Banc One Corp. has laid aside plans to issue a controversial credit card linked to 401(k) funds, because of a congressman's crusade to ban it and the Internal Revenue Service's slowness in granting formal approval.

Banc One, Columbus, Ohio, gave up its exclusive rights to issue and process the card, which would have allowed employees to borrow against their retirement funds using a credit card.

In August, Rep. Charles Schumer, D-N.Y., introduced a bill that would effectively ban the 401(k) credit card. The bill never made it to committee because it was conceived late in Congress' session.

"These funds are for retirement, not for consumption now," Rep. Schumer said in August. "The last thing we need is to make it this easy - with a credit card - for people to tap these funds before retirement."

Rep. Schumer plans to reintroduce the bill in the 105th Congress, said a spokesman in his office.

Several weeks after Mr. Schumer voiced his position on the matter, Banc One released itself from a licensing agreement with the card's patent holders, Francis Vitagliano, a compliance officer at Scudder, Stevens & Clark, and Franco Modigliani, an economics professor at the Massachusetts Institute of Technology.

"We were paying fees to the inventors, which we expected to recoup when we introduced the product. But with pending legislation, it could take a year of paying fees with no return," said Banc One spokesman John Russell.

Banc One planned to test the program with its own employees before it introduced the concept to other companies. But the bank requires approval from the Internal Revenue Service to do so.

Though the IRS approved the plans verbally, Mr. Russell said Banc One is still waiting for a formal letter from the agency.

Banc One could manage and issue the card for another company, but because it manages its employees' 401(k) plans it is not allowed to offer it to them without IRS approval.

In the meantime, the patent holders are in discussions with other banks to issue the card. Mr. Modigliani, who is a Nobel Prize-winning economist, said that although his relationship with Banc One has remained "excellent," he and Mr. Vitagliano were disappointed that the Columbus, Ohio-based company had backed out.

The partners offered to reduce or waive the licensing fees Banc One was paying them, on condition that they would be paid later if the program became successful. "We were willing to share in the risk, but we were not ready to reduce our share of the profits," said Mr. Modigliani.

"My impression is that there was disagreement within the Banc One staff" over whether the product was right for the bank, said the professor.

With the end of the arrangement, the patent holders' relationship with the consulting firm that had found Banc One for them also expired.

The two decided to sell the card idea on their own instead of employing Back Pages Inc., an affiliate of Auriemma Consulting Group, Westbury, N.Y.

Back Pages vice president Matthew Auriemma, said his firm would now consider representing a bank interested in issuing the card.

Banc One's decision to give up its exclusive rights to the program does not preclude it from processing the card for another company. It is likely that Banc One will still play a part in launching the first 401(k) card, said Mr. Russell, because it has invested in software capable of running and processing the program.

"I doubt that another bank would process this on their own," he said.

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