AMSOUTH
BANK
July 15, 2004
Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Attention: Comments/Legal ESS
Re: Definition
of “Deposit”;
Stored Value Cards
12 CFR Part 303
RIN 3064-AC80
Dear Mr. Feldman:
Please accept this
letter as comments on behalf of AmSouth Bank and its affiliates in
response
to the notice of proposed rulemaking published
by the Federal Deposit Insurance Corporation on April 16, 2004, to clarify
when funds at insured depository institutions underlying stored value
cards will constitute “deposits” under the Federal Deposit
Insurance Act. We appreciate the opportunity to comment on this important
proposal, and we appreciate your consideration of our comments.
Under the proposal, funds underlying stored value cards issued by a
financial institution would constitute deposits unless the institution:
1. Records its liabilities for such funds in an account representing
multiple cardholders and
2. Does not maintain supplemental records or subaccounts reflecting
the amount owed to each cardholder.
Under these proposed requirements, the only time such funds would not
be deposits is when the institution has no records of the amount of available
funds on each card. The proposal does not focus on the type of stored
value card involved, such as gift cards, payroll cards, rewards cards
or some new, innovative combination of those or other types of cards.
As a result, the proposal would apply to any and all types of stored
value cards.
By so narrowly limiting the focus of the determination of whether or
not the funds underlying a Stored Value Card are a deposit to the mechanics
of how an institution maintains its records, the proposal fails to consider
policy issues that may arise in connection with various types of stored
value cards. We believe the proposal should focus on the type of card
involved and the underlying policy issues applicable to that type of
card to determine whether certain products should be characterized as
deposits. The proposal should not focus solely on the mechanics of how
an institution records the liabilities on its books.
Take, as an example, the policy issues relating to deposit insurance
coverage. The purpose of deposit insurance is to maintain confidence
in and the security of the banking system. While some stored value cards
may have some characteristics that would merit treating such cards as
deposits, other stored value cards are more in the nature of pure payment
vehicles that substitute for cash and would not merit treatment as a
deposit. Other policy issues should be considered as well. The characterization
of stored value cards as deposits could ultimately result in unintended
consequences with respect to reserve requirements, money laundering,
electronic fund transfer rules, state escheat laws and possibly others.
For example, gift cards are analogous in many ways to paper gift certificates.
Gift cards are typically considered the same as cash. If a gift card
is lost, there is no expectation that it will be replaced. Identifying
information is not generally required when purchasing a gift card, whether
buying it from a retailer or a bank. A gift card may be given to an individual
completely unknown to the card issuer. Accordingly, this type of product
may not warrant treatment as a deposit under the FDIA, the consumer protections
provided by Regulation E, or obtaining customer identification information.
We urge the FDIC
to delay implementation of the proposal until it can conduct a comprehensive
study of the market for stored value cards and
the proposal’s implications on public policy and other regulatory
issues, as well as competitive implications of the proposal. Thank you
again for the opportunity to comment on the proposal.
Very truly yours,
A. Lee Hardegree
Assistant General Counsel
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