A credit union that shares leadership with the Illinois CreditUnion League is issuing a credit card that consumer advocates havecondemned as a consumer unfriendly, “fee-harvesting” card.

The cards are issued by Services Credit Union, a privatelyinsured, state chartered credit union that lists Daniel Plauda, the CEOof the Illinois Credit Union League, as its CEO and shares the sameaddress as the ICUL.

Consumer advocates define fee-harvesting credit cards as thosewith low credit limits and high fees. According to 2007 report from the National Consumer Law Center on the topic“fee harvesting” cards “share a common thread: high fees that eatup most of an already low credit limit, leaving the consumer withlittle real, useable credit and at a high price.”

According to a financial statement from private deposit insurerAmericanShare Insurance, Services Credit Union has 1,945 members,$227,625.00 in assets and had net income of $950 as of the end ofMarch of this year.

The statement lists credit card balances worth $24,451.00 withan average interest rate of 15% as its only loans

ICUL declined a request for an interview.

“Thank you for your recent request for an interview with DanPlauda,” wrote Patrick Smith, ICUL's vice president ofcommunications and regulatory affairs in an email. “Unfortunately,the nature of your inquiry relates directly to a proprietary andconfidential agreement thus prohibiting participation in aninterview.”

Services CU does not have a website.

Services is listed as the issuer of two Discover cards, theMatrix card and the Cerulean card, offered by the ContinentalFinance Company, a non-bank financial firm founded in 2005.

Continental Financial also has not yet returned callsabout its cards, but it is one of the companies named as afee-harvesting issuer in the NCLC report.

Services is not CFC's first issuing partner. The company hadbeen issuing cards in partnership with the First Bank of Delaware,based in Wilmington, until June 2008 when the bank was servedwith a cease and desist order from the FDIC. Parts of the order'sNotice of Charges reads like the CFC card terms of today:

“The CFC Cards were marketed as a MasterCard credit card with aninitial credit limit of typically $300 with low annual fees.However, initial fees, typically consisting of a set-up fee of $99,participation fee of $89, and an annual fee of $49 or $27 werecharged and posted to the consumer's CFC Card account immediatelyafter the consumer applied for and was issued a card. The Bank andContinental Finance also charged the consumer a monthly maintenancefee typically of $10.00. This fee was posted to the consumer'saccount immediately after the consumer was issued a card.”

The cards are not available in Connecticut, Georgia, Hawaii,Massachusetts, Minnesota, Montana, North Carolina, Washington, andthe District of Columbia, according to the CFC website, andContinental Finance says that if a cardholder moves to one of thesestates, it will close the account. The company's website does notsay why.

The website also contains four links to CUNA information pagesabout credit unions, below a statement that reads, “The CreditUnion Difference: Why we remain a necessary and extremely popularfinancial alternative.” The site also carries the Americas CreditUnion logo. Contacted about the use of the logo and the link, CUNAspokesman Pat Keefe explained that the association has a policy ofnotifying a website owner if it looks like the owner is using thelogo fraudulently, but said the association had not determined ifthat was the case here.

According to disclosures tailored to the states where the cardsare issued, the APR for the cards is 29.99%. The cards have creditlimits of $300 and each carries an annual fee of $75 which is takenas soon as the card is opened, leaving the cardholder with $225available credit and an immediate bill for $75.00. Further, afterthe first year, the issuer will charge maintenance fees of $144.00per year in monthly increments of $12.00 and will also charge $4.95per month if the cardholder receives paper statements. Other feeswill also kick in after the first year.

Further, NCLC said expect the fees to rise. The 2009 Credit CardAccountability Responsibility and Disclosure Act capped such feescharged when a card account is opened at no more than 25% of theavailable credit limit for the first year. But that element of theact has been overturned in court and no regulation has yet replacedit, Chi Chi Wu, staff attorney at the NCLC said, so there is everyreason to expect Continental Finance and Services CU's fees willrise later this year.