ST. PETERSBURG, Fla. – One of the efforts to establish a credit union industry-owned industrial loan corporation which would compete with banks in the market for credit union credit card portfolios is still going forward, but without two of its founding partners.
Speaking to attendees at Card Services For Credit Union's 2006 annual meeting, Robert Hackney told the card and vendor executives that CSCU, one of the group's original organizers, would not be an equity owner of the new company when it finally gets regulatory approval.
"I don't know how many of you have ever had to deal with federal regulators," Hackney told the packed auditorium, "but this was my first time and I have to say it was an eye-opening experience."
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Hackney didn't say any more, but Wally Jensen, the CEO of the Union Financial effort, confirmed other sources' reports that neither CSCU nor Corporate One would be equity partners in the final company. That will leave CUNA Mutual and Fidelity National Information Systems (formerly Certegy) as the last of the original four partners.
"We just couldn't get to the point where federal regulators felt comfortable with CSCU or Corporate One participating, even though Corporate One would have held only a minority position," Jensen said, admitting he was inclined to remain tight lipped about the effort until all the contracts and agreements are finalized.
The four had announced the effort to charter an ILC to buy card portfolios in February 2005, but the effort has hung up on regulatory snags since then. In the original proposal, CSCU would have had a slightly larger position than the other three, and CUNA Mutual and FIS (Certegy) would have had equal portions, with Corporate One holding the smallest position.
Previously sources had indicated that NCUA couldn't reach a decision on whether or not CSCU was or was not a CUSO and that this had a bearing on the regulatory situation.
Sources said NCUA would not have permitted CSCU to own part of the ILC, but if it had not been a CUSO their ownership would have been allowed. Sources also said that Corporate One's role in the new venture hung up on the question of whether a credit union can own an ILC, but Jensen didn't discuss the precise circumstances behind Corporate One's difficulty.
Union Financial's difficult regulatory situation stems, in part, from regulator's questions being raised about ILC's in general. The FDIC is under pressure from different banking groups not to allow Wal-Mart, the nation's largest retailer, to own an ILC because of questions over how much supervision and regulation the new entity would face and whether it would have a competitive edge over local banks.
Consumer groups have also raised questions about ILCs, openly questioning whether or not a Wal-Mart ILC would have the same responsibilities for consumer protection that a regulated bank would have.
Even though the Wal-Mart ILC controversy has little or nothing to do with Union Financial's efforts, or another similar effort being led by Wescom CU to purchase an existing ILC, it has made the entire regulatory process surrounding ILCs much slower than it might otherwise have been.
Jensen said he remains optimistic about the ability of the new organization to thread the different regulatory needles it faces, but he remained quiet on what direction the organization's next step will be. "We are working hard on it," he said. "But it will not be appropriate to talk any more about it before we get everything into place."
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