Card violates 'one bank, one CU' rule, say defense CUs

ALEXANDRIA, Va. (5/14/08)--A new rewards MasterCard offered by Chase Card Services is prompting the defense credit unions to request the Department of Defense halt issuing the card. The credit unions say the card violates the "one bank, one credit union" rule allowing only a single bank and credit union for each military base.

The Military Star Rewards MasterCard is a collaboration between the Army and Air Force Exchange Service (AAFES)--which manages the military exchange credit card program--and Chase Card Services, an affiliate of JP Morgan Chase (Marine Corps Times May 5).

The defense credit unions also said that the card violates the Pentagon's own prohibition against the exchange operating banking services.

The card, which debuted May 1, gives users two points for every dollar spent on the military installations at commissaries, exchanges, gas stations and other retail outlets. The card also can be used outside installations, unlike the military exchanges' regular Military Star card.

In essence, AAFES and J.P. Morgan Chase are issuing a co-branded card for military personnel to use on and off base. This is a violation of the "one bank, once credit union" policy, Arty Arteaga, president/CEO of the Defense Credit Union Council--which represents credit unions on U.S. military bases--told News Now.

"Only the one bank and one credit union can provide financial services to military personnel per the policy," Arteaga said. "The legal counsel at Defense Finance and Accounting Services agrees with this. However, AAFES does not. So on April 29, we asked the Department of Defense general counsel for a ruling. At this time, we are waiting for that ruling.

If the office of the general counsel decides there's a violation of the rule, AAFES would have to request an exception to that policy before it could proceed.

"The Army and Air Force are aware of our concerns, and they know we oppose the granting of an exception for the policy," Arteaga said.

"We are addressing an issue with AAFES, we're not fighting JP Morgan Chase," Arteaga added.

courtesy of cuna.org