CUNA Mutual's Credit Card Bank Runs IntoObstacle
WASHINGTON - (10/19/05) -- A bid to develop a creditunion-owned credit card bank has encountered an impediment as theFDIC has asked the owners of Union Financial Services for moreinformation before agreeing to provide deposit insurance for thenew venture. The banking regulator has returned an application fromUnion Financial Services Corp. while it awaits a determination fromNCUA on whether Card Services for CUs, which would be thecontrolling owner of the venture, is a CUSO, according to WallyJensen, president of the fledgling credit card bank. "CUSO's areprohibited by law from having a controlling interest in a financialinstitution," Jensen explained to The Credit Union Journal. Theissue though will not kill the project if NCUA rules that CSCU is aCUSO. "If NCUA finds it's a CUSO, we'll just change our ownershipstructure," he said. "We will adopt another structure because themarket needs another solution." But the matter will delay theproject, which its owners: CSCU, CUNA Mutual Group, Corporate OneFCU and Certegy, had hoped to unveil this quarter, until at leastthe first part of next year, he conceded. Union Financial plans tobuy credit card portfolios from credit unions, then sell interestsin the pools of receivables, just like mutual funds, to creditunions, keeping the credit union-originated assets within thecredit union movement.