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4000 - Advisory Opinions

Issuance of Check Guarantee Cards is Violation of Part 332 of FDIC's Regulations


January 30, 1984

Ford R. Paulson, Regional Counsel

This will confirm our telephone conversation of Thursday, January 19, 1984 which was in response to several calls made by you and * * * to various persons in this office and the Washington D.C. office of the FDIC.

In the original telephone inquiry from * * * I was advised that you had information that at least two state non-member banks in the State of * * * were issuing check guarantee cards. She asked whether this was an appropriate activity for your bank and whether such a practice would be in violation of FDIC rules and regulations. In subsequent calls to other FDIC personnel, the same information was requested and in at least two of the conversations, it was indicated that you felt that * * * needed to proceed with such a program in order to meet the competition of other banks engaged in this same activity.

As I advised you, I discussed the matter with Roger Hood, Assistant General Counsel in our Washington office and with Anthony Scalzi, Regional Director of the San Francisco Regional Office as well as with other persons contacted by you and your staff with respect to this matter during the past couple of weeks.

As I advised you on January 19th, 1984, it is the position of the Federal Deposit Insurance Corporation that the check guarantee card arrangement in which the bank guarantees payment of checks written by bank customers is considered to be in violation of Part 332.1 of the rules and regulations of the FDIC (12 CFR Section 332.1).

As you are aware, a proposed amendment of that regulation which would have had the effect of modifying the impact of Part 332.1, as applied to check guarantee care arrangements, was promulgated in 1981. However, that proposed amendment has never been adopted by the FDIC. I have been advised by our Washington office that it is possible that the regulation will be amended in the future in such a manner as to allow the use of check guarantee cards, under certain circumstances. However, until that occurs, it seems quite clear that the regulation as it now exists prohibits the use of a check guarantee card by a state non-member insured bank.

With respect to the four state non-member banks which you called to our attention on January 19, we are advising them in writing of the fact that the FDIC considers check guarantee card arrangements to be in violation of Part 332.1 of the rules and regulations of the FDIC.

Thank you for your interest in this matter. Please be assured that the bank will be advised of any change in our regulations which would be of such a nature as to allow the issuance of check guarantee cards.

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