Bank Seeks Bad Credit Risks, Retailer Says

     (CN) – Gander Mountain sporting goods claims World Financial Network Bank threatened to stop issuing co-branded credit cards to customers who have good credit – because such transactions are not profitable enough for the bank.




     In its federal complaint in Minneapolis, Gander Mountain claims that customers with FICO scores over 800 are its “most valuable customers,” and if World Financial turns them away, it will create a “negative customer experience” and hurt its business.
     Gander says it contracted with World Financial in 2005 to offer customers “private label” cards, which contain only the Gander name, or cobranded credit cards, which offer greater benefits and also bear a Mastercard logo.
     Gander says the purpose the agreement was so that “World Financial would gain access to Gander Mountain customers and Gander Mountain would be able to offer its customers desired credit services.”
     “Customers who have a co-brand credit card earn 1% cash back for non-Gander Mountain purchases, such as gas or groceries,” and can also manage their account online.
     Under the co-brand agreement, Gander says, World Financial promised to pay it $37 – aka “the Bounty” – for each new account, as long as the account activation rate was 85 percent or higher.
     But Gander claims that in May this year, World Financial said it would no longer pay the $37 “bounty” on new accounts if the cardholder had a FICO score of more than 800, or it would deny those customers credit under the co-brand altogether.
     Gander claims that World Financial told it that “it was not achieving a satisfactory economic benefit through the contractual arrangement because it was not earning profit on those accountholders who have an 800 or greater FICO credit score.”
     Gander says that when it refused to forgo the $37 bounty, World Financial threatened to deny co-branded cards to customers with high credit scores, beginning in July.
     “Based on recent history, World Financial estimates that approximately 25% of all new co-brand accountholders will have an 800 or greater FICO score,” Gander says.
     Gander claims that customers with high FICO scores are Gander’s “most valuable customers,” and that refusing to issue them the co-branded credit card will create a “negative customer experience,” which will hurt Gander Mountain’s business.
     Gander seeks an injunction and damages for breach of contract.
     Its lead is Edward Wahl with Faegre & Benson.

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