, shall be final and conclusive.

2. (a) The exercise price of this option is ___________dollars
($_____) per share.

(b) The exercise price per share shall be paid upon exercise
of all or any part of each installment which has become exercisable by you at
the time the option is exercised in cash or by a check payable to the order of
the Company. In the sole and absolute discretion of the Company, the Company may
accept a promissory note or other shares of Common Stock in partial or full
payment of the purchase price of Common Stock being acquired pursuant to
exercise of this option. In the event such Common Stock is accepted as payment,
such Common Stock shall be valued at its then current fair market value.

3. The minimum number of shares with respect to which this option
may be exercised at any one time is one hundred (100). However, in the event
that at any time there are less than one hundred (100) shares that may be
acquired at such time through exercise of this option, the number of shares
that may be acquired through option exercise at such time shall be the minimum
number of shares.

4. The Company may require the Optionee or any person to whom an
option is transferred under paragraph 7, as a condition of exercising the
option, to give written assurance satisfactory to the Company stating that such
person is acquiring the stock subject to the option for such person's own
account and not with any present intention of selling or otherwise distributing
the stock.

5. The term of this option commences on the Effective Date and may
be exercised by you only with respect to the vested portion of this Option and
only while you are an employee and have maintained Continuous Service (as
defined in the Plan) from the date hereof or within three months after
termination of such Continuous Service (but not later than the tenth
anniversary of the Effective Date), except if your Continuous Service
terminates by reason of:

(a) "Just Cause" which for purposes hereof shall have the
meaning set forth in any unexpired employment agreement between you and
the Company (and, in the absence of any such agreement, shall mean
termination because of your personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any
law, rule or regulation, other than traffic violations or similar
offenses) then your rights to exercise this Option shall expire on the
date of such termination;

(b) Death, then all Option Shares which have vested and
which vest within two years of the date of your death may be exercised
within two years from the date of your death (but not later than the
tenth anniversary of the Effective Date) by the personal representatives
of your estate or person or persons to whom your rights under this
option shall have passed by will or by laws of descent and distribution;

(c) Permanent and Total Disability (as such term is defined
the Plan), then all Option Shares which have vested and which vest
within two years of the date of your disability may be exercised within
two years from the date of such Permanent and Total Disability (but not
later than the tenth anniversary of the Effective Date).

6. This option may be exercised, to the extent specified above, by
delivering written notice of exercise (specifying the number of Option Shares
to be purchased) together with the exercise price to such person as the Company
may designate, during regular business hours, together with such additional
documents as the Company may then require.

7. This option is not assignable or transferable, except at death
by will or by the laws of descent and distribution, and is exercisable during
your life only by you or by your personal representative.

8. Any notices provided for in this option shall be given in
writing and shall be deemed effectively

2
<PAGE> 3
given upon receipt or, in the case of notices delivered by the Company to you,
five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the address specified below or at such other address as you
hereafter designate by written notice to the Company.

9. You shall have no rights as a shareholder with respect to Option
Shares covered by this option until the date of issuance to you of a
certificate representing such shares. No adjustment will be made for dividends
or other rights for which the record date is prior to the date such certificate
is issued.

10. You represent that this option and any Common Shares which may be
acquired hereby are being acquired by you for your own account and not for
resale; and you agree: (a) that the Option Shares may not be registered under
the Securities Act of 1933, as amended, or any state securities law; (b) that
transfer of the Option Shares will be severely limited, and that none of the
Option Shares may be sold, transferred, pledged, or hypothecated unless first
registered under such laws or unless counsel satisfactory to the Company has
given an opinion that registration under such laws is not required; (c) that
certificates for the Option Shares may contain the following legend: "The
common shares represented by this certificate were acquired for investment only
and not for sale. They have not been registered under the Securities Act of
1933 or any state securities law. These shares may not be sold, transferred,
pledged, or hypothecated unless first registered under such laws, or unless the
Company has received an opinion of counsel satisfactory for it that
registration under such laws is not required;" (d) that the Company may issue
stop transfer instructions to its transfer agent or make a notation to such
effect on its appropriate records; and (e) that the sale of Option Shares in
market transactions be limited to transactions described in Rule 144 of the
Securities and Exchange Commission.

11. The Company is not providing you with advice, warranties, or
representations regarding any of the legal, tax or business effects to you with
respect to this grant. This document has been prepared by the Company's legal
counsel. You are encouraged to seek legal, tax and business advice from your
own legal, tax and business advisers as soon as possible.

Dated as of the th day of , 1996.
----- ------------

Very truly yours,

CREDIT MANAGEMENT SOLUTIONS, INC.

By:
-------------------------------------
James R. DeFrancesco
President and Chief Executive Officer

The undersigned acknowledges receipt of the foregoing option and
understands that all rights and liabilities with respect to this option are set
forth herein.

Acknowledged as of this th day of , 1996.
----- -------------

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Address: ---------------------------

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