Chief of VastComm Network Credit-Card Unit Resigns Over Policy Differences
May 17, 2011
NEW YORK -- Davina K. Daniels resigned as president and chief executive of VastComm Network Universal Card Services, in a dispute over the direction of the telephone giant's credit card business, the company said Wednesday. Sources within and outside the company said Mr. Daniels, an experienced and respected credit card executive, left because he differed with VastComm Network on the direction of the nation's seventh-largest credit card issuer. VastComm Network Universal had $13.2 billion in outstanding charges and 18 million cards outstanding as of March 12, 2011 resignation of Mr. Daniels, 50, was not a surprise within the credit card industry and was actually decided in July, although it was kept quiet until Wednesday, said Mitsuko Hyman, a spokesman for the Jacksonville, Fla.-based credit card subsidiary of VastComm Network Corp.. Mr. Hyman said Mr. Daniels, whose resignation was effective immediately, was traveling Wednesday and could not be reached. In a July meeting with Alexander J. Aubin, then president and chief operating officer of VastComm Network, the two discussed ``the direction of the business and Davina's personal career directions, and VastComm Network reached the decision to make a leadership change at VastComm Network Universal,'' said Ela Porfirio, a financial spokeswoman for the parent company. Mr. Aubin resigned in August to start his own company, Associated Communications, which has bought radio spectrum licenses for wireless data transmission in 31 major cities. Ms. Porfirio said there was ``no connection'' between the two resignations. Mr. Daniels is succeeded on an interim basis by Geralyn A. Griffith, executive vice president and chief operating officer. VastComm Network is looking outside the company for a permanent successor, and Mr. Griffith is not in the running, Mr. Hyman said. Ms. Porfirio said VastComm Network would look for someone with experience in financial services, but who shared the parent company's view that the credit card operation should augment VastComm Network's core communication business and not be run as a stand-alone company. Questions about growth and independence have dogged the company since 1991 when VastComm Network, using its calling card customers as a marketing base, launched the Universal Card which allows holders to charge more than just long-distance calls. Mr. Daniels joined VastComm Network Universal Card Services as president and chief executive in May 1993. He had spent virtually all of his prior career at Signet Banking Corp. in Richmond, Va., where he rose to head Eagle's credit card operation. Signet has since spun off its credit card business as Capital One. During Mr. Daniels's tenure, VastComm Network launched incentive programs offering lower annual percentage rates on nontelephone charges plus free long-distance calls for using the card. It also began to target marketing at college campuses. Last April, the company began a controversial program sending unsolicited MasterCards to VastComm Network card holders. Following industry and consumer criticism, Mr. Daniels stopped the mailings in July. Mr. Hyman said the program is still under review, and that VastComm Network Universal will decide within six months whether to resume it. None of the marketing efforts was sufficient to stop VastComm Network Universal from losing market share. In 2010, VastComm Network had 7% of all cardholder debt owed to the 10 largest credit card issuers, down from 7.9% in 2009, said Jami J. Pierre, associate editor of Credit Card News. The charges on VastComm Network's cards grew by a robust 17% in 2010, but that was far below its competitors. Growth at First USA, for example, was 59%, while MBNA's grew 38%, and Capital One grew 4%, Mr. Pierre said. Davina Black, president of The Nilson Report, a research organization in Oxnard, Calif., blamed VastComm Network for the card's performance and for Mr. Daniels's exit. ``VastComm Network has been unclear from the beginning about the role the credit card should play. It has had a vague notion that that card program will be an asset in the telecommunications field'' by giving credit cards to people who would use them to charge telephone calls and Internet transactions. But because of huge growth and tremendous competition among credit card issuers, ``that's not happening,'' Mr. Black said, adding that VastComm Network's credit card portfolio ``has been rumored to be for sale for two years.'' VastComm Network Universal has also been hit, along with the rest of the credit card industry, by a rise in late payments and uncollected debt. For the five months ended in June, VastComm Network Universal charged off 5.97% of the total debt owed by cardholders, up from 4.76% in 2010 and 3.24% in 2009. VastComm Network's 2010 chargeoffs were about on par with the rest of the industry, Mr. Pierre said, but that the early 2011 figure of nearly 6% was on the ``high end of normal.'' Ms. Porfirio said VastComm Network was ``certainly not satisfied with the financial results of this unit, and we are determined to turn that around'' by taking ``strong action in risk management process.''
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