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#6132 - 10/31/01 06:33 PM Bank Service Company Act
Bartman Offline
Diamond Poster
Bartman
Joined: Oct 2000
Posts: 1,191
Springfield
My boss attended a risk management seminar in Chicago this week, and a presenter cited FDIC financial institution letter 49-99. This was a reminder to FDIC regulated banks about the requirements of the above act, and that if banks contract with third-party service providers for things like data processing or delivery of internet banking, they must contact the FDIC on a special form.

Our question - does the Bank Service Company Act apply to all banks, or just FDIC-supervised institutions? We're a Fed bank, and we're introducing internet banking through a third party later this year - I need to figure out if we have any notification requirements.

Also, where can I get my hands on a copy of the Act itself?

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Opinions stated are not legal advice, and are not necessarily the opinions of OAK Financial Corp.

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General Discussion
#6133 - 10/31/01 07:31 PM Re: Bank Service Company Act
Michelle D Offline
Gold Star
Michelle D
Joined: Oct 2001
Posts: 313
Terminator Country
I can't comment on whether you need to notify the agencies on when you change service providers, but I know that the OTS requires that you notify them in writing at least 30 days prior to implementation of a transactional website. You need to complete and application and then they call you back and do a telephone interview. What they are looking for is to ensure that you have all your ducks in a row prior to going live. They ask about internal controls, KYC, and now probably info security and privacy issues.

Good Luck.

The opinions are mine and do not necessarily represent those of my employer.

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The opinions are mine and do not necessarily reflect those of my employer.

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#6134 - 10/31/01 07:40 PM Re: Bank Service Company Act
Rubaiyat Offline
Diamond Poster
Joined: Jun 2001
Posts: 1,373
Lido Deck
This was news to me but here is a link to the Act and the FDIC advisory letter.
http://www4.law.cornell.edu/uscode/12/ch18.html
http://www.fdic.gov/news/news/financial/1999/fil9949.html
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#6135 - 11/01/01 02:40 PM Re: Bank Service Company Act
Anonymous
Unregistered

I did a quick read of the Act, and it appears to me that the notification requirement only applies if the bank is investing in a bank service company. Contracting with a third party to provide data processing services, for example, would not fall under the Act's provisions, since the bank is only paying for services rendered and is not investing in the data processing company itself.

THE OPINIONS EXPRESSED ARE MINE AND NOT THOSE OF MY EMPLOYER.


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#6136 - 11/01/01 02:48 PM Re: Bank Service Company Act
prosperity Offline
Member
prosperity
Joined: Oct 2001
Posts: 82
Houston, TX
Hi,
The citation is 12 CFR 304 and section 7 of the Bank Service Corporation Act.

The required notice has to be sent to the Director of Supervision of the region in which the bank's main office is located within 30 days of the making of the bank service contract or the performance of the bank service, whichever occurs first. 304.5.

According to FDIC FIL49-99 Insured financial institutions are required to notify their appropriate banking agency in writing of contracts or relationships with third parties that provide certain services to the institution.

The citation for the Bank Service Company Act is 12 USC 1867.

I also have a copy of the notice that is to be filed with the regulator.


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#6137 - 11/02/01 08:17 PM Re: Bank Service Company Act
Rubaiyat Offline
Diamond Poster
Joined: Jun 2001
Posts: 1,373
Lido Deck
For those national banks out there, the OCC just issued Bulletin 2001-47 on 11/1/01 regarding Risk Management Principles. In it, it clearly states that "the OCC treats as subject to the Bank Service Company Act, situations in which a bank arranges, by contract or otherwise, for the performance of any applicable functions of its internal operations". It also goes on to say in pretty clear terms that the OCC will be looking at these products and services very closely and can even assess a special examination (or investigation fee!) if they examine or investigate the activites provided to a bank by a third party.
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