MIRAMAR, Fla. - For the better part of four or five years, theflow in credit union credit card portfolio sales has been only oneway as some credit unions stopped issuing cards in favor ofentering into an agent relationship with a credit card issuingbank. Sometimes they chose to do so because the credit card marketappeared to have become too competitive. Other times they sold theportfolio in order to put the premium they earned in the sale towork in some other way. But as the oldest of those agent agreementsbegin to come up for renewal, at least one credit union has optednot to renew it and to get back into card issuing again. "As far aswe were concerned, it was a matter of having control of theunderwriting on these cards," said George Lanier, senior vicepresident for the $1.8 billion Eastern Financial Credit Union, theformer Eastern Airlines Credit Union. "We were having members whowere being turned down for cards when we perhaps might not haveturned them down. It hurt the overall relationship." Four yearsago, the credit union sold its credit card portfolio to the FirstNational Bank of Omaha in a move which seemed to make sense at thetime, Lanier said. Issues with the portfolio at the time includedmanagement and competition at a time when the credit union waspreoccupied with other issues, Lanier explained. But soon after thecredit union sold the portfolio it began to be aware of thedownsides of its decision. "Fundamentally, this is a relationshipproduct and having a relationship product means that the creditunion really needs to be involved in how it is managed," Laniersaid. "We were never really happy with the way the card productthat still carried our name was being run." Lanier said the creditunion never had a lot of confidence in how well FNBO knew its SouthFlorida area or that the issuer paid attention to its opinion asthe original issuer. "We have a heavily Hispanic local area,"Lanier said, adding that there were aspects of that community thatFBNO just had never appreciated. Ironically, some of the creditunion's concern had to do with the underwriting that FNBO used inmanaging the portfolio, noting that it was in general tooconservative from the credit union's point of view. The irony ofthis rests in the advice credit card experts frequently offer whichholds that credit union's unwillingness to extend credit morefrequently is a reason for credit union card portfolios oftendeclining in value over time. A second irony is that this adviceseems to hold true even in this case. According to Lanier, the cardportfolio after four years of FNBO management stands at 30,000accounts which, according to NCUA's records, is only slightlylarger than where it was when the credit union sold it. But even ifEastern had been delighted with how the card portfolio had beenmanaged, the overall card market has changed enough to make thecredit union want to take another crack at it, Lanier explained.One of the biggest changes has been the development of the debitside and the increase in signature debit cards which areincreasingly used much in the same way that credit cards are used.The growth in its debit card program made Eastern want to bringboth together and to offer a comprehensive rewards program thatwill offer points for the use of both their credit and debitproducts. "FNBO put a rewards program onto the card, but we neverfelt it was comprehensive enough," Lanier said. "We wanted a morecomprehensive program that we could integrate better with our debitcard program." Lanier said the credit union also looked forward tobeing able to integrate its card programs into the rest of itsproducts and services by, for example, being able to offer a 25basis point discount on credit card rates if a member finances hisor her car through the credit union and he also confirmed that itplans to process with Certegy to make these changes happen. Certegydeclined comment pending the contract being finalized but CardServices for Credit Unions, the association of credit unions thatprocess their card transactions with Certegy said it planned toapproach Eastern about membership and was almost exultant about thecredit union's return. "It's truly heartening to see this creditunion getting back into the card business. Beyond providing aservice to its members, issuing a credit card helps to retainmembers and strengthens member relationships with the creditunion," said Robert Hackney, president of CSCU. "By issuing theirown cards, they bring the relationship back in house. Theydetermine the underwriting controls and risk tolerance for thecredit union as well as the rate, credit limit and card for eachmember. I think it will help their overall relationship with theirmembers. We've always said that with a little effort, credit unionscan compete with the big guys," he added. FNBO did not return callsfor comment about Eastern's departure. Meanwhile, the creditunion's decision has reverberated across the market for credit cardportfolios and led to some speculation that Eastern will not be theonly credit union to get back into the card issuing business. "Iexpect that 95% of the credit unions whose agent programs come upfor renewal will renew them," said William (Willie) Koo, CEO ofAsset Exchange, the largest independent broker of credit unions'card portfolios. "But there will likely be some credit unions thatwill opt out and choose to start issuing again." Keith Floen, themanager of InfiCorp, a major credit card portfolio buyer, echoedKoo's comments and noted that such changes in direction are, moreor less, regular in different aspects of a credit union's life."When a credit union changes processors or changes some otherthird-party provider, it's not that big a deal," Floen said."Things change, leaderships change, attitudes change. What fit fouror five years ago might not fit as well now." Floen was careful todraw a distinction between InfiCorp and FNBO because they each havethe same parent company. InfiCorp is owned by the First National ofNebraska, a multi-state, multi-bank holding company located inOmaha, Nebraska which also owns FNBO. Before InfiCorp came intoexistence, Floen explained, FNBO purchased credit card portfoliosand was among their earliest buyers. But now that InfiCorp ishandling credit union agent programs FNBO has pretty much left thatmarket, he said. "That account [Eastern's] was never ours and wenever handled it," Floen said. MBNA, the largest purchaser ofcredit union card portfolios, said that none of its agent creditunions had declined to renew its agreement with the Delaware cardissuer and that the overall trend is still for credit unions toleave the management of card programs to firms that specialize init. MBNA is every bit as busy acquiring credit union cardportfolios this year as it was last, Hal Erskine, MBNA senior vicepresident said. [email protected]