The Illinois Credit Union League Service Corp. has introduced a new program it says will help CUs to expand product and service offerings while also providing opportunities to increase investment earnings.
The program, called EZ Launch, includes several hassle- and expense-free products for affiliated credit unions, such as credit cards and vehicle loans. There is also a new an investment plan structured as a CUSO that offers an open-end, variable rate line of credit with the service corp. that officials say has the potential of paying above-market returns.
George Fiegle, ICUL Service Corp. executive vice president, said the program was created based on need, first for CUs in a rate environment that is at a 40-year low and, second, for CUs to provide credit cards to their members without risk or expense.
"Essentially, we are matching supply and demand within the credit union movement,'' Fiegle said. "On the supply side, we have credit unions that want better investment returns. On the demand side, we have credit unions that want to sell their portfolios and those that would like to offer a world-class program without risk, expense or burden of servicing.''
Through EZ Launch Offering, investors can receive returns by way of a base rate (Fed funds target rate plus 50 basis points) or profit sharing. For example, Fiegle noted the current FF target rate is 1.25%, meaning a base rate return of 1.75% at a minimum.
The note profit rate give investors a combined 50 percent return on any profits derived from the EZ Launch Program (described below). Money earned here is added to the investors' base rate yield. Fiegle said the EZ Launch Offering would enable LSC to accomplish other components of the program by providing capital to establish a consumer loan credit facility for participating credit unions.
EZ Launch Program
This part of the program seeks to generate loan receivables from three sources:
* The EZ Launch New Start Program, which expands on the Apollo credit card program by providing credit cards to members without the risk or expense to CUs serving them.
* The EZ Launch Purchase Program through which LSC will purchase existing card portfolios from CUs looking to sell , allowing funds to stay within CUs, Fiegle said.
* The EZ Launch AutoSource/Centrix Program that involves LSC purchases of dealer auto loans that generally don't meet the financial criteria of their CUs, but carry default insurance.