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4000 - FDIC Advisory Opinions
Would certain courier/messenger services constitute branch banking
and, therefore, violate branch banking laws
FDIC--97--6
September 26, 1997
Robert C. Fick, Counsel
You have requested our opinion as to whether certain
courier/messenger services proposed by the (the
"Bank") would constitute branch banking and, therefore, violate
any branch banking laws.
According to your letter the Bank would hire a contract employee on
a part-time basis who would work exclusively for the Bank; any work
performed outside of the contract would have to be approved by the Bank
to eliminate conflicts of interest. The employee would use his/her
personal vehicle to provide the services; the Bank would not reimburse
the employee for use of the personal vehicle. In addition to providing
various courier services for the offices and staff of the Bank, the
employee would provide the following services to the Bank's retail
merchant customers: (i) pick up of the customer's deposits at the
customer's location and delivery of those deposits to the Bank at a
specified time each day, and (ii) delivery of currency (specifically,
change orders) from the Bank to the customer's location at a specified
time each day. You also asked whether our determination would change
(i) if the Bank hired the employee as a regular employee instead of a
contract employee, or (ii) if the employee used a bank vehicle instead
of a personal vehicle.
This letter addresses only Federal law and specifically does not
address any requirements imposed on branches by applicable State law.
Section 3(o) of the Federal Deposit Insurance Act (the "FDI Act")
provides, in pertinent part, that the term "domestic branch"
includes "any branch bank, branch office, branch agency, additional
office, or any branch place of business located in any State of the
United States . . . at which deposits are received or checks paid or
money lent." 1
Unfortunately, there are no published judicial decisions that provide a
comprehensive interpretation of the term, and there is little written
guidance 2
as to its meaning. However, the definition of "domestic branch"
is, in relevant part, identical
{{12-31-98 p.4984.21}}to the definition of
"branch" 3
in the National Bank Act, and there is substantial case law and agency
guidance interpreting that term.
Generally, the statutory definition of "branch" includes any
bank facility at which one or more of the following activities is
carried on: receiving deposits, paying checks, or lending
money. 4
These activities have been collectively referred to as the "core
banking functions." 5
Engaging in one or more of these functions is clearly one of the
indicia of a branch; 6
however, it is not the sole determinative factor. Courts have
determined that there are two additional criteria necessary in order
for a facility to be considered a branch. First, the facility must be
established by the bank. 7
Second, the facility must provide the bank some advantage in its
competition for customers; it must offer the bank's customers some
convenience that gives the bank a competitive advantage over other
banks. 8
The first issue presented is whether the courier/messenger service
envisioned by the Bank would involve a core banking function. According
to the Bank's plan, a Bank employee would pick up a customer's
deposits at the customer's location and deliver them to one of the
Bank's three offices. Since a Bank employee would physically receive
the customer's deposits, the Bank clearly would be engaged in a core
banking function, i.e., receiving
deposits. 9
The next issue is whether this service would be established by the
Bank. In this regard, the Bank plans to use a part-time, contract
employee to carry out this service. The services to be performed would
be performed exclusively for the Bank. Also, the employee would not be
permitted to perform any work outside the contract without the Bank's
approval. Apparently, the Bank would designate or have the right to
designate the customer locations the employee would visit as well as
the schedule for such visits. Notwithstanding the fact that the Bank
apparently would not reimburse the employe for the employee's business
use of his/her personal vehicle, such a service would be considered to
have been established by the Bank. The service would be operated by the
Bank's own employee, exclusively for the Bank and under the exclusive
control of the Bank. Under those circumstances it may reasonably be
concluded that the Bank has established the courier/messenger
service. 10
The third issue presented is whether the proposed service would
provide customers some convenience that would give the Bank a
competitive advantage over other banks in attracting customers. The
U.S. Supreme Court in the Plant City case provided clear
guidance on this issue when it stated that: "[u]nquestionably, a
competitive advantage accrues to a bank that provides the service of
receiving money for deposit at a place away from its main
office. . . ." 11
Therefore, the proposed service most likely would provide a competitive
advantage for the Bank.
In summary, it appears from the facts provided that the proposed
courier/messenger services would include at least one of the core
banking functions, i.e., receiving deposits, that the
service would be established by the Bank, and that the service would
provide the Bank a competitive advantage over other banks. As a result,
such a service would be considered to be a branch and, therefore, would
require the FDIC's prior consent under section 18(d)(1) of the Federal
Deposit Insurance Act, 12 U.S.C.
§ 1828(d)(1).
{{12-31-98 p.4984.22}}
Additionally, you asked if our opinion would be different if certain
facts were changed. Specifically, you asked whether the result would
change either (i) if the Bank utilized a regular employee, instead of a
contract employee, or (ii) if the employee used a Bank-owned vehicle,
instead of his/her personal vehicle. With regard to the status of the
employee as a regular employee as opposed to a contract employee, the
critical fact is that he/she is a Bank employee. As such, the employee
is paid by the Bank and is subject to the Bank's control and
direction. Therefore, in our view, it is immaterial whether the
employee is a contract employee or a regular employee. However, if the
messenger service were owned and operated by a truly independent, third
party that, among other things, hired its own employees, provided
messenger services to other institutions or the general public,
controlled the scheduling and other details of the service, and assumed
responsibility for the items during transit, then it is not likely that
the Bank would be considered to have established the service. With
regard to ownership of the vehicle used in providing the service,
changing from a personal vehicle to a bank-owned vehicle would not
change the result. Ownership of the vehicle used in providing the
service may, in other circumstances, provide some indication as to who
established the service. However, where, as in this case, a Bank
employee operates the service, vehicle ownership is of little
significance. Consequently, our opinion that the proposed messenger
service would constitute a branch would not change in either case.
The opinions expressed herein represent the view of the Legal
Division staff and, like all staff opinions, are not binding upon the
FDIC or its Board of Directors. In addition, the opinions expressed
herein are based upon the facts presented in your letter. Any change in
the facts or circumstances may result in different conclusions. If you
have any other questions regarding this matter, please contact me at
your convenience.
112 U.S.C.
§ 1813(o). Go Back to Text
2See FDIC Advisory Op.
92--85, 2 FED. DEPOSIT INS. CORP. LAW, REGULATIONS, RELATED
ACTS 4697. Go Back to Text
312 U.S.C. § 36(j). Go Back to Text
4Id. Go Back to Text
5See, Clarke v. Securities Industry Ass'n, 479 U.S.
388 (1987). Go Back to Text
6First Nat'l Bank in Plant City v. Dickinson, 396
U.S. 122, 135 (1969) ("Plant City"). Go Back to Text
7Independent Bankers Ass'n of America v. Smith, 534
F.2d 921, 951 (D.C. Cir.), cert. denied, 429 U.S. 862
(1976). Go Back to Text
8Plant City, 396 U.S. at 136--37; Smith,
534 F.2d at 951. Go Back to Text
9It is not clear from the facts you provided whether the
delivery of currency to customers constitutes another core banking
function, i.e., "paying checks." Go Back to Text
10Cf. 12 C.F.R. § 7.1012 (1997) (If a national
bank utilizes a messenger service for items related to branching
functions that is established by a third party (as opposed to a bank),
the messenger service is deemed not to be a branch. In addition, the
OCC has identified a set of circumstances that, in its view, clearly
would constitute third party establishment. Consistent with our
conclusion in this case, the proposed service would not appear to
satisfy the OCC's "safe harbor" criteria either.) Go Back to Text
11Plant City, 396 U.S. at 137 (1969). Go Back to Text
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