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FIL-44-2004 Attachment

[[Page 20558]]

FEDERAL DEPOSIT INSURANCE CORPORATION


 

12 CFR Part 303


 

RIN 3064-AC80


 

 

Definition of ``Deposit''; Stored Value Cards


 

AGENCY: Federal Deposit Insurance Corporation (FDIC).


 

ACTION: Notice of proposed rulemaking.


 

-----------------------------------------------------------------------


 

SUMMARY: The FDIC is publishing for notice and comment a proposed rule

that would clarify the meaning of ``deposit'' as that term relates to

funds at insured depository institutions underlying stored value cards.

This proposed rule would add a new section to part 303 of title 12 of

the Code of Federal Regulations and would replace General Counsel's

Opinion No. 8, published by the FDIC in 1996. Since the publication of

General Counsel's Opinion No. 8, the banking industry has developed new

types of stored value card systems. As a result, this new section is

necessary to provide guidance to the industry and the public as to when

funds underlying stored value cards will satisfy the definition of

``deposit'' at section 3(l) of the Federal Deposit Insurance Act. This

new section would promote accuracy and consistency by insured

depository institutions in reporting ``deposits.''


 

DATES: Written comments must be received by the FDIC no later than July

15, 2004.


 

ADDRESSES: All comments should be addressed to Robert E. Feldman,

Executive Secretary (Attention: Comments/Legal ESS), Federal Deposit

Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.

Comments may be hand-delivered to the guard station located at the rear

of the 550 17th Street Building (located on F Street) on business days

between 7 a.m. and 5 p.m. Also, comments may be sent by e-mail to

comments@fdic.gov. Comments may be inspected and photocopied in the


 

FDIC Public Information Center, Room 100, 801 17th Street, NW.,

Washington, DC, on business days between 9 a.m. and 4:30 p.m. The FDIC

may post comments at its Internet site at the following address: http://www.fdic.gov/regulations/laws/federal/propose.html

.



 

FOR FURTHER INFORMATION CONTACT: Christopher L. Hencke, Counsel, Legal

Division, (202) 898-8839, Federal Deposit Insurance Corporation, 550

17th Street, NW., Washington, DC 20429.


 

SUPPLEMENTARY INFORMATION:


 

I. Introduction


 

For purposes of the Federal Deposit Insurance Act (``FDI Act''),

the term ``deposit'' is defined at section 3(l) (12 U.S.C. 1813(l)). In

1996, the FDIC interpreted this term as it relates to funds at insured

depository institutions underlying ``stored value cards.'' The FDIC's

interpretation is set forth in General Counsel's Opinion No. 8

(``GC8'') (discussed below in Section III). See 61 FR 40490 (August 2,

1996).

GC8 did not address all types of stored value card systems

involving insured depository institutions. These systems were new in

1996 and many of the systems currently offered by insured depository

institutions were developed after the issuance of the FDIC's opinion.

The development of new systems has created a need for additional

guidance as to whether the underlying funds qualify as ``deposits.''

Although the proposed rule would provide such additional guidance, it

would retain the basic principles set forth in GC8 and extend these

principles to new types of stored value card systems.

An example of a system not addressed in GC8 is where a company

maintains an account at an insured depository institution for the

purpose of making payments on stored value cards issued by that company

(and not issued by the insured depository institution). For reasons

explained below, the FDIC believes that the funds in such accounts are

``deposits.''

Another system not addressed in GC8 is one in which an insured

depository institution--in connection with stored value cards issued by

the insured depository institution (and not issued by another

company)--maintains a pooled self-described ``reserve account''

(representing the institution's liabilities to multiple cardholders)

but also maintains individual subaccounts (with each subaccount

representing the institution's liability to a particular cardholder).

For reasons discussed below, the FDIC proposes to add a new section to

part 303 of title 12 of the Code of Federal Regulations that would

classify the funds in such systems as ``deposits.'' The FDIC seeks

comments on the proposed rule.

GC8 also did not address the insurability of the funds underlying

``payroll cards.'' As discussed below, the FDIC does not propose to

adopt any rule dealing specifically with ``payroll cards.'' Rather, the

FDIC proposes to apply the same rules governing the insurability of the

funds underlying other types of stored value cards.

As a preliminary matter, the meaning of certain terms must be

clarified. In this notice of proposed rulemaking, companies that issue

stored value cards--other than insured depository institutions--are

referred to as ``sponsoring companies.'' This term is used in the

proposed rule. In referring to the ``issuance'' of stored value cards

by insured depository institutions or sponsoring companies, the FDIC

means the distribution of cards to cardholders (directly or through an

agent) and the making of a promise to the cardholder that the card may

be used to transfer the underlying funds (i.e., the funds received by

the issuer in exchange for the card's issuance) to one or more

merchants at the merchants' point of sale terminals. Also, in using the

term ``stored value card,'' the FDIC means a device that enables the

user to effect such transfers of funds at merchants' point of sale

terminals. The definition of ``stored value card'' is discussed in

detail in Section VI.\1\

---------------------------------------------------------------------------


 

\1\ This proposed rulemaking does not apply to ``gift cards''

offered by retailers in ``closed systems.'' Although such cards may

be referred to as ``stored value cards,'' a ``gift card'' offered by

a retailer (in a ``closed system'') is different than a ``stored

value card'' offered by a bank (in an ``open system'') because the

former card--unlike the latter card--does not move through a

``clearing'' process. In other words, the ``value'' on the card does

not depend on whether a bank holds sufficient funds to back-up the

card. Indeed, the retailer who accepts the card does not expect to

receive payment through a bank. On the contrary, the retailer has

been prepaid through the retailer's sale of the card. Through such

sale, the ownership of the cardholder's funds passes from the

cardholder to the retailer. Of course, the retailer might then place

the collected funds into a deposit account at an FDIC-insured

depository institution but any such placement of funds would have no

effect on the ``value'' of the card or the cardholder's ability to

use the card to collect the promised goods or services from the

retailer. To the extent that the retailer places funds into an

account at an FDIC-insured depository institution, the funds would

be insurable to the retailer (not the cardholder) in accordance with

the ordinary deposit insurance rules at 12 CFR part 330. See 12 CFR

330.11(a) (providing that the deposit accounts of a corporation are

added together and insured up to $100,000).


 

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[[Page 20559]]


 

This proposed rulemaking may not resolve all questions concerning

the definition of ``deposit'' as that term relates to funds underlying

stored value cards and other stored value products. Developments in the

banking industry may lead to new questions. The process of defining

``deposit''--in response to such developments--may be evolutionary. In

any event, this rulemaking will resolve certain specific questions that

have arisen since the publication of GC8. In the event that questions

arise that are not resolved by this rulemaking, the FDIC may need to

resolve such questions on a case-by-case basis.

Also, this rulemaking is not intended to address any issue except

the meaning of ``deposit'' under the FDI Act but the FDIC welcomes

comments on any issues that may be related to the meaning of

``deposit'' in the context of stored value cards.\2\

---------------------------------------------------------------------------


 

\2\ The meaning of ``deposit'' is relevant under the FDI Act for

assessment and insurance purposes. There are a number of other

issues, not addressed in this proposed rulemaking, which are of

great importance to the FDIC and which the FDIC will continue to

monitor as appropriate. Such issues include, but are not limited to,

systemic risk, security, electronic fund transfer matters, reserve

requirements, counterfeiting, monetary policy and money laundering.

---------------------------------------------------------------------------


 

The determination of whether certain funds are ``deposits''

requires an analysis of the statutory definition of ``deposit'' at

section 3(l) of the FDI Act. The relevant portions of the statutory

definition are quoted below. The recitation below of the relevant

statutory language is followed by a detailed summary of the FDIC's

interpretation of this language in GC8. This summary is followed by an

analysis of the new types of stored value card systems.


 

II. The Statutory Definition


 

The definition of ``deposit'' at section 3(l) of the FDI Act is a

broad one. At paragraph 3(l)(1), the term ``deposit'' is defined in

part as ``the unpaid balance of money or its equivalent received or

held by a bank or savings association in the usual course of business

and for which it has given or is obligated to give credit, either

conditionally or unconditionally, to a commercial, checking, savings,

time, or thrift account, or which is evidenced by its certificate of

deposit, thrift certificate, investment certificate, certificate of

indebtedness, or other similar name. * * *'' 12 U.S.C. 1813(l)(1).

At paragraph 3(l)(3), the term ``deposit'' is defined in part as

``money received or held by a bank or savings association, or the

credit given for money or its equivalent received or held by a bank or

savings association, in the usual course of business for a special or

specific purpose, regardless of the legal relationship thereby

established, including without being limited to, escrow funds, funds

held as security for an obligation due to the bank or savings

association or others (including funds held as dealers reserves) or for

securities loaned by the bank or savings association, funds deposited

by a debtor to meet maturing obligations, funds deposited as advance

payment on subscriptions to United States Government securities, funds

held for distribution or purchase of securities, funds held to meet its

acceptances or letters of credit, and withheld taxes. * * *'' 12 U.S.C.

1813(l)(3).

In addition, paragraph 3(l)(5) provides that the FDIC may in

consultation with other financial regulatory agencies define

``deposit'' through regulation. Specifically, paragraph 3(l)(5)

provides that the term ``deposit'' includes ``such other obligations of

a bank or savings association as the Board of Directors [of the FDIC],

after consultation with the Comptroller of the Currency, Director of

the Office of Thrift Supervision, and the Board of Governors of the

Federal Reserve System, shall find and prescribe by regulation to be

deposit liabilities by general usage. * * *'' 12 U.S.C. 1813(l)(5). In

accordance with paragraph 3(l)(5), the FDIC has invited comments from

the other federal banking agencies in connection with this proposed

rulemaking.

In GC8, the FDIC relied in large part upon paragraphs 3(l)(1) and

3(l)(3) (quoted above) in determining whether the funds underlying

certain types of stored value cards qualified as ``deposits.'' A

summary of GC8 is set forth below.


 

III. General Counsel's Opinion No. 8


 

GC8 is an interpretation of the term ``deposit'' as that term

relates to funds underlying stored value cards. In GC8, the FDIC

identified several types of stored value card systems involving insured

depository institutions. The FDIC made no attempt, however, to identify

all types of systems. Moreover, the FDIC made no attempt to analyze

systems offered by particular insured depository institutions. Rather,

the FDIC described a mechanism or framework for determining when the

funds underlying stored value cards may or may not qualify as

``deposits.'' See 61 FR 40490. This framework was based upon

information available to the FDIC in 1996. Since that time, the banking

industry has developed new types of stored value cards.

In GC8, the FDIC identified four types of stored value card

systems: (1) A ``Bank Primary-Reserve System''; (2) a ``Bank Primary-

Customer Account System''; (3) a ``Bank Secondary-Advance System''; and

(4) a ``Bank Secondary-Pre-Acquisition System.'' Each of these systems

is summarized below.

In a ``Bank Primary-Reserve System,'' the insured depository

institution issues stored value cards in exchange for cash from the

cardholders. The depository institution does not maintain an individual

account for each cardholder; rather, the institution maintains a pooled

``reserve account'' for all cardholders. In making payments to

merchants or other payees (as the cardholders use their cards to

purchase goods or services), the depository institution disburses funds

from this ``reserve account.'' In GC8, the FDIC determined that such

funds held by the insured depository institution do not satisfy the

statutory definition of ``deposit'' at section 3(l) of the FDI Act. In

making this determination, the FDIC specifically addressed the

applicability of paragraphs 3(l)(1) and 3(l)(3) (quoted above). First,

in finding that the funds do not satisfy paragraph 3(l)(1), the FDIC

found that the stored value cards are not structured so that the

institution credits a conventional commercial, checking, savings, time

or thrift account. Rather, the institution credits the pooled ``reserve

account.'' See 61 FR 40490. The FDIC noted that ``the sample agreements

which the FDIC staff has reviewed clearly indicate that the parties to

a stored value card agreement * * * do not intend that the funds be

credited to one of the five enumerated accounts.'' Id. Second, in

finding that the funds do not satisfy paragraph 3(l)(3), the FDIC

determined that the purpose of the funds is not sufficiently ``special

or specific'' because the funds might be disbursed to any number of

merchants as the cardholders use their cards to engage in miscellaneous

and unrelated transactions. See 61 FR 40490. The FDIC noted that the

holding of funds by a depository institution to meet obligations to

numerous transferees does not appear to be as specific a purpose as the

examples in the statute and case law. See id. The FDIC concluded that

the funds in this type of system are not ``deposits.'' See 61 FR 40490.


 

[[Page 20560]]


 

A ``Bank Primary-Customer Account System'' is similar to a ``Bank

Primary-Reserve System'' in that the insured depository institution

issues stored value cards in exchange for cash from the cardholders.

The accounting techniques in the two systems, however, are different.

In a ``Bank Primary-Customer Account System,'' the depository

institution does not maintain a pooled ``reserve account'' for all

cardholders. Rather, the institution maintains an individual account

for each cardholder. Citing paragraph 3(l)(1) of the statutory

definition (quoted above), the FDIC in GC8 determined that the funds in

these individual accounts are ``deposits.'' See 61 FR 40490.

In a ``Bank Secondary-Advance System,'' the insured depository

institution acts as an intermediary in collecting funds from

cardholders in exchange for stored value cards issued by a third party

or sponsoring company. The funds are held by the depository institution

for a short period of time, then forwarded to the third party. See 61

FR 40490. Later, when the cardholder uses the stored value card to make

a purchase from a merchant, the third party (and not the depository

institution) sends the appropriate amount of money to the merchant. In

GC8, the FDIC determined that the funds collected by the depository

institution are ``deposits'' belonging to the third party for the brief

period before the funds are forwarded to the third party. The funds are

not ``deposits'' belonging to the cardholders because the institution's

liability for these funds is owed to the third party for whom the

institution is temporarily holding the funds. See 61 FR 40490.

Similarly, in a ``Bank Secondary-Pre-Acquisition System,'' the

insured depository institution provides cardholders with cards issued

by a third party or sponsoring company. Prior to selling the cards to

the cardholders, however, the depository institution purchases the

cards from the third party. See 61 FR 40490. In this respect, the

system is different than a ``Bank Secondary-Advance System.'' When the

depository institution resells the cards to the cardholders, no money

is owed to the third party. For this reason, the depository institution

is free to retain the funds collected from the cardholders. Later, when

a cardholder uses his/her stored value card to make a purchase from a

merchant, the third party and not the depository institution sends the

appropriate amount of funds to the merchant.

In GC8, the FDIC determined that the funds collected by the

depository institution in a ``Bank Secondary-Pre-Acquisition System''

are not ``deposits.'' See 61 FR 40490. This conclusion was based upon

the fact that the depository institution, in collecting funds from

cardholders, does not assume a responsibility to return or disburse the

funds to the cardholders or the third party or any other party. Rather,

the depository institution merely sells the right to collect funds from

the third party (i.e., the issuer of the cards). Thus, the funds

underlying the stored value cards are held by the third party, not the

depository institution. Under these circumstances, no ``deposits''

exist at the depository institution. See 12 U.S.C. 1813(l)(1) (defining

``deposit'' as an ``unpaid balance of money or its equivalent''); 12

U.S.C. 1813(l)(3) (providing that the term ``deposit'' does not include

``funds which are received by the bank or savings association for

immediate application to the reduction of an indebtedness to the

receiving bank or savings association, or under condition that the

receipt thereof immediately reduces or extinguishes such an

indebtedness'').


 

IV. New Types of Stored Value Cards


 

As a result of developments in the banking industry, the

classification scheme described in the previous section is at a minimum

incomplete, and may be obsolete. That is, this classification scheme

does not include all types of stored value card systems involving

insured depository institutions. Examples of new types of systems are

described below:

Example A: A sponsoring company issues cards to cardholders in

exchange for cash. The company then places the cash into an account at

an insured depository institution. Through an agreement between the

company and the depository institution, the account is designated as a

``reserve account.'' The company uses the funds in the self-described

``reserve account'' to make payments to merchants as the cardholders

use their cards. In this manner, the company satisfies its obligations

as the issuer of the cards.

Example B: Through kiosks at retail stores, an insured depository

institution issues cards to cardholders in exchange for cash. In

connection with the issuance of these cards, the depository institution

maintains a self-described ``reserve account.'' At the same time, the

institution maintains an individual account or subaccount for each

cardholder. When a cardholder uses his/her card to purchase goods or

services from a merchant, the ``reserve account'' is debited and the

individual account or subaccount also is debited. Account statements

are made available to the cardholders so that they may check their

balances.

Example C: In paying wages to its employees, a company distributes

``payroll cards'' in lieu of checks. Prior to the distribution of the

cards, the company places funds at an insured depository institution.

Briefly, the funds are held in a self-described ``funding account.''

After the distribution of the cards (on payday), however, the funds are

transferred to individual accounts for the various employees. When an

employee uses his/her card to purchase goods or services, funds are

disbursed from the employee's individual account to the merchant.

None of the cards or systems described above was addressed in GC8.

In Example A, the system is similar to a ``Bank Primary-Reserve

System'' in that the insured depository institution maintains a

``reserve account.'' The system is different, however, in that the

issuer of the cards is a sponsoring company and not the insured

depository institution.

In Example B, the system is similar to a ``Bank Primary-Reserve

System'' in that the insured depository institution maintains a

``reserve account.'' The system is different, however, in that the

depository institution also maintains an account or subaccount for each

cardholder. In this respect, the system is similar to a ``Bank Primary-

Customer Account System.''

Finally, in Example C, the system is different than the systems

described in GC8 because none of the systems in GC8 involved the

payment of wages by an employer. The involvement of the employer raises

questions as to (1) whether the issuer of the cards is the employer as

opposed to the depository institution; and (2) whether the owner of the

funds placed at the depository institution is the employer as opposed

to the employees.

The examples above may or may not be typical. Possibly, the stored

value card systems offered by some banks differ from the systems above

in a variety of ways. For instance, a ``payroll card'' system might

exist in which the funds are not transferred to individual accounts.

Rather, the system might be designed so that the funds are held in a

pooled ``reserve account.'' This pooled account might or might not

include individual subaccounts. The cardholders might or might not

receive periodic statements. The cardholders might or might not possess

the ability to reload their cards. The possibilities are numerous.

In any event, GC8 did not address all types of stored value card

systems involving insured depository


 

[[Page 20561]]


 

institutions. Additional guidance is needed as to whether the

underlying funds held by depository institutions qualify as

``deposits.'' Below, this issue is discussed in connection with the

three types of systems described in the examples above.


 

A. Accounts Funded by Sponsoring Companies


 

A type of system not addressed in GC8 is a system in which (1)

Consumers place funds with a sponsoring company in exchange for stored

value cards; and (2) in order to make payments on the stored value

cards, the sponsoring company maintains an account at an insured

depository institution. In this system, the issuer of the cards is the

sponsoring company (as in the ``Bank Secondary-Advance System'' and the

``Bank Secondary-Pre-Acquisition System'') and not the depository

institution.

The question is whether the funds placed at the insured depository

institution, in this type of system, are ``deposits'' as defined at

section 3(1) of the FDI Act. For the reasons explained below, the FDIC

believes that the funds are ``deposits'' under paragraph 3(1)(1) and

paragraph 3(1)(3).

Paragraph 3(1)(1). As previously quoted, paragraph 3(1)(1) defines

``deposit'' as ``[t]he unpaid balance of money or its equivalent

received or held by a bank or savings association in the usual course

of business and for which it has given or is obligated to give credit,

either conditionally or unconditionally, to a commercial, checking,

savings, time, or thrift account. * * *'' 12 U.S.C. 1813(1)(1). In the

case of an account funded by a sponsoring company for the purpose of

making payments on stored value cards, the account is a ``commercial

account'' under this paragraph because the account is owned for a

commercial purpose by a commercial enterprise (i.e., the sponsoring

company). The account is not a non-deposit ``general liability

account'' maintained by the depository institution. See 61 FR 40490

(recognizing a distinction between a ``commercial, checking, savings,

time, or thrift account'' under paragraph 3(1)(1) and a ``general

liability account'').

Paragraph 3(1)(3). As previously quoted, paragraph 3(1)(3) provides

that the term ``deposit'' includes ``money received or held by a bank

or savings association, or the credit given for money or its equivalent

received or held by a bank or savings association, in the usual course

of business for a special or specific purpose, regardless of the legal

relationship thereby established, including without being limited to *

* * funds deposited by a debtor to meet maturing obligations. * * * ''

12 U.S.C. 1813(1)(3). In GC8, the FDIC found that this paragraph is not

satisfied by a pooled ``reserve account'' funded by multiple

cardholders for the purpose of engaging in miscellaneous unrelated

transactions. See 61 FR 40490. In the case of an account funded by a

sponsoring company, however, paragraph 3(1)(3) is satisfied because the

single intended purpose is to hold the funds for the sponsoring

company. Under paragraph 3(1)(3), this ``special or specific purpose''

means that the liabilities represented by the account at the insured

depository institution (whether or not the account is described as a

``reserve account'') are ``deposits.''

The conclusion above is supported by the case law. The purpose of

funding stored value cards is no less ``special or specific'' than the

purposes recognized by the courts as ``special or specific.'' See

Seattle-First National Bank v. FDIC, 619 F. Supp. 1351 (W.D. Okla.

1985) (funding a participated loan is a ``special or specific

purpose''); FDIC v. European American Bank & Trust Co., 576 F. Supp.

950 (S.D.N.Y. 1983) (funding an interbank clearinghouse payment is a

``special or specific purpose''). The conclusion above is supported by

GC8 as well. See 61 FR 40490 (even in the case of a ``reserve account''

funded by cardholders, the funds are ``deposits'' if each cardholder's

``ultimate payee can only be one predetermined party''). Finally, the

conclusion above is supported by one of the examples of a ``deposit''

specifically mentioned in paragraph 3(l)(3): ``funds deposited by a

debtor to meet maturing obligations.'' In the case of an account funded

by a sponsoring company, the funds are equivalent to ``funds deposited

by a debtor to meet maturing obligations'' because the funds are

deposited by the sponsoring company to meet that company's obligations

to the cardholders as the cardholders use their cards.

In conclusion, the FDIC believes that funds placed at an insured

depository institution by a sponsoring company for the purpose of

making payments on stored value cards are ``deposits.'' This conclusion

is incorporated in the proposed rule.

A separate question is whether the ``deposits'' in such a system

can be insured on a ``pass-through'' basis to the cardholders (as

opposed to being insured to the sponsoring company). Under the FDIC's

insurance regulations, funds deposited by an agent or custodian on

behalf of a principal or principals are insured not to the agent but to

the principal(s) (in aggregation with any other deposits owned by the

principal(s) at the same insured depository institution). See 12 CFR

330.7(a). In other words, the insurance coverage ``passes through'' the

agent to the principal(s). Such ``pass-through'' coverage is not

available, however, unless certain requirements are satisfied. First,

the fiduciary status of the nominal accountholder must be disclosed in

the deposit account records of the insured depository institution. See

12 CFR 330.5(b)(1). Second, the interests of the principals or actual

owners must be ascertainable either from the account records of the

insured depository institution or records maintained in good faith by

the agent or other party. See 12 CFR 330.5(b)(2). Third, the agency or

custodial relationship must be genuine. Through this relationship, the

deposit actually must belong not to the nominal agent but to the

alleged owners. See 12 CFR 330.3(h); 12 CFR 330.5(a)(1).

Under the rules summarized above, an account funded by a sponsoring

company for the purpose of making payments to cardholders cannot be

insured on a ``pass-through'' basis to the cardholders unless (1) the

account records reflect a custodial relationship between the sponsoring

company and the cardholders (e.g., ``Sponsoring Company as Custodian

for Cardholders''); (2) the depository institution or the sponsoring

company or some other party maintains records reflecting the interest

of each cardholder; and (3) the deposit is owned in fact by the

cardholders.

Satisfaction of the third requirement will depend upon the

agreements between the sponsoring company and the cardholders. One

factor would be whether the sponsoring company retains the right to

recover the funds under certain circumstances (e.g., upon the

expiration of a card). Such a right would indicate that the funds in

the account actually belong to the sponsoring company, not the

cardholders. If the funds belong to the sponsoring company, ``pass-

through'' coverage will be unavailable.


 

B. Pooled ``Reserve Accounts'' With Individual Subaccounts


 

As previously discussed, the FDIC in GC8 identified two types of

systems in which the stored value cards are issued by an insured

depository institution. These systems are the ``Bank Primary-Reserve

System'' and the ``Bank Primary-Customer Account System.'' In the

former system, the insured depository institution maintains a pooled

``reserve account'' for all cardholders. In the latter system, the


 

[[Page 20562]]


 

insured depository institution maintains an individual account for each

cardholder. Under GC8, only the funds in the latter system are

``deposits.''

The FDIC has learned that some insured depository institutions have

combined the two systems in issuing stored value cards. The hybrid

system used by these depository institutions is similar to a ``Bank

Primary-Reserve System'' in that the institution maintains a pooled

self-described ``reserve account'' for all cardholders. On the other

hand, the system also is similar to a ``Bank Primary-Customer Account

System'' in that the institution maintains a subaccount for each

cardholder. In some cases, the depository institution maintains the

subaccounts through a processing agent. In this notice of proposed

rulemaking, the term ``subaccount'' is used to mean any supplemental

records maintained by the insured depository institution (directly or

through an agent) that enable the institution to determine the amounts

of money owed to particular persons (i.e., that enable the institution

to calculate a balance for each of the persons who holds a card).

Through this notice of proposed rulemaking, the FDIC is proposing

to treat the funds in a hybrid system (i.e., a system in which a

``reserve account'' is supplemented by subaccounts) as ``deposits.''

An argument could be made that the funds in a hybrid system should

not be treated as ``deposits'' because neither the pooled ``reserve

account'' nor any of the individual subaccounts in a hybrid system is a

conventional ``commercial, checking, savings, time, or thrift account''

as those terms are interpreted in GC8. Therefore, under the reasoning

in GC8, it could be argued that the funds are not ``deposits'' under

paragraph 3(l)(1) of the statutory definition. See 61 FR 40490.

Moreover, the funds are used by the bank customers to engage in

miscellaneous and unrelated transactions. Under the logic set forth in

GC8, it could be argued that the funds are not ``deposits'' under

paragraph 3(l)(3). See 61 FR 40490.

On the other hand, the FDIC in GC8 applied paragraph 3(l)(3) to

pooled ``reserve accounts'' but never applied paragraph 3(l)(3) to

individual accounts or subaccounts. In the case of a ``Bank Primary-

Customer Account System,'' the FDIC did not apply paragraph 3(l)(3) to

the individual accounts because the FDIC assumed that the individual

accounts would be conventional ``commercial, checking, savings, time,

or thrift accounts'' and therefore ``deposits'' under paragraph

3(l)(1). See 61 FR 40490. Even if the individual accounts in a ``Bank

Primary-Customer Account System'' or hybrid system are not conventional

``commercial, checking, savings, time, or thrift accounts'' as those

terms are interpreted in GC8, an argument can be made that the funds in

each of these accounts or subaccounts are ``deposits'' under paragraph

3(l)(3) because they are held by the insured depository institution for

the ``special or specific purpose'' of satisfying the institution's

obligations to a specific customer, i.e., the cardholder. In fact, the

FDIC staff has endorsed this legal analysis in a published advisory

opinion involving a stored value product. See FDIC Advisory Opinion No.

97-4 (May 12, 1997).

Moreover, in a hybrid system, the fact that the pooled self-

described ``reserve account'' may not qualify as a ``commercial,

checking, savings, time, or thrift account'' under paragraph 3(l)(1)

does not mean that the individual subaccounts do not qualify as

``commercial, checking, savings, time, or thrift accounts'' under

paragraph 3(l)(1).

In summary, the funds in a hybrid system qualify as ``deposits''

under paragraph 3(l)(3) and paragraph 3(l)(1). Accordingly, the FDIC is

proposing to treat the funds in a hybrid system as ``deposits.''

Comments are requested.


 

C. ``Payroll Cards''


 

Another new type of stored value card is the ``payroll card.'' In

paying wages, some employers are distributing ``payroll cards'' to

their employees in lieu of checks.

Prior to the distribution of the cards, the employer places funds

at an insured depository institution. After the distribution of the

cards, the employees may withdraw the funds by using their cards.

Specifically, the employees may withdraw the funds at automated teller

machines or transfer the funds to merchants through the merchants'

point of sale terminals.

The FDIC's staff position with respect to ``payroll cards'' is set

forth in FDIC Advisory Opinion No. 02-03 (August 16, 2002). In that

opinion, the staff addressed the question of whether the funds placed

at the insured depository institution by the employer are insurable on

a ``pass-through'' to the employees. As explained in that opinion, the

issue depends upon the actual ownership of the funds. If the funds

belong to the employer (as in the case of a traditional corporate

payroll account), the funds are insurable to the employer. In other

words, in the event of the failure of the insured depository

institution, the funds would be aggregated with the employer's other

funds (if any) at the same insured depository institution and insured

up to $100,000. See 12 CFR 330.11(a) (providing that the deposit

accounts of a corporation are added together and insured up to

$100,000). On the other hand, the funds would be insurable on a ``pass-

through'' basis to the employees (assuming the satisfaction of the

FDIC's requirements for ``pass-through'' insurance coverage as

previously explained) if ownership of the funds has passed to the

employees (as in the case of direct deposits made by an employer on

behalf of employees) prior to the failure of the insured depository

institution.

The actual ownership of the funds would depend upon the agreement

between the parties. One factor would be whether the employer retains a

reversionary interest in the funds (e.g., in the event of the

expiration of a card). The retention of a reversionary interest would

indicate that the funds actually belong to the employer and not the

employees.

As explained above, the issue addressed in FDIC Advisory Opinion

No. 02-03 was whether deposits underlying certain ``payroll cards''

were eligible for ``pass-through'' insurance coverage to the employees.

In contrast, the issue addressed by this proposed rulemaking is whether

certain funds qualify as ``deposits.'' The two issues are distinct. The

former issue (whether coverage is limited to $100,000 in aggregation

with the employer's other deposits) may be moot depending upon the

resolution of the latter issue (whether the funds qualify as

``deposits'').

In regard to the former issue as to the insurance coverage of

deposits underlying ``payroll cards,'' this proposed rulemaking does

not conflict with FDIC Advisory Opinion No. 02-03. In fact, the

proposed rule includes no special provisions dealing with ``payroll

cards.'' Likewise, the proposed rule includes no special provisions

dealing with ``prepaid cards'' or ``debit cards'' or ``check cards.''

Rather, the proposed rule would apply equally to all types of stored

value bank cards. Under the proposed rule, the funds underlying all

such types of cards--including ``payroll cards''--would be ``deposits''

except under the following circumstances: (1) The issuer of the cards

(i.e., the party that promises to make payments on the cards) is the

insured depository institution (and not the employer or other

sponsoring company); and (2) the depository institution maintains a

pooled ``reserve account'' but maintains no subaccounts or other

supplemental records reflecting the amount of money owed to particular

cardholders.


 

[[Page 20563]]


 

In a case involving ``payroll cards,'' the FDIC would apply the

proposed rule in determining whether the underlying funds qualify as

``deposits.'' If a determination is made that the funds are

``deposits,'' the FDIC then would apply the principles set forth in

FDIC Advisory Opinion No. 02-03 in determining whether the deposits are

entitled to ``pass-through'' insurance coverage.

Comments are requested as to whether the treatment outlined above

is the appropriate treatment of funds underlying ``payroll cards'' and

other types of stored value bank cards.

Whether funds underlying stored value bank cards are ``deposits''

has implications in a number of areas, including but not limited to

those discussed below.


 

V. Acquisitions and Mergers


 

Section 3(d) of the Bank Holding Company Act (``BHC Act'') and

section 44(b) of the FDI Act allow the appropriate federal banking

agency to approve an interstate bank acquisition or merger only if,

among other things, the resulting organization and its affiliates, upon

consummation, would not control more than 10 percent of the total

amount of ``deposits'' of insured depository institutions in the United

States. See 12 U.S.C. 1831u(b); 12 U.S.C. 1842(d). For purposes of this

restriction, the term ``deposit'' is defined by reference to section

3(l) of the FDI Act. See 12 U.S.C. 1842(d)(2)(E). Comments are

requested on whether this rulemaking could materially affect the

operation of the deposit limit on interstate acquisitions or mergers

under section 3(d) of the BHC Act or section 44(b) of the FDI Act.


 

VI. The Definition of ``Stored Value Card''


 

In GC8, the FDIC described a ``stored value card'' as follows: ``A

stored value card stores information electronically on a magnetic

stripe or computer chip and can be used to purchase goods or services.

The balance recorded on the card is debited at a merchant's point of

sale terminal when the consumer makes a purchase.'' 61 FR 40490.

Some stored value card systems may be designed in such a manner

that a balance is not recorded on the card itself through a magnetic

stripe or computer chip. Rather, the system might be designed so that

the cardholder or merchant must contact the bank to determine the

cardholder's balance. In any event, a stored value card is a device

that enables the cardholder to transfer the underlying funds (i.e., the

funds received by the issuer of the card in exchange for the issuance

of the card) to a merchant at the merchant's point of sale terminal.

As explained in GC8, stored value cards may be ``loaded'' in a

variety of ways. If the cards are issued by a sponsoring company, a

card will be ``loaded'' when the cardholder gives cash to the

sponsoring company (directly or through the sponsoring company's

receiving agent) in exchange for the card. If the cards are issued by

an insured depository institution, a card will be ``loaded'' when (1)

The cardholder gives cash to the depository institution in exchange for

the card; or (2) the cardholder directs the depository institution to

draw funds from a pre-existing account in exchange for the card. Some

cards are ``reloadable''; others are not. See id.

A stored value card is not cash. Rather, a stored value card is a

device that stores information electronically (e.g., on a magnetic

stripe or computer chip). A stored value card enables a consumer to

transfer the underlying funds (i.e., the funds received by the issuer

of the card in exchange for the issuance of the card) to a merchant at

the merchant's point of sale terminal. When used by a consumer, a

stored value card (or the information on the card) moves through a

``clearing'' process. In GC8, the FDIC explained this point as follows:

``Although it may not be apparent to the consumer, a stored value card

transaction must typically move through a complex payment system before

a payment is completed. Moreover, what is actually stored on stored

value cards is information that, through the use of programmed

terminals, advises a prospective payee that rights to a sum of money

can be transferred to the payee, who in turn can exercise such right

and be paid.'' 61 FR 40490.

Different types of stored value cards function in different ways.

For example, a stored value card transaction may be ``on-line'' in that

the card may provide direct access to a database for the purpose of

obtaining payment authorization. On the other hand, the transaction may

be ``off-line'' in that the card may not provide direct access to a

database. Rather, information concerning the transaction may be

captured at the merchant's point of sale terminal and then

transmitted--after some delay--to a data facility. See 61 FR 19696 (May

2, 1996). In either case, ``clearing'' will occur when payment is made

to the merchant by the insured depository institution.

For purposes of this proposed rulemaking, the distinction between

``on-line'' transactions and ``off-line'' transactions is unimportant.

The distinction that matters to the FDIC is whether the stored value

card provides access (directly or indirectly) to money received and

held by an insured depository institution. Assuming that money is held

by an insured bank, the proposed rule would govern the question of

whether the money qualifies as ``deposits.'' In the absence of any such

money, however, the existence of ``deposits'' is impossible. See FDIC

v. Philadelphia Gear Corporation, 106 S. Ct. 1931 (1986). Thus, the

proposed rule would not apply to a ``closed'' stored value card system

(such as a ``gift card'' system sponsored by a retailer) in which the

merchant receives prepayment from the cardholder and does not receive

payment through a bank. See footnote 1, supra.\3\

---------------------------------------------------------------------------


 

\3\ In a ``closed'' system sponsored by a retailer, the

possibility may exist that data-processing is provided by an insured

depository institution. This circumstances would not affect the

conclusion above that the funds are not ``deposits'' provided that

the funds are not received or held by the insured depository

institution.

---------------------------------------------------------------------------


 

The description of a ``stored value card'' in GC8 has been used in

defining ``stored value card'' in the proposed rule. Comments are

requested on the proposed definition.


 

VII. Insurance Coverage


 

The proposed regulation does not set forth any special rules

regarding the insurance coverage of any ``deposits'' underlying stored

value cards. Rather, the proposed regulation merely states that the

insurance coverage of any such ``deposits'' shall be governed by the

FDIC's insurance regulations at 12 CFR part 330.

Under the FDI Act and the insurance regulations, the FDIC must

aggregate all ``deposits'' owned by a particular depositor in a

particular ownership capacity in applying the $100,000 insurance limit.

See 12 U.S.C. 1821(a)(1)(C); 12 CFR 330.3(a). In identifying the owners

of ``deposits'' for insurance purposes, the FDIC is entitled to rely

upon the account records of the failed insured depository institution.

See 12 U.S.C. 1822(c); 12 CFR 330.5. The application of these basic

principles may be difficult in the case of ``deposits'' underlying

certain stored value cards. For example, an insured depository

institution might offer a type of stored value card that can be

transferred from the original purchaser to some other person. Assuming

the existence of such transferable cards, the depository institution

might keep records as to the identities of the original purchasers but

no records as to the ultimate cardholders. In the absence of such


 

[[Page 20564]]


 

records, the FDIC may be unable to identify the ultimate cardholder in

the event of the failure of the institution. In light of such

possibilities, comments are requested as to whether the FDIC should

adopt any special rules governing the insurance coverage of any

``deposits'' underlying stored value cards or other stored value

products.

Of course, insurance coverage will not be an issue if the funds do

not qualify as ``deposits'' under the proposed rule. As previously

explained, the funds will not be ``deposits'' if (1) the issuer of the

cards is the insured depository institution (and not a sponsoring

company); and (2) the depository institution maintains a pooled

``reserve account'' but maintains no subaccounts or supplemental

records reflecting the amount of money owed to particular cardholders

(i.e., the institution maintains no supplemental records reflecting the

amount of money owed to the original cardholder or any subsequent

cardholder in the case of a transferable card).


 

VIII. Required Disclosures


 

In a press release dated June 24, 1997 (PR-44-97), subsequent to

the issuance of GC8, the FDIC stated that it ``expects insured

depository institutions to clearly and conspicuously disclose to

customers the insured or non-insured status of the stored-value cards

they offer to the public.''

The FDIC continues to be concerned that some purchasers of stored

value cards may not understand whether the funds given to an insured

depository institution in exchange for such cards are covered by

federal deposit insurance. In order to avoid confusion on the part of

customers, depository institutions must accurately disclose the

insurability of the funds underlying any stored value product in a

manner that is clear and conspicuous. For example, in cases in which

the funds qualify as ``deposits,'' the cards might include the

following statement: ``Member FDIC--Funds accessible by this card are

insured by the Federal Deposit Insurance Corporation.'' On the other

hand, in cases in which the funds do not qualify as ``deposits,'' the

cards might include this statement: ``NOT FDIC INSURED--Funds

accessible by this card are NOT insured by the Federal Deposit

Insurance Corporation.'' In addition, any advertisements for the stored

value product (including written materials provided by the depository

institution when a card is delivered to a consumer) must state whether

the underlying funds are insured by the FDIC. Also, any advertisements

for insured ``deposit'' products must comply with the membership

advertisement requirements of 12 CFR 328.3.

In the case of cards issued by sponsoring companies (and not issued

by an insured depository institution), the company should not suggest

that the customer will be protected by the FDIC. Even if the sponsoring

company maintains an account at an FDIC-insured depository institution

for the purpose of making payments on its cards, the company should

make no representations about FDIC insurance to the customer because

the insured depositor will be the company and not the customer (unless

the FDIC's requirements for ``pass-through'' insurance coverage have

been satisfied as previously explained). False representations about

FDIC insurance could be subject to criminal penalties. See 18 U.S.C.

709.

Although the proposed regulation does not set forth any new

specific disclosure requirements, the FDIC seeks comments on this

subject. Specifically, the FDIC requests comments as to whether the

proposed rule ought to mandate the disclosures detailed above (or

similar disclosures).


 

Request for Comments


 

The FDIC is seeking comments on whether the agency should adopt a

regulation to clarify the meaning of the term ``deposit'' as that term

relates to funds at insured depository institutions underlying stored

value cards. Under the proposed regulation, the funds would be

``deposits'' unless (1) the institution itself has issued the cards

against a pooled ``reserve account'' representing multiple cardholders;

and (2) the institution maintains no supplemental records or

subaccounts reflecting the amount owed to each cardholder.

Comments are requested on the proposed rule. Commenters may wish to

address each of the following specific questions:

1. Should the FDIC promulgate a new section to part 303 to clarify

the meaning of ``deposit'' as that term relates to funds at insured

depository institutions underlying stored value cards?

2. If so, should the FDIC adopt the proposed rule? Why?

3. In the alternative, should the FDIC adopt some other rule? Under

what circumstances should funds received by an insured depository

institution not be insurable as ``deposits''?

4. What should be the treatment of funds underlying ``payroll

cards''?

5. Will the proposed rule affect the operation of the deposit

limitations in section 3(d) of the Bank Holding Company Act or section

44(b) of the FDI Act?

6. Should the FDIC adopt the proposed definition of ``stored value

card''? Can this definition be improved? What are the differences (if

any) between ``stored value cards'' and other types of bank cards such

as ``prepaid cards,'' ``debit cards,'' ``check cards'' and ``payroll

cards''?

7. Should the FDIC adopt specific disclosure requirements? If so,

do the disclosures provided as examples in the preamble adequately

address consumer confusion about the insurability of funds underlying

stored value products? Are there ways to reduce the costs or burdens

associated with providing disclosures about the insurability of such

funds?

8. Should the FDIC adopt any special rules governing the insurance

coverage of any ``deposits'' underlying stored value cards?

9. Are insured depository institutions offering stored value

products or systems that are not addressed in this notice of proposed

rulemaking? Please explain.

10. In the case of a stored value card system in which the cards

are issued by an insured depository institution, and the depository

institution maintains a pooled ``reserve account'' reflecting its

liabilities for all cards but does not maintain individual accounts or

subaccounts reflecting its liabilities to individual cardholders, how

does the institution keep track of its liabilities? What technology is

used? How does the institution know when and whether to make payments

to merchants?


 

Paperwork Reduction Act


 

The FDIC believes that insured depository institutions--in issuing

stored value cards--must make clear and accurate disclosures as to

whether the underlying funds are insured. The subject of disclosures is

discussed in Section VIII.

Requiring the disclosure of information to the public may qualify

as a ``collection of information'' for purposes of the Paperwork

Reduction Act (44 U.S.C. 3501 et seq.). See 5 CFR 1320.3(c). In this

case, however, the required disclosure is not a ``collection of

information'' because the FDIC (in Section VIII) is providing specific

language that insured depository institutions may use in disclosing

information to the public. See 5 CFR 1320.3(c)(2). Moreover, insured

depository institutions must ascertain the information in question--

whether funds underlying stored value cards qualify as ``deposits''--in

completing


 

[[Page 20565]]


 

their Call Reports. Thus, nothing in this notice of proposed rulemaking

requires an insured depository institution to collect information that

the institution otherwise would not collect.

In summary, no collections of information pursuant to the Paperwork

Reduction Act are contained in the proposed rule. Consequently, no

information has been submitted to the Office of Management and Budget

for review.


 

Regulatory Flexibility Act


 

Request for Comments

In accordance with section 3(a) of the Regulatory Flexibility Act

(5 U.S.C. 603(a)), the FDIC must publish an initial regulatory

flexibility analysis with this proposed rulemaking or certify that the

proposed rule, if adopted, will not have a significant economic impact

on a substantial number of small entities. For purposes of the required

analysis or certification, depository institutions with total assets of

$150 million or less are considered to be ``small entities.''

For the reasons set forth below, the FDIC hereby certifies pursuant

to 5 U.S.C. 605(b) that the proposed rule, if adopted, will not have a

significant economic impact on a substantial number of small entities.


 

Economic Impact


 

This proposed rulemaking is not intended to apply to any issue

except the meaning of ``deposit'' under the FDI Act. Though this

rulemaking may affect the manner in which some insured depository

institutions report ``deposits'' in their Call Reports, the rulemaking

generally will not impose new obligations on insured depository

institutions because such institutions--irrespective of this

rulemaking--must file Call Reports.

Notwithstanding the above, the FDIC may be imposing new obligations

on insured depository institutions in directing such institutions--when

issuing stored value cards--to make clear and conspicuous disclosures

as to whether the underlying funds are insured. The subject of

disclosures is discussed in Section VIII. The FDIC believes that clear,

conspicuous disclosures are necessary in order to prevent confusion on

the part of the public. See 12 U.S.C. 1819 (investing the FDIC with

general rulemaking authority with respect to deposit insurance). In any

event, the FDIC believes that the cost of adding clear and conspicuous

disclosures to stored value cards will not result in a significant

economic impact on a substantial number of small entities. This

conclusion is based upon the fact that the cost will involve the design

of a depository institution's stored value cards, not the production of

such cards. Adding a one-sentence disclosure to a card should involve

at most only a minimal cost. Indeed, the addition of a clear and

conspicuous disclosure about insurance coverage may reduce the

institution's costs in answering questions from the public about FDIC

insurance coverage.

Although this proposed rulemaking should not create a significant

adverse economic impact on an insured depository institution, and may

even result in a modest net benefit, the FDIC believes that insured

depository institutions should be given an opportunity to provide

comments on the subject. Accordingly, comments are requested (see

below).

The FDIC is not aware of any Federal rules that would duplicate,

overlap or conflict with a requirement that stored value cards issued

by insured depository institutions must include clear and conspicuous

disclosures about insurance coverage.


 

Request for Comments


 

The FDIC requests comments as to the cost of adding a clear and

conspicuous disclosure about insurance coverage to stored value cards

issued by insured depository institutions. Commenters may wish to

address the following: (1) The number of small entities that are

issuing stored value cards or may issue stored value cards; (2) the

manner and impact of adding a clear and conspicuous disclosure about

insurance coverage to stored value cards; and (3) alternative methods

of preventing confusion on the part of the public.


 

Impact on Families


 

The proposed rule would not affect family well-being within the

meaning of section 654 of the Treasury and General Government

Appropriations Act, enacted as part of the Omnibus Consolidated and

Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105-277, 112

Stat. 2681).


 

List of Subjects in 12 CFR Part 303


 

Administrative practice and procedures, Authority delegations

(Government agencies), Banks, Banking, Bank merger, Branching, Foreign

investments, Golden parachute payments, Insured branches, Interstate

branching, Reporting and recordkeeping requirements, Savings

associations.

For the reasons set forth in the preamble, the Board of Directors

of the Federal Deposit Insurance Corporation proposes to amend part 303

of Title 12 of the Code of Federal Regulations as follows:


 

PART 303--FILING PROCEDURES


 

1. The authority citation for part 303 continues to read as

follows:


 

Authority: 12 U.S.C. 378, 1813, 1815, 1816, 1817, 1818, 1819

(Seventh and Tenth), 1820, 1823, 1828, 1831a, 1831e, 1831o, 1831p-1,

1835a, 3104, 3105, 3108, 3207; 15 U.S.C. 1601-1607.


 

2. New Sec. 303.16 is added to read as follows:



 

Sec. 303.16 The definition of ``deposit'' as that term relates to

funds underlying stored value cards


 

(a) Purpose. The term ``deposit'' is defined in section 3(l) of the

Federal Deposit Insurance Act (12 U.S.C. 1813(l)). The purpose of this

section is to clarify the meaning of ``deposit'' as that term relates

to funds at insured depository institutions underlying stored value

cards.

(b) Funds received from cardholders, or funds received from others

on behalf of cardholders or for payment to cardholders, in exchange for

stored value cards issued by the insured depository institution. In the

case of funds received by an insured depository institution from

cardholders, or funds received from others on behalf of cardholders or

for payment to cardholders, in exchange for stored value cards issued

by the depository institution, the funds are ``deposits'' unless:

(1) The depository institution records its liabilities for such

funds in an account representing multiple cardholders; and

(2) The depository institution (directly or through an agent)

maintains no supplemental records or subaccounts reflecting the amount

owed to each cardholder. Nothing in this subparagraph (b)(2) is

intended to suggest that an insured depository institution may ignore

any law or regulation that may otherwise require the depository

institution to maintain records reflecting the amount owed to each

cardholder.

(c) Funds received from cardholders in exchange for stored value

cards issued by a sponsoring company. In the case of funds received by

an insured depository institution from cardholders in exchange for

stored value cards issued by a company (``sponsoring company'') and not

issued by the insured depository institution (i.e., the insured

depository institution serves as an agent of the sponsoring company in

collecting funds and distributing cards), the funds shall be classified

as follows:


 

[[Page 20566]]


 

(1) The funds are ``deposits'' if the depository institution bears

an obligation to forward the funds to the sponsoring company or to hold

the funds for the sponsoring company. After the forwarding of such

funds to the sponsoring company, or the withdrawal of such funds by the

sponsoring company from the depository institution, the funds shall

cease to be ``deposits'' at the depository institution.

(2) The funds are not ``deposits'' if the depository institution

bears no obligation to forward or hold the funds (e.g., the depository

institution purchases the cards from the sponsoring company and then

resells the cards to the cardholders).

(d) Funds placed by sponsoring companies. In the case of funds

placed at an insured depository institution by a sponsoring company for

the purpose of making payments on stored value cards issued by that

company, the funds are ``deposits.''

(e) Insurance coverage. In the case of any funds that qualify as

``deposits'' under this section, the insurance coverage of such funds

shall be governed by the rules set forth in part 330 of this chapter.

(f) Definition of ``stored value card.'' For the purposes of this

section, the term ``stored value card'' means a device that enables the

cardholder to transfer the underlying funds (i.e., the funds received

by the issuer of the card in exchange for the issuance or reloading of

the card) to a merchant at the merchant's point of sale terminal.


 

Dated at Washington, DC, this 6th day of April, 2004.


 

Authorized to be published in the Federal Register by Order of

the Board of Directors of the Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

[FR Doc. 04-8613 Filed 4-15-04; 8:45 am]

BILLING CODE 6714-01-P

Last Updated: March 23, 2024