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FDIC Federal Register Citations
[Federal Register: June 23, 2008 (Volume 73, Number 121)]
[Rules and Regulations]
[Page 35337-35339]
From the Federal Register Online via GPO Access []


12 CFR Part 303

RIN 3064-AD28

Financial Education Programs That Include the Provision of Bank
Products and Services

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Interim final rule and request for comment.


SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is amending
its regulations to permit state nonmember banks to participate or
assist in financial education programs conducted on school premises
where, in connection with the program, deposits are received, checks
are paid, or money is lent, without the need to submit a branch
application to, and receive prior approval from, the FDIC. However, any
state nonmember bank that desires to engage in such financial education
programs must satisfy certain conditions.

DATES: Effective date: June 23, 2008.
Comment date: Comments on this interim final rule must be received
by July 23, 2008.

ADDRESSES: You may submit comments by any of the following methods:
Federal eRulemaking Portal:
Follow the instructions for submitting comments.
Agency Web Site:
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments/Legal ESS, Federal Deposit Insurance Corporation, 550 17th
Street, NW., Washington, DC 20429.
Hand Delivered/Courier: The guard station at the rear of
the 550 17th Street Building (located on F Street), on business days
between 7 a.m. and 5 p.m.
Public Inspection: Comments may be inspected and
photocopied in the FDIC Public Information Center, Room E-1002, 3502
Fairfax Drive, Arlington, VA 22226, between 9 a.m. and 5 p.m. on
business days.
Instructions: Comments submitted must include ``FDIC'' and ``RIN
3064-AD28''. Comments received will be posted generally without change
to, including
any personal information provided.

FOR FURTHER INFORMATION CONTACT: Donald R. Hamm, Section Chief, Risk
Management and Applications Section, (202) 898-3528, Division of
Supervision and Consumer Protection; or Mark L. Handzlik, Senior
Attorney, (202) 898-3990, or Robert C. Fick, Counsel, (202) 898-8962,
Supervision Branch, Legal Division, Federal Deposit Insurance
Corporation, 550 17th Street, NW., Washington, DC 20429.


1. Background

The FDIC recognizes the importance of financial education programs,
particularly for those individuals who have little or no experience
using bank-provided services. Such programs generally contribute to the
financial stability of individuals, families, and communities.
Accordingly, the FDIC supports the ongoing efforts of state nonmember
banks to enhance financial literacy, and continues to encourage
institutions to collaborate with others members of the community to
deliver financial education.
Recently, the FDIC received a number of inquiries as to whether the
definition of branch includes a school or school facility where a state
nonmember bank participates or assists in a financial education program
for the benefit of students. Generally, through such programs, students
are trained in various banking functions and personal financial
management. A bank employee may serve as an advisor to the students and
assist faculty in developing a financial education curriculum.
In some instances, students provide limited banking services to
students and faculty directly at the school, on either a part-time
basis or designated school days. A bank engaged in such a program could
train students in bank operations and provide general supervision over
the program and the provision of banking services. These services could
include opening deposit accounts at the bank for students, faculty and
parents, and receiving deposits for credit to such accounts. The
participating bank may also pick up and deliver to its main office or a
branch any funds received by the students in connection with the
program. Note that this is not intended to provide an exclusive list of
permissible activities for banks involved in financial education
Section 18(d)(1) of the Federal Deposit Insurance Act (FDI Act)
(Section 18(d)(1)) provides that no state nonmember bank shall
establish or operate a new domestic branch without the prior written
consent of the FDIC.\1\ Section 3(o) of the FDI Act (Section 3(o))
generally defines a domestic branch to include any branch bank, branch
office, branch agency, additional office or any branch place of
business where deposits are received or checks paid or money lent (each
a core-banking function).\2\ The FDIC has determined by regulation that
a messenger service that is established and operated by a state
nonmember bank or its affiliate, which performs one of the core-banking
functions, is a branch and requires a prior approval pursuant to these
statutory provisions.\3\

\1\ See 12 U.S.C. 1828(d)(1).
\2\ See 12 U.S.C. 1813(o).
\3\ See 12 CFR 303.41. If, however, the messenger service is
established or operated by a non-affiliated third party, it
generally does not constitute a branch for purposes of Section 18(d)
and FDIC regulations. This interpretation is consistent with a plain
reading of Section 18(d)(1), and with the decision in Cades v. H & R
Block, where Justice Butzner, writing for the Fourth Circuit,
explained that ``courts apply a two-part test to decide whether a
bank is operating a branch office. First, the court determines
whether [the] branch is established and operated by the bank. * *
*'' See 43 F.3d 869, 814 (4th Cir. 1994), citing Independent Bankers
Ass'n of New York v. Marine Midland Bank, 757 F.2d 453, 456-63 (2d
Cir 1985); Independent Bankers Ass'n of America v. Smith, 534 F.2d,
921, 951-52 (DC Cir. 1976). See also First National Bank in Plant
City v. Dickinson, 396 U.S. 122, 137 n. 10 (1970).

Under certain conditions, a bank's participation in a financial
education program conducted on school premises differs from a bank
messenger service in that any core-banking function provided in
connection with such program is (i) provided at the discretion of the
school; (ii) made available on a limited basis to a discrete group of
individuals and not to the general public; and (iii)

[[Page 35338]]

conducted and designed primarily for educational purposes. Moreover,
participating in a financial education program differs from
establishing a branch because, generally, with respect to such program,
the facility where banking services are provided is established by the

2. Interim Final Rule

This interim final rule exempts from the definition of branch any
financial education program operated on school premises or a facility
used by a school, where, in connection with the program, deposits are
received, checks are paid, or money is lent, subject to certain
conditions.\4\ As provided in this rule, the principal purpose of the
financial education program must be educational, and not designed for
the purpose of profit-making. Further, any banking services provided in
connection with the program must be provided at the discretion of the
school. The FDIC expects that such services would be limited in nature;
available only to students, parents, and faculty; and accessible on a
part-time basis or designated school days. The bank must monitor the
program to ensure that it is conducted in a safe and sound manner and
complies with applicable law.

\4\ This exemption is consistent with a regulation promulgated
by the Office of the Comptroller of the Currency in 2001 which
exempts from the definition of branch a national bank's
participation in a financial literacy program conducted on school
premises. 12 CFR 7.1021.

Request for Comments

The FDIC requests comments on all aspects of this interim final
rule. Specifically, the FDIC requests comment on whether specific
controls are needed to ensure the safety and soundness of financial
education programs conducted on school premises and covered by this
regulation, for example, rules regarding data and physical security.
The FDIC also requests comment on whether the scope of, or a bank's
involvement in, any financial education programs extends beyond the
activities described in this rule.

Regulatory Analysis and Procedure

A. Administrative Procedure Act

Section 553(d) of the Administrative Procedure Act (APA) requires
the FDIC to publish a substantive rule at least 30 days before its
effective date, unless, under subsection (d)(1), the rule establishes
or recognizes an exemption or relieves a restriction.\5\ This interim
final rule establishes an exemption to the definition of branch
provided in 12 CFR part 303, subpart C, which has the effect of
permitting state nonmember banks to participate in certain financial
education programs conducted on school premises without having to
submit a branch application to, and receive prior approval from, the
FDIC. Therefore, the FDIC is not required to publish this interim final
rule in the Federal Register at least 30 days before its effective

\5\ See 5 U.S.C. 553(d).

B. Solicitation of Comments on the Use of Plain Language

Section 722 of the Gramm-Leach-Bliley Act requires the federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000.\6\ We invite your comments on how to
make this rule easier to understand. For example:

\6\ See Pub. L. 106-102, sec. 722, 113 Stat. 1338, 1471 (Nov.
12, 1999).

Is the material provided in this rule well organized? If not, how
could this material be better organized?
Are the requirements in the interim final rule clearly stated? If
not, how could the rule be more clearly stated?
Does the rule contain language or jargon that is not clear? If so,
which language requires clarification?

C. Regulatory Flexibility Analysis

The Regulatory Flexibility Act (RFA) requires an agency that is
issuing a proposed rule to prepare and make available for public
comment an initial regulatory flexibility analysis that describes the
impact of a proposed rule on small entities.\7\ Because this rulemaking
does not involve the issuance of a notice of proposed rulemaking, the
requirements of the RFA for a final regulatory flexibility analysis do
not apply.\8\

\7\ See 5 U.S.C. 603(a).
\8\ See 5 U.S.C. 604.

D. Paperwork Reduction Act

The FDIC has determined that this interim final rule does not
involve a collection of information pursuant to the provisions of the
Paperwork Reduction Act of 1995.\9\

\9\ 44 U.S.C. 3501 et seq.

List of Subjects

12 CFR Part 303

Banks, banking, State nonmember banks.

Authority and Issuance

For the reasons set forth in the preamble, part 303 of chapter III of
title 12 of the Code of Federal Regulations is amended as follows:


1. The authority citation for part 303 continues to read as follows:

Authority: 12 U.S.C. 378, 1813, 1815, 1817, 1818, 1823, 1819
(Seventh and Tenth), 1820, 1823, 1828, 1831a, 1831e, 1831o, 1831p-1,
1831w, 1835a, 1843(l), 3104, 3105, 3108, 3207, 15 U.S.C. 1601-

2. In Sec. 303.41, the introductory text of paragraph (a) is revised
to read as follows:

Sec. 303.41 Definitions.

* * * * *
(a) Branch, except as provided in Sec. 303.46, includes any branch
bank, branch office, additional office, or any branch place of business
located in any State of the United States or in any territory of the
United States, Puerto Rico, Guam, American Samoa, the Trust Territory
of the Pacific Islands, the Virgin Islands, and the Northern Mariana
Islands at which deposits are received or checks paid or money lent. A
branch does not include an automated teller machine, an automated loan
machine, or a remote service unit. The term branch also includes the
* * * * *

3. A new Sec. 303.46 is added to subpart C to read as follows:

Sec. 303.46 Financial education programs that include the provision
of bank products and services.

No branch application or prior approval is required in order for a
state nonmember bank to participate in one or more financial education
programs that involve receiving deposits, paying withdrawals, or
lending money if:
(a) Such service or services are provided on school premises, or a
facility used by the school;
(b) Such service or services are provided at the discretion of the
(c) The principal purpose of each program is financial education.
For example, the principal purpose of a program would be considered to
be financial education if the program is designed to teach students the
principles of personal financial management, banking operations, or the
benefits of saving for the future, and is not designed for the purpose
of profit-making; and
(d) Each program is conducted in a manner that is consistent with
safe and sound banking practices and complies with applicable law.

Dated at Washington, DC, the 17th day of June, 2008.

By order of the Board of Directors

[[Page 35339]]

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E8-14076 Filed 6-20-08; 8:45 am]


Last Updated 06/23/2008

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