FDIC Chairman Andrew C. Hove, Jr. announced today that the agency has decided
not to propose regulations or seek legislative action at this time to define
stored-value cards as "deposits" for purposes of insurance coverage. The
agency will continue to rely on guidance provided in General Counsel Opinion
No. 8, which clarified conditions for stored-value cards to qualify for
federal deposit insurance coverage.
The FDIC 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. If customer confusion in this area impedes
the cards' acceptability or customers' ability to meaningfully distinguish
differing card systems, the FDIC may revisit the need for regulation.
In its decision, the agency took into account public comments it received on
the General Counsel's opinion as well as an analysis of the types of stored-
value cards now offered to the public.
In the General Counsel opinion letter, published in the Federal Register on
August 2, 1996, the FDIC concluded that in most cases stored-value cards are
not protected by deposit insurance because the issuing institution would
typically maintain a single pooled account to hold the funds represented by
all their customers' stored-value cards. However, a bank customer's
balance on a stored-value card would be covered by deposit insurance if the
funds used to pay for goods and services with the card remain in the
customer's account at the bank until the value is transferred to the merchant.
The FDIC held a public hearing on September 12, 1996, to listen to the views
of consumers, bankers and others on whether the FDIC should issue regulations
on providing deposit insurance coverage for stored-value card balances. Most
hearing participants and the majority of those submitting written comments
agreed with the General Counsel's analysis and believed it was unnecessary at
this time for the FDIC to issue a rule on applying deposit insurance to
The computer technology supporting stored-value products is rapidly
evolving. The FDIC is concerned that premature regulation could stifle
experimentation or burden banks with costs that would unfairly place bank
systems at a competitive disadvantage. The FDIC believes any regulation in
this area should be based on an accumulation of data from actual experience
with these systems. Stored-value cards are now issued to a small portion of
the banking public, so the compromise of any stored-value card system does
not pose a particularly serious risk to any card-issuing bank or the banking
system as a whole.
The FDIC continues to monitor stored-value cards as part of its examinations
for safety and soundness as well as compliance with consumer credit laws, and
may consider a regulatory response at a future date.
Congress created the Federal Deposit Insurance Corporation in 1933 to restore
public confidence in the nation's banking system. The FDIC insures deposits
at the nation's 11,337 banks and savings associations and it promotes the
safety and soundness of these institutions by identifying, monitoring and
addressing risks to which they are exposed.
FDIC press releases and other documents are available on the Internet
via the World Wide Web at www.fdic.gov/news/
or through Gopher at gopher.fdic.gov. They may also be obtained
through the FDIC's Public Information Center, 801 17th Street, N.W.
Room 100, Washington, D.C. 20434 ((703) 562-2200 or 800-276-6003).