Federal Deposit
Insurance Corporation

Re: Notice of Proposed Rulemaking RIN 3064-AC49 (Being Engaged in the Business of Receiving Deposits Other Than Trust Funds)

Dear Sir:

The Consumer Bankers Association (CBA) welcomes the opportunity to comment on and voice our support for the FDIC's proposal to replace General Counsel Opinion No. 12 with a formal regulation. CBA was founded in 1919 and provides leadership and representation on retail banking issues such as privacy, fair lending, and consumer protection legislation/regulation. CBA members include most of the nation's largest bank holding companies as well as regionals and hold two-thirds of the industry's total assets. CBA is the recognized voice on retail banking issues in the nation's capital. Member institutions are the leaders in consumer finance (auto, home equity and education), retail electronic commerce, small business services, and community development.

In light of the recent decision in Heaton v. Monogram Credit Card Bank of Georgia, Civil Action No. 98-1823 (E.D. La.), there is a need to clarify the ambiguous language of the Federal Deposit Insurance Act (FDI Act), that an insured depository institution be "engaged in the business of receiving deposits other than trust funds." We fully support the FDIC's proposal to do so by replacing Opinion Letter No. 12 with a regulation that it would satisfy the requirement that an institution be engaged in the business of receiving deposits other than trust funds by the continuous maintenance of one or more non-trust deposit accounts in the aggregate amount of $500,000.

In applying the statutory standard over many years, the FDIC approved applications from numerous institutions that did not intend to accept non-trust deposits from the general public. The FDIC has also approved applications from institutions that only intended to hold one type of deposit account or that did not intend to hold more than a few non-trust deposit accounts. Nevertheless, this history of approval was not adequate to remove uncertainty about the meaning of the phrase "engaged in the business of receiving deposits other than trust funds." To put the uncertainty to an end, the FDIC issued General Counsel Opinion Letter No. 12, in which the FDIC stated that the statutory requirement of being "engaged in the business of receiving deposits other than trust funds" can be satisfied by the continuous maintenance of one or more non-trust deposit accounts in the aggregate amount of $500,000. Notwithstanding the clear intent of the opinion letter to end the uncertainty in this regard, the Heaton court has once again raised doubts by disagreeing with the opinion of the agency.

The phrase "engaged in the business of receiving deposits other than trust funds" must be interpreted consistently. As noted in the proposal, inconsistent interpretation can lead to irrational results. Banks would be treated and regarded differently in each state, depending on local interpretation. Nor is the FDIC in a position to adopt whatever interpretation a court reached, and apply it nationwide. If it did, the application would conflict with the interpretation of other courts, result in the inconsistent status of the bank in question, and potentially affect every bank with similar deposits. Perhaps most importantly, inconsistent interpretations would prevent customers and owners from being able to rely on a bank's status-including its ability to maintain insurance on deposits. We believe it is imperative that the FDIC end the uncertainty and we therefore support this rulemaking.

CBA supports the position stated in General Opinion No. 12, and the proposed regulation, that the language in dispute would be satisfied if an institution continuously maintains one or more non-trust deposit accounts in the amount of $500,000. The CBA maintains that the FDIC has in fact properly understood and carried out the FDI Act since its enactment, and that restating General Opinion No.12 in a formal regulation will help put an end to any uncertainty. Facts and history support the FDIC's interpretation of the ambiguous statutory language. For years the FDIC has approved applications from many non-traditional depository institutions that did not intend to maintain more than a few non-trust deposit accounts. These have included trust companies, credit card banks and other specialized institutions. Furthermore, as the FDIC has noted, the leading case of Meriden Trust indicates that an amount as small as $200,000 is a sufficient amount of non-trust deposits.

We are very concerned that any inconsistency between the FDIC's interpretation and a court's interpretation, if allowed, could produce harmful results. The solution put forth by General Counsel Opinion No. 12 and the proposed regulation are consistent with the statute, and in the best interest of public policy. CBA maintains that the FDIC proposed regulation should be adopted.

Thank you for your consideration.

Very truly yours,
Steven I. Zeisel
Senior Counsel
Comsumer Bankers Association