July 18, 2001Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Attn.: Mr. Robert E. Feldman
Executive Secretary Comments/OES
Re: Notice of Proposed Rulemaking Regarding Being Engaged in
the Business of Receiving Deposits Other Than Trust Funds
Ladies and Gentlemen:
Monogram Credit Card Bank of Georgia ("Monogram"), the defendant
in Heaton v. Monogram Credit Card Bank of Georgia, is writing to express
its support for the FDIC's proposal to convert General Counsel Opinion No.
12 ("GC Opinion No. 12") into a formal regulation. In the wake
of lower court rulings in Heaton, the adoption by the FDIC of a regulation
formalizing its long-standing position on when an institution is
"engaged in the business of receiving deposits" is required to
ensure clarity for the financial services industry, state and federal
regulatory authorities, bank depositors and the public. 1
In 1988, GE Capital chartered Monogram as a "credit card bank"
under the newly enacted Competitive Equality Banking Act of 1987 ("CEBA").
Congress enacted the "credit card bank" provisions in CEBA
specifically to facilitate competition and credit availability in a
nationwide credit card market. These provisions enabled GE Capital and
other non-banking companies (such as insurance, securities and industrial
firms) to own FDIC-insured banks which could make credit card loans
nationwide at the uniform rates permitted by their home states, provided
these banks limited their deposit-taking as provided by CEBA. CEBA also
required "credit card banks" to comply with the full regimen of
banking supervision and regulation applicable to FDIC-insured
institutions. Thus, for instance, credit card banks are required to
maintain high levels of capital; to meet Community Reinvestment Act
requirements promoting the availability of credit for low and
moderate-income individuals; to comply with a host of consumer credit
protection laws; and to have their compliance monitored by federal
examiners. 2
Pursuant to this authority, Monogram became an FDIC-insured credit card
bank more than 12 years ago. At all times since then, Monogram has
maintained its FDIC insurance in good standing and has fully complied with
all the regulatory requirements applicable to FDIC-insured banks.
Adoption of a regulatory standard is urgently required to prevent a number
of serious adverse consequences arising from the lower court decisions in
Heaton. First, the continuing prospect of judicial decisions inconsistent
with grants of FDIC deposit insurance threatens to penalize, years after
the fact, Monogram and other banks that have relied upon FDIC insurance
determinations. Second, as the Conference of State Bank Supervisors (the
"CSBS") has warned in an amicus curiae brief filed in Heaton,
decisions of this type "threaten[] to destroy, with respect to
state-chartered credit card banks, the competitive equality that Congress
has established between State banks and national banks in the charging of
interest rates on loans" and "the carefully balanced system of
federal and state regulation for such banks." Third, these decisions
create the prospect that similarly situated banking institutions will be
afforded disparate treatment in different jurisdictions or, even worse,
that the same institution will be subject to conflicting (and
unpredictable) rules in different jurisdictions (e.g. where one court
holds a bank's deposits are insured, while another court in a different
jurisdiction holds the same deposits are not insured). Finally, these
decisions threaten public and depositor confidence in the FDIC and the
deposit insurance system. Depositors and the public at large must have
certainty that a bank displaying the FDIC decal or logo is in fact
insured, and that their deposit insurance is not subject to judicial
annulment years after the fact (and perhaps at a time when the insurance
is most needed because the institution would otherwise not be able to meet
its deposit obligations). 3
The conversion of GC Opinion No. 12 into a formal regulation will provide
the certainty that the industry, bank customers, regulators and the public
are justifiably entitled to. Moreover, the adoption of a regulatory
standard will not adversely affect the public. In Heaton, for example, the
rates and fees permitted by Georgia law and exported by Monogram as an
FDIC-insured bank are competitive market charges comparable to the rates
and fees lawfully charged Louisiana residents by a host of other
out-of-state financial institutions and by in-state companies as well.
Monogram appreciates the opportunity to submit this comment favoring
the adoption of this important proposal.
Very truly yours,
Donald R. Ramon
President
Enclosure
cc: Christopher L. Hencke, Esquire
1 Monogram's outside counsel is separately submitting a
comment letter in support of the FDIC's proposal.
2 The recent OCC consent decree requiring Providian
National Bank to pay over $300 million to redress violations of federal
and state consumer credit and trade practices laws provides a perfect
example of the value of this federal monitoring to consumers.
3 That Congress had no intention of allowing belated judicial
review of FDIC deposit insurance determinations is fully confirmed by the
conclusive authority given the FDIC under Section 8(p) of the Federal
Deposit Insurance Act to determine that institutions are not, in fact,
engaged in the business of receiving deposits and the special limitations
under Section 8(i) of that act on judicial interference with FDIC orders
under Section 8.