Visa Opts to Extend Moratorium On New Nonbank Memberships

SAN FRANCISCO -- Visa U.S.A. is extending a moratorium on new nonbank members, saying it needs more time to develop a permanent policy.

The extension, adopted on Tuesday as the original six-month moratorium was set to expire, will last until the Visa board reconvenes in October.

Lawsuit Pending

Robert H. Heller, Visa's president, said the card group needs the extra time because of pending actions in the courts and Congress. In one high-profile case, Sears, Roebuck and Co. has filed a suit challenging a Visa bylaw that prohibits the retailer from issuing Visa cards.

Meanwhile, Congress is taking up the issue of whether commercial companies can own banks as part of a proposed overhaul of the financial services industry.

Developments in the Sears antitrust suit and in Congress could influence the association's position on nonbank participation in the credit card system, said Mr. Heller.

"We are at a time of great change in the financial industry," he said, "and we want to have a totally comprehensive review of the outside and inside environment and then come to a decision in October."

The membership moratorium applies only to new applicants that are owned by companies outside the banking industry. In December, the card association said the temporary ban "was established as a prudent measure while the company continues its ongoing review of Visa membership eligibility in general."

The move is a bold attempt to limit inroads by nonbank entities into the profitable credit card business. It was touched off by the stunning success of AT&T's Universal credit card.

Other industrial companies, including General Motors Corp., are expected to unleash their own bank card products soon.

Mr. Heller declined to comment on whether Visa has received any applications from nonbank companies since the moratorium began in December.

The issue of nonbank participation grew more complicated in January when Sears filed its antitrust suit against Visa. The Chicago-based retailer wants to distribute Visa cards through a Utah thrift it purchased from the government last year. While its suit does not challenge the moratorium, the case raises questions about what steps banks can take to keep nonbanks out of the card business.

A federal appeals court in Denver is now weighing whether Sears can launch its Visa program before the entire antitrust suit is heard. According to Mr. Heller, a decision on that component is expected soon.

In other action, Visa appointed three new directors to its board: Donald L. McWhorter, chairman and chief executive of Banc Once Corp.; Thomas P. Johnson Jr., chief retail banking executive for Barnett Banks Inc.; and Robert B. Palmer, chief retail services officer at CoreStates Financial Corp.

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