Groups ask Pentagon to review new AAFES card
Stars and Stripes May 26, 2008
TOKYO — Two national financial groups have asked the Pentagon’s chief financial officer to review the issuance of a new credit card from AAFES, saying the card violates Pentagon banking and financial policies.
The request claims that the Military Star Rewards MasterCard, run by AAFES and JP Morgan Chase, violates rules that limit the number of banks on military bases, according to the National Association of Federal Credit Unions and the Association of Military Banks of America.
Both groups also claim the Army and Air Force Exchange Service is marketing an off-base financial business, a violation of Pentagon policy when on-base banks or credit unions exist.
AAFES declined multiple requests for interviews through Lt. Col. William Thurmond, the chief of corporate communications at AAFES’ headquarters in Dallas. Instead, Thurmond issued a statement saying the new rewards card is an extension of an existing product the exchange has offered for more than two decades.
"Since 1987 AAFES has offered both an Affinity MasterCard and Military Star Card," Thurmond wrote in response to questions. "AAFES is simply combining these lines of credits into one simple, convenient piece of plastic. We look forward to resolving any misunderstanding regarding the issuance of this product."
AAFES late last month announced the new Rewards card, which allows customers to accrue points for money spent. Unlike AAFES’s Military Star Card, which can only be used in exchange stores, the new product is a commercial MasterCard. That means shoppers can use it on and off base.
According to Javier Sanchez, the legislative director for the credit unions, that also means AAFES is participating in retail banking, which Pentagon regulations prohibit.
He said the credit card goes against two other regulations. One limits one bank and one credit union on each military base. The other limits military exchange services from distributing literature from off-base financial institutions if there are on-base institutions.
"It’s a clear violation," Sanchez said last week during a phone interview from the group’s offices in Virginia. "It opens the flood gate for those who want to circumvent the system."
The banking association made a similar argument.
"We believe that DOD policy does not permit AAFES to proceed with the Military Star Rewards MasterCard because the policy prohibits off-installation financial institutions from offering products on installations where there is an existing bank and/or credit union," retired Air Force Maj. Gen. Andrew M. Egeland Jr., the bank group’s president, wrote in an e-mail to Stripes in response to questions.
Thurmond, through an e-mail, disagreed.
"In offering this product, AAFES has not introduced a second bank onto the Army and Air Force installations we serve," he said in his e-mail last week.
"The creation of the Military Star Rewards MasterCard was initiated several years ago through an open bid process," Thurmond continued. "As a nonappropriated fund activity of the Department of Defense, AAFES is empowered to market products that it offers to its military customers on installations. AAFES is fully engaged with DOD leaders as this issue is being discussed in official channels."
Sanchez said the association’s May 8 letter to Tina Jonas, the chief financial officer for the Pentagon, has been received. Egeland said his group sent a similar letter to Jonas and David Chu, the Pentagon’s under secretary of defense for personnel and readiness.
Both groups said late last week they are awaiting official response.
Inquiries from Stars and Stripes to Pentagon spokesmen and the military’s Defense Finance and Accounting Service about the association’s concerns went unanswered last week.