PASADENA, Calif. — After what seemed like a very long and difficult time, the $3.7 billion Wescom Credit Union has brought a new credit union-owned card portfolio purchaser to the market and made a splash when it did so, landing one of the biggest CU card portfolios to have sold in a long time.

Dubbed CU Card Association, the new organization is a joint effort between Wescom and PSCU Financial Services, a leading card servicing CUSO. CU Card Association's creation represents a long sought victory in a campaign that saw Wescom first seek to purchase a bank owned by an industrial loan corporation only to renounce that effort when it stalled due to regulatory and political obstacles.

The credit union didn't give up, however, and relatively quickly switched to plan B–a strategy that led it to apply for and receive a charter that allowed it to serve members of other credit unions around the country by purchasing their card accounts.

Once the new charter was received, the CU moved quickly to get CU Card Association established and to finalize the purchase of its first card portfolio.

That first portfolio belonged to the $136 million Coastline Federal Credit Union. Headquartered across the country from Wescom, in Jacksonville, Fla., CU President Wayne Harubin said that his CU had been looking to sell its portfolio since 2004, but had been waiting and hoping that Wescom would be the buyer.

“We believe that our card portfolio can be grown,” Harubin said, “but we weren't sure that we were going to be the best people to do that. We needed the card expertise that Wescom and PSCU can provide.”

But when Coastline started thinking about selling its portfolio and began working with an independent broker to evaluate it and seek bids, Wescom hadn't even revealed a plan to form a card purchasing group, Harubin explained. So Coastline went through the process and by the time the CU was getting closer to selling, they were told of Wescom's effort and decided to hold off finalizing the purchase to see if Wescom could offer another alternative.

Harubin admitted that it was a longer wait than the CU had initially thought it would be, watching as Wescom first tried hard to work with regulators to resolve their concerns and then finally abandoned the attempt. Coastline wanted to see whether the option could come to light because it believed Wescom and PSCU could bring a strong set of options to the table.

First, because Coastline already processed with First Data and had its card accounts serviced through PSCU, there would be a minimum amount of disruption to cardholders from the sale, Harubin explained. Second, because it was a credit union, Coastline believed Wescom could offer the deal that fit best with what Wescom wanted to do with the portfolio, Harubin added.

“We are the sort of credit union which took a smaller premium up front in exchange for a bigger share of the interest and interchange income going forward,” Harubin explained. The CU had received bids from other card portfolio buyers earlier in the process, including from TNB Card Services, the card purchasing and servicing arm of credit union-owned Town North Bank, based in Dallas, but in the end it was Wescom that was the best fit, he said.

But while Coastline may have been the most patient of Wescom's newest client CUs, the biggest will almost surely be the $2.3 billion Bethpage Federal Credit Union, headquartered in Bethpage, N.Y., which also sold its card portfolio to the Wescom division. Both Wescom and Bethpage have confirmed the sale that, according to the credit union, will bring almost 14,000 active card accounts worth $30 million in outstanding balances, along with 10,000 inactive accounts that Bethpage said it looks to Wescom for help in activating.

The sale moves CU Card Association into the bracket of big players in the card portfolio market. In the past, when it was still MBNA, FIA Card Services, indicated that it considered CU card portfolios of that size to be its ideal market and one source familiar with the market said that all the card portfolio buyers wanted the Bethpage deal.

The fact that CU Card Association got up and running so quickly and captured the Bethpage deal seems to portend it will take a very strong position in the overall market for CU card portfolios, particularly on the smaller end where TNB has been the only CU player.

“As a buyer, Wescom provides a unique alternative to the current buyers in the market,” said William Coo, CEO of Asset Exchange, one of the leading independent card portfolio brokers. “Their entrance to the market provides one more option for credit unions considering a sale, which enhances a credit union's ability to find a partner that will be the best fit. We look forward to working with Wescom.”

Another broker, Tim Kolk, managing partner with Brookwood Capital, said that his firm was also looking forward to working with the new firm. “We know the people involved with it and think they are really going to bring a strong alternative for credit unions,” Koch said.

No one from TNB Card Services was available to comment on the launch of CU Card Association, but in the past the firm has said it that welcomes the increased competition. –dmorrison@cutimes.com

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