CALIFORNIA BANKERS ASSOCIATION
July 15, 2004 Robert E. Feldman
Executive Secretary (Attn: Comments/Legal ESS)
Federal Deposit Insurance Corporation
550 17th Street, Northwest
Washington, D.C. 20429 Re: Stored Value Cards Dear Mr. Feldman: California Bankers Association (CBA) is a non-profit professional organization established in 1891 representing most of the depository financial institutions in California. Among CBA members are issuers of stored value cards. CBA is pleased to have this opportunity to submit this comment letter on the referenced proposal. CBA’s principal concern about the proposal pertains to its unintended consequences. The scope of the proposal, which is to determine if funds associated with a stored value card are “deposits” under the FDI Act, could have much broader effects. We urge the FDIC to work together with the other federal banking agencies to consider the various ways that the proposed definition would affect the complex set of federal banking laws and regulations. How amounts represented by stored value cards, if considered as deposits, would be treated under several laws and regulations needs to be explored further. For example, if such cards are deposits within the meaning of Regulation D and subject to reserve requirements, the cost of offering them would be significantly affected. The status of stored value cards under Regulation E was addressed in a 1996 Federal Reserve proposal, in which a hands off approach was adopted. At present, the industry does not consider stored value cards as accounts for Regulation E purposes. The FDIC should work with the Federal Reserve to determine whether the proposed definition would affect the Board’s intentions in this regard. Other regulations that potentially may be applied to stored value cards depending on the treatment of “deposits” and “accounts” include the federal privacy regulations (Regulation P), Expedited Funds Availability Act (Regulation CC), and the USA PATRIOT Act, particularly Section 326. State-based laws and regulations that could be affected by the FDIC’s definition include those pertaining to escheat and legal process (liens, subpoenas, etc. on accounts). CBA agrees with the FDIC that it is also important to define the scope of any proposed rule or rules. There are several kinds of cards now available in the marketplace. Stored value cards, at one time, referred to experimental cards with imbedded chips that represented a certain amount of funds that were depleted as the card was used. The term “prepaid card” is used more generically in the banking industry to describe the various types of cards presently in the marketplace, including gift card. The meaning and use of the term “debit card” (sometimes referred to as a “check card”) is widely acknowledged as an access device associated with a deposit account. The regulation of debit cards is clear and should not be included in any proposal relating to stored value cards. The term “payroll card” refers to type of prepaid card used exclusively for payroll purposes. As suggested in this letter, the proposal cannot be considered in isolation. CBA believes it is premature for the FDIC to treat amounts represented by stored value cards as deposits. We recommend that the FDIC, perhaps through the FFIEC, work with the other banking agencies and with the industry to consider the proposal in light of all the other regulations that may apply. It is also appropriate for the agencies to consider the effect of any proposal on the fast-growing segment of card issuers or sellers that are not depository financial institutions. CBA is grateful for the opportunity to submit these comments to the proposed rule. Please feel free to contact the undersigned if you have any questions.
Sincerely,
Leland Chan
General Counsel
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