Caribou Mountain Credit Union: Back to the Future?

No one liked to handle customer complaints, and employees at Caribou Mountain Credit Union (CM CU) were no exception. Most of their members were so satisfied with credit union's that employees seldom heard complaints. Recently, however, a few members who used credit union's branded credit card started to grumble about interest rates, fees, and poor customer service. In so distant past, CM CU had its own in-house credit card. Because small financial institutions find it difficult to compete in credit card market, it sold VISA credit card program to Bank SL in 2002. The bank offered a card with CM CU's logo, but CM CU was involved in its operation or service. John North, CEO of CM CU, hearing complaints from members about BankSL credit card, wondered if it was time for credit union to offer its own credit card While relatively new to CM CU, North had worked in credit union industry for many years and was very member-focused. He believed in credit union motto: not for profit, for charity, but for service (NCUA, 2014). He wanted CM CU to provide its members with exceptional service, so he proposed to Board of Directors idea of bringing credit card program back. Should CM CU again offer its own credit card? Background CM CU was a medium-sized credit union with over 14,000 members and more than $130 million in assets as of 2011. Credit unions were not-for-profit (co-operative) financial institutions that typically offered their members better rates than did banks; they did pay stockholders or corporate income tax. (National Credit Union Administration, n.d.) However, they still needed to offer competitive rates to retain their members and pay dividends on deposits, as well as earn a positive net income to add to their capital so they could grow. CM CU began offering a credit card in 1980s. It was a plain-vanilla credit card, with most of servicing of program handled in-house. By 2000, however, CM CU found itself in same situation as many credit unions when its credit card loan portfolio stagnated. Other, larger credit card providers offered more appealing options, such as cash back on purchases and various rewards for travel and/or merchandise. Many credit unions managers simply felt that they did have economies-of-scale to compete in credit card market. CM CU's core computing system was also limiting as it could only handle basic, plain vanilla card that they were offering. In fact, CM CU loan portfolio had declined by 10% during 1999-2002. Weighing Options The minutes of October 2002 board addressed credit card Sharon Wright was former CM CU CEO who retired in 2007. The minutes stated that since there has been no growth in Visa program, Sharon feels that credit union's program must be enhanced in order to be competitive. One way to develop program and offer a better to members would be to enter into a partnership with another company that has numerous At December 2002 board meeting, Wright recommended that they sell their credit card program to BankSL and to partner with them to offer a CM CU branded credit card. The board voted in favor of this. The December board minutes stated that Wright, discussed advantages of this partnership which would include more options like cash back or travel awards to credit union members, better interest rates, incentives for new accounts and revenue sharing, eliminating charge-offs and servicing accounts. Members will still have ability to make their payments at credit union. The disadvantages are late fees, over-limit fees, loss of income and loss of total control of program. The late and over-limit fees would be higher with CM CU-branded credit card. The December 2002 board minutes also stated that the program could eventually generate $35,000 to $40,000 of income per year. …