[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Notices]
[Pages 65325-65326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30728]



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FEDERAL RESERVE SYSTEM

First American Corporation; Application to Engage in Nonbanking 
Activities;

    First American Corporation, Nashville, Tennessee (Applicant), has 
given notice pursuant to section 4(c)(8) of the Bank Holding Company 
Act (12 U.S.C. 1843(c)(8)) (BHC Act) and 225.23(a)(3) of the Board's 
Regulation Y (12 CFR 225.23(a)(3)) of its intention to engage de novo 
through it indirect subsidiary, The SSI Group, Inc., Mobile, Alabama 
(Company), 1 in processing and transmitting medical payment data 
between health care providers (Providers) and insurance companies and 
other entities responsible for providing medical benefits (Payers). 
Providers would enter claims information (such as patient 
identification, coverage eligibility, and a description of the medical 
services provided) into Company's medical claims network, and Company 
would 

[[Page 65326]]
transmit claims information to the proper Payers and transmit Payers' 
coverage decisions to Providers for posting on Providers' books as 
accounts receivable. In addition, Company would arrange for electronic 
funds transfers from Payers to Providers through an affiliate, First 
American National Bank, Nashville, Tennessee (Bank), offer medical 
service credit cards, issued by Bank, to Providers' patients to be used 
to pay for all medical expenses not covered by Payers, and operate a 
collection agency for Providers to collect past-due accounts. Company 
also would perform general data processing services, including 
maintaining medical records and scheduling the provision of medical 
services, for Springhill Hospitals, Inc., Mobile, Alabama, which is 
affiliated with Applicant's co-venturer and would serve as a beta site 
for the testing and development of data processing and transmission 
software and facilities offered by Company to Providers. Applicant also 
proposes that Company would provide electronic storage and retrieval of 
financial documents and information to insured depository institutions 
and other financial companies. The scope of Company's activities would 
be nationwide.

    \1\  Applicant proposes to acquire 49.25 percent of the voting 
shares of Company from Southern Medical Health Systems, Inc., 
Mobile, Alabama (Co-Venturer), which would 
retain 49 percent of the voting shares. Co-Venturer's sole 
shareholder would retain an additional 1.75 percent of the voting 
shares. Applicant also would acquire an option to purchase up to an 
additional 17.75 percent of the voting shares from Co-Venturer.
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    Section 4(c)(8) of the BHC Act provides that a bank holding company 
may engage in any activity that the Board, after due notice and 
opportunity for hearing, has determined by order or regulation to be so 
closely related to banking or managing or controlling banks as to be a 
proper incident thereto. This statutory test requires that two separate 
tests be met for an activity to be permissible for a bank holding 
company. First, the Board must determine that the activity is, as a 
general matter, closely related to banking. Second, the Board must find 
in a particular case that the performance of the activity by the 
applicant bank holding company may reasonably be expected to produce 
public benefits that outweigh possible adverse effects.
    A particular activity may be found to meet the ``closely related to 
banking'' test if it is demonstrated that banks have generally provided 
the proposed services, that banks generally provide services that are 
operationally or functionally similar to the proposed services so as to 
equip them particularly well to provide the proposed services, or that 
banks generally provide services that are so integrally related to the 
proposed services as to require their provision in a specialized form. 
National Courier Ass'n v. Board of Governors, 516 F.2d 1229, 1237 (D.C. 
Cir. 1975). In addition, the Board may consider any other basis that 
may demonstrate that the activity has a reasonable or close 
relationship to banking or managing or controlling banks. Board 
Statement Regarding Regulation Y, 49 FR 806 (1984).
    Applicant states that the Board previously has determined by 
regulation that providing certain financial, banking, or economic data 
processing and data transmission services and facilities and providing 
access to such services and facilities by any technological means are 
closely related to banking for purposes of section 4(c)(8) of the BHC 
Act. See 12 CFR 225.25(b)(7). Applicant maintains that the transmission 
of claims from providers to payers and the payers' responses to such 
claims constitutes the transmission of financial data.
    Applicant also contends that, to the extent the proposed activities 
involve transmitting nonfinancial data (such as patient identification, 
coverage eligibility, and a description of the medical services 
provided), a bank holding company may engage in these activities as 
incidental to the transmitting of Providers' requests for payment. See 
Banc One Corporation, 80 Federal Reserve Bulletin 139 (1994). Applicant 
contends that Providers' requests for payment and Payers' remittance 
decisions on those requests are financial data, even in the absence of 
an actual transfer of funds. See Citicorp, 72 Federal Reserve Bulletin 
497 (1986).
    Applicant states that the Board previously has determined by 
regulation that operating a collection agency for overdue accounts 
receivable, either retail or commercial, is closely related to banking 
for purposes of section 4(c)(8) of the BHC Act, provided the collection 
agency does not obtain the names of customers of competing collection 
agencies from an affiliated depository institution that maintains trust 
accounts for those agencies and does not provide preferential treatment 
to an affiliate or customers of an affiliate seeking collection of an 
outstanding debt. See 12 CFR 225.25(b)(23). Applicant states that its 
proposed collection agency activities would solely be for overdue 
accounts as required by the Board's regulation.
    In order to approve the proposal, the Board also must determine 
that the proposed activities to be engaged in by Company are a proper 
incident to banking that ``can reasonably be expected to produce 
benefits to the public, such as greater convenience, increased 
competition, or gains in efficiency, that outweigh possible adverse 
effects, such as undue concentration of resources, decreased or unfair 
competition, conflicts of interests, or unsound banking practices.'' 12 
U.S.C. 1843(c)(8). Applicant contends that its proposal would produce 
public benefits, including gains in efficiency, that outweigh any 
potential adverse effects.
    In publishing the proposal for comment, the Board does not take a 
position on issues raised by the proposal. Notice of the proposal is 
published solely to seek the views of interested persons on the issues 
presented by the notice and does not represent a determination by the 
Board that the proposal meets, or is likely to meet, the standards of 
the BHC Act.
    Any comments or requests for hearing should be submitted in writing 
to William W. Wiles, Secretary, Board of Governors of the Federal 
Reserve System, Washington, D.C. 20551, not later than January 2, 1996. 
Any request for a hearing on this notice must, as required by Sec.  
262.3(e) of the Board's Rules of Procedure (12 CFR 262.3(e)), be 
accompanied by a statement of reasons why a written presentation would 
not suffice in lieu of a hearing, identifying specifically any 
questions of fact that are in dispute, summarizing the evidence that 
would be presented at a hearing, and indicating how the party 
commenting would be aggrieved by approval of the proposal.
    This application may be inspected at the offices of the Board of 
Governors or the Federal Reserve Bank of Atlanta.

    Board of Governors of the Federal Reserve System, December 12, 
1995.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 95-30728 Filed 12-18-95; 8:45 am]
BILLING CODE 6210-01-F