-CITE-

12 USC CHAPTER 18 - BANK SERVICE COMPANIES 01/06/03

-EXPCITE-

TITLE 12 - BANKS AND BANKING

CHAPTER 18 - BANK SERVICE COMPANIES

.

-HEAD-

CHAPTER 18 - BANK SERVICE COMPANIES

-MISC1-

Sec.

1861. Short title and definitions.

(a) Short title.

(b) Definitions.

1862. Amount of investment in bank service company.

1863. Permissible bank service company activities for depository

institutions.

1864. Permissible bank service company activities for other

persons.

(a) Services permissible other than taking deposits.

(b) Services to be performed in State where

shareholders or members are located.

(c) Performance where State bank is shareholder or

member.

(d) Performance where national bank is shareholder or

member.

(e) Performance where State bank and national bank

are shareholders or members.

(f) Geographic location.

1865. Prior approval for investments in bank service companies.

(a) Approval of Federal banking agency.

(b) Approval of Board.

(c) Considerations in determining approval.

(d) Failure to act on application for approval.

1866. Services to nonstockholders or nonmembers.

1867. Regulation and examination of bank service companies.

(a) Principal investor.

(b) Applicability of section 1818 of this title.

(c) Services performed by contract or otherwise.

(d) Issuance of regulations and orders.

-SECREF-

CHAPTER REFERRED TO IN OTHER SECTIONS

This chapter is referred to in section 24a of this title.

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12 USC Sec. 1861 01/06/03

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TITLE 12 - BANKS AND BANKING

CHAPTER 18 - BANK SERVICE COMPANIES

-HEAD-

Sec. 1861. Short title and definitions

-STATUTE-

(a) Short title

This chapter may be cited as the ''Bank Service Company Act''.

(b) Definitions

For the purpose of this chapter -

(1) the term ''appropriate Federal banking agency'' shall have

the meaning provided in section 1813(q) of this title;

(2) the term ''bank service company'' means -

(A) any corporation -

(i) which is organized to perform services authorized by

this chapter; and

(ii) all of the capital stock of which is owned by 1 or

more insured banks; and

(B) any limited liability company -

(i) which is organized to perform services authorized by

this chapter; and

(ii) all of the members of which are 1 or more insured

banks.

(3) the term ''Board'' means the Board of Governors of the

Federal Reserve System;

(4) the term ''depository institution'' means an insured bank,

financial institution subject to examination by the Federal Home

Loan Bank Board or the National Credit Union Administration

Board, or a financial institution the accounts or deposits of

which are insured or guaranteed under State law and are eligible

to be insured by the Federal Deposit Insurance Corporation, the

Federal Savings and Loan Insurance Corporation, or the National

Credit Union Administration Board;

(5) the term ''insured bank'' shall have the meaning provided

in section 1813(h) of this title;

(6) the term ''invest'' includes any advance of funds to a bank

service company, whether by the purchase of stock, the making of

a loan, or otherwise, except a payment for rent earned, goods

sold and delivered, or services rendered prior to the making of

such payment;

(7) the term ''limited liability company'' means any company,

partnership, trust, or similar business entity organized under

the law of a State (as defined in section 1813 of this title)

which provides that a member or manager of such company is not

personally liable for a debt, obligation, or liability of the

company solely by reason of being, or acting as, a member or

manager of such company; and

(8) the term ''principal investor'' means the insured bank that

has the largest dollar amount invested in the equity of a bank

service company. In any case where two or more insured banks

have equal dollar amounts invested in a bank service company, the

company shall, prior to commencing operations, select one of the

insured banks as its principal investor and shall notify the

bank's appropriate Federal banking agency of that choice within 5

business days of its selection.

-SOURCE-

(Pub. L. 87-856, Sec. 1, Oct. 23, 1962, 76 Stat. 1132; Pub. L.

97-320, title VII, Sec. 709, Oct. 15, 1982, 96 Stat. 1540; Pub. L.

97-457, Sec. 32(a), Jan. 12, 1983, 96 Stat. 2511; Pub. L. 104-208,

div. A, title II, Sec. 2613(a), (b), Sept. 30, 1996, 110 Stat.

3009-476.)

-MISC1-

AMENDMENTS

1996 - Subsec. (a). Pub. L. 104-208, Sec. 2613(a), inserted

heading and amended text of subsec. (a) generally. Prior to

amendment, text read as follows: ''This chapter may be cited as the

'Bank Service Corporation Act'.''

Subsec. (b)(2). Pub. L. 104-208, Sec. 2613(b)(1), amended par.

(2) generally. Prior to amendment, par. (2) read as follows: ''the

term 'bank service corporation' means a corporation organized to

perform services authorized by this chapter, all of the capital

stock of which is owned by one or more insured banks;''.

Subsec. (b)(6). Pub. L. 104-208, Sec. 2613(b)(2), substituted

''company'' for ''corporation'' and struck out ''and'' after

semicolon at end.

Subsec. (b)(7). Pub. L. 104-208, Sec. 2613(b)(3), added par. (7).

Former par. (7) redesignated (8).

Subsec. (b)(8). Pub. L. 104-208, Sec. 2613(b)(4), substituted

''company'' for ''corporation'' wherever appearing and ''equity''

for ''capital stock''.

Pub. L. 104-208, Sec. 2613(b)(3), redesignated par. (7) as (8).

1983 - Subsec. (b)(4). Pub. L. 97-457 substituted ''a'' for ''or

another'' after ''insured bank,'' and inserted reference to a

financial institution insured by State law and eligible to be

insured by certain Federal agencies.

1982 - Subsec. (a). Pub. L. 97-320 substituted provision that

this chapter may be cited as the ''Bank Service Corporation Act''

for provision that term ''Federal supervisory agency'' meant the

Comptroller of the Currency, the Board of Governors of the Federal

Reserve System, or the Board of Directors of the Federal Deposit

Insurance Corporation.

Subsec. (b). Pub. L. 97-320 substituted definitions of

''appropriate Federal banking agency'', ''bank service

corporation'', ''Board'', ''depository institution'', ''insured

bank'', ''invest'', and ''principal investor'' for provision that

term ''bank services'' meant services such as check and deposit

sorting and posting, computation and posting of interest and other

credits and charges, preparation and mailing of checks, statements,

notices, and similar items, or any other clerical, bookkeeping,

accounting, statistical, or similar functions performed for a bank.

Subsec. (c). Pub. L. 97-320 redesignated provisions of subsec.

(c) defining ''bank service corporation'' as (b)(2), and revised

definition.

Subsec. (d). Pub. L. 97-320 redesignated provisions of subsec.

(d) as (b)(6).

-TRANS-

TRANSFER OF FUNCTIONS

Federal Home Loan Bank Board and Federal Savings and Loan

Insurance Corporation abolished and functions transferred, see

sections 401 to 406 of Pub. L. 101-73, set out as a note under

section 1437 of this title.

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12 USC Sec. 1862 01/06/03

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TITLE 12 - BANKS AND BANKING

CHAPTER 18 - BANK SERVICE COMPANIES

-HEAD-

Sec. 1862. Amount of investment in bank service company

-STATUTE-

Notwithstanding any limitation or prohibition otherwise imposed

by any provision of law exclusively relating to banks, an insured

bank may invest not more than 10 per centum of paid-in and

unimpaired capital and unimpaired surplus in a bank service

company. No insured bank shall invest more than 5 per centum of

its total assets in bank service companies.

-SOURCE-

(Pub. L. 87-856, Sec. 2, Oct. 23, 1962, 76 Stat. 1132; Pub. L.

97-320, title VII, Sec. 709, Oct. 15, 1982, 96 Stat. 1541; Pub. L.

104-208, div. A, title II, Sec. 2613(c), Sept. 30, 1996, 110 Stat.

3009-477.)

-MISC1-

AMENDMENTS

1996 - Pub. L. 104-208 substituted ''company'' for

''corporation'' in section catchline and ''company'' and

''companies'' for ''corporation'' and ''corporations'',

respectively, in text.

1982 - Pub. L. 97-320 substituted provisions relating to the

maximum permissible amount of investment in a bank service

corporation by an insured bank for provisions which read as

follows:

''(a) No limitation or prohibition otherwise imposed by any

provision of Federal law exclusively relating to banks shall

prevent any two or more banks from investing not more than 10 per

centum of the paid-in and unimpaired capital and unimpaired surplus

of each of them in a bank service corporation.

''(b) If stock in a bank service corporation has been held by two

banks, and one of such banks ceases to utilize the services of the

corporation and ceases to hold stock in it, and leaves the other as

the sole stockholding bank, the corporation may nevertheless

continue to function as such and the other bank may continue to

hold stock in it.''

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12 USC Sec. 1863 01/06/03

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TITLE 12 - BANKS AND BANKING

CHAPTER 18 - BANK SERVICE COMPANIES

-HEAD-

Sec. 1863. Permissible bank service company activities for

depository institutions

-STATUTE-

Without regard to the provisions of sections 1864 and 1865 of

this title, an insured bank may invest in a bank service company

that performs, and a bank service company may perform, the

following services only for depository institutions: check and

deposit sorting and posting, computation and posting of interest

and other credits and charges, preparation and mailing of checks,

statements, notices, and similar items, or any other clerical,

bookkeeping, accounting, statistical, or similar functions

performed for a depository institution.

-SOURCE-

(Pub. L. 87-856, Sec. 3, Oct. 23, 1962, 76 Stat. 1132; Pub. L.

97-320, title VII, Sec. 709, Oct. 15, 1982, 96 Stat. 1541; Pub. L.

104-208, div. A, title II, Sec. 2613(d), Sept. 30, 1996, 110 Stat.

3009-477.)

-MISC1-

AMENDMENTS

1996 - Pub. L. 104-208 substituted ''company'' for

''corporation'' wherever appearing in section catchline and text.

1982 - Pub. L. 97-320 substituted provisions relating to

permissible bank service corporation activities for depository

institutions for provisions that a bank service corporation must

provide bank services to a bank that applied for them if the

applying bank competed with a bank which held stock in the

corporation unless comparable services were available elsewhere at

competitive cost or furnishing the services would be beyond the

practical capacity of the corporation.

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12 USC Sec. 1864 01/06/03

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TITLE 12 - BANKS AND BANKING

CHAPTER 18 - BANK SERVICE COMPANIES

-HEAD-

Sec. 1864. Permissible bank service company activities for other

persons

-STATUTE-

(a) Services permissible other than taking deposits

A bank service company may provide to any person any service

authorized by this section, except that a bank service company

shall not take deposits.

(b) Services to be performed in State where shareholders or members

are located

Except with the prior approval of the Board under section 1865(b)

of this title in accordance with subsection (f) of this section -

(1) a bank service company shall not perform the services

authorized by this section in any State other than that State in

which its shareholders or members are located; and

(2) all insured bank shareholders or members of a bank service

company shall be located in the same State.

(c) Performance where State bank is shareholder or member

A bank service company in which a State bank is a shareholder or

member shall perform only those services that such State bank

shareholder or member is authorized to perform under the law of the

State in which such State bank operates and shall perform such

services only at locations in the State in which such State bank

shareholder or member could be authorized to perform such services.

(d) Performance where national bank is shareholder or member

A bank service company in which a national bank is a shareholder

or member shall perform only those services that such national bank

shareholder or member is authorized to perform under the law of the

United States and shall perform such services only at locations in

the State at which such national bank shareholder or member could

be authorized to perform such services.

(e) Performance where State bank and national bank are shareholders

or members

A bank service company that has both national bank and State bank

shareholders or members shall perform only those services that may

lawfully be performed by both any shareholder or member of the

company which is a national bank under the law of the United States

and any shareholder or member of the company which is a State bank

under the law of the State in which any such State bank operate

(FOOTNOTE 1) and shall perform such services only at locations in

the State at which both its State bank and national bank

shareholders or members could be authorized to perform such

services.

(FOOTNOTE 1) So in original. Probably should be ''operates''.

(f) Geographic location

Notwithstanding the other provisions of this section or any other

provision of law, other than the provisions of Federal and State

branching law regulating the geographic location of banks to the

extent that those laws are applicable to an activity authorized by

this subsection, a bank service company may perform at any

geographic location any service, other than deposit taking, that

the Board has determined, by regulation, to be permissible for a

bank holding company under section 1843(c)(8) of this title as of

the day before November 12, 1999.

-SOURCE-

(Pub. L. 87-856, Sec. 4, Oct. 23, 1962, 76 Stat. 1132; Pub. L.

97-320, title VII, Sec. 709, Oct. 15, 1982, 96 Stat. 1542; Pub. L.

97-457, Sec. 32(b)(2), Jan. 12, 1983, 96 Stat. 2511; Pub. L.

104-208, div. A, title II, Sec. 2613(e), Sept. 30, 1996, 110 Stat.

3009-477; Pub. L. 106-102, title I, Sec. 102(b)(2), Nov. 12, 1999,

113 Stat. 1342.)

-MISC1-

AMENDMENTS

1999 - Subsec. (f). Pub. L. 106-102 inserted before period at end

''as of the day before November 12, 1999''.

1996 - Pub. L. 104-208, Sec. 2613(e)(5), substituted ''company''

for ''corporation'' in section catchline.

Subsec. (a). Pub. L. 104-208, Sec. 2613(e)(1), substituted

''company'' for ''corporation'' in two places.

Subsec. (b). Pub. L. 104-208, Sec. 2613(e)(1), (2), inserted ''or

members'' after ''shareholders'' wherever appearing in heading and

text and substituted ''company'' for ''corporation'' in two places.

Subsecs. (c), (d). Pub. L. 104-208, Sec. 2613(e)(1), (3),

inserted ''or member'' after ''shareholder'' wherever appearing in

heading and text and substituted ''company'' for ''corporation''.

Subsec. (e). Pub. L. 104-208, Sec. 2613(e)(1), (4), substituted

''company'' for ''corporation'', ''any shareholder or member of the

company which is a national bank'' for ''its national bank

shareholder or shareholders'', ''any shareholder or member of the

company which is a State bank'' for ''its State bank shareholder or

shareholders'', and ''any such State bank'' for ''such State bank

or banks'', and inserted ''or members'' after ''national bank and

State bank shareholders'' and after ''State bank and national bank

shareholders''.

Subsec. (f). Pub. L. 104-208, Sec. 2613(e)(1), substituted

''company'' for ''corporation''.

1983 - Subsecs. (d), (e). Pub. L. 97-457 substituted ''under the

law of the United States'' for ''under this chapter''.

1982 - Pub. L. 97-320 substituted provisions relating to bank

service corporation activities for other persons for provisions

which read: ''No bank service corporation may engage in any

activity other than the performance of bank services for banks.''

EFFECTIVE DATE OF 1999 AMENDMENT

Amendment by Pub. L. 106-102 effective 120 days after Nov. 12,

1999, see section 161 of Pub. L. 106-102, set out as a note under

section 24 of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1863, 1865 of this title.

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12 USC Sec. 1865 01/06/03

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TITLE 12 - BANKS AND BANKING

CHAPTER 18 - BANK SERVICE COMPANIES

-HEAD-

Sec. 1865. Prior approval for investments in bank service companies

-STATUTE-

(a) Approval of Federal banking agency

No insured bank shall invest in the capital stock of a bank

service company that performs any service under authority of

subsection (c), (d), or (e) of section 1864 of this title without

prior notice, as determined by the bank's appropriate Federal

banking agency.

(b) Approval of Board

No insured bank shall invest in the capital stock of a bank

service company that performs any service under authority of

section 1864(f) of this title and no bank service company shall

perform any activity under section 1864(f) of this title without

the prior approval of the Board.

(c) Considerations in determining approval

In determining whether to approve or deny any application for

prior approval or whether to approve or disapprove any notice under

this section, the Board or the appropriate Federal banking agency,

as the case may be, is authorized to consider the financial and

managerial resources and future prospects of the bank or banks and

bank service company involved, including the financial capability

of the bank to make a proposed investment under this chapter, and

possible adverse effects such as undue concentration of resources,

unfair or decreased competition, conflicts of interest, or unsafe

or unsound banking practices.

(d) Failure to act on application for approval

In the event the Board or the appropriate Federal banking agency,

as the case may be, fails to act on any application under this

section within ninety days of the submission of a complete

application to the agency, the application shall be deemed

approved.

-SOURCE-

(Pub. L. 87-856, Sec. 5, Oct. 23, 1962, 76 Stat. 1133; Pub. L.

95-630, title III, Sec. 308, Nov. 10, 1978, 92 Stat. 3677; Pub. L.

97-320, title VII, Sec. 709, Oct. 15, 1982, 96 Stat. 1542; Pub. L.

103-325, title III, Sec. 323, Sept. 23, 1994, 108 Stat. 2227; Pub.

L. 104-208, div. A, title II, Sec. 2613(f), Sept. 30, 1996, 110

Stat. 3009-478.)

-MISC1-

AMENDMENTS

1996 - Pub. L. 104-208 substituted ''companies'' for

''corporations'' in section catchline and ''company'' for

''corporation'' wherever appearing in text.

1994 - Subsec. (a). Pub. L. 103-325, Sec. 323(1), substituted

''prior notice, as determined by'' for ''the prior approval of''.

Subsec. (c). Pub. L. 103-325, Sec. 323(2), inserted ''or whether

to approve or disapprove any notice'' after ''approval''.

1982 - Pub. L. 97-320 substituted provisions relating to prior

approval for investments in bank service corporations for

provisions relating to regulation and examination of bank services

for a regularly examined bank or its subsidiary or affiliate

whether performed on or off its premises. See section 1867(c) of

this title.

1978 - Pub. L. 95-630 among other changes, substituted provisions

requiring banks regularly examined by a Federal supervisory agency,

which cause to be performed, by contract or otherwise, any bank

service for itself, to notify such supervisory agency of the

existence of a service relationship within 30 days after making

such service contract or performance of service, whichever occurs

first for provisions requiring that no bank subject to examination

by a Federal supervisory agency may cause to be performed, by

contract or otherwise, any bank service for itself unless

satisfactory assurances are furnished to such supervisory agency by

both the bank and the party performing such services that the

performances thereof will be subject to regulation and examination

by such agency to the same extent as if such services were being

performed by the bank itself.

EFFECTIVE DATE OF 1978 AMENDMENT

Amendment by Pub. L. 95-630 effective on expiration of 120 days

after Nov. 10, 1978, see section 2101 of Pub. L. 95-630, set out as

an Effective Date note under section 375b of this title.

-SECREF-

SECTION REFERRED TO IN OTHER SECTIONS

This section is referred to in sections 1863, 1864 of this title.

-CITE-

12 USC Sec. 1866 01/06/03

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TITLE 12 - BANKS AND BANKING

CHAPTER 18 - BANK SERVICE COMPANIES

-HEAD-

Sec. 1866. Services to nonstockholders or nonmembers

-STATUTE-

No bank service company shall unreasonably discriminate in the

provision of any services authorized under this chapter to any

depository institution that does not own stock in or is not a

member of the service company on the basis of the fact that such

depository institution is in competition with an institution that

owns stock in or is a member of the bank service company, except

that -

(1) it shall not be considered unreasonable discrimination for

a bank service company to provide services to a nonstockholding

or nonmember institution only at a price that fully reflects all

of the costs of offering those services, including the cost of

capital and a reasonable return thereon; and

(2) a bank service company may refuse to provide services to a

nonstockholding or nonmember institution if comparable services

are available from another source at competitive overall costs,

or if the providing of services would be beyond the practical

capacity of the service company.

-SOURCE-

(Pub. L. 87-856, Sec. 6, Oct. 23, 1962, as added Pub. L. 97-320,

title VII, Sec. 709, Oct. 15, 1982, 96 Stat. 1543; amended Pub. L.

104-208, div. A, title II, Sec. 2613(g), Sept. 30, 1996, 110 Stat.

3009-478.)

-MISC1-

AMENDMENTS

1996 - Pub. L. 104-208, Sec. 2613(g)(1)-(4), (6), in section

catchline, inserted ''or nonmembers'' after ''nonstockholders'',

and in introductory provisions of text, substituted ''company'' for

''corporation'' wherever appearing and ''such depository

institution'' for ''the nonstockholding institution'' and inserted

''or is not a member of'' after ''does not own stock in'' and ''or

is a member of'' after ''that owns stock in''.

Pars. (1), (2). Pub. L. 104-208, Sec. 2613(g)(1), (5),

substituted ''company'' for ''corporation'' wherever appearing and

inserted ''or nonmember'' after ''nonstockholding''.

-CITE-

12 USC Sec. 1867 01/06/03

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TITLE 12 - BANKS AND BANKING

CHAPTER 18 - BANK SERVICE COMPANIES

-HEAD-

Sec. 1867. Regulation and examination of bank service companies

-STATUTE-

(a) Principal investor

A bank service company shall be subject to examination and

regulation by the appropriate Federal banking agency of its

principal investor to the same extent as its principal investor.

The appropriate Federal banking agency of the principal shareholder

or principal member of such a bank service company may authorize

any other Federal banking agency that supervises any other

shareholder or member of the bank service company to make such an

examination.

(b) Applicability of section 1818 of this title

A bank service company shall be subject to the provisions of

section 1818 of this title as if the bank service company were an

insured bank. For this purpose, the appropriate Federal banking

agency shall be the appropriate Federal banking agency of the

principal investor of the bank service company.

(c) Services performed by contract or otherwise

Notwithstanding subsection (a) of this section, whenever a bank

that is regularly examined by an appropriate Federal banking

agency, or any subsidiary or affiliate of such a bank that is

subject to examination by that agency, causes to be performed for

itself, by contract or otherwise, any services authorized under

this chapter, whether on or off its premises -

(1) such performance shall be subject to regulation and

examination by such agency to the same extent as if such services

were being performed by the bank itself on its own premises, and

(2) the bank shall notify such agency of the existence of the

service relationship within thirty days after the making of such

service contract or the performance of the service, whichever

occurs first.

(d) Issuance of regulations and orders

The Board and the appropriate Federal banking agencies are

authorized to issue such regulations and orders as may be necessary

to enable them to administer and to carry out the purposes of this

chapter and to prevent evasions thereof.

-SOURCE-

(Pub. L. 87-856, Sec. 7, Oct. 23, 1962, as added Pub. L. 97-320,

title VII, Sec. 709, Oct. 15, 1982, 96 Stat. 1543; amended Pub. L.

97-457, Sec. 32(b)(1), Jan. 12, 1983, 96 Stat. 2511; Pub. L.

104-208, div. A, title II, Sec. 2613(h), Sept. 30, 1996, 110 Stat.

3009-478.)

-MISC1-

AMENDMENTS

1996 - Pub. L. 104-208, Sec. 2613(h)(3), substituted

''companies'' for ''corporations'' in section catchline.

Subsec. (a). Pub. L. 104-208, Sec. 2613(h)(1), (2), substituted

''company'' for ''corporation'' wherever appearing and inserted

''or principal member'' after ''principal shareholder'' and ''or

member'' after ''other shareholder''.

Subsec. (b). Pub. L. 104-208, Sec. 2613(h)(1), substituted

''company'' for ''corporation'' wherever appearing.

1983 - Subsec. (b). Pub. L. 97-457 substituted reference to

section 1818 of this title for reference to the Financial

Institutions Supervisory Act of 1966 (12 U.S.C. 1818(b) et seq.).

-CITE-