CALIFORNIA
BANKERS ASSOCIATION
July 15, 2004
Robert E. Feldman
Executive Secretary (Attn: Comments/Legal ESS)
Federal Deposit Insurance Corporation
550 17th Street, Northwest
Washington, D.C. 20429
Re: Stored Value Cards
Dear Mr. Feldman:
California Bankers Association (CBA) is a non-profit professional
organization established in 1891 representing most of the depository
financial institutions in California. Among CBA members are issuers
of stored value cards. CBA is pleased to have this opportunity to submit
this comment letter on the referenced proposal.
CBA’s principal concern about the proposal pertains to its
unintended consequences. The scope of the proposal, which is to determine
if funds associated with a stored value card are “deposits” under
the FDI Act, could have much broader effects. We urge the FDIC to work
together with the other federal banking agencies to consider the various
ways that the proposed definition would affect the complex set of federal
banking laws and regulations.
How amounts represented
by stored value cards, if considered as deposits, would be treated
under several laws and regulations needs to be explored
further. For example, if such cards are deposits within the meaning
of Regulation D and subject to reserve requirements, the cost of offering
them would be significantly affected. The status of stored value cards
under Regulation E was addressed in a 1996 Federal Reserve proposal,
in which a hands off approach was adopted. At present, the industry
does not consider stored value cards as accounts for Regulation E purposes.
The FDIC should work with the Federal Reserve to determine whether
the proposed definition would affect the Board’s intentions in
this regard.
Other regulations
that potentially may be applied to stored value cards depending on
the
treatment of “deposits” and “accounts” include
the federal privacy regulations (Regulation P), Expedited Funds Availability
Act (Regulation CC), and the USA PATRIOT Act, particularly Section
326. State-based laws and regulations that could be affected by the
FDIC’s definition include those pertaining to escheat and legal
process (liens, subpoenas, etc. on accounts).
CBA agrees with
the FDIC that it is also important to define the scope of any proposed
rule
or rules. There are several kinds of cards
now available in the marketplace. Stored value cards, at one time,
referred to experimental cards with imbedded chips that represented
a certain amount of funds that were depleted as the card was used.
The term “prepaid card” is used more generically in the
banking industry to describe the various types of cards presently in
the marketplace, including gift card. The meaning and use of the term “debit
card” (sometimes referred to as a “check card”) is
widely acknowledged as an access device associated with a deposit account.
The regulation of debit cards is clear and should not be included in
any proposal relating to stored value cards. The term “payroll
card” refers to type of prepaid card used exclusively for payroll
purposes.
As suggested in this letter, the proposal cannot be considered in
isolation. CBA believes it is premature for the FDIC to treat amounts
represented by stored value cards as deposits. We recommend that the
FDIC, perhaps through the FFIEC, work with the other banking agencies
and with the industry to consider the proposal in light of all the
other regulations that may apply. It is also appropriate for the agencies
to consider the effect of any proposal on the fast-growing segment
of card issuers or sellers that are not depository financial institutions.
CBA is grateful for the opportunity to submit these comments to the
proposed rule. Please feel free to contact the undersigned if you have
any questions.
Sincerely,
Leland Chan
General Counsel
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