- 9 -
cardholders were added, which petitioner offered through the use
of third-party providers. Petitioner provided loss-protection
service whereby cardholders who lost their wallets or purses
could notify the designated third-party provider, with whom they
had listed all of their credit card accounts, and this company
would contact all the card issuers. Petitioner made available
life insurance in conjunction with the use of the card to
purchase an airline ticket. Similarly, rental car insurance was
provided when the cardholder charged the rental to the card.
The amount of the annual fee to be charged was limited by
competitive factors in the industry. The annual fee did not
cover the entire cost of serving the cardholders. During 1980
and 1981, petitioner's revenue with respect to the credit card
program derived from four sources: (1) Merchant discounts, (2)
interchange fees, (3) interest charges paid by cardholders with
outstanding (revolving) balances, and (4) the annual fees paid by
cardholders. In 1979, the year prior to the institution of the
annual fee, 66 percent of petitioner's Visa revenue came from
interest charges, 33 percent from merchant discounts and
interchange fees, and the remaining 1 percent from other sources.
The issuing banks have never placed any restrictions on their use
of the annual fees for any corporate purpose.
Usual Banking Practices
Under ordinary commercial banking practices, borrowers of
money are charged interest based on the amount of money borrowed.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011