A decision by the Office of the Comptroller of the Currency to allow Fleet Financial Group to provide services for its small-business customers over the Internet reopens an issue that was believed to limit the authority of national banks to offer data processing services to retailers.

The 11-page approval letter to Fleet by OCC Chief Counsel Julie Williams reopens an issue long thought to be closed by a court decision.

David W. Roderer, a Washington lawyer with Goodwin, Procter & Hoar, said that in approving the application, the agency noted the so-called "subordination requirements"–which generally limit non-banking data processing services–are not applicable. The agency said that the level of revenues from "associated traditional bank products" offered through the Web site are expected to greatly exceed those relating directly to the Web site services, and so the limits don’t apply inasmuch as "the Web site hosting activity is part, rather than incidental to the business of banking, and is thus not subject to scope limitations that apply to some incidental activities."

The data processing issue deals with a 1979 decision by a panel of the 9th U.S. Circuit Court of Appeals, based in San Francisco. Williams said in her interpretation that a 1995 Supreme Court ruling superseded the 1979 decision. The 9th Circuit decision limited the authority of national banks to offer data processing services to retailers.

The 1995 Supreme Court decision dealt specifically with annuities, but added that the OCC should be granted deference in determining whether a specific product was banking or closely related to banking. Williams argued that the 1995 ruling held that the "business of banking" is an evolving concept not limited to the powers enumerated under the National Bank Act.

The decision, which allows Fleet to help its small business customers to market their services through the Internet, is seen as allowing the majority of retail firms to do business on the Internet relatively inexpensively. It also opens an avenue for banks to expand their service offerings and increase their value to customers.

"The latest ruling acknowledges the ability of national banks to offer their small business customers a package of electronic services consisting of three components: retail Web site housing; retail payments processing; and business checking accounts," said Roderer. He also said that in holding that the business of banking encompasses a wide range of "informational services, the OCC "further opens the ever-expanding world of electronic commerce to banks.

"As full participants in developing and providing e-commerce capabilities to their retailer customers, banks might be expected to play a major role in affording efficient access to electronic markets for small businesses that might otherwise be beyond their reach," he said.

"Numerous concerns still need to be addressed, including tying, customer privacy, security and the full array of issues confronting electronic commerce," he said.

Under the approved product program, the bank will charge a one-time set-up fee and a monthly maintenance fee for a package of services that bundles traditional merchant credit card banking services with the software, hardware and technical support necessary for a small business to have its own Web site "able to accept credit card payments in a secure environment," Roderer noted, citing language in the letter.

"Significantly," Roderer said, "the Web site product, with related system support, will not be available as a separate product offering and cannot be purchased without the entire package of associated banking products and services, such as the checking account and merchant credit card relationship."