Federal Deposit
Insurance Corporation

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

Re: Deposit Insurance Coverage, Stored Value Cards and Other Nontraditional Access Mechanisms
(12 CFS Part 330-Stored Value Cards)

Dear Mr. Feldman:

ACS State & Local Solutions, Inc. (ACS) welcomes this opportunity to submit comments on Deposit Insurance Coverage, Stored Value Cards and Other Nontraditional Access Mechanisms (12 CFS Part 330-Stored Value Cards). Increasingly, states are requiring that child support payments to custodial parents be credited to a stored value card as an alternative to paper checks and direct deposit. Stored value cards offer the states lower program costs while enabling payment recipients greater access to their funds at lower cost to the states and the cardholder. As an issuer of stored value cards, we would like to address the FDIC requests for comment on whether to distinguish specific types of stored value cards and the nature of FDIC insurance disclosure to cardholders.

Distinguishing Card Types

While acknowledging the significant difference between stored value card applications such as payroll and gift cards, ACS urges the FDIC not to promulgate its regulation based on a distinction among specific card types but rather on the ownership of the underlying funds and cardholder account recordkeeping. More and more, stored value cards are becoming multi-functional, blurring the distinction between card categories. This trend toward deploying multi-purpose card programs is growing rapidly throughout both the public and private sectors. For government payments, issuing different payment categories to a single card provides reduced program expense for states and increased convenience to cardholders. By focusing on a stored value card's type, the FDIC may unintentionally narrow a particular card program to a single payment type or create confusion and program costs when multiple categories of funds are credited to the same stored value card.

Rather than relying on the type of stored value card application to establish insurability, ACS recommends the FDIC focus on the ownership of underlying funds and the ability of the FDIC to obtain specific cardholder information to verify individual cardholder ownership in the event of the sponsoring financial institution's failure. Dictated by client demand and internal business standards, full "pass through" FDIC insurability of all deposits at the individual participant level is an essential element of successful stored value card programs that include pre-funded deposits. Essential elements of these programs and in accord with 12 CFR 330.5(b)(1), the account records of the insured depository institution clearly indicates the ownership of program funds to the benefit of participant cardholders and in compliance with 12 CFR 330.5(b)(2), detailed records at the cardholder level are maintained by the issuer. In these programs, the states have no reversionary rights to funds once they are transferred to a cardholder.

Disclosure of Insurance Coverage

Ensuring the consumer confidence and overall program participation requires full disclosure of all features and benefits of a particular stored value card program to the individual participant. Mandated by Regulation E and card industry rules, cardholders receive considerable information on the terms and conditions of each card program along with other instructional information. ACS fully supports the inclusion of FDIC language indicating the insurance coverage of cardholder funds at the time of card issuance. ACS urges the FDIC not to require language on the actual card. Compliance information already on the back of each card is finely printed and often challenging for the cardholder to read. Adding more language would further reduce the readability of this important cardholder information. Additionally, the cards in circulation today do not currently include specific FDIC language yet may represent insurable deposits. The absence of FDIC verbiage on these cards when compared to newly issued cards with FDIC language may create potential confusion among cardholders. Reissuing cards for pre-existing programs would create a burden on the industry. Disclosure should be provided at the time of issuance and through customer service functions and program informational sites accessed by participants through the Internet.

We thank you again for this opportunity to provide our comments to the Proposed Rule. Please do not hesitate to contact me at (202) 414-3551 with any questions or comments.

Sincerely,

Nicholas Bevilacqua
Vice President and Senior Corporate Counsel
ACS State & Local Solutions, Inc.