Dear Mr. Feldman:
This letter is in response to the proposed rule on determining when
funds underlying stored value cards qualify as deposits. First PREMIER
Bank is a $1 billion community bank headquartered in Sioux Falls, South
Dakota. While the Bank provides traditional community banking services,
it has established a national presence in Treasury Services. The Bank
is a proven leader in the payments industry as represented by being the
32nd largest ACH originator in the country.
First PREMIER Bank recently added a stored value card
product to its suite of Treasury Services products. When conducting
its analysis for
this business decision, the current ruling on the definition of “deposit,” to
exclude funds underlying stored value cards, was a very significant
consideration.
In conclusion, we believe that the funds in a hybrid
system (i.e. a system in which a “reserve account” is supplemented by subaccounts)
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 General Counsel’s
Opinion No. 8.
The Bank’s primary concern with the proposed regulation
is that the FDIC insurance premium assessment on the funds underlying
stored
value cards likely will be passed on to the end consumer. Stored value
cards provide a great benefit to consumers, especially payroll cards
which provide timely access to wages at a lower cost, and allow the
unbanked to participate fully in the modern economy. Rather than promoting
the
use of alternative payment mechanisms with the advantages they provide
to consumers, this proposal would likely discourage the use of such
mechanisms, and significantly limit their growth.
Currently, some stored value card programs are marketed to consumers
as having FDIC insured accounts and some are not. We believe the decision
relative to the insurance of such accounts should be determined by the
marketplace rather than being mandated by federal regulation. This approach
would encourage innovation by financial institutions in providing alternative
payment mechanisms that are beneficial to consumers, at a cost that is
acceptable for the benefits provided.
Thank you for the opportunity to provide comments to this proposal. Please
contact David Mickelson, Operations Officer, at (605) 357-3141 if you
have any questions.
Sincerely,
Dana Dykhouse
President and CEO
First PREMIER Bank
