The Federal Reserve Board eagle logo links to home page
December 19, 2003

Isaac B. Lustgarten, Esq.
Arnold & Porter
399 Park Avenue
New York, New York 10022-4690

Dear Mr. Lustgarten:

You have requested the opinion of the Board's staff regarding the provisions of section 225.28(b)(3) of the Board's Regulation Y (12 C.F.R. 225.28(b)(3)) that permit bank holding companies to engage in leasing activities. In connection with its automobile leasing activities, Stichting Administratiekantoor ABN AMRO Holding, ABN AMRO Holding N.V., and ABN AMRO Bank N.V. (collectively "ABN AMRO"),1 provides fleet management services to its automobile fleet leasing customers through its wholly-owned subsidiary, Lease Plan U.S.A., Inc., Atlanta, Georgia ("LP USA").

In connection with making automobile and equipment leases that conform with the requirements of Regulation Y, LP USA engages in the business of commercial lending and financial leasing of motor vehicle fleets and equipment located throughout the United States, and provides fleet management services to companies that lease corporate automobile fleets.2 According to your letters and the other materials that you have submitted regarding the fleet financing services industry, these three services are marketed and delivered as a bundled service to clients, not only by LP USA, but by other participants in this business.

In order to better provide fleet management services to its automobile fleet leasing customers, LP USA acquired Consolidated Service Fleet Management, L.L.C. ("CSC") in December 2000. The fleet management services LP USA provides entail arranging for third parties to provide vehicle maintenance, accident management services, and safety management services and directly providing client support services in connection with the services arranged by LP USA.3 It provides these services in connection with leases that conform with Regulation Y.4 In addition to permissible leasing activities, CSC conducts some fleet management services for automobiles that are owned by the client, and not, therefore, subject to a lease.

You state in your letter that approximately 90 percent of the vehicles serviced by CSC are leased and approximately 10 percent are owned by the client. According to your letters, revenues earned from fleet management services provided for vehicles owned by the client comprise less than 2 percent of the total revenues of LP USA. You have asked whether it would be permissible for ABN AMRO to provide fleet management services with regard to automobile fleets if the customer owns rather than leases the vehicles.

You contend that without the ability to provide fleet management services to some owned vehicles, LP USA would be at a competitive disadvantage with respect to its primary U.S. competitors because many commercial vehicle fleets typically consist of both owned and leased vehicles, and that many companies continually change the composition of their commercial fleets between owned and leased vehicles based on the changing needs of the business environment.5 You state that many companies that become customers of LP USA choose to migrate from owned to leased fleets, but this migration may typically take 2 to 3 years, during which time the customer requires fleet management services of its fleet of owned and leased vehicles.6

As a general matter, Regulation Y permits a bank holding company to engage in any incidental activities that are necessary to carry on an activity permitted by the regulation.7 The courts also have recognized the authority of bank holding companies to engage in incidental activities reasonably necessary to the conduct of closely related activities.8

In light of the nature of the practices in the fleet management industry and the difficulty in continually monitoring the migration between leased and owned vehicles in the same fleet, it appears that some ability to perform fleet servicing for owned vehicles is necessary to retain customers in connection with LP USA's fleet leasing activities. In view of all the facts of record, including this necessity, the minimal amount of revenue LP USA earns from servicing owned vehicles, and the fact that the activity is primarily an agency activity, it is my opinion that ABN AMRO may provide fleet management services to owned vehicles as an activity incidental to ABN AMRO's authorized leasing activities. In reaching this conclusion, I have relied on all the information you provided, including that LP USA will limit its fleet management services involving vehicles not subject to a Regulation Y permissible lease to no more than 15 percent of the fleet management revenues, and 5 percent of the total leasing revenues of LP USA. This opinion is based on the facts and representations you have provided, and any material change in these facts or representations, could result in a different conclusion and should be reported to Board staff. Provision of fleet management services on owned vehicles is subject to the same restrictions set forth in Regulation Y for leased vehicles.9 If you have any questions regarding this matter, please contact Daniel Meade (202/452-3838) of the Board's legal staff.


(signed) J. Virgil Mattingly, Jr.

J. Virgil Mattingly, Jr.
General Counsel

cc: Federal Reserve Bank of New York
Robert Mannion, Esq., Arnold and Porter


1. ABN AMRO is a foreign banking organization that is treated as a bank holding company and has effectively elected to be treated as a financial holding company pursuant to section 225.92 of Regulation Y. Return to text

2. The Board has previously found that providing fleet management services is permissible when the fleet involves vehicles that are under a lease that conforms to the requirements of Regulation Y. See 12 C.F.R. 225.28(b)(3) n. 5. Permissible leases are considered to be the functional equivalent of a loan. Return to text

3. A complete list of the proposed activities is in the attached Appendix. Return to text

4. In connection with the acquisition of CSC, ABN AMRO committed that it would divest or conform all impermissible activities of CSC within two years, and on December 19, 2002, was granted a one-year extension of time to fulfill its commitment. Return to text

5. The Office of the Comptroller of the Currency has found that a national bank may provide fleet management services to its leasing customers as well as to those who do not lease from the bank as a finder activity or a permissible use of its excess capacity. See OCC Corporate Decision #2001-28 (PDF), September 21, 2001. This interpretation is based on the leasing authority in Regulation Y, not the finder authority. Return to text

6. Some customers may continue to have a fleet consisting solely of owned vehicles. Return to text

7. 12 C.F.R. 225.21(a)(2). Return to text

8. National Courier Association v. Board of Governors, 516 F.2d 1229 (D.C. Cir. 1975); Alabama Association of Insurance Agents v. Board of Governors, 533 F.2d 224 (6th Cir. 1976), cert. denied, 435 U.S. 904 (1978); Association of Data Processing Service Organizations, Inc. v. Board of Governors, 745 F.2d 677 (D.C. Cir. 1984). See also Letter from Michael Bradfield, General Counsel of the Board to Mr. Kenneth H. Robin, Assistant Secretary of Citicorp (June 12, 1984) (indicating that the occasional remarketing of a limited number of aircraft for unaffiliated persons is permissible as an activity incidental to Citicorp's authorized leasing activities). Return to text

9. 12 C.F.R. 225.28(b)(3) n. 5. Return to text


1.  Arranging for Vehicle Maintenance
    The following services are offered through a vehicle maintenance
    service network by means of coupon books, credit cards or purchase 
    orders with network vendors unaffiliated with ABN AMRO: 
    (i)	   maintenance management (representatives respond to calls from 
           drivers, service coordinators arrange for repairs with vendors, 
           audit charges, review vehicle maintenance history to make 
           determination as to whether vehicle should be repaired, and if 
           so under warranty or completed with a charge); 
    (ii)   preventive management (preventative maintenance scheduling 
           linked to nationwide vendor network); 
    (iii)  credit card services (offering discounts at automotive service 
           and product vendors through national account agreements); 
    (iv)   Major mechanical repair facilitation (service coordinators 
           arrange towing and rental services, track repairs, including 
           examining the estimate, arranging for repairs at a network 
           approved maintenance facility);
    (v)    glass replacement and maintenance program (representatives 
           facilitate arrangements between the driver and a vendor within 
           the national glass replacement dealer network arrange billing 
           with vendor); 
    (vi)   detailing programs (provides access to national network of 
           detailing specialists); 
    (vii)  back-up rental program (arranging vehicle rental replacement or 
           bridge vehicle); and 
    (viii) emergency road service (arranges for 24-hour access to towing 
           and repair facilities, lock-out service, tire changing, fuel 
           service, jump start service and arranging for substitute
Under some contracts, an agreement would be made that if any maintenance 
services to a vehicle are not done to the satisfaction of the customer, 
then LP USA or CSC would arrange to have the maintenance facility redo the
repair to the client's satisfaction at the maintenance facilities expense 
based on the pre-arranged agreement with the maintenance facility.

2.  Arranging for Accident Management Services
    For customers whose fleets are self-insured, CSC would arrange for the 
handling of all informational details following an accident, including:
arranging for a detailed report of the accident; selecting a network 
approved facility for the vehicle; arranging for property recovery through
the Pro-Claim Subrogation Recovery Service; arranging for a back-up rental
vehicle if necessary (Back-up Fleet Vehicle Rental program and uninsured 
Back-up Fleet Vehicle Rental program); and additionally, because of data in 
its systems, a driver profiling service (Accident Prone Index Table), would 
be issued which maps individual driver patterns.
3.  Client Support Services
    Administrative support is provided to customers by: organizing and 
storing vehicle titles (Title Retention); fielding driver calls related to 
fleet policy and vehicle delivery (Driver Call Center); processing 
registration renewals, parking violations and insurance cards; arranging
drive-away service for fleet and individual vehicle relocation; and, 
arranging employee vehicle purchase programs.
4.  Safety Management Services
    CSC outsources the provision of continuing education driving safety 
newsletters and other educational materials, and an external review of 
fleet safety standards and procedures.
Return to topReturn to top

Home | Banking information and regulation | Legal interpretations | 2003 BHC/Change in control
Accessibility | Contact Us
Last update: September 2, 2003