Visa U.S.A. announced yesterday changes in regulations concerning its credit cards that could upset AT&T's hugely successful new credit card program and protect the business of the large banks that dominate the business.
The new rules would set limits on operators of "affinity programs," in which banks issue credit cards on behalf of organizations ranging from an Elvis Presley fan club to American Airlines.
Visa is owned by commercial banks, and several of its largest members are fighting hard to have the entry by American Telephone and Telegraph Co. to the credit card business turned back by the Federal Reserve Board and the Federal Communications Commission.
Visa said credit card programs operated by banks for affinity groups started after Oct. 8 are covered by the new rules.
It added that the AT&T program would be reviewed to decide if the new rules should be applied retroactively to the phone company's six-month-old program.
"Visa is clearly motivated by the success of the AT&T program," said David Robertson, vice president at the Nilson Report, a newsletter based in Santa Monica, Calif., covering the credit card industry. "At the very least they want to make sure that nothing like the AT&T program happens again."
The AT&T card program could be hurt by a new rule banning any bank that issues cards to affinity groups from selling more than 25 percent of its credit card loans to non-Visa members.
Another problem for AT&T could be a new rule prohibiting non-Visa members from providing credit evaluations.
Under the AT&T program, which has attracted 3.1 million customers with more than 5 million cards since late March, credit cards are issued by the Universal Bank, Columbus, Ga., a bank created specially for the AT&T program by Synovus Financial Corp., a Columbus banking company.
The phone company makes daily purchases of the credit card receivables from Universal Bank.
In evaluating the credit worthiness of potential card holders "AT&T has input, but the final decision is with Universal Bank," said Bruce E. Reid, a spokesman for the phone company.
"This is not an attempt to oust any single program," said David Brancoli, a spokesman for Visa. "Visa guarantees that merchants get paid and that consumers get billed on time. We think it is important that the operational controls remain in the hands of regulated financial institutions."
In the past, control of the credit card business has remained with banks, which own Visa, because they are the only institutions allowed to issue Visa cards. But their control has been eroding, as special banks were created whose primary purpose was to issue credit cards, such as the Discover Card of Sears, Roebuck & Co.
AT&T solved its need for a bank by reaching an agreement with Synovus Financial, a banking company with a strong credit card processing business.
If Visa was to attempt to change its rules retroactively to keep AT&T out of the business, Mr. Robertson of the Nilson Report said the phone company could push ahead with its pending application to charter a bank it would own.