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.

 

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