4000 - Advisory Opinions
Does an automated loan machine constitute a "remote service unit" under section 3(o) of the FDI Act
July 8, 1997
Robert C. Fick, Counsel
You have asked our opinion as to whether an automated loan machine ("ALM") constitutes a "remote service unit" (an "RSU") under section 3(o) of the Federal Deposit Insurance Act (the "FDI Act"), as amended by the Economic Growth and Regulatory Paperwork Reduction Act of 1996 ("EGRPRA"), 12 U.S.C. § 1813(o) (1994). Section 2205(b) of EGRPRA amended section 3(o) of the FDI Act to exclude automated teller machines and remote service units from the definition of the term "domestic branch."
You indicate generally that an ALM is a remote, electronic terminal that permits any person to apply for a loan, obtain a credit decision, and, if the application is approved, have the loan proceeds disbursed, either by check directly from the machine, or by credit to an existing account. An ALM is apparently programmed to verify the information entered, correlate it to credit reports, and make a credit decision based upon the bank's underwriting standards. The entire transaction is meant to take about ten-to-fifteen minutes.
Prior to EGRPRA section 3(o) of the FDI Act provided, in pertinent part, that:
The term "domestic branch" includes any branch bank, branch office, branch agency, additional office, or any branch place of business . . . at which deposits are received or checks paid or money lent. . . .
Section 2205(b) of EGRPRA amended the definition of "domestic branch" by inserting the following provision: "[t]he term domestic branch' does not include an automated teller machine or a remote service unit." EGRPRA does not provide any definition of the terms "automated teller machine" and "remote service unit,"1 nor is there any legislative history on this issue.
Nevertheless, a number of conclusions can be drawn about the meaning of the term "remote service unit" simply from the words used in the term and the context in which the term is used in the EGRPRA amendments. First, RSUs are, by their very name, remote facilities. Second, since Congress specifically excluded RSUs from the definition of "domestic branch," it may have considered that an RSU would have otherwise qualified as a "domestic branch," i.e., as a place where one or more of the core banking functions (receiving deposits, paying checks, and making loans)2 is conducted. Consequently, it may be concluded that the term RSU includes a facility that engages in one or more of the core banking functions. Finally, an RSU would appear to be an automated facility. In excluding ATMs and RSUs from the definition of "domestic branch" it is unlikely that Congress meant to exclude staffed banking facilities that engage in one or more of the core banking functions. Otherwise, such an interpretation could be read to exclude traditional "brick-and-mortar" branches. Furthermore, the term "remote service unit" is very similar in name to the term "remote service facility," and "remote service facility" is defined in the FDIC regulations as an electronic facility.3
In sum, based upon the above analysis, it is reasonable to conclude that a "remote service unit" includes a remote, electronic or automated, facility that provides one or more of the core banking functions. As noted above, lending money is one of the core banking functions. Consequently, based upon the above description of an "automated loan machine," it is also reasonable to conclude that an "automated loan machine" qualifies as a "remote service unit" as used in EGRPRA and is, therefore, excluded from the definition of "domestic branch" in section 3(o) of the FDI Act.4
If you have any further questions regarding this matter, please contact me at your convenience.
1The OTS is the only Federal bank regulatory agency to define the term "remote service unit." 12 C.F.R. § 545.141(a)(3). However, the OTS has recently requested comment on whether it should revise its regulation regarding RSUs. Deposits and Electronic Banking, 62 Fed. Reg. 15626, 15631 (April 2, 1997). Since this regulation does not apply to banks, has been shaped by case law and a regulatory history peculiar to the thrift industry, and may be changed, it is of limited significance in determining the meaning of the term "remote service unit" as used in EGRPRA. Go back to Text
2Clarke v. Securities Industry Ass'n, 479 U.S. 388, 409 (1987). Go back to Text
312 C.F.R. § 303(a)(23). Go back to Text
4We note that the Office of the Comptroller of the Currency in response to an inquiry from a national bank has confirmed that in its opinion, an ALM qualifies as an ATM or RSU and is, therefore, excluded from the amended definition of "branch" in the National Bank Act. OCC Interp. Ltr. 772 (Mar. 6, 1997). Go back to Text