Federal Deposit
Insurance Corporation

From: Karen Neeley [mailto:kneeley@ibat.org]
Sent: Wednesday, October 05, 2005 10:28 AM
To: Comments
Cc: Hencke, Christopher L.
Subject: Part 330--Stored Value Cards

Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, NW.
Washington, DC 20429

Dear Mr. Feldman:

The Independent Bankers Association of Texas ("IBAT") would like to take this opportunity to comment on the proposed changes to Part 330 dealing with insurance of accounts. In particular, the current proposal would clarify when electronic deposit accounts, which may be accessible through a debit card or other device, may be insured in accordance with FDIC rules.

IBAT observes that the marketplace is moving rapidly to develop an array of new deposit account relationships. Some of these simply do not utilize paper checks to access funds. Nonetheless, these accounts are deposit account relationships with the institution. The difference between them and a traditional checking account is that the customer accesses funds through a debit card or other manner. In IBAT's opinion, that does not prevent these accounts from being true deposit accounts for purposes of deposit insurance.

As a part of the convenience in offering this type of account, the issuing institution may brand and distribute the cards through a third party. As a result, the deposits collected in the process may be maintained in a custodial account for the use and benefit of all of the cardholders. However, if the issuing institution either directly or through its third party data processor maintains records on each individual account holder and maintains the funds in a custodial relationship for the benefit of each individual cardholder, then this type of account seems highly analogous to other aggregated accounts such as trust accounts where the individual beneficiaries are known and separately insured. This is quite distinct from the original "stored value card" which actually had the value of the card embedded on a magnetic stripe on the card. Such cards are still in use, typically as gift cards. They are readily transferable. In short, there is no need for an "account" relationship with regard to these instruments. These instruments would not and should not qualify for individual deposit insurance under this proposal.

In further clarification, IBAT would note that such deposit account relationships might be accessed by debit cards. However, they may also be accessed by other devices or techniques such as telephone transfers, online banking, or other methodologies. The critical factor that makes these account relationships individual ones worthy of individual insurance is the fact that each relationship is with that particular account holder even if the funds themselves might be aggregated for the convenience of the financial institution.

IBAT concurs with the observations in the preamble to this proposed rule that this rule resolves only the insurance issue with regard to these emerging products. We look forward to further clarification of regulatory treatment of these accounts by other regulators in the future.

Thank you for this opportunity to comment.

Sincerely,
Karen M. Neeley
General Counsel