THE economy is brushing recession; credit-card delinquencies are booming; and the country is trying to rise from a swamp of financial scandal.

What a perfect time for credit-card issuer Metris Companies to sell high-risk junk bonds directly to unwary small investors.

The word "junk" does not appear in the ads Metris is running across the country on radio and in newspapers, including this one. "Investment opportunity" is the preferred term, or, if you insist, "renewable unsecured subordinated notes."

Whatever the name, this is an opportunity you probably want to miss.

Junk bonds - a generic term for debt deemed "speculative" and below investment-grade by the ratings houses - are normally sold to pension pools, mutual funds, insurance companies and other sophisticated institutional investors.

But Metris is issuing this $150 million batch of junk through a small broker dealer in its hometown of Minneapolis and hawking it to individuals.

All by the book. There is no evidence that Metris has not made all the required disclosures. All legal. But Caesar's Palace is legal, too.

The Metris paper, which represents a loan to the company and promises up to 10.25 percent annual interest for investments of less than $2,500, is especially tempting in this day of low rates.

Bank savings pay less than 2 percent. Ten-year Treasury notes yield all of 4.2 percent. So why not invest a couple grand in a nice, 3-year Metris note yielding 8.9 percent a year? Here's why not.

Metris, which has a processing center in White Marsh, is largely in the "subprime" credit-card business, that is, lending money to people with less-than-perfect records of repaying it. Lately, more of Metris' customers have been doing what statisticians would have expected of them in a tough economy: missing payments.

Metris' delinquency rate hit 10.8 percent on Sept. 30, up from 8.9 percent a year previously. Charges on Metris cards plunged 17 percent in the third quarter compared with the same period last year.

The company lost $1.3 million in the third quarter and $36.4 million in the second quarter. Its stock has fallen 85 percent this year.

Not convinced?

The Metris notes are not insured. There is no collateral if the company defaults. Metris reserves the right to borrow additional money, which could hinder its ability to repay investors. There is no secondary market for the Metris notes, so one of the chief reasons to buy junk bonds - potential capital gains if a company's fortunes improve - is missing. And Metris can redeem the notes anytime.

So the risk is asymmetrical: If Metris thrives, it's status quo at best for the noteholders. If Metris crashes, goodbye money.

Still not convinced?

The Metris notes are at the bottom of the company's debt barrel. That is, they would be just about the last to be repaid in the event of bankruptcy. Yet - and this is the clincher - the interest they pay is far less than what sophisticated investors are demanding from more "senior," more highly rated Metris bonds.

Take the company's senior unsecured notes expiring in July 2006. Issued in 1999 to institutional buyers, these securities now sell at a sharp discount to face value - 72 cents on the dollar - and at that price their annual interest yield is 14 percent.

Now look at Metris notes with the same maturity being offered to small investors. These investments - lower in the repayment queue than the senior debt - yield only about 9 percent. The senior debt yielding 14 percent is rated B-plus by Standard & Poor's, not a bad score for a junk bond. But, owing to their junior status, the 9 percent bonds being sold to individuals are rated B-minus - deeper in the bin of paper with "significant speculative characteristics," as S&P; puts it.

Wall Street wants 14 percent on the Metris B-pluses. Why settle for 9 on the B-minuses?

Metris didn't ask S&P; to rate the new notes, but the agency felt obliged, said S&P; bond analyst Daniel Martin.

"It's the mom and pops that are buying it," Martin said. "People are looking at the yields, but I don't know how much thought they're giving to the credit quality of it. That's why it's easier to sell this. It looks like a substitute for a CD."

Metris has plenty of cash. Despite its troubles, it shows no sign of collapsing anytime soon. An economic recovery could solve its problems. But there's a reason the sharps in Lower Manhattan are insisting on 14 percent from the bonds.

Attention, Mom and Pop: This is not a CD.