Bank of America made official last week what many anticipatedwhen a spokesperson acknowledged that it will no longer issuecredit cards in agent relationships with credit unions and smallerbanks.

During the height of the CU card sale market, from 2004 to 2007,Bank of America's card-issuing arm, FIA Card Services, and itspredecessor, MBNA, dominated the market for CU-issued creditcards.

MBNA was a monoline bank that only issued credit cards. Bank ofAmerica purchased the bank in 2005 and subsequently launched FIACard Services to handle its agent business.

Typically, FIA Card Services has purchased credit cardportfolios from credit unions or smaller banks and then continuedto issue the cards in the credit unions' or banks' names, often infive-year contracts.

But sources in the card industry said the bank has concludedthat the agent card-issuing business is no longer imperative to itscore operations and has decided to discontinue it.

Credit unions that currently issue cards with Bank of Americahave also been told that their contracts will not be renewed afterthey expire.

Card industry sources estimate that the move will leave between40 and 50 credit unions around the country with the need to eitherfind another agent issuer or to start reissuing cardsthemselves.

For its part, the bank explained that it had come to find agentissuing unsatisfactory because it inherently limited the bank toonly the credit card business with cardholders.

In a statement about its strategic shift, the bank appeared toallude to this conflict.

“In many cases, our agent-bank business has servicedpredominantly single-service card customers with limitedopportunity for Bank of America to do more business with them,” thestatement said.

Traditionally, Bank of America, like other agent issuers ofCU-branded credit cards, has agreed not to cross sell credit unioncardholders other banking products and services, and the bankdecided that those cross-selling opportunities were those that madethe business worthwhile.

“We decided earlier this year that the agent-bank relationship,where we issue cards on behalf of other financial institutions, wasnot core to our goal of building deeper relationships and we beganthe process of exiting those relationships,” wrote Bank of Americaspokesperson Betty Riess in an email.

Industry sources explained that it would bedifficult to tell what the former BofA agent credit unions would doin the wake of the bank's departure, since each CU's contract wasdifferent. In addition, some of the credit unions were no longer inagent contracts with the bank since the contracts had alreadylapsed, the sources said.

Essentially, the credit union could buy its portfolio or cardaccounts back from BofA and take them in-house, sources said. Butthey added that the bank was a charging a $1 million deconversionfee and often at a premium so that option tended to beexpensive.

Jeff Russell, CEO of TMG Financial Services, the card portfoliopurchasing and management arm of payment CUSO TMG, confirmed thatTMG had heard from roughly 15 of the credit unions that had beenwith Bank of America, but he declined to discuss individual CUcircumstances, citing nondisclosure agreements. A few of the CUs,he said, had opted to start reissuing credit cards with TMG as a processor.

Several former Bank of America agent CUs confirmed Bank ofAmerica had informed them the relationship was ending, but theydeclined to comment on their plans.

Elan also did not return calls or emails seeking comment beforepress time.

Ondine Irving, founder of Card Analysis Solutions and long askeptic of CU agent-issuing, applauded the news.

“I think it’s great,” Irving said. “I think the CUs should seeit as a gift. They should spend 2012 bringing their staff up tospeed and get back into card issuing. Three thousand card-issuingcredit unions can't be wrong.”

The Bank of America move comes as the overall market for CU cardportfolios remains significantly below where it once was but seemedon track to do better than last year, according to an analysis ofCU call report data.

The analysis indicates that only two more credit unions soldtheir credit card portfolios and entered into agent-issuingprograms with the purchasing banks, according to Tim Kolk,president of TRK Advisors, a CU card portfolio brokerage andconsultancy.

Kolk reported that, according to the NCUA data, seven creditunions had sold their credit card portfolios as of the end of thethird quarter. The two sold in the third quarter representedbalances of roughly $23 million, taking the year-to-date totalbalances sold to $85 million. This puts the total balances sold forthis year at over $100 million for the first time since 2009,Kolk said.

“Sales volumes are expected to remain below the high-water marksof 2004-2007 when over 60 portfolios per year were sold. It isuncertain if sales will rebound further from current levels,” Kolkwrote in his analysis. “Potential sellers continue to evaluate thestrategy and benefits of such sales, but the desire to generateloan volume and put to use excess liquidity lead many to determinethat sale is not prudent at this time.”