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Arnold Tours, Inc. v. Camp - 472 F.2d 427 (1st Cir. 1972)

Rule:

A national bank's activity is authorized as an incidental power, necessary to carry on the business of banking, within the meaning of the National Bank Act, 12 U.S.C.S. § 24, Seventh, if it is convenient or useful in connection with the performance of one of the bank's established activities pursuant to its express powers under the National Bank Act. If this connection between an incidental activity and an express power does not exist, the activity is not authorized as an incidental power.

Facts:

The South Shore National Bank (South Shore), a national banking association chartered by the United States Government, has been engaged in the travel agency business, operating it as a department of the bank since November 1966. Plaintiffs, Arnold Tours, Inc., and 41 other independent travel agents of Massachusetts engaged in the travel agency business, filed a class action seeking for declaratory relief and injunctive relief to force South Shore out of the travel business. The district court granted summary judgment for plaintiffs, holding that it is illegal for a national bank to operate a full-scale travel agency. In addition, the district court permanently enjoined South Shore from engaging in the travel agency business and ordered the bank to divest itself of its travel department within six months. The bank challenged the district court’s decision.

Issue:

Was it illegal for a national bank to operate a full-scale travel agency, thereby, justifying the district court’s decision to rule in favor of the plaintiffs?

Answer:

Yes.

Conclusion:

The Court held that it was illegal for a national bank to operate a full-scale travel agency since such an operation was not an exercise of the incidental powers of a bank as referred to in the National Bank Act, 12 U.S.C.S § 24. According to the Court, the activities of national banks which have been held to be permissible under the "incidental powers" provision have been those which were directly related to one or another of a national bank's express powers. However, the Court held that the bank could still render travel banking services such as sale of travelers’ checks and foreign currency.

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