Deal to Help CU Group Enter Processing

The Iowa Credit Union League, planning for the expected consolidation of the corporate credit union system, has applied to federal banking regulators to buy an Arizona bank that would help it expand into payment processing.

The proposed purchase of the $16 million-asset CreditCard National Bank in Tucson would aid the league's move into credit card processing and provide a broader scope of investment and lending opportunities than a corporate credit union commands, the league said in an application filed with the Federal Reserve Bank of Chicago.

"This is an alternative way of providing some credit card processing and looking to the future," said Steven Johnson, a Minneapolis attorney representing the league on the deal. The league is "looking ahead, seeing potential changes with the credit union, credit card and corporate credit union systems."

In its application, the Iowa league said it expects corporate credit union reform to include consolidation of several organizations including the Iowa Corporate Central Credit Union. The Iowa corporate entity remains strongly capitalized and is the only one of 27 corporates not participating in the National Credit Union Administration's Share Guarantee Program.

"It is widely believed that the process of reforming the corporate credit union network will result in a reduced number of corporate credit unions with higher cost structures and more limited investment opportunities," the application said. "In such an environment, … credit unions of all sizes seeking the services provided by corporate credit unions will face increased costs. Moreover, the impact is likely to be most profound on small to midsize credit unions."

Among the services the league is weighing is investing in credit card portfolios that its Members Group affiliate has been acquiring from credit unions for at least two years.

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