As credit card portfolios at both banks and credit unions have improved in performance, return and profitability, credit card loans have become a more attractive investment vehicle, spurring a market in securities backed by credit card loans and participation in a CUSO that specializes in agent issuing cards for credit unions.

The CUSO, TMG Financial Services, associated with payment processor The Members Group in Des Moines, Iowa, buys credit union credit card portfolios and issues cards in agent relationships with the credit union sellers. It also operates a Collateralized Advance Program which allows credit unions to loan the CUSO money it uses to purchase the portfolios and earn a return on their loans.

“We have seen an increase in interest this year,” said TMG FS CEO Jeff Russell, who said that roughly 65 credit unions are participating in the CAP program right now.

Credit union CAP participants loan the CUSO money in contracts of up to five years in length and earn somewhere between 2% and 4% interest depending on the length of their contracts, Russell explained.

Russell attributed the increased interest in the CAP program to both an improved perception of the safety and profitability of credit union card lending and the ongoing increased liquidity many credit unions have.

But since the CUSO uses card loan receivables to back the loans, the CUSO often cannot offer as many loan contracts as there is demand, he added.

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Improving Performance Making Cards an Attractive Investment

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