my 5 yr old said what?

[Brenda]

A few days ago my children bought their first set of baseball cards. They love baseball and they especially love the Red Sox.

They came home to show their daddy what they got and as they were going through the cards, William, my just turned 5 yr old, points to a card and says, "ehh, that guy is a P***Y!"
My hubby went nuts, came into the room and tells me what my son said, kind of like the movie A Christmas story, you know where the kid Ralphy and dad are trying to fix a tire, the nuts go flying and the kid says "oh fudge" But not really fudge? Well, that's what it was like here.
Where did he hear this? From an 8 yr old boy that lives around the corner. My kids have been playing with him and his brother who is only 3. There are no other kids on our street.
Where did he learn this word? What do I do? How do I approach, or do I not talk to his mother? I feel like I need to say something. This is the kid that taught my kids to say balls and nuts. I know kids, especially boys do thir "grown up" talking when no one is listening, but to teach my child/children that? That will not fly in this household!