Citizen Bank Case

The merger of U. S. Citizen Bank and Louisiana Purchase Bank (LPB) in 1998 resulted in a formation of a financial powerhouse possessing core competencies in commercial lending and innovation. Upon recognizing the much needed annuity-driven market potential existing within the U. S. college population, the LPB pioneered the student credit card program in 1989. Indeed, the student credit card program proved to be more profitable with net income margin around 6 percent compared to that of 4 percent for non-student product offerings.

In fact, LPB was collecting revenue on 60 percent of its accounts. The sheer magnitude of credit usage among college students caught public’s attention. Well respected college professors claimed direct correlation between credit institutions’ success and college students’ irresponsible financial behavior leading to debt and higher drop-out rates.

Due to this increased public awareness, The U. S. General Accounting Office (GAO) initiated an investigative report to further analyze the magnitude of student credit card usage and its consequences on students’ academic, financial, and personal well-being. The GAO asked LPB’s head of Student Card Services division, Michelle Jeffries, to participate in a survey soliciting data pertinent to their college student accounts as well as information regarding LPB’s marketing approach to this demographic.

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Data submitted would be compared to that of other (unnamed) financial institutions and published (in aggregate) without identifying individual responders. In addition, Michelle Jeffries was notified that a popular investigative television series, ’60 Minutes’ will be featuring a story on student credit cards and plans to portray credit card issuers in a negative light similar to that of tobacco companies. I believe Michelle is in the best position to be the key decision maker due to the fact that she has the most insight into divisional operations, objectives, and values.

She is the leader of the student credit card services division and should be the one to decide and communicate next steps – after having gathered input from other constituents – including the President, Risk Manager and other employees. Michelle needs to consider the interests of U. S. Citizen Bank, its employees and shareholders, all calling for a profitable and prospering organization.

In addition, she needs to consider the rights of general public and media to know what U. S. Citizen Bank’s ultimate objectives are, including its corporate values and goals. Does U. S. Citizen Bank need to have a moral obligation to look after the best interests of customers it serves? If so, what is in college students’ best interest when it comes to credit cards? Is it ethical to extend credit to students? Finally, Michelle needs to think about her own virtues and character in addition to those of the organization. What virtues does the company value the most? Do those align with her personal virtues?

The most important ethical issue at hand is the implied allegation that success of U. S Citizen Bank’s Student Card Services division was at the expense of college students’ financial well-being. That begs the question of moral obligation and the ethics of extending credit to college students. Another important ethical issue is U. S. Citizen Bank’s response to the public in regards to the GAO survey as well as 60 Minutes. The bank is being asked to disclose confidential customer information as well as their business and marketing plans.

Lastly, Michelle needs to marry her own personal values to those of the organization which she leads. She has a solid track record of being honest, fair and ethical and she needs to lead the organization keeping those core values in mind. Lastly, she needs to assure those shared values are actually being practiced. Michelle is presented with the following possible options. She could disregard GAO’s request for information on grounds of protecting customer privacy as well as corporate business and marketing plans in terms of promotional and marketing strategies.

She could also choose not to publicly address 60 Minutes to avoid the possibility of self-imposed negative attention on U. S. Citizen Bank in relation to the series. Another viable option would be to submit the requested information to the GAO as well as publicly address the 60 Minutes series while firmly defending company’s current strategy without identifying any holes or areas for improvement. The third option would be to respond to the GAO’s request as well as release a public statement in response to the 60 Minutes series clearly identifying U. S. Citizen Bank’s corporate values, objectives and responsibilities to all of its stakeholders.

In both responses, Michelle could acknowledge things the corporation believes they’ve done right as well as things they could and plan to improve on in response to helping college students become more financially responsible when it comes to credit card debt. Michelle should respond to the GAO survey by submitting requested account data and marketing information while emphasizing company’s strong commitment to customer privacy and onfidentiality of information submitted.

She should address the 60 Minutes series by clearly identifying and defending her organization’s values and commitment to its customers. She should highlight company’s accomplishments and strides in the area of student credit card education programs. Furthermore, she should identify areas of improvement with well-defined action plans that will elevate the organization to the next level vs. merely pointing out weaknesses to the competitors.

The overall theme should re-iterate company’s commitment to all of its stakeholders, acknowledging what they’ve done to support that commitment followed by an action plan to further evolve and improve their student credit card education programs. They should raise the bar for all credit card issuers on educating college students on responsible use of credit cards. More importantly, they should publicly acknowledge their ethical responsibility to provide customers with information necessary to make sound financial decisions.

Michelle also needs to ensure external communication aligns with the internal translation in order to successfully execute publicly announced action plan. Internal stakeholders need to be assured that external message is honest and action-driven and not just a media ‘spin’ to protect company’s interests. An internal communication to employees and shareholders should clearly translate the external message into sustainable long-term profitability and well-being of the company.

Considering the interests of all parties involved, the suggested approach is clearly the right one. By publicly acknowledging and recognizing an increased concern surrounding college students’ credit card debt, they will gain public’s sympathy and respect. By choosing to do something about it via a well defined action plan, they will gain public’s trust. By gaining public’s trust, they will gain a more loyal and increased customer base which will contribute to company’s long-term profitability.

In addition, this approach will clearly communicate company’s values and traits of responsible corporate citizenship which will set an example for other companies in their industry, including their competitors. One might argue the organization should really re-evaluate the business they are in as it may not be morally responsible to extend credit cards to students. I would argue that the morality question certainly does come into play and should definitely be considered when deciding on tactics used to promote and market credit cards to students.

However, the actual extension of credit to students, by its nature, is not unethical. In fact, when utilized properly, it serves students’ interests by allowing them to build credit history while teaching financial responsibility and spending within means. In conclusion, while credit lending geared towards college students is not considered unethical business to be in, marketing techniques utilized to promote such products and service may certainly cross ethical boundaries.

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