In an unusual arrangement, both MBNA Corp. and Providian Corp. will issue cobranded credit cards for eBay Inc., with Providian getting dibs on the applicants who fall outside MBNA's superprime credit limits, the companies announced Thursday.
Though MBNA's specialty is affinity and cobrand cards, its confines to the upper reaches of the Fair Isaac scale would leave a number of applicants out of the offer. Providian's willingness to manage accounts for cardholders somewhere between prime and subprime complements the deal, eBay says.
Neither MBNA nor Providian would specify how the accounts would be split up, but a look at the online application posted Thursday on the eBay Web site confirms that MBNA will funnel its rejected applicants to Providian.
"In the event you are not approved for the MBNA eBay MasterCard credit card," the site says, "then by submitting this application, you are authorizing MBNA … to share information about you with Providian National Bank … [which] will use this information to consider your eligibility for the Providian eBay MasterCard credit card."
Though some companies with credit card cobrand deals - such as General Motors Corp., American Airlines Inc., and Hilton Hospitality Inc. - have selected more than one card issuer, none have done so in order to cover a wider portion of the credit spectrum. In eBay's case, two issuers splitting the accounts may mean signing up more applicants for its new Anything Points MasterCard.
"Look at the target market that MBNA has traditionally underwritten. Look at Providian's," said Providian spokesman Alan Elias. "There is greater value for eBay" in selecting two issuers, he said. "There's an ability for eBay to reach a much greater portion of its customer base."
Jennifer Chu Caukin, an eBay spokeswoman, said MBNA, as the primary issuer worked out the subcontract with Providian. eBay's prior cobrand contract with Bank One Corp. expired this year, and though she would not say why eBay did not renew, she did say that an inability to extend card offers to a broader segment of customers "was a lesson learned" during the Bank One relationship.
"We thought it was important to get cards into more people's hands," Ms. Caukin said.
The applicant-referral arrangement is not unprecedented. Two other monolines had tried it, albeit not for a cobrand card. In 2001, NextCard Inc., which billed itself as a superprime issuer, began referring rejected applicants to CompuCredit Corp., which markets subprime cards. NextCard's portfolio turned out to be less pristine than it had said, however, and it went out of business.
As for the eBay deal, MBNA spokesman Jim Donohue said, "MBNA will maintain its normal credit standards and will underwrite the cards as we do with almost all of our programs."
The application shows two sets of terms and conditions for each issuer. MBNA's card boasts an 8.9% annual percentage rate; Providian's 8.99% to 23.99%. Neither carries an annual fee; late and overlimit fees differ. In addition to advertisements on the eBay site, direct-mail solicitations will be sent.
"We do expect there to be overlap at the high end of the credit spectrum and have worked out details with MBNA," said Providian's Mr. Elias.
Last month the San Francisco company's chief executive, Joseph Saunders, alluded to at least two cobrand agreements near finalization. Cobrand and reward cards, Mr. Saunders told attendees of a New York conference sponsored by Lehman Brothers, would help drive the company's new "middle-market" strategy to reach customers at "the near-prime part" of the subprime market.
"You are seeing what we said we were going to do," Mr. Elias said. "This would be a good first example" of cobrand deals that will boost the issuer's new near-prime focus. He reiterated Providian's policy of not extending credit to consumers with Fair Isaac scores below 600.
Providian has issued the credit card for eBay subsidiary PayPal Inc. for the last two years, and says that that contract remains unchanged by the new eBay card agreement.
