ALEXANDRIA, Va. - Defense credit unions are petitioning the Department of Defense to halt a new credit card offered by JP Morgan Chase that is sponsored by the Army and Air Force Exchange Service, which operates all post exchange (PX) and base exchange (BX) retail outlets at military installations around the globe, saying the card violates the Pentagon’s own prohibition on having the exchange operate banking services.
The credit unions, who have been joined by on-base banks, also claim the Chase card violates the DoD’s long-time “one bank, one credit union” rule which approves only a single bank and credit union for each military base. “The question is, ‘is Chase going to be allowed to come on the military bases now,?” said Kenneth Leonard, president of America’s CU, which operates at Fort Lewis, Wash.
“The military personnel have enough sources of credit, they don’t need another one to satisfy the profit margin of AAFES or Chase Bank,” Leonard told Credit Union Journal. He said he is particularly miffed because new DoD regulations require on-base credit unions to participate in financial literacy training and other programs to benefit military personnel that will be not be required of Chase.
“The sad part is, is they didn’t even give the large guys; the credit unions or the banks, a chance to do it before they went ahead with this,” said Lewis.
The stakes in the dispute are huge, as AAFES operates more than 3,100 retail facilities on bases around the globe and reported sales of $8.7 billion last year.
NAFCU President Fred Becker said the issuance of the Chase Military Rewards MasterCard and related on-base solicitations effectively adds a third financial institution to base services in direct violation of the one bank, one credit union rule. “They’re not supposed to be on the base,” said Becker.
He also said that regulations bar any DoD entity, like the exchange services, from performing any retail banking services.
A spokesman for the exchange services said they have been issuing an affinity card through a forerunner of Chase, First US Bank, then Bank One, since 1987. “There’s been an affinity program for some time,” said Judd Anstey, Since 1987 AAFES has offered both an Affinity MasterCard and Military Star Card. AAFES is simply combining these lines of credits into one simple, convenient piece of plastic, he said.
“It wasn’t a bank a decade ago, and it isn’t a bank now,” Anstey said.
This isn’t the first time JP Morgan Chase has run afoul of on-base credit unions and banks, who forced the banking giant to rescind a proprietary card it issued for the DoD’s Moral Welfare Recreation program, which funds gyms, golf courses, bowling alleys, camp sites and retail outlets at bases around the world.
