BELEVUE, Neb.-Two credit unions announced separate deals last week to repurchase card portfolios from Bank of America.
Among them was SAC FCU, which did so as part of the banking giant's exit from the card agent business, The $560-million SAC FCU was given the right of first refusal to buy back its $12-million portfolio with 5,000 accounts, according to SVP-Lending Bruce Schroeder. Considering that BofA had failed to grow the portfolio, SAC decided to repurchase it and launch its own program.
"The main reason we sold it was that regulations kept expanding and we had trouble growing it," Schroeder told the Credit Union Journal of the 2006 sale to MBNA, which was later acquired by BofA. "We couldn't offer some of the programs they could because of economies of scale, like rewards."
Since then the credit union has grown to become Nebraska's largest and branched out to additional counties, making its market and potential greater.
The price of the repurchase is unclear, but MBNA paid the equivalent of a 21.5% premium over the value of the portfolio's receivables and SAC bought the portfolio back for a 3% premium, according to Schroeder.
Plans call for Iowa's The Members Group to service the accounts and to provide a rewards program. In addition, SAC plans to offer a lower risk-based rate on the cards than BofA, and charge a lower fee for cash withdrawals, 3%, compared to BofA's 4%.
In Indianapolis, meanwhile, Eli Lilly FCU said it bought back its $20-million Visa cards portfolio from Bank of America's FIA Services unit and will also have its 6,500 accounts serviced by credit union-owned The Members Group.
Like SAC FCU, the credit union had sold the portfolio in 2002 under an agent agreement to MBNA.
Rick Jones, SVP with Eli Lilly FCU, said what prompted the buy back of the cards portfolio was BofA's announced plan to sell its affinity cards, with the bank giving its agent issuers the right of first refusal. Jones added the credit union was not satisfied with the way its card-holding members were being treated with respect to managing payments, interest rates and other facets, and its high liquidity made it a good time to make the move.
