[Federal Register Volume 61, Number 2 (Wednesday, January 3, 1996)]
[Notices]
[Pages 167-168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-00010]



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FEDERAL RESERVE SYSTEM

National City Corporation; Request for an Exemption From Tying 
Provisions

    National City Corporation, Akron, Ohio (National City), has 
requested, pursuant to section 106(b) of the Bank Holding Company Act 
Amendments of 1970 (12 U.S.C. Sec.  1971 et seq.) (section 106), that 
the Board grant an exemption to permit the subsidiary banks of National 
City to vary the consideration charged for a floorplan loan to an 
automobile dealership based on the dollar amount of retail paper 
financing originated by the dealership on behalf of National City. A 
``floorplan loan'' is a loan or line of credit provided to an 
automobile dealership to finance the acquisition of the dealer's 
inventory for sale to the general public, and ``retail paper 
financing'' means financing provided to consumers seeking to purchase 
an automobile from the dealer's inventory.\1\ National City indicates 
that floorplan loans and retail paper financing will remain separately 
available to customers at market prices. This request is similar to a 
request submitted by Huntington Bancshares, Incorporated. See 60 
Federal Register 57,429 (November 15, 1995).

    \1\ For purposes of this proposal, retail paper financing may 
consist of either: (1) a retail installment contract or similar 
instrument between the purchaser and the dealer which is then 
assigned to National City; or (2) a direct obligation between the 
purchaser and National City originated on National City's behalf by 
the dealer.
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    Section 106 generally prohibits a bank from varying the 
consideration charged for any product or service, including an 
extension of credit, on the condition or requirement that: (1) a 
customer obtain some additional credit, property, or service from such 
bank, other than a loan, discount, deposit, or trust service (so 
called, ``traditional bank products'') (See 12 U.S.C. Sec.  
1972(1)(A));\2\ or (2) a customer provide some additional credit, 
property, or service to such bank, other than those related to and 
usually provided in connection with a loan, discount, deposit, or trust 
service. (See 12 U.S.C. Sec.  1972(1)(C)). The Board may, by regulation 
or order, grant exceptions that are not contrary to the purposes of the 
section.

    \2\ Section 106 also prohibits a bank from varying the 
consideration charged for any product or service on the condition or 
requirement that a customer ``obtain'' some additional credit, 
property or service from an ``affiliate'' of such bank. See 12 
U.S.C. Sec.  1972(1)(B).
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    National City argues that the proposed tying arrangement should be 
permissible under the statutory exceptions discussed above as well as 
exceptions contained in the Board's anti-tying rules. 12 CFR 225.7. 
However, National City is seeking an exemption from section 106 to 
clarify whether retail paper financing may be characterized as either a 
traditional bank product so that the proposal is consistent with the 
exception contained in 12 U.S.C. Sec.  1972(1)(A), or as a practice 
related to and usually provided in connection with a floorplan loan so 
that the proposal is consistent with the exception contained in 12 
U.S.C. Sec.  1972(1)(C).
    Even if the proposal does not fall within the literal terms of 
exceptions to the prohibitions contained in section 106, National City 
believes that the proposed package arrangement is not anticompetitive 
and is generally offered by its nonbank competitors who are not subject 
to section 106. National City also argues that the market for floorplan 
loans and retail financing services is national in scope and highly 
competitive, and that National City does not possesses sufficient 
market power in any relevant market to impair competition in that 
market. Furthermore, National City believes that the proposal is 
consistent with Congressional intent that section 106 not interfere 
with a customer's ability to negotiate the price of multiple banking 
services with a bank on the basis of the customer's entire relationship 
with the bank.\3\ Finally, National City asserts that the proposal will 
promote competition because automobile dealerships may obtain floorplan 
lending and retail paper financing from other financial institutions, 
and there is no requirement that consumers finance their vehicle 
purchase through this arrangement.

    \3\ S. Rep. No. 1084, 91st. Cong., 2d Sess., 16-17 (1970).
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    Notice of National City's request is published in order to seek the 
views of interested persons on the issues presented by the request and 
does not represent a determination by the Board that the request meets 
or is likely to meet the standards of Section 106. The request may be 
inspected at the offices of the Board of Governors or at the Federal 
Reserve Bank of Cleveland.
    Any comments or requests for hearing should be submitted in writing 
and received by William W. Wiles, Secretary of the Board of Governors 
of the Federal 

[[Page 168]]
Reserve System, Washington, DC 20551, not later than January 29, 1996.

    Board of Governors of the Federal Reserve System, December 27, 
1995.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 96-00010 Filed 1-2-96; 8:45 am]
BILLING CODE 6210-01-F