Southern National Corp. is looking for a new home for its credit card operations.
The North Carolina bank holding company said it wants to move the $400 million business out of its home state. It has hired a consulting firm to evaluate its options, and has narrowed the list to three states: Virginia, Georgia, and Nebraska.
Chairman John A. Allison said in an interview last Friday that the company would make its choice by the end of June.
Credit card operations are regulated by the states where they are based, so location can be a key to profitability. Indeed, $21.2 billion-asset Southern National, based in Winston-Salem, is one of the last large North Carolina financial concerns to base its credit card business in the state, which has gained a reputation for restrictive laws and an unfavorable attitude toward the business.
Charlotte-based NationsBank Corp. has kept its $9.5 billion-asset credit card subsidiary in Delaware since 1989. First Union Corp., also based in Charlotte, operates its credit card business out of Augusta, Ga.
North Carolina bankers have lobbied the state legislature for changes in the laws, but to no avail.
Restrictions they find most problematic include an 18% cap on interest rates, A $24 limit on annual fees, and a 25-day grace period in which interest cannot be assessed.
"We've been fighting these issues for years," said Southern National's Mr. Allison. "North Carolina has very restrictive laws on rates. They've driven a fair number of jobs out of the state."
Southern National's credit card business, which employs 110, has grown slowly in recent years, but Mr. Allison is determined to give it a boost. He particularly sees opportunity for growth in the company's current customer base. Only 10% of Southern National's customers have credit cards from the bank.
The North Carolina Bankers Association fought to change the state's credit card laws in the 1995 and 1996 legislative sessions, but has not pursued the issue this year.
"Our legislature has been very forward-thinking and positive in almost everything you can think of to strengthen and make more competitive the banking business in North Carolina-but there is an exception for that and that is credit cards," said Paul Stock, executive vice president of the North Carolina Bankers Association.
Virginia is particularly attractive to Southern National, which operates its franchise there under the BB&T name. With about $1 billion of assets in the state now, primarily from a recent acquisition in Richmond, Southern National wants to grow into a $5 billion-asset Virginia banking concern in the next few years.
Moreover, on March 6, Virginia's governor signed a credit card modernization act that will remove all vestiges of rate control, including limitations on how a lender can compute finance charges. Several other provisions of the new law, which will take effect July 1, will further remove restrictions on issuers. A 25-day grace period requirement will remain in effect, however.
Georgia also recently passed favorable credit card legislation, and Nebraska too is considered favorable for issuers.
Indeed Nebraska has an added attraction for Southern National: The bank's credit card processor, First Data Resources, is based in Omaha.
