PSCU Financial Services is urging credit unions to be cautious and to not rush in with new credit card portfolios following a U.S. Supreme Court decision allowing financial institutions to issue all brands of major credit cards.
As reported in The Credit Union Journal Oct. 11, the Supreme Court's decision to let stand a lower court ruling that the exclusionary policies by MasterCard and VISA violated U.S. antitrust laws means that banks and credit unions can now issue American Express and Discover cards as well.
"We have weathered many changes in the credit union market during the last 27 years, and we are advising credit unions to create a sound business plan before making the decision to offer new credit cards," said David Serlo, President of PSCU Financial Services.
He said credit unions need to carefully review existing contractual commitments with VISA and MasterCard as well as the associations' bylaws to determine if issuing American Express or Discover cards could violate and have a negative financial impact on those agreements. "The credit unions that signed an agreement with a credit issuer to guarantee a certain percentage of sales are still subject to those terms. In addition, association bylaws may have some penalty provisions if issuers reduce their card transaction volumes by a material amount."
Serlo added that PSCU Financial Services has been closely following the progress of the lawsuit, and is currently evaluating how it will respond to the Court's decision, and said the company is exploring credit union interest in potentially offering additional cards.
The U.S. Department of Justice filed a lawsuit against MasterCard and VISA six years ago, charging that exclusionary policies by MasterCard and VISA violated U.S. antitrust laws. These policies prohibited financial institutions that issued MasterCard and VISA credit cards from issuing American Express and Discover cards as well.
