|July 3, 1996|
Mark T. Gillett, Esq.
Dear Mr. Gillett:
This is in response to your letter dated March 5, 1996, concerning the status under Regulation D (12 C.F.R. Part 204) of certain checks issued under a proposed loan program. We previously wrote you on December 28, 1995, concerning an earlier version of your proposal.
Under the earlier proposal, a federally chartered savings bank ("FSB") was to mail firm offers of credit lines to a prescreened list of persons qualified for unsecured credit. Such persons would not necessarily be existing customers of FSB. The letter making the offer was to be accompanied by a "check" in a specified amount representing an initial advance on the line of credit and payable to the customer. Signature of the check as drawer was to constitute acceptance of the terms of the line of credit as well as acknowledgement of the amount owing. When a customer's check was processed at FSB, the line of credit was to be established and the line of credit account debited for the amount of the check. For ease of processing, however, all the customer checks in the proposed program were to be drawn against a single clearing account at FSB.
The checks you provided us as examples in the earlier proposal appeared to be checks drawn by the potential customer either on the customer payable at or through a bank, or on the bank promoting the loan program. In any event, they were subject to a separate contract (letter, loan agreement and disclosure form, and endorsements) under which FSB agreed with the customer to honor the draft through a specified date and to debit a loan account to be created for him when and if a signed draft was presented. We advised you that, in staff's opinion, those checks were not deposits under 12 CFR 204.2(a)(1)(i) or (iii).
Under your present proposal, we understand that the checks would be signed by a manager on behalf of the bank (and thus drawn by the bank as drawer) with the customer as payee, rather than drawn by the customer as drawer. The checks also would be dated by the bank, and are drawn either on the bank as drawee or on another depository institution as drawee. By endorsing the check, the customer could accept the line of credit. You represent that the other terms of the proposal are unchanged from the earlier proposal.
As noted in our letter dated December 28, 1995, Regulation D defines "deposit" to include, in relevant part:
an outstanding teller's check, or an outstanding draft, certified check, cashier's check, money order, or officer's check drawn on the depository institution. issued in the ordinary course of business for any purpose . . .
12 CFR 204.2(a)(1)(iii). A check drawn by a bank as drawer on the same bank as drawee is a cashier's check, and a check drawn by a bank as drawer on another depository institution as drawee is a teller's check. Therefore, the checks in both alternatives in your present proposal would be deposits under 12 CFR 204.2(a)(1)(iii) and would be reservable by FSB.
I hope this information is helpful to you. Further questions can be directed to Rick Heyke of my staff (202/452-3688) or the undersigned.
Very truly yours,
(signed) Oliver Ireland
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