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Each depositor insured to at least $250,000 per insured bank

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FDIC Federal Register Citations

July 13, 2001

Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street NW St.
Washington, DC 20429

Attn: Comments - OES

Re: Notice of Proposed Rulemaking, Being Engaged in the Business of Receiving Deposits other than Trust Funds (12 CFR Part 303)

Dear Mr. Feldman:
The American Financial Services Association1 ("AFSA")) appreciates this opportunity to provide comments on the Notice of Proposed Rulemaking published in the April 19, 2001 Federal Register by the Federal Deposit Insurance Corporation concerning the replacement of General Counsel Opinion No. 12 with a new regulation (proposed 12 CFR Section 303.14), clarifying the requirement that an FDIC-insured depository institution is "engaged in the business of receiving deposits other than trust funds" if the institution continuously maintains one or more non-trust deposit accounts in the aggregate amount of $500,000 or more.

AFSA strongly supports the promulgation of the proposed regulation as a Final Rule.

In its capacity as a trade association representing non-traditional providers of consumer credit, AFSA has taken an active role over the years in seeking legislative and regulatory clarification of the status of insured entities such as industrial banks, "non-bank" banks, credit card banks, and unitary savings and loans. Many AFSA members are lawfully affiliated with such entities in order to achieve the operational efficiencies and benefits that have been vested in such institutions. As an association, we have participated in the legislative, regulatory and judicial arenas to obtain for such entities the maximum degree of regulatory predictability, fair treatment, and parity with institutions that could be characterized as more traditional in nature.

The model followed by credit card banks and other limited-purpose banks has been successful in allowing the emergence of new and innovative participants in the credit markets, while not subjecting the banking system to any increased safety and soundness risk. Often these institutions make FDIC-insured deposits available upon request to eligible depositors, although the availability of such deposit products may not be actively marketed to the public. We urge the FDIC to avoid taking any action that would threaten the viability of these institutions, as they have proven to be responsible and productive participants in our financial system.

We believe that the FDIC's proposed approach to making the determination as to whether a depository institution is engaged in the business of receiving deposits is appropriate. The standard should not be based on any particular number of non-trust deposits. It would be unreasonable to require an institution to acquire deposits before it is able to acquire deposit insurance, or to maintain a particular number of accounts unrelated to the size or operations of the bank. The FDIC should not be constrained in its ability to determine whether a financial institution qualifies for insurance if the institution otherwise demonstrates its ability to comply with all applicable laws and regulations designed to ensure the safety and soundness of the banking system.

Any required minimum dollar amount of deposits set by the FDIC to be eligible for insurance should not be excessive. The $500,000 proposal would be a reasonable amount for the FDIC to promu!gate in its final rule.

Similarly, the FDIC should not require an institution to accept deposits from the public at large as a condition to the grant of deposit insurance. Rather, it should be sufficient for an institution to accept deposits from any group, including the institution's customers, employees, or affiliates.

We appreciate this opportunity to comment on the Proposal. If you should have any questions or comments regarding this letter, please feel free to contact me .at the number below.

The American Financial Services Association ("AFSA") is the trade association for a wide variety of providers of financial services to consumers and small businesses. AFSA members and their affiliates, which include FDIC insured institutions, are major participants in the credit card market, automobile credit and leasing markets, and the mortgage lending market.

Robert E. McKew
Senior Vice President and General Counsel
American Financial Services Association

Last Updated 07/23/2001

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