Special to CU Times WEST PALM BEACH, FL – John Deese, CEO of The Credit Union of Palm Beach County ($54 million), former head of the Florida Credit Union League and current CUNA Board member said competition from other card issuers, combined with a declining credit card portfolio and an inability to offer members the cards they wanted led the credit union to sell its $5.2 million credit card portfolio to MBNA in April. But officials with other credit union based credit card organizations maintain that there were still other things that the credit union could have done other than sell the portfolio. Deese said a decline in its credit card portfolio's value initially got the credit union's attention but it was an investigation into what was going on that led the institution to consider selling. "We had experienced a drop of $3 million over two years in our credit card portfolio," Deese said, adding that development got the credit union's attention. "And when I investigated I found our members with credit cards were being bombarded by mailings from other credit card issuers that offered deals we just could not match," Deese said. Offers like extremely low rates for balance transfers, bonuses, and different promotional offers were leading members to transfer their balances out of the credit union's cards and, eventually, to cancel their accounts. This led Deese to commission some analyses of the credit union's portfolio with an eye toward what some possible options might be. Deese asked Kessler Financial, the firm which represents MBNA in its credit union credit card purchases and the Florida Credit Union League which processes the credit union's card transactions, to analyze the portfolio with an eye toward possible options. Both analyses recommended selling, Deese reported. "The Kessler analysis presented the most positive picture in favor of selling and the Florida League a bit less so." Deese said. "Then I did my own analysis which I thought was the most realistic and which still came down in favor the sale." Deese said he sat down with representatives from Kessler in December, and the firm offered a number of additional positive reasons for making the sale. For example, the credit union had long wanted to offer its members a broader variety of cards, particularly including business cards that it had not been able to offer. With MBNA owning and administering the portfolio The Credit Union of Palm Beach County could make an additional four or five additional types of cards, including business cards, available to its members, Deese said. The credit union also estimated that allowing MBNA to own and administer its credit card portfolio would actually strengthen its relationship with its members by making its branded card more competitive with other cards and helping its members feel better about its cards, Deese said. The credit union further guarded against the oft-voiced suspicion that MBNA sought the credit card portfolio in order to cross-market its other products to its members by securing an agreement, extending past the contract's initial five years, to prevent that from happening, Deese said, an exclusion which is more the rule than the exception, according to Steven Fuld, Senior Vice President of Kessler. The portfolio sale was finalized in April, and Deese said The Credit Union of Palm Beach County expects the transfer to MBNA's processing system, the issuing of new cards and new bin numbers to be finished by September. Deese said he had spoken with credit unions where similar transfers had also been done and that they had told him that the process was done "virtually invisible" to the credit union members. But philosophical opponents to credit unions selling their credit card portfolios maintained that there were still things the credit union could have done to turn its credit card portfolio around without selling it and they remain suspicious of how bank purchasers like MBNA will handle the portfolio's once purchased. Most credit unions treat managing their credit card portfolios in a homogenous way, said Robert Hackney, President of the St. Petersburg, Florida based Card Services for Credit Unions. Instead they need to integrate their credit card management, promotion and effort into their entire credit union marketing plan and to bring creativity to it, he added. The 1,600 credit union strong CSCU stands adamantly opposed to credit unions selling their credit card portfolios. Hackney said, for example, that a credit union facing extremely low offers from other card issuers for balance transfers doesn't have to simply surrender in the face of those offers but can fight, for example, by offering better rates to credit union members who are being offered those transfers for their card balances. "Suppose your credit union offered a standard rate for your card," Hackney said, "and a member called in who had just been offered a very low transfer rate from another issuer. You can work with that member to point out the other ways that credit card offer might not be as good as yours even though the rate might be lower." Working with the member can include offering them a lower rate on their established balance, Hackney said, though that would not be the first option. CSCU urges credit unions to have their employees bring in the credit card offers they get over a two week or one month period so that they can be analyzed and put on a "competitive grid." "The grid is a handy way for credit union employees to be able to see which credit cards offer which rates and which have different things like higher late fees, higher annual fees and other negatives," said CSCU's Karen Fry, Director of Marketing. All the credit union employees should be aware of the grid and familiar with it so that they can be familiar with the credit union card's strengths in comparison to other cards, Fry added. CSCU touts strong credit union card marketing efforts, including some credit unions that have done things like securing discounts from local retailers whenever someone uses the credit union's card in making a purchase as well. "There are all sorts of things credit unions can do to market their cards and retain portfolio value," Hackney said.