Hypothetical: PenFed Eaten by USAA ??

[Anonymous]

There have been a slew of recent articles about the deteriorating state of corporate credit unions and the effect that has on retaiul credit unions such as, for example, Alliant, Navy Federal, PSECU, PenFed and others.  Most articles warn that there were be a certain number of retail credit unions that simply will not survive and, apparently, the NCUA maintains a list of credit unions that are in a precarious fianncial state. 

The NCUA's preferred method of dealing with credit unions on the brink of collapse is structured merger à la USA Federal / Navy Federal marriage.

All this started me thinking about some things that have always struck me as unusual about PenFed to include their secured credit card policies, their heightened sensitivity to new accounts and / or inquiries and the most unusual and conspicuous statement on their Website:

Our Lending Practices

We do not - and will not - participate in sub-prime lending practices. We are a consistently well capitalized financial institution offering many creditworthy members superior loan value, nation-leading low rates on mortgage products with cost-saving features, and we will continue to do so.

That kind of writing seems like those Enronesque statements that appear every so often on companies that are in trouble, but are trying to maintain public confidence to forestall -- or possibly delay -- what many have become to see as inevitable.  I mean, how would you feel shopping at a merchant who posts a big sign at the entrance saying, "By the way, we are not in financial distress so please buy our store-branded gift cards"?   

Recently there has been another strange event with PenFed in that they now prominently push automobile insurance &, ultimately, membership in USAA -- their major competitor.  Color me skeptical, but I have yet to see Discover recommend their cardholders to use, say, American Express TRS for all their travel needs or Bank of America recommending Citibank for investment advice.  Could this be corporate foreplay for a possible USAA acquisition of PenFed? 

Will we see PenFed eaten up by USAA in the not-so-distant furure?  Or PenFed taking over USAA?

[RammaCredit]

I saw the link on theirsite for USAA auto insurance. It might happen. Would that be a bad thing? Is USAA a workable lender?

[Anonymous]

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@RammaCredit wrote:

I saw the link on theirsite for USAA auto insurance. It might happen. Would that be a bad thing? Is USAA a workable lender?

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Not sure if it would be bad or good.  On one hand PenFed's rates and credit card incentives seem to be better than USAA's.

[chasmith]

I think this is a stretch.  NCUA would push a Credit Union merger and USAA isn't a CU, although they are a customer owned (in some obscure way as a Texas insurance cooperative) entoity that owns a Federal Savings Bank.

NFCU has an arrangement with GEICO.  This seems to me to be a sensible way for USAA to expand its insurance marketing, since PenFed's members have a high proportion of people who would qualify for USAA insurance.

[Anonymous]

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@chasmith wrote:

I think this is a stretch.  NCUA would push a Credit Union merger and USAA isn't a CU, although they are a customer owned (in some obscure way as a Texas insurance cooperative) entoity that owns a Federal Savings Bank.

NFCU has an arrangement with GEICO.  This seems to me to be a sensible way for USAA to expand its insurance marketing, since PenFed's members have a high proportion of people who would qualify for USAA insurance.

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Could be.

Not many businesses would push you into the hands of a competitor, though.  Once a PenFed member obtained insurance through USAA all USAA has to do is smack a "pre-approval" offer on their My Offers page. 

I still think PenFed is on less-than-firm ground.  But as long as they put the cash rebates back into my card each month I'll keep going along for the ride.