According to a consent order published Feb. 4, Continental Finance lied to consumers about the card fees and whether security deposits made for some of the cards carried FDIC insurance. The company also violated the Truth in Lending Act by requiring consumers to pay more than 25% in fees during the account's first year.

As a result, the CFPB fined Continental Finance $250,000 and demanded it repay cardholders $2.67 million for its practices.

The bureau said the $264,000 Services Credit Union allowed Continental Finance to brand more than 290,000 credit cards issued from June 2012 through December 2013. While the card issuer funded the cards and serviced the accounts, Services CU's name appeared on the cards as Continental Finance engaged in abusive and illegal practices against cardholders, according to the consent order.

The CFPB did not name Services CU in the consent order but in 2013, some consumer groups identified the cooperative's credit card as a “fee-harvesting” card.

Read more: Why ICUL partnered with Continental …

Hession, shown at left, told CU Times the Illinois league initially sponsored the privately insured Services Credit Union as a corporate credit union in 1989. Later, the cooperative helped small credit unions issue credit cards, which led to the creation of a nationwide field of membership.

“Back then, it was very expensive to get into card issuing, particularly for smaller credit unions,” Hession said. “An issuer would have to have a portfolio of 400 accounts just to be able to afford the fees Visa and MasterCard charged.”

By using Services CU as an aggregator, Hession said credit unions were able to start issuing credit cards with as few as 40 card accounts, just 10% of the 400 accounts they would have previously needed.

As more credit unions got into card issuing, the Illinois league started using Services CU as a vehicle to help it do other things, including helping the underserved and underbanked, Hession said. This led to a deal between the league and Continental Finance.

Hession said he could not share details about how Continental Finance and the league negotiated the terms of the agent contract because he was not at the league at the time.

He also said he didn't know how much money the league made from the partnership but that records would likely show that amount. Hession said those figures would be released although he did not give a date when that would happen.

While the league's card agreement ended in December 2013, Services CU issued its last card with Continental Finance in June 2013, according to Hession.

Hession said the league will not apologize for trying to help Illinois' lower income residents and will continue on with those efforts.

At its annual meeting in April, the league will host a crowdsourcing session aimed at improving the financial lives of lower income consumers, Hession said.

“Everyone is familiar with crowdsourcing as a means to generate funds,” he noted. “What people forget is that another way of looking at crowdsourcing is as collaborative problem solving.”