By now nearly every credit card issuer understands that the CARD Act and the new normal has changed the way credit card programs must be managed. What is only now coming into view is a special and material set of concerns related to merging credit unions. CARD Act rules, when combined with now-in-place accounting rules for merging credit unions, can together create long-term compliance and unanticipated financial risks for years to come.
When merging in a credit card program we urge all credit unions to think through the following issues carefully.
Fair Value Accounting Requirements. Under current standards merging credit unions must use the acquisition method in financial reporting. One of the credit unions becomes the acquirer and brings the other's assets and liabilities onto its balance sheet at fair value. This can include determining the fair value of an included credit card portfolio.
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