"Credit unions are evaluating a lot of things these days," said Jeff Russell, TMGFS CEO. "Not just in terms of cards, but in terms of a lot of different things. They are asking questions about abilities and expense and core competencies and asking whether they are doing the best they can with what the have."
Russell contended that TMG and TMGFS are well-situated for that conversation because the firms both process card transactions as well as purchase card portfolios. TMG processes card transactions on the First Data Corp. card platform and helps credit union clients better manage their card port-
folios, while TMG Financial Services buys card portfolios that Russell said emphasizes
continued credit union involvement with its card portfolio.
"I think it's a stereotype that credit unions sell their portfolios to 'wash their hands' of them," Russell said. "And the ones that do that have never really been our customers because we have never offered the highest premiums for card portfolios."
Credit unions selling their portfolios generally get paid for them in three ways. The most prominent method is the premium over the value of the card balances, though those numbers have come down a great deal. The less common ways include sharing in the finance charge income or the interchange income the portfolio will continue to generate.
A number of TMG's card issuing partners are former processing clients that sold to TMG, Russell explained. One such client was St. Cloud Federal Credit Union. After having been a card management client with TMG for almost a decade, St. Cloud sold its portfolio a year ago in January 2008 and converted accounts onto TMGFS' system in April that year.
Since that time, the portfolio has experienced 21.05% year-over-year cumulative sales growth, TMG said, adding that TMG currently processes credit cards for almost two million cardholders, a growth of 16.87% since the beginning of June 2008.