Filene to CUs: Focus on consumer-friendly cards

WASHINGTON (12/21/09)--As larger financial institutions find ways to get around the new rules imposed by the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, a Filene Research Institute report has recommended that "credit unions should re-focus on their traditional consumer-friendly cards as a differentiator to for-profit entities."

The Filene Research Institute also recommended that credit unions focus their efforts on "simplicity and transparency" and improving their "collaborative credit card efforts to improve efficiencies" in order to "pick off the current and future malcontents fleeing boorish bank behavior."

The CARD Act will "limit" some of the "tricks and traps" that many credit card issuers use, "but it will also incentivize large issuers to come up with new ones," Levitin said.

While credit card accounts are not "core to most credit union lending practices," as they only represent 5% of total credit union lending, the report found that credit union members that carry credit cards "carry higher balances and have fewer dormant accounts than bank card users."

"Credit unions are at a disadvantage when they attempt to compete with large institutions on business models that require economies of scale and are centered around backloaded, behaviorally contingent pricing," according to Levitin, but the CARD Act "scrambles the credit card industry's backloaded pricing model" by "constraining introductory credit terms and making it difficult for issuers to change borrowing terms."

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