As the popularity of co-branding in the credit card industry skyrockets, one credit card issuer is hoping to team up with the national party committees so that both can cash in on the marketing concept.
Co-branding — essentially the convergence of the credit card issuer and another retailer, such as an airline, alumni society or department store — often results in benefits such as rebates or bonuses to the cardholder.
Now, Providian National Bank, the ninth leading U.S. bank credit card issuer, has asked the Federal Election Commission if it can use a political party’s membership lists and trademark to market credit cards co-branded with both Providian’s and the sponsor’s name.
In return, the cardholder would be able to choose to direct bonuses to the national party as a political contribution or receive additional rebates for donating to the party.
“None of the arrangements involves Providian making a payment of its funds to a National Party,” Providian’s attorneys, Ken Gross and Ki Hong, both of Skadden, Arps, Slate, Meagher & Flom, explained in a May 6 letter to the FEC.
“Rather, in exchange for the use of a National Party’s mailing list and trademark, Providian will edit the mailing list based on its own criteria and possibly give the individual cardholders … the option of directing their Rebates or Bonuses … to a national party,” Gross and Hong wrote.
Providian, which currently has more than 9.6 million open credit card accounts and approximately $18.6 billion in outstanding receivables as of Dec. 31, 2002, is federally chartered in the state of New Hampshire. Its federal PAC has given to both Democrats and Republicans over the past several election cycles.
As Gross’ letter explains, the company is particularly interested in co-branding with the national party committees for its “value-added card,” which has frequent-use incentives for cardholders such as reward points redeemable for air travel, hotels, merchandise, entertainment and other gifts.
Providian’s FEC advisory opinion request argues that the reward points are “permissible” under federal campaign laws “given that neither those reward points nor any benefit resulting from those reward points would be transferred to a National Party.”
Instead, consumers might be offered opportunities to earn extra reward points “if they contribute a certain amount to a National party.”
The national party would pay a third-party vendor fair market value for any rewards claimed by a cardholder as a result of the extra reward points. The party would also be required to buy advertising space in Providian’s promotional materials or other communications in which the party would offer the extra rewards points.
In the case of cash bonuses, once cardholders spend a certain threshold limit, cardholders will have the opportunity to direct that they go directly to the national party instead of themselves.
Gross and Hong argued the FEC should give a thumbs up to the plan because the arrangements involved permissible arm’s-length negotiations and Providian’s “bottom line” is to increase its customer base and improve business, not provide a benefit to the national party.
Moreover, they contend that the national party engaging in such a plan would be sufficiently compensating Providian for any services by providing the mailing list, and therefore in no way could this be construed as a prohibited corporate contribution.
In 1979, the FEC denied a bank’s request to make payments from its funds to a party committee in connection with a similar credit card program — although in that case it was the bank, not the cardholders, directing funds.
The FEC has approved of somewhat similar business arrangements more recently. In 1994, the agency said a telephone company could in fact give its customers the option of directing a portion of their purchase time to political committees as a voluntary contribution.
If the FEC gives Providian the go-ahead, not every political contributor should expect a bank card offer in their mailbox. The company plans to market the credit cards only to those deemed creditworthy after their names are screened by a consumer-reporting agency.
Gross noted that the still-hypothetical offers might also include an invitation from a chairman or senior official from a national party inviting the consumer to apply for the card.
While the invitation would likely explain that the card would be a way for the individual to show support for the party, it would not mention federal candidates or “otherwise promote the National Party.”