To All Bank Holding Companies and Others Concerned in the Second Federal Reserve District:

Section 106 of the Bank Holding Company Act Amendments of 1970 generally prohibits a bank from tying the availability or price of a product or service to the purchase by a customer of another product or service offered by the bank or its affiliates. The statute allows an exception for traditional bank products (e.g., loans, discounts, deposits, or trust services) of the bank.

The Board of Governors of the Federal Reserve System is proposing to grant a regulatory exception to section 106 for private-label credit cards that may be used to purchase products or services from a retailer affiliated with the bank, if:

• The products or services may also be purchased from the retailer-affiliate using other payment methods, such as credit cards issued by other banks, and
• The retailer affiliate does not discount its products or services for purchases with the private-label credit cards.

The Board's proposal (pdf - 122kb), as published in the Federal Register of February 11, is available as a file. Comments on the proposal should be submitted to the Board, as specified in the notice, by March 13, 2000.

Contact:
Public Affairs
(212) 720-6130
general.info@ny.frb.org