NAPERVILLE, Ill. – A program designed to help enable credit unions to invest in credit cards without having to necessarily manage their own card program has taken off and gained ground in Illinois. But while credit union investors appreciate the earning their investment has brought them so far, they all report that the spirit of credit union cooperation, more than potential income, guided their decision to get involved. For the Illinois Credit Union League Service Corporation, a wholly-owned subsidiary of the Illinois League, the initial problem was as stark as the solution was clear. On the one hand there were credit unions, particularly smaller credit unions, which struggled to keep their credit card programs profitable in the era of more intense card competition and would just as soon sell them under the right circumstances. On the other hand there were credit unions that, in many cases, had a lot of liquidity and were looking for reliable vehicles in which to invest. Why not get the two together? That was the question the ICULSC asked and their answer, the EZ Launch program, has gotten off to a strong start. Since the beginning of 2003, the program has reported purchasing nine credit union card portfolios and has been able to return to its investing credit unions a 3.4% return. "We are happy and gratified to see the program going as well as it is," said George Fiegle, COO of the ILCUSC. "We think that we are off to a great start," he added. Fiegle declined to reveal the names of the credit unions whose card programs EZ Launch had purchased, citing previous promises of confidentiality about the transactions. However he did reveal the names of some of the program's credit union investors, all of whom spoke of their participation in the program not only in the terms of investments and yields but also in terms of credit unions helping each other succeed. "I guess there is no other way to put it, I just have a problem with a credit union selling its card program to a bank," said John Fiore, CEO of the $450 million Motorola Employees Credit Union, based in Schaumburg, Illinois. Motorola has a card program that puts a credit card into almost half of the credit union's 41,000 members, Fiore reported. "I think in the short term [selling a portfolio] can seem like a good solution, but I have to wonder if seven or 10 years out it is going to look as good," he said. "Here you have a credit union taking a relationship with some of its most valuable members, members who are going to have other products with you as well, and letting someone else in on it. Whose to say after five years when the contract ends that banks won't be offering your members other products that you offer." Fiore declined to say exactly how much money Motorola invested in the program. While he maintained that the credit union spirit behind the investment, he also noted that the program had performed well on strictly monetary terms. He explained that the credit union had a lot of liquidity currently because activity had been slow in its other loan programs. "So we were looking for a place to put our money and the EZ Launch program has provide that," he said. He noted that Motorola earned 3.9% on its auto loans currently and those required the credit union to take the risk of the loan. By comparison, EZ Launch's 3.4% looked pretty good. Eldon Arnold, CEO of the $2.6 billion CEFCU, based in Peoria, Illinois, reported a similar orientation. "The league needed help with credit unions who wanted to keep their card program in credit union hands," Arnold said. "We wanted to help. That's part of what makes being a credit union different," he added. Like Motorola, Arnold reported CEFCU has a 50,000 strong card program worth roughly $62 million, but that the credit union had invested in EZ Launch anyway. "We have been pleased with the investment return," Arnold said, "but for us it's not really been about the money as much as it has been helping credit unions succeed – even other credit unions in Peoria," he added. Like Fiore, Arnold admitted that the investment's current performance had probably made the decision to get involved easier, but he maintained that even if the investment return had not been as high, or if the return on other investments had been higher, that the credit union would have made the same decision. John Bratsakis, CEO of the $155 million Community Trust Credit Union in Gurnee, Illinois, reported that confidence in the card management ability in the EZ Launch program had been part of what made his credit union comfortable with the decision to invest. Community Trust invested $1 million in the program, Bratsakis reported. "Part of why we invested was to help smaller CUs with their card portfolios," Bratsakis said, "and part of it was for the yield. But part of it was also because we have confidence in the leadership over at ICULSC," he said. Robert Hammer, CEO of R.K. Hammer, a noted card consultancy firm headquartered in Thousand Oaks, California, congratulated ICULSC on attaining the yields it had, but added that more time would be needed to evaluate its ability to maintain those gains over time. Nationally the yield on credit card loans ran a little over 1%, he pointed out, and he expected the EZ Launch yield to drop as the program grew. "I wish them all the best," Hammer said, "but at this stage I would have to advise wait and see." [email protected]