Sec. 7.1. Certain activities with respect to credit cards

A company wished to engage in the business of gathering credit card purchase slips from a number of small merchants and presenting the same for payment to the bank having issued the cards. By such presentment in bulk the company obtained a more favorable purchase rate from the card issuer than would have been available to each merchant making smaller individual presentments. Part of the saving was to be retained by the company, and the rest to be passed on to the participating merchants. The department was asked whether this activity required licensing under the Banking Law.

In response the department indicated that article XI-B of the Banking Law would only require licensing of the activity described if the company was in the business of “purchasing or otherwise acquiring” the credit-card obligation involved. If title to the obligations at no time vested in the company and its activity was solely in the nature of providing bookkeeping and bailment services to the merchants as their agent, neither article XI-B nor any other Banking Law provision would require licensing. The department understood that payment arrangements between issuing banks and merchants were not such as to constitute the company as one which receives money for transmission or transmits the same, an activity which would require licensing under article XIII of the Banking Law.

DATED: June 1, 1974