BJ's MC Drops Freeloaders (10/01/97)

SUMMARY:

Beneficial National Bank's decision to not renewal BJ MasterCard cardholders who pay off balances regularly may withstand legal challenges. A Massachusetts superior court judge denied a temporary restraining order yesterday requested by BJ's Wholesale Club to halt Beneficial National Bank's action to drop non-revolving cardholders from the 'BJ's MasterCard' program. Beneficial is currently notifying about 12,000 customers, whose cards expired yesterday, that a the card will not be re-issued since no finance charges where paid in the previous twelve months. BNB began negotiating with BJ's about a year ago to make adjustments in the program to assure profitability. The negotiations broke down in mid-September with both parties filing suit. BNB said yesterday it has no intention of terminating the program, merely modifying it. A January court date has been set to hear BNB's case in Delaware. Despite yesterday's setback for BJ's, the wholesale club says it will go forth "vigorously" with its complaint filed in Massachusetts.

FULL STORY:

Superior Court Upheld Beneficial National Bank USA In Court Case Involving BJ's Wholesale Club
Beneficial National Bank USA (BNB USA), which issues the BJ's Wholesale Club credit card, said today that a Massachusetts superior court judge has upheld the bank's position in a court case involving a small number of BJ's cardholders.

"Obviously, we hope this is the first step toward finding a resolution with BJ's to adjust the program as we have been attempting to do for some time now," said Ross N. Longfield, president, BNB USA, which has announced plans not to reissue BJ's credit cards to approximately 12,000 customers, whose cards expire September 30.

BJ's argued in superior court in Massachusetts last week in an attempt to halt the bank's plans not to reissue the cards. The bank learned today that Justice Charles T. Spurlock denied BJ's motion for a preliminary injunction. BNB USA, which earlier had filed suit in Delaware in an attempt to address certain issues with BJ's, will move forward with its Delaware case which has been set for trial in January.

BNB USA is exercising its contractual right not to reissue new cards to certain BJ's cardholders upon expiration, consistent with both the agreements with the cardholders and the agreement with BJ's.

"Although the Massachusetts court has sided with us, it's regrettable that BJ's has put us and their customers in this unfortunate position," said Longfield.

"We still seek to work with BJ's to make the necessary adjustments in the program to assure fairness and profitability for both BJ's and BNB USA, in an attempt to continue to serve eligible BJ's customers," he added.

Beneficial National Bank USA is a subsidiary of Beneficial Corporation, a $17 billion, New York Stock Exchange-listed financial services holding company. Subsidiaries of the Company provide financial services through their various consumer finance, credit card, banking and insurance operations located throughout the United States, Canada, the United Kingdom, Ireland and Germany.

BJ's Wholesale Club Continues to Pursue Lawsuit Against Beneficial National Bank
BJ's Wholesale Club has announced that although a judge in Massachusetts Superior Court has denied BJ's request for preliminary injunction against Beneficial National Bank USA, BJ's will continue to vigorously pursue its lawsuit against Beneficial. The judge's decision did not contain any comment on the merits of the pending lawsuit nor any reason for the denial. The preliminary injunction sought to prevent Beneficial from canceling 12,000 BJ's MasterCard accounts with a September 1997 expiration date.

"BJ's recognizes that the preliminary injunction we sought to prevent Beneficial from canceling the accounts of 12,000 credit-worthy BJ's MasterCard holders, was the first step in what may be a lengthy legal process," said Ed Gillooly, Senior Vice President and Director of Marketing. "We knew it would be difficult to get an injunction, but we felt it was a necessary step to prevent Beneficial from canceling the accounts of our Members who have paid their bills on time and in full."

"BJ's first priority is our Members and we will continue to pursue our lawsuit against Beneficial to prevent Beneficial from cancelling the accounts of credit-worthy BJ's MasterCard holders," Gillooly stated. "Beneficial has a contractual obligation to BJ's and our Members."

BJ's lawsuit asserts that Beneficial's actions are a breach of its contract with BJ's, and that Beneficial may not cancel the credit cards of any credit-worthy BJ's Members. Beneficial, the issuer of the BJ's MasterCard, has said that it is canceling these accounts of customers with good credit records who paid their bills in full and on time for the last year because Beneficial receives no finance charges from them.