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4000 - Advisory Opinions
Does an automated loan machine constitute a "remote service
unit" under section 3(o) of the FDI Act
FDIC--97--5
July 8, 1997
Robert C. Fick, Counsel
You have asked our opinion as to whether an automated loan machine
("ALM") constitutes a "remote service unit" (an
"RSU") under section 3(o) of the Federal Deposit Insurance Act
(the "FDI Act"), as amended by the Economic Growth and Regulatory
Paperwork Reduction Act of 1996 ("EGRPRA"),
12 U.S.C. § 1813(o) (1994).
Section 2205(b) of EGRPRA amended section 3(o) of the FDI Act to
exclude automated teller machines and remote service units from the
definition of the term "domestic branch."
You indicate generally that an ALM is a remote, electronic terminal
that permits any person to apply for a loan, obtain a credit decision,
and, if the application is approved, have the loan proceeds disbursed,
either by check directly from the machine, or by credit to an existing
account. An ALM is apparently programmed to verify the information
entered, correlate it to credit reports, and make a credit decision
based upon the bank's underwriting standards. The entire transaction
is meant to take about ten-to-fifteen minutes.
Prior to EGRPRA section 3(o) of the FDI Act provided, in pertinent
part, that:
The term "domestic branch" includes any branch bank, branch
office, branch agency, additional office, or any branch place of
business . . . at which deposits are received or checks paid or money
lent. . . .
Section 2205(b) of EGRPRA amended the definition of "domestic
branch" by inserting the following provision: "[t]he term
domestic branch' does not include an automated teller machine or a
remote service unit." EGRPRA does not provide any definition of the
terms "automated teller machine" and "remote service
unit," 1
nor is there any legislative history on this issue.
Nevertheless, a number of conclusions can be drawn about the meaning
of the term "remote service unit" simply from the words used in
the term and the context in which the term is used in the EGRPRA
amendments. First, RSUs are, by their very name, remote facilities.
Second, since Congress specifically excluded RSUs from the definition
of "domestic branch," it may have considered that an RSU would
have otherwise qualified as a "domestic branch," i.e., as a place
where one or more of the core banking functions (receiving deposits,
paying checks, and making
loans) 2
is conducted. Consequently, it may be concluded that the term RSU
includes a facility that engages in one or more of the
core
{{2-27-98 p.4984.20}}banking functions. Finally, an RSU
would appear to be an automated facility. In excluding ATMs and RSUs
from the definition of "domestic branch" it is unlikely that
Congress meant to exclude staffed banking facilities that engage in one
or more of the core banking functions. Otherwise, such an
interpretation could be read to exclude traditional
"brick-and-mortar" branches. Furthermore, the term "remote
service unit" is very similar in name to the term "remote service
facility," and "remote service facility" is defined in the
FDIC regulations as an electronic
facility. 3
In sum, based upon the above analysis, it is reasonable to conclude
that a "remote service unit" includes a remote, electronic or
automated, facility that provides one or more of the core banking
functions. As noted above, lending money is one of the core banking
functions. Consequently, based upon the above description of an
"automated loan machine," it is also reasonable to conclude that
an "automated loan machine" qualifies as a "remote service
unit" as used in EGRPRA and is, therefore, excluded from the
definition of "domestic branch" in section 3(o) of the FDI
Act. 4
If you have any further questions regarding this matter, please
contact me at your convenience.
1The OTS is the only Federal bank regulatory agency to define
the term "remote service unit." 12 C.F.R. § 545.141(a)(3).
However, the OTS has recently requested comment on whether it should
revise its regulation regarding RSUs. Deposits and Electronic Banking,
62 Fed. Reg. 15626, 15631 (April 2, 1997). Since this regulation does
not apply to banks, has been shaped by case law and a regulatory
history peculiar to the thrift industry, and may be changed, it is of
limited significance in determining the meaning of the term "remote
service unit" as used in EGRPRA. Go Back to Text
2Clarke v. Securities Industry Ass'n, 479 U.S. 388,
409 (1987). Go Back to Text
312 C.F.R. § 303(a)(23). Go Back to Text
4We note that the Office of the Comptroller of the Currency in
response to an inquiry from a national bank has confirmed that in its
opinion, an ALM qualifies as an ATM or RSU and is, therefore, excluded
from the amended definition of "branch" in the National Bank Act.
OCC Interp. Ltr. 772 (Mar. 6, 1997). Go Back to Text
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