Enid Gamer had long used her L.L. Bean credit card to qualify for coupons, free shipping on returns, and other perks from the New England outdoors retailer.
So the Milton psychologist thought nothing of it when she received a new credit card in the mail this month, just as her old L.L. Bean card was about to expire. Just like her old card, the new one contained a scenic photo of a mountain range.
But when she took the new card to the Dedham store to return a cashmere sweater and other clothing, she received an unpleasant surprise. The store clerk pointed out it wasn’t an L.L. Bean credit card after all. It was from Bank of America — the financial giant that used to mint L.L. Bean cards until the store switched to a different bank.
“The clerk said that it happens all the time,” Gamer said. “In my opinion, it is misrepresenting the card.”
Gamer got a rare peek into what happens when relationships sour in the affinity credit card business — where credit card companies team up with merchants, universities, associations, and other groups to aggressively market the cards to members and customers.
When business is good, both sides can benefit handsomely. Card issuers gain access to a new pool of customers and organizations receive a steady stream of revenue in exchange for that access, typically a bounty for each new customer plus a small percentage of the transactions customers ring up on the cards. But when partners divorce, it can spread confusion as both sides battle for custody of the customers.
The split between Bank of America and L.L. Bean appears to have been particularly acrimonious. L.L. Bean, based in Freeport, Maine, originally hired Delaware credit card giant MBNA in 1996 to run a co-branded card. But L.L. Bean said it received a growing number of complaints from customers after Bank of America bought MBNA in 2006.
L.L. Bean ended the agreement in June 2008 and tapped British financial giant Barclays to take over the business. Bank of America, however, decided to keep the old L.L. Bean branded card accounts open. And when those cards were about to expire, Bank of America issued replacement cards with a mountain scene similar to the one on L.L. Bean cards.
The Charlotte, N.C.-based bank even used the image of a hiker on a mountain top carrying sporting goods gear in related promotional material.
L.L. Bean was so aggrieved that it filed a lawsuit in federal court accusing the bank of deliberately trying to deceive customers. Bank of America denied the allegations, including the suggestion that L.L. Bean had exclusive rights to “mountains or mountain scenes.”
In 2009, a judge declined to order Bank of America to cancel the old L.L. Bean cards, ruling there was “room for reasonable minds to differ” over the meaning of the contract. Both companies ultimately agreed to take the matter to arbitration.
Neither Bank of America nor L.L. Bean would say how the arbitrator ruled, although L.L. Bean said most of the customer confusion has subsided. And a Bank of America spokeswoman pointed out that its cards are “clearly marked with the Bank of America brand” on the front and back.
Doug Furbush, who helped pioneer the affinity credit card business three decades ago as a vice president of Trans National Group Services in Boston, said Bank of America has long been one of the biggest companies in the affinity credit card business.
Furbush, now chief executive of Affinity Marketing Group in Natick, said Trans National helped MBNA (which later became part of Bank of America) issue one of the first affinity cards in 1983 with the American Dental Association. It was an instant hit, with 17 percent of customers signing up for the card through direct mail, compared to the usual response of less than 1 percent for unsolicited mailings.
Furbush said affinity customers tended to use the group cards more. They were also less likely to default, in part because they mistakenly thought their organization would find out.
But over the past few years, Furbush said, Bank of America has tried to cut back on smaller and less profitable partnerships, replacing thousands of affinity credit cards with its own generic bank cards. Many customers will likely keep the new cards, Furbush said, either because they want the credit or think it’s too much of a hassle to switch. Bank of America will no longer have to make royalty payments to the partners.
“Bank of America is trying to squeeze the grapefruit,” Furbush said.
The bank said it continues to maintain affinity relationships with key partners, including the Boston Red Sox, PGA Tour, and Alaska Airlines. In a recent conference call with analysts, Bank of America chief executive Brian Moynihan said the affinity business remains “very core” to its credit card business.
Still, the affinity business is no longer as hot as it once was. The recession and increased regulations drove many banks to be pickier about extending credit, while many consumers cut back on borrowing.
Bank of America, for instance, said it had $95 billion in US credit card loans at the end of 2012, down from $102 billion a year earlier.
“Consumers on average have fewer cards in their wallets today than they did five years ago,” said David Morris, author of a report on affinity credit cards for Packaged Facts, the Maryland market research firm.