Court's Decision Would Allow CUs To Offer AmEx, Discover

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The Supreme Court last week declined to review a lower court ruling invalidating so-called exclusionary clauses used by MasterCard International and VISA USA preventing participating institutions from issuing competing card brands, thereby clearing the way for credit unions and banks to add American Express and Discover cards to their offerings.

Both companies expressed interest last week in breaking into the credit union market, which has been dominated by the two bank/credit union-owned card associations up until now.

"We are interested in dealing with financial institutions, based on the Supreme Court decision not to hear the appeal (by MasterCard and Visa) and we will be entering into discussions with various financial institutions," said Beth Metzler, a spokesperson for Discover Financial Services, a unit of Morgan Stanley.

Mike O'Neil, a spokesperson for AmEx, said the ruling will allow the company to begin offering its cards through MBNA to high-wealth customers, its main area of focus, but down the road they intend to expand their market to other institutions, including credit unions. "We are interested in talking to many people, small, medium and large institutions. Right now, we're most interested in the high-end. But it could very well include credit unions," he said.

MBNA, which is a member of both MasterCard and Visa, said it will begin offering American Express credit cards.

A spokesperson for St. Petersburg, Fla.-based PSCU Financial Services, the largest processor of credit union card transactions, said last week its organization is capable of processing AmEx cards but has not been asked to do so yet.

The High Court decision not to review the lower court ruling lets stand a decision by the U.S. Appeals Court in New York that found bylaws enacted by both MasterCard and Visa violate federal antitrust laws because they are aimed at limiting competition in the multi-trillion-dollar marketplace.

The case began in 1998 when the Department of Justice filed suit against the two card associations. The U.S. District Court in New York rued in favor of the government in 2001, saying the companies could no longer bar issuers from issuing other brands. That ruling was upheld by the appeals court last year. And the Supreme Court refused to hear an appeal of that ruling.

Following the Supreme Court's decision last week not to review the case, Discover filed a suit against MasterCard and Visa asking for as much as $1 billion in damages for harm caused to it by the exclusionary clauses. AmEx was reported to also be considering a suit but had not decided whether to do so last week.

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