Credit worthies

MBNA Europe is a major player in the credit card market. Husnara Begum meets the woman who has to deal with everything from service agreements to securitisations

MBNA Bank Europe Limited (MBNA Europe) is not the biggest brand in the credit card market, but its parent company, MBNA Corporation, is the largest independent credit card lender in the world.

“People haven’t heard of MBNA because we’re not a strong brand like some credit cards,” admits MBNA Europe legal director and head of corporate affairs Donna Pumfrey. But MBNA Europe has gained market share through canny partnering. “A lot of our work is what we call ‘affinity’, where we partner other organisations that have a stronger brand, such as Abbey National, Alliance & Leicester, Virgin and Thomas Cook,” she explains.

MBNA Corporation, headed by US army general Charles Krulak, was founded in the US in 1982 and today has operations in Canada, the UK, Ireland and Spain. MBNA Europe, which was launched nine years ago, has around 15 per cent of the UK credit card market share, based on the outstanding amount of debt owed by the bank’s customers.

Pumfrey joined MBNA Europe three years ago after 18 years at Barclaycard, where she held a variety of positions, including posts in legal, operational management, project management and HR. She explains that when MBNA Europe approached her she was very happy at Barclaycard and was not looking for a move. “But the offer came at the right time for me because Barclaycard was losing market share and reducing in size,” she says.

In the short time that Pumfrey has been at MBNA Europe, she has bolstered the bank’s legal function, created a legal panel and helped it to complete two major acquisitions.

The legal department comprises nine lawyers, one trainee solicitor and one paralegal, with another two lawyers joining, one this month and the other in July. Pumfrey says MBNA Europe has expanded its legal department partly to replace two lawyers who recently departed, but also because the volume of work the department handles has increased significantly. “I was very lucky, because when I joined I inherited a very strong team,” she says. “I have four lawyers who are more than 10 years-qualified and who’ve been at MBNA for over five years.”

When Pumfrey joined MBNA Europe, the bank had relationships with 15 or 16 different firms. “I think what happened is that, as lawyers were recruited into MBNA, they maintained relationships with people they knew from outside,” says Pumfrey. “Also, I felt we weren’t getting enough leverage over price and nor were firms getting to understand our business well enough.” So 18 months ago Pumfrey decided to create a legal panel and, with the help of the bank’s internal purchasing department, she invited firms to pitch for a place on it.

Addleshaw Goddard and DLA were successful in securing a place on MBNA

Europe’s first legal panel. Pumfrey says she chose the two national firms primarily because she felt they had the same attitude as MBNA Europe. She says the firms’ presences in the North West, where the bank is headquartered, was also a factor. Pumfrey is hoping to review the panel next year because, although she is happy with the service provided by MBNA Europe’s external lawyers, it is the bank’s policy to review its external purchasing arrangements on a regular basis.

In addition to Addleshaws and DLA, MBNA Europe also has relationships with Denton Wilde Sapte and Clifford Chance. Dentons acts for the bank on acquisitions while Clifford Chance is retained to advise on securitisations. Indeed, MBNA Europe introduced credit card securitisation to the UK along with the magic circle firm. Pumfrey says: “Securitisation is a very technical area and we wouldn’t even try to do it ourselves. You need someone who’s doing it all the time and is keeping up-to-date with trends and changes to the documentation.”

Pumfrey says that in terms of value Clifford Chance gets the lion’s share of the work, but in terms of volume Addleshaws and DLA get around the same amount. She adds that employment work gravitates more towards DLA, while Addleshaws is advising on two large pieces of litigation. Nevertheless, MBNA Europe only outsources around 15 per

cent of its legal work because Pumfrey believes that her department’s hourly rate is much lower than what the bank would pay outside.

Dentons has recently advised MBNA Europe on two key acquisitions. In March 2001 the bank acquired Abbey National’s credit card business for £289m, which at the time was by far the largest acquisition the bank had ever made. Pumfrey explains: “We were growing organically but MBNA in the US had grown by acquisition, so it became part of our corporate strategy in the UK as well.

“Abbey National was at that stage by far the biggest acquisition we’d made in the UK. It presented real opportunities for us and also challenges. But it all actually went through very, very smoothly, which is very good from a customer’s point of view.”

In August 2002 MBNA Europe bought Alliance & Leicester’s credit card portfolio for £230m and instructed Dentons to advise on the deal. “We were happy with what they [Dentons] did for us, which is why we went back to them for the Alliance & Leicester acquisition,” she says. “They put a strong team together and we were very pleased with the service and advice we got.”

As part of the Alliance & Leicester acquisition, MBNA Europe acquired £800m of account balances for £225m. Under the terms of the deal, MBNA Europe entered into a number of agreements with Alliance & Leicester, including an interim servicing agreement whereby the financial services group continued to service customer accounts on behalf of the bank. The parties also entered into a co-brand agreement that sets out the service level agreements to ensure that the customers were getting the same level of service that Alliance & Leicester offered. The new Alliance & Leicester credit card was launched in January.

Pumfrey has also been busy negotiating and drafting documents for a new product. Earlier this year MBNA Europe launched a ‘business card’, aimed principally at small to medium-sized enterprises. She says the business card can be issued to employees to use for business spending, but unlike a Corporate Amex the balance on a business card does not have to be paid in full at the end of each month. Therefore, it is essentially a revolving credit facility, which is a useful line of credit available to smaller businesses. One of Pumfrey’s principal tasks on the launch of the business card was to negotiate the customer terms and conditions.

In the three years since her arrival from Barclaycard then, Pumfrey has expanded the legal team, established a panel, and completed two major acquisitions. There is clearly more to managing the legal function at MBNA than just knowing your consumer credit laws.

Donna Pumfrey
Director of legal and corporate affairs
MBNA Bank Europe Limited

Organisation MBNA Bank Europe Limited
Sector Banking and financial services
Employees 4,500 based in the UK, Ireland and Spain
Legal capability Nine lawyers, one trainee and one paralegal
Annual legal spend Approximately £500,000
Director of legal and corporate affairs Donna Pumfrey
Reporting to Chief financial officer Robin Russell
Main law firms Addleshaw Goddard, Clifford Chance, Denton Wilde Sapte and DLA