FIRST DATA CORPORATION
July 15, 2004 Robert F. Feldman, Executive Secretary
(Attention: Comments/Legal ESS)
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, D.C. 20429 RE: Definition of "Deposit"; Stored Value Cards—Comments on Notice of Proposed Rulemaking dated April 16, 2004 Dear Mr. Feldman: I am writing on behalf of First Data Corporation ("First Data") and its subsidiaries, including Western Union Financial Services, Inc. ("Western Union"). First Data employs over 30,000 people and is a global leader in payment services. It processes the information that allows millions of consumers to pay for goods and services by credit or debit cards at the point of sale, over the Internet, by check or by money wire. Western Union enables consumers and businesses to securely transfer money or make payments using money orders and other electronic systems. Western Union operates through approximately 190,000 agent locations in more than 195 countries and territories. First Data also owns a limited purpose bank, First Financial Bank, which is a Colorado industrial bank and a member of the FDIC. First Data's businesses participate in several roles with respect to stored value cards. We act as a processor for bank and nonbank card issuers. We support systems to allow cardholders to load money onto their cards. We issue cards. We support systems used by cardholders to withdraw monies from their cards. Given our multiple roles, we support the goal of the proposed rule to bring clarity and consistency to the key question of the status of funds consumer place with depository institutions. Consumers have a right to expect their funds will be available to pay for purchases, or to obtain cash through ATMs or merchant's POS systems, when using their cards. Clarification of the status of funds will give the consumers the ability to make the right choice regarding the safety of their funds. When depository institutions sponsor stored value card programs in which nonbanks are acting as card issuers, we believe the FDIC should consider the expectations of the consumers with respect to these programs, i.e., do they expect the depository institution to protect their money? We also believe the FDIC should consider whether depository institutions should exercise appropriate diligence before agreeing to support such programs. For example, should the depository institution be required to determine whether the nonbank card issuer has obtained the proper state licenses to issue stored value cards, such as a money transmitter's license?1
The FDIC touched on similar matters in footnote 2 of the notice of proposed rulemaking, and we urge the FDIC to at least comment on this equally important matter. As noted in the notice of proposed rulemaking, many stored value card programs are promoted by unregulated sponsoring companies, with depository institutions playing a secondary role. In many cases, consumers pay their funds to these unregulated sponsoring companies, and often the consumers' only contractual recourse is to those companies, not to any depository institution. Assuming the FDIC adopts the proposed rule, we should expect to see stored value cards being truthfully marketed as insured deposits. Many consumers may reasonably, but incorrectly, assume that deposit insurance protects them from the sponsoring company's failure to place the funds on deposit. One of the purposes of money transmitter laws is to ensure that funds provided to the money transmitter will in fact be used for their intended purposes. This is accomplished by a number of means, including state licensing, which includes background checks and minimum capital requirements, and strict limits on how funds received from the public may be invested. Without guidance from the FDIC, depository institutions, which may not be familiar with money transmitter laws (since all jurisdictions exempt most depository institutions from their coverage), may unknowingly lend significant support to stored value card programs that may be operating in violation of state law. We also offer the following comment on the proposed rule. Proposed §303.16(f), defining "stored value card" uses the term "device". We suggest that any final rule make it clear that "device" is not limited to a physical item. For example, a stored value account need not have a physical card associated with it. A consumer could access funds by providing a merchant with a card number. A definition of "device" similar to that of "access device" in Regulation E, 12 CFR § 205.2(a)(1) would accomplish this. Respectfully submitted, Mike Rodin
Associate General Counsel
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1See, e.g., N.C. GEN. STAT. §§ 53-208.2(11), (38); 53-208.3 (2003) (license required for monetary transmission including the "sale or issuance of ... stored value", defined as "monetary value that is evidenced by an electronic record"); VA. CODE ANN. § 6.1-370 (Michie 2003) (license required for transmission including "selling or issuing stored value", defined as "monetary value that is evidenced by an electronic record"); VT. STAT. ANN. tit. 8, §§ 2500(11), (19); 2502(a) (2002) (license required for money transmission including "selling or issuing ... stored value", defined as "monetary value that is evidenced by an electronic record"); see also LA. REV. STAT. ANN. § 6:1033 (West 2001) (license required for "money transmission" including "selling or issuing stored value"); W. VA. CODE § 32A-2-1(6); 32A-2-2(a) (2001) (license required for transmission including "the transmission of funds through the issuance and sale of stored value cards which are intended for general acceptance and used in commercial or consumer transactions"). See, e.g., MINN. STAT. §§ 53B.02; 53B.03, Subd. 13 (2001) (license required to sell "payment instrument" including an "electronic instrument", defined as a "card or other tangible object for the transmission or payment of money"); N.C. GEN. STAT. §§ 53-208.2(6), (14); 53-208.3 (2003) (license required to sell "payment instrument" including an "electronic or written instrument" and "electronic instrument" is defined as "[al card or other tangible object for the transmission or payment of money or monetary value"); OR. REV. STAT. §§ 717.200 (7), (12); 717.205 (2002) (license required to sell "payment instrument" including an "electronic instrument", defined as "a card or other tangible object for the transmission or payment of money"); see also FLA. STAT. §§ 560.103(14); 560.204 (2002) (license required to sell "payment instrument", defined as a "check, draft warrant, money order, travelers check or other instrument or payment of money"); VT. STAT. ANN. tit. 8, §§ 2500(13); 2502(a) (2002) (license required to sell "payment instrument", defined as "a check, draft, money order, traveler's check, or other instrument for the transmission or payment of money or monetary value").
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