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A Great Time To Start Issuing Again

Every day we read about how difficult it is to be a credit card issuer: credit losses at all time highs, CARD Act requirements are difficult to implement, marketing money is hard to come by, and on and on. While all of these difficulties exist, this market has created a significant and unique opportunity for one surprising segment of the credit union market. Believe it or not, this is the perfect time for credit unions that have sold their credit card portfolios to reenter the business.

In the past decade approximately 450 credit unions sold their portfolios, with total card balances of $3.3 billion. While the sale of those portfolios generated strong feelings, it is only fair to acknowledge that those institutions by-and-large made a great financial decision. Credit card portfolio valuations, which had often generated 20% or greater premiums over book value, have dropped precipitously and today many portfolios cannot be sold at any price. Further, in addition to generating a financial windfall, those credit unions have avoided getting swept away in this raging river of consumer credit risk as well as avoiding all the expenses and complexities required of all issuers by the CARD Act. In short, those management teams that sold are in many ways looking like the smartest people in the room. But things have changed, and staying smart is no easy task.

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