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A wide variety of rates and terms now meets the needs of more than 60 credit unions.
Besides being one of the stickiest products for boosting member loyalty, credit cards can be a revenue center for credit unions that manage their portfolios well. Through the Collateralized Asset Program from TMG Financial Services, credit unions can benefit from the returns of a well-run portfolio, whether or not they have one themselves.
The way this works is for credit unions to invest—in the form of a collateralized loan to a CUSO—in CAP, which is a portfolio of credit union credit card accounts that have been sold to TMG Financial Services. CAP investors receive competitive yields—often better than CDs—based on soundly underwritten assets, as the average cardholder in the TMGFS card portfolio has a credit score of 740. An ownership stake in the CUSO is not required.
Other CAP features include:
- fixed interest rate
- a wide variety of terms and rates
- interest payments made semiannually to credit unions that have invested
- consistent and frequent reporting that models reporting for publicly traded, asset-backed credit card securities; and
- credit and fraud losses assumed by TMG Financial Services, not shared with CU investors.
To many credit unions, making investments that support the movement as well as their bottom lines is important. The more than 60 credit unions that take part in CAP—now 10 years old—are ensuring critical credit card assets stay inside the credit union industry.
One example is $1.1 billion Oregon State Credit Union in Corvallis, Ore. The 100,000-member CU has a rich history of giving back to both its community and the movement.
“We believe in supporting the industry at the same time we provide for our members,” says CUES member Bonnie Humphrey-Anderson, EVP/chief financial officer of the fast-growing cooperative. “When we evaluated the CAP program, we found it to be an interesting way to diversify our investments, as well as to support the credit union industry through a collaborative effort.”
Humphrey-Anderson reports that CAP has provided Oregon State CU with a good yield and reasonable security of principal. Oregon State CU and the other CAP credit unions have together invested more than $200 million in the CAP portfolio.
Credit union service organizations have a long history of providing credit unions and the consumers they serve with industry leading, consumer-centric services rooted in the people-over-profits value system. The opportunities provided by the CAP are no different. It gives forward-thinking leaders the opportunity to invest in their credit unions’ futures, as well as the future of the industry.
Ben Rempe is VP/business development for TMG Financial Services. TMG Financial Services is owned by the Iowa Credit Union League and was not impacted by the recent sale of sister company TMG to CO-OP Financial Services.
