FIRST PREMIER BANK
July 1, 2004
Robert E. Feldman, Executive Secretary
(Attention: Comments/Legal ESS)
Federal Deposit Insurance Corporation
550 17th Street, NW.
Washington, DC 20429.
Dear Mr. Feldman: This letter is in response to the proposed rule on determining when funds underlying stored value cards qualify as deposits. First PREMIER Bank is a $1 billion community bank headquartered in Sioux Falls, South Dakota. While the Bank provides traditional community banking services, it has established a national presence in Treasury Services. The Bank is a proven leader in the payments industry as represented by being the 32nd largest ACH originator in the country. First PREMIER Bank recently added a stored value card product to its suite of Treasury Services products. When conducting its analysis for this business decision, the current ruling on the definition of “deposit,” to exclude funds underlying stored value cards, was a very significant consideration. In conclusion, we believe that the funds in a hybrid system (i.e. a system in which a “reserve account” is supplemented by subaccounts) should not be treated as “deposits” because neither the pooled “reserve account” nor any of the individual subaccounts in a hybrid system is a conventional “commercial, checking, savings, time, or thrift account” as those terms are interpreted in General Counsel’s Opinion No. 8. The Bank’s primary concern with the proposed regulation is that the FDIC insurance premium assessment on the funds underlying stored value cards likely will be passed on to the end consumer. Stored value cards provide a great benefit to consumers, especially payroll cards which provide timely access to wages at a lower cost, and allow the unbanked to participate fully in the modern economy. Rather than promoting the use of alternative payment mechanisms with the advantages they provide to consumers, this proposal would likely discourage the use of such mechanisms, and significantly limit their growth. Currently, some stored value card programs are marketed to consumers as having FDIC insured accounts and some are not. We believe the decision relative to the insurance of such accounts should be determined by the marketplace rather than being mandated by federal regulation. This approach would encourage innovation by financial institutions in providing alternative payment mechanisms that are beneficial to consumers, at a cost that is acceptable for the benefits provided.
Thank you for the opportunity to provide comments to this proposal. Please contact David Mickelson, Operations Officer, at (605) 357-3141 if you have any questions.
Sincerely,
Dana Dykhouse
President and CEO
First PREMIER Bank
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