CUs Fear ‘Sleeping with the Enemy’

LOS ANGELES – When USC FCU sold its credit card portfolio to MBNA it chose the monoline bank because it didn’t want to be competing with the giant lender on other products, but then MBNA was sold to Bank of America, which competes with the $300 million credit union in almost every market. So it was with some apprehension that the credit union viewed yesterday’s announcement that Sallie Mae, its partner on its $100 million student loan program had been sold to a group on investors including–Bank of America. The Sallie Mae deal conjures up the whole MBNA deal, said Gary Perez, president of USC FCU, one of the largest student lenders among credit unions. He worries that not only will the banking giant gain access to its members’ information, but also that key services provided by Sallie Mae, like servicing and securitization, will be affected. “The purpose of selling (the credit card portfolio) to a monoline was that we wouldn’t be selling to a competitor,” Perez told The Credit Union Journal yesterday, likening it to ‘sleeping with the enemy.’ While Sallie Mae had grown from a credit union partner on student loans to a major competitor, its business was mostly restricted to student loans, said Perez. BofA and JP Morgan Chase, one of the other partners in the huge Sallie Mae takeover, compete with credit unions in every market, he noted.