Skip Header

Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank



Home > Regulation & Examinations > Laws & Regulations > FDIC Federal Register Citations




FDIC Federal Register Citations

Commerce Bancshares

Commerce Bancshares, Inc.
Compliance Department, TB12-1
922 Walnut P.O. Box 13686
Kansas City, MO 64199-3686

November 7, 2005

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 Sir:

Commerce Bancshares, Inc. is a registered bank holding company with total assets of $13.9 billion at September 30, 2005, and three bank subsidiaries. Two of these banks are full-service banks, with approximately 200 branch locations in Missouri, Illinois, and Kansas. The other bank is a limited-purpose bank, with one office in Omaha, Nebraska. All of the banks are national banks.

The FDIC has asked for comment regarding the application of FDIC insurance to stored value and other nontraditional access mechanisms and we appreciate the opportunity. Our original comment letter, which was submitted on May 28, 2004, indicated our agreement that the stored value card product was aimed at and benefited consumers without access to a full range of banking services, and as such, should be afforded FDIC insurance.

In the eighteen-month period since submitting our original comment letter, we have seen a trend in the use of this product that is quite different from the assumption above mentioned. As a general rule, it is not exclusively used as an efficient means to purchase necessities by unbanked consumers, but as an auxiliary item to other deposit accounts. For example, a consumer will have their payroll direct deposited into their checking account, using the funds in that account to pay for housing and other living expenses. Small dollar amounts are directed to a stored value card, which is then given to a child for their weekly allowance. We have also seen customers that utilize the card to save and spend discretionary income for vacation or to budget for holiday spending.

This points out an important consideration – the product itself is new and developing. Financial institutions are exploring additional ways to utilize the cards, including using it to provide student aid, and for health savings accounts. Consumers themselves come up with creative and innovative ways to use the product that can be outside of the way in which it is marketed. Rules regarding the insurance of these products could negatively impact growth by increasing a financial institution’s reserve requirements. In addition, they could stifle product growth by increasing the regulatory requirements on financial institutions, leaving other non-regulated entities considerable opportunity to offer the products.

While we appreciate the FDIC’s view that a change in the definition of deposit doesn’t trigger the application of deposit regulations, we must respectfully disagree. It is true that the applicability of the regulation need not be coextensive with the insurance coverage of deposits. But federal banking regulators determine the applicability of the regulation and are influenced by changes such as the one proposed. In addition, it would be difficult to argue that the application of deposit regulations, such as Regulation CC and Regulation E would not be influenced by a new definition of “deposit” in the Federal Deposit Insurance (FDI) Act. Regulation DD is particularly illustrative.

The definition of “Account” provided in 12 CFR § 230.2(a) states that an “(a)ccount means a deposit account at a depository institution that is held by or offered to a consumer.” (emphasis added) The definition goes on to reference § 29(g) of the FDI Act in relation to the term deposit broker.

This definition speaks directly to the applicability of Regulation DD. It calls an account a “deposit account” and incorporates the FDI Act to define another term. Therefore, it’s reasonable to assume Regulation DD may be applicable if the definition of “deposit” is changed as proposed. Similar arguments can be made about all of the referenced regulations including § 326 of the USA Patriot Act.

It is also important to note that systems aren’t yet structured specifically to handle the products due to their newness. As demand grows and the products become more profitable, financial institutions will be able to invest in systems that could handle additional regulatory requirements. Additional requirements that are imposed at this time could negatively impact a financial institution’s ability to offer the affected products.

We appreciate the opportunity to make comment on the proposal and thank you for your time in reviewing our concerns.

Sincerely,

Katherine A. D. Foster, J.D.
Compliance Research Manager

 


Last Updated 11/08/2005 Regs@fdic.gov

Skip Footer back to content