ARLINGTON, Va. – A landmark report on credit union credit cardmanagement and options has drawn praise from all quarters of whatis often an otherwise contentious and competitive industry. Thereport, prepared by Washington D.C.-based Callahan and Associates,reflected responses from a survey of 1,300 credit unions whichissue cards and have assets of $50 million or more. CharleneLedbetter, a research analyst with Callahan, said that growinginterest among credit unions had driven the study, which Ledbetterreported was Callahan's first of its kind. “We had heard from a fewcredit unions that were thinking about selling their portfolios. Asyou know, the credit card marketplace is very competitive right nowand many CUs have been approached to sell,” Ledbetter said. “On theother hand, we could see from the call report data that some creditcard portfolios were doing very well.” What all sectors of thecredit union card industry praised was the study's ability toprovide meaningful data while straddling the contentious linebetween advocates of credit unions selling their card portfoliosand those who believe credit unions should keep and better managean important relationship asset themselves. The report balancesdata about the industry overall, along with a mixture of differentcase studies of credit unions which have adopted differentstrategies to overcome specific common problems, including somecredit unions which decided to sell their portfolios, all to MBNA.“I think the overall message of the study is that credit unionshave to proactively manage their portfolios or seek to partner witha firm who can do that form them,” said Steven Fuld, Senior VicePresident of Boston-based Kessler Financial Services, a notedbroker of credit union's card portfolios which is closelyassociated with MBNA, a Delaware-based bank which is a leader inpurchasing portfolio from credit unions. While Fuld's remark mightbe expected, Brian Crawford, Chief Marketing Officer for PSCUFinancial Services, and a leading advocate of credit unions keepingand managing their portfolios, by and large agreed. “The overallmarket in cards has moved, and does move, so quickly,” Crawfordsaid. “This report gives credit unions a clarion call to take theircard management seriously. Most of the practices the reportrecommends to are what we recommend our clients,” he said. KarenFry, Assistant Vice President of Marketing for Card Services forCredit Unions, the Clearwater, Florida-based association for creditunions that process their card accounts with Georgia-based Certegy.“The report really just confirms what we've been telling our creditunions all along. That, with a little bit of attention, their cardprogram(s) can be successful,” Fry said. Some of the practices thereport recommended are considered card basics, the industryexecutives agreed. For example, the study found that 45% of creditunions responding to the survey do not track the percentage of cardaccounts that have had at least one transaction in the past month.Tracking monthly transaction behavior can help credit unions spotinactive accounts and take action before they are closed and is thesort of practice that a credit union would have to do if it plannedto manage its card portfolio to its greatest potential, theexecutives agreed. They also agreed with the recommendation thatcredit unions make one person responsible for all aspects of thecredit card portfolio, which could include such diverse areas asmarketing, collections, teller education and customer service. Someof the executives cited this recommendation, as important as itwas, as very difficult for some credit unions to do, since it meantmaking someone almost a “czar” over all parts of a credit union'sbusiness. “I think that person would almost have to be a directreport to the CEO,” said Keith Floen, managing director ofAtlanta-based InfiCorp, a bank which buys credit unions cardportfolios and a previous credit union card manager. “That personis going to need the power and the authority to make the changes acredit union will need to make to make its card an integral part ofthe credit union's business.” Floen pointed to the shrinking levelsof penetration of cardholders among credit union members as a“particularly troubling statistic” for credit unions and suggestedthat someone in the key role of card manager would help. He alsowondered how many credit unions might be willing to make the neededchanges for a loan type that might only represent 5% of theiroverall business. Crawford, while agreeing that he found thepenetration statistic significant, thought the changes that neededto be made to reverse it would go deeper than just changing whoreported to whom. “Credit unions have gotten used to veryconservative loan vehicles which have very low and predictablewrite off's,” he noted. “Credit cards as unsecured loans are adifferent product and are going to have higher write offs.” Bothcredit unions' culture, and that of their regulators, would have tochange to recognize the difference between auto loans or mortgagesand credit cards. But he also expressed confidence in creditunions' ability to make the needed changes. He pointed to otherproducts in which credit unions had come to dominate, such as autoloans, as examples of loan products that credit unions had come tofind very familiar and “own.” When credit unions turn theirattention to a product or service, Crawford estimated, they willsucceed at it. Frank Selker, CEO of Asset Exchange, the largestbroker of credit union's card portfolios that is based in Portland,Oregon said that while he found the study useful, it nonethelesscould have made more of the benefit of a credit union getting asmany offers as possible if they decide to sell. “We agree thatselling can be a good choice, but would add that how you sell is asimportant as whether you sell,” Selker said. “For example, we haveseen competition for a portfolio double the value of an offerrelative to an unsolicited offer without competition. That kind ofbump can make the difference between a sale being a bad or a goodidea,” he said. He also said Asset Exchange urges credit unions toget more offers than the examples in the Callahan study. “We wouldincrease their recommended number of offers credit unions seek from2-3 up to 3-5. Credit unions should understand that some brokerswork closely with one buyer, and those brokers aren't a good sourcefor competing offers.” -

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