WASHINGTON – The Department of Defense has rejected a challenge by defense credit unions to a new credit card offered by JP Morgan Chase at on-based PX and BX retail outlets.
The DoD said its general counsel had reviewed the card program, sponsored by the Army and Air Force Exchange Service, and ruled it permissible, said Roland “Arty” Arteaga, director of the Defense CU Council. In effect, the Chase Military Rewards MasterCard is a continuation of a prior cards contract the Exchange Service had with Chase, the DoD’s general counsel ruled, said Arteaga. “We’re reviewing it,” Arteaga told The Credit Union Journal yesterday. “We want to see the actual opinion.”
NAFCU President Fred Becker said his group got the same response from the DoD, but will continue to pursue the issue. He noted NAFCU recently asked Congress to review the Chase card.
The defense credit unions argue that the Chase card violates two provisions of DoD regulations covering on-base financial services. The first is the so-called “one-bank, one-credit union per base” rule, which limits financial services on base to one pre-designated bank and credit union.
The credit unions also say the Chase agreement violates a rule barring on-base service entities, such as the Exchanges, from directly providing financial services.
Officials with the Exchange Service told The Credit Union Journal the Chase card simply represents an expansion of an affinity card that a forerunner of Chase, First US Bank, then Bank One, has had since 1987. The Pentagon’s legal opinion supports that assertion.
The stakes in the dispute are huge, as Exchange Service operates more than 3,100 retail facilities on bases around the globe and reported sales of $8.7 billion last year.
