Mr. James A. Sheriff
Godrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202-3590

Dear Mr. Sheriff

This is in response to your letters dated May 1 and June 9, 1998, requesting an opinion concerning whether various services that M&I Support Services Corp. ("M&I Services"), a wholly owned subsidiary of Marshall & Ilsley Corporation ("M&I"), both of Milwaukee, Wisconsin, proposes to provide to unaffiliated financial institutions are permissible nonbanking activities under section 225.28(b) of the Board's Regulation Y (12 C.F.R. 225.28(b)). The proposed services of M&I Services would be offered in conjunction with the data processing and transmission services that M&I provides to unaffiliated financial institutions throughout the United States pursuant to section 225.28(b)(14) of Regulation Y.

We understand from your correspondence and conversations with Federal Reserve System staff that M&I Services proposes to provide the following services:

1. Deposit Servicing. Various services to support the deposit activities of unaffiliated financial institution clients, including maintaining and supporting the client's deposit database systems and related sub-system databases; processing openings and changes to deposit accounts; processing maintenance changes to and performing status verifications of certificates of deposit, time deposits and retirement accounts; processing retirement account distributions and providing reports related thereto; performing deposit database system balancing services; processing garnishments and levies on deposit accounts; monitoring the deposit databases for excessive transactions and compliance with the Board's Regulation D; and processing research requests for statement copies, court subpoenas and deceased party matters.

2. Loan Application Processing. Application processing services related to consumer loans originated by unaffiliated financial institutions, including providing on-line processing for loan applications to the financial institution client; preparing loan documentation using on-line systems and transmitting such documents electronically to the client for execution with the loan customer; and processing Home Mortgage Disclosure Act reports for the client. M&I Services would provide solely the data processing capability for applications. All decisions regarding credit scoring and whether a loan will be approved or denied will be made by the unaffiliated financial institution. M&I Services does not propose to advise its clients about the use of any particular credit score card, and would not have any discretionary authority to approve or deny a loan application or to override the results of the clients's credit scoring program with respect to any application. The financial institution client would send adverse action notices to those customers whose applications are denied.

3. Loan Processing and Servicing. Support services for the lending activities of unaffiliated financial institutions, such as providing maintenance and support services for a client's loan product database system and related sub-system databases (e.g., entering the client's new loan accounts into the database system and processing loan account maintenance changes, payments and other related monetary transactions); reviewing the client's loan document packages after initial processing and generating exception reports for the client's management; coordinating with third parties for proper recording of real estate mortgages or security interest filings related to the client's loans; maintaining a central storage facility for loan files and performing document retrieval services; processing transactions related to loan accounts that are paid in full; and performing loan database system balancing services.

4. Call Center. Telephone call center services for unaffiliated financial institutions, including providing answers to inquiries from the client's customers concerning their deposit or loan accounts and processing telephone requests for the opening of deposit accounts, renewal of certificates of deposit, transfer of funds between accounts, and similar transactions. In addition, the call center staff would direct telephone inquiries regarding a client's products and services to appropriate personnel of the client. M&I Services also would provide information support for customers using a financial institution client's personal computer banking and telephone bill support .services. In connection with such activities, M&I Services commits that it will not use or disclose to any person any confidential information concerning customers of unaffiliated financial institutions without the express consent of such institution.

5. Miscellaneous Services. Various reports based on the data processed by M&I Services, such as reports on the volume of loan applications; customized or enhanced computer software for the financial products and services of the financial institution client and related maintenance services; and review and development of manuals documenting the financial institution client's policies and procedures for using the services of M&I Services and its affiliates, and recommendations concerning the effective use of such services.

The Board has determined, in section 225.28(b)(14) of Regulation Y, that it is permissible for bank holding companies to provide certain data processing and transmission services, facilities, databases, advice, and access to such services, facilities or databases by any technological means, provided that the data to be processed or furnished are financial, banking or economic in nature.¹ Regulation Y also provides that bank holding companies may engage in incidental activities that are necessary to carry on an activity that is closely related to banking.² In addition, sections 225.28(b)(1) and (2) of Regulation Y permit bank holding companies to service loans and to engage in activities related to extending credit.³

It appears that the proposed deposit servicing, loan processing and servicing, loan application processing, call center, and miscellaneous services discussed above involve or are related to processing banking and financial data for unaffiliated financial institution clients or to loan servicing, or are a necessary part of providing such services. M&I Services proposes merely to provide data processing for the financial products and services of financial institution clients. The financial institution clients will fund and establish all the terms of their financial products and services. Moreover, all decisions regarding credit scoring and whether or not to approve or deny a loan application will be made exclusively by the financial institution clients. In this light, and based on all the facts of record, we believe that the proposed services described in this letter are within the scope of permissible data processing and transmission activities under section 225.28(b)(14) of Regulation Y,⁴ permissible loan servicing and related activities under sections 225.28(b)(1) and (2) of Regulation Y,⁵ or permissible incidental activities under section 225.21(a)(2) of Regulation Y. ⁶

This opinion is limited solely to the proposed activities described above, and does not address the treatment of any other activities or authorize M&I Services to engage in any other activities. Any material change in the proposed activities described above may require this opinion to be reconsidered and should be communicated immediately to Board staff.

Very truly yours,

(Signed) Scott G. Alvarez

Scott G. Alvarez

cc: Philip Jackson,
        Federal Reserve Bank of Chicago

1. See 12 C.F.R. 225.28(b)(14). Return to text

2. See 12 C.F.R. 225.21(a)(2).Return to text

3. See 12 C.F.R. 225.28(b)(1)( and (2).Return to text

4. See 12 C.F.R. 225.28(b)(14). M&I Services must provide these data processing and transmission services in accordance with the limitations set forth in section 225.28(b)(14) of Regulation Y.Return to text

5. See 12 C.F.R. 225.28(b)(1), (2).Return to text

6. See 12 C.F.R. 225.21(a)(2).Return to text