Somewhat counterintuitively, CU card industry experts say thattwo conflicting trends in the economy make 2012 a good year for acredit union that had foregone credit card issuing in the past toget back into the business.

First, the economy is improving, bringing higher employment andtapping into pent-up consumer demand for goods, services andcredit. Second, enough consumers have seen their credit lines shutdown and credit cards withdrawn that they need a source of consumercredit they can rely upon and trust. These two trends gives creditunions a strong opportunity for their card programs, according tocard experts.

According these industry experts, about 425 existing creditunions sold their credit card portfolios to card-issuing banksbetween 2000 and 2010 and entered in agent-issuing programs withthose banks. Of those, about 375 remain in business today, thebalance  either closed or merged with other creditunions.

Tim Kolk, the owner of TRK Advisors, a New Hampshire-basedconsultancy, estimates that about 40 of the credit unions that soldtheir card portfolios and started issuing with someone else eitherbought their card portfolios back or started completely new cardprograms.

Kolk included in his figure only credit unions that had growntheir new programs to have at least $1 million in assets and didnot include credit unions that had merely announced they were goingto start issuing but had not yet gotten their new programs up andrunning.

“It's a good time to get back in on the ground floor because ofthe cautiously optimistic comments being made by economists,” saidCaroline Lane, a senior vice president at COOP Financial Services, in a white paper the CUSO has preparedon the topic. “There are signs that things are sparking back tolife and when consumer confidence returns, consumers use theircredit cards. So now is a good time because consumers aren'treceiving a flood of competing card offers yet.”

Lane also pointed out that credit unions generally and creditunion card programs have been recognized as significantly betterdeals for consumers, and this also should help credit unions marketthem.

But as Kolk, Lane and other experts made the case for creditunions getting back into card issuing, they also stressed thatcredit unions need to carefully structure new card programs andkeep their expectations in check.

For example, Kolk reported that credit unions launching creditcard programs start with only 2% of their membership at thebeginning. In addition, as a unsecured product, Kolk noted that itis a riskier product in the beginning, with higher than averagecharge-offs, but that it will stabilize over time.

“It can be a great decision to get back in but don't expect tohave a quick turnaround to profit here,” Kolk said. “Credit unionsneed to have a rigorous business plan to succeed, with realisticexpectations about the time, energy and costs required to invest tobuild that long-term value.”

The most important aspect is a well thought out and flexiblebusiness plan, Kolk stressed, noting that there are examples ofcredit unions without such plans seeing very high charge-offrates.

“This remains a tough economy for prudent lending, particularlyunsecured credit. The economy doesn't care if you make a mistake,”Kolk stated. “Credit unions need to have a well-developed andreviewed plan and staff their card management with data-drivenprofessionals. Only then will they be able to track performance toplan and correct course early on when issues arise.”

Lane agreed, noting that these loans are unsecured and thus areoften the first thing to go when consumers wind up in economictrouble. She also noted another paradox that makes getting backinto card issuing difficult. Right at the time that the pool ofmembers who could qualify for a credit card is smaller, many ofthose members have cut back on their use of credit.

“People are much more cautious now about carrying debt or justhaving balance rollers on their cards,” she explained. “Creditunions can't depend on that income anymore; they'll have to dependon transactions and get creative in managing their risk.”