Hello bullhorn-ga, and thanks for an interesting question.
Banking regulation in the U.S. ir a pretty complex affiar, but the
so-called National Banks are regulated in the US by the Office of the
Comptroller of the Currency.
According to an OCC document issued in 2002: "Activities Permissible
for a National Bank", which can be found on their website at:
the following rules (from pages 11-12) apply to credit card issuance
by National Banks:
General. National bank and its operating subsidiaries may make,
purchase, sell, service orwarehouse house loans or other extensions of
credit for its own or another's account, includingconsumer loans,
credit card loans, commercial loans, residential mortgage loans,
commercial mortgage loans, and standbyletters of credit.12 USC
24(Seventh), 371; 12 CFR 5.34. A national bank's broad authority to
lend and extendcredit includes, but is not limited to, the following
Card Banking. National banks may perform a variety of activities
related to credit cards, including issuing credit cards, handling
credit applications for other card issuers, operating a card loss
notification service, and credit verification services over point of
service (POS) terminals. Interpretive Letter (November 14, 1980);
Interpretive Letter (January 25, 1979); Interpretive Letter (September
18, 1975); Interpretive Letter (November 14, 1974).
As you can see, the nation's banking authority has granted its
permission for National Banks to issue credit cards. It is also
clear, however, that this authority was granted through a series of
what the OCC calls "Interprettive Letters". That is, the authority
for the banks to issue credit cards is presumably implied, rather than
explicitly stated, in federal law. The OCC made explicit this
authority through the issuance of its Interpretive Letters.
Hope that clears up the matter between you and your friend. However,
if you find you need additional information, please let me know before
rating this question. Just post a request for clarification, and I'll
be happy to assist you further.
search strategy: Google search on "national banks" "credit cards" authority