James P. Stephenson, Esq.
Faegre & Benson
2200 Norwest Center
90 South Seventh Street
Minneapolis, MI 55402-3901

Dear Mr. Stephenson:

This is in response to your request on behalf of Fingerhut Corporation, St. Cloud, Minnesota ("Fingerhut"), regarding whether Fingerhut's proposal to offer an "installment credit card" through a nationally chartered credit card bank would qualify for the credit card bank exemption under the Bank Holding Company Act ("BHC Act"). A credit card bank is exempted from the definition of "bank" for purposes of the BHC Act if it meets certain limitations, including engaging "only in credit card operations." Credit card banks are also prohibited from: (1) accepting demand deposits or similar checkable accounts, (2) accepting savings or time deposits of less than $100,000, (3) maintaining more than one office that accepts deposits, and (4) engaging in the business of making commercial loans. See 12 U.S.C. � 1841(c)(2)(F). Unless the credit card bank exemption is available in this case, the BHC Act would effectively prohibit the proposal by causing Fingerhut to become a bank holding company.

Based on your correspondence and conferences with Board staff, we understand that Fingerhut sells merchandise to customers with a free 30-day trial period at the end of which the customer must either pay for the merchandise with a lump-sum payment, begin to pay for the merchandise in installments, or return the merchandise. Installment payments are made under arrangements that have a predetermined payment schedule represented by separate coupon books used to submit monthly payments. These arrangements are subject to different limitations on interest rates and other charges imposed by individual states.

Fingerhut has applied to the Office of the Comptroller of the Currency for a nationally chartered credit card bank which would permit it to "export" uniform interest rates and charges under Supreme Court case law. Fingerhut anticipates that it would transfer its credit function to the credit card bank. Although Fingerhut also plans to offer credit cards with a revolving line of credit, the predominate form of credit arrangement offered through the bank would continue to be an "installment credit card" which would, in essence, simply substitute the credit card bank for Fingerhut as the credit extender without changing the manner in which credit is extended to or repaid by the Fingerhut customer.

Based on our understanding of the proposed arrangement, Board staff would not recommend that the Board initiate an action under the BHC Act if Fingerhut establishes a credit card bank that issues an "installment credit card." This view is based on the arrangement as set forth above. Any change in the arrangement could result in a different conclusion and should be reported to the staff.

If you have further questions regarding this matter, please call Robert deV. Frierson (202/452-3711) of the Board's Legal Division.

Very truly yours,

(signed) Oliver I. Ireland

Oliver I. Ireland