Federal Deposit
Insurance Corporation

November 7, 2005

ATTN: Mr. Robert E. Feldman
Executive Secretary
Attention: Comments/Legal ESS
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429 

Re: Part 330-Stored Value Cards

We are pleased to respond on behalf of our member credit unions and ICUL Service Corporation to the Federal Deposit Insurance Corporation’s (“FDIC”) Notice of Proposed Rulemaking concerning stored value cards and other non-traditional access mechanisms. The proposed rule would clarify whether the funds underlying certain stored value cards are eligible for, or required to have federal deposit insurance coverage through the FDIC. The Illinois Credit Union League represents over 400 federal and state chartered credit unions, and therefore our interest in this topic is predicated on the belief that the NCUA will promulgate a regulation paralleling the FDIC’s regulation.

The single most important element of this proposed regulation is to distinguish between the various types of stored value cards. We believe the cards can be separated into two distinct categories. One category would include cards that are continuously funded or replenished through an account maintained at the financial institution, i.e. payroll cards. The second category would consist of a one-time card purchase at a financial institution for a specific sum of money. The typical program requires that the purchase amount be maintained in a suspense account. The suspense account is then “cleared out” nightly by the sponsoring company, i.e. gift cards. Separating the stored value cards into two categories would provide the FDIC the flexibility to require federal deposit insurance for one type of stored value card, but exempt the other type of stored value card.

The justification for two different sets of rules for these two distinct product types can be based on the difference between the terms “consumer” and “customer.” A consumer is “someone that has obtained a financial service or product” from a financial institution. In contrast, a customer is someone “who has a continuing relationship, in which one or more on-going services exist.” (12 CFR 216). Pursuant to the definition of customer, the federal deposit insurance requirement would then seem to be appropriate for a product that is maintained for the customer at the financial institution, as is presently required for non- stored value products, such as escrow accounts and deferred compensation accounts. On the other hand, there would be no federal deposit insurance requirement for one-time “consumer” purchases of a stored value gift card, just as there is no federal deposit insurance coverage presently, for traveler checks and money orders. To require a financial institution to maintain detailed files of all non-customer consumer transactions would be overly-burdensome and would also lead to additional Privacy disclosure requirements.

We thank you for the opportunity to comment on the proposed rulemaking concerning stored value cards. Please contact me at 800-942-7124 ext.4263 with any questions concerning the above comments.

Very truly yours,

ILLINOIS CREDIT UNION LEAGUE

By: Niall K. Twomey
Technical Specialist