[Federal Register Volume 73, Number 187 (Thursday, September 25, 2008)]
[Rules and Regulations]
[Pages 55431-55432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22326]



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 Rules and Regulations
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  Federal Register / Vol. 73, No. 187 / Thursday, September 25, 2008 / 
Rules and Regulations  

[[Page 55431]]



FEDERAL DEPOSIT INSURANCE CORPORATION

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: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is amending 
its regulations to permit state nonmember banks to participate or 
assist in certain 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 in order for the exemption to 
apply.

DATES: The final rule is effective on September 25, 2008.

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.

SUPPLEMENTARY INFORMATION:

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 other members of the community to 
deliver financial education.
    On June 23, 2008, the FDIC published in the Federal Register an 
interim final rule and request for comment titled, Financial Education 
Programs that Include the Provision of Bank Products and Services (the 
``Interim Rule'').\1\ The FDIC issued the Interim Rule in response to 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.
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    \1\ See 73 FR 35337.
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    In some instances, students provide limited banking services to 
other students, faculty, and parents 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.\2\
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    \2\ Note that this paragraph is not intended to provide an 
exclusive list of permissible activities for banks involved in 
financial education programs.
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    Section 18(d)(1) of the Federal Deposit Insurance Act (FDI Act) 
generally provides that no state nonmember bank shall establish or 
operate a new domestic branch without the prior written consent of the 
FDIC.\3\ Under the FDI Act, the term domestic branch generally is 
defined to include any branch bank, branch office, branch agency, 
additional office or any branch place of business located in any State 
or U.S. territory at which deposits are received or checks paid or 
money lent (each a core-banking function).\4\ The FDIC has determined 
by regulation that a messenger service that is established and operated 
by a state nonmember bank, which performs one of the core-banking 
functions, is a branch and requires a prior approval pursuant to these 
statutory provisions.\5\ However, under certain circumstances, 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) not provided to the general public; 
and (iii) conducted and designed primarily for financial education 
purposes. Moreover, participating in a financial education program 
differs from establishing a branch because, generally, with respect to 
such a program, the facility where banking services are provided is 
established by the school.
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    \3\ See 12 U.S.C. 1828(d)(1).
    \4\ See 12 U.S.C. 1813(o).
    \5\ 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 (D.C. Cir. 1976). See also First National Bank in Plant 
City v. Dickinson, 396 U.S. 122, 137 n. 10 (1970).
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    The Interim Rule generally exempts from the definition of branch 
any participation by a state nonmember bank in a financial education 
program that is 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. 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. Finally, the program 
must be conducted in a safe

[[Page 55432]]

and sound manner and comply with applicable law.
    The FDIC received three comments on the Interim Rule from trade- 
and research-based organizations. Generally, the commenters supported 
the Interim Rule, and lauded the FDIC for recognizing the importance of 
financial education programs, particularly for those individuals with 
little or no experience using bank-provided services. The commenters 
expressed no concerns regarding the Interim Rule, and they proposed no 
substantive or technical revisions. However, the FDIC has made a 
technical, nonsubstantive change to paragraph (a) of 12 CFR 303.41, 
which involved moving the reference to the financial education program 
exception provided in 12 CFR 303.46 to the sentence that lists the 
other exceptions to the definition of branch. Except for this change, 
the final rule is identical to the Interim Rule.

2. Final Rule

    The final rule excludes 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.\6\ As 
provided in this rule, the principal purpose of the program must be 
financial education, and not 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 program must be conducted in a safe and sound manner 
and comply with applicable law.
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    \6\ 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.
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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.\7\ This final rule 
establishes an exemption from 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 final rule in the Federal 
Register at least 30 days before its effective date.
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    \7\ See 5 U.S.C. 553(d).
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B. 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.\8\ 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.\9\
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    \8\ See 5 U.S.C. 603(a).
    \9\ See 5 U.S.C. 604.
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C. Paperwork Reduction Act

    The FDIC has determined that this final rule does not involve a 
collection of information pursuant to the provisions of the Paperwork 
Reduction Act of 1995.\10\
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    \10\ 44 U.S.C. 3501 et seq.
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List of Subjects in 12 CFR Part 303

    Banks, Banking, State nonmember banks, Filing procedures, 
Establishment and relocation of domestic branches and offices, 
Financial education programs.

Authority and Issuance

0
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:

PART 303--FILING PROCEDURES

0
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(1), 3104, 3105, 3108, 3207, 15 U.S.C. 1601-
1607.2.

0
2. In Sec.  303.41, revise paragraph (a) to read as follows:

Sec.  303.41  Definitions.

* * * * *
    (a) Branch, except as provided in this paragraph, 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, a remote service unit, or a facility described 
in section 303.46. The term branch also includes the following:
* * * * *

0
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 
school;
    (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.

    By Order of the Board of Directors.

    Dated at Washington, DC, the 18th day of September, 2008.

Federal Deposit Insurance Corporation.

Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. E8-22326 Filed 9-24-08; 8:45 am]
BILLING CODE 6714-01-P