December 6, 2002
Re: [ ]- Loan Disbursement Program
Dear [ ]:
Your letter of October 9, 2002, to Deputy Superintendent and Counsel Kelsey, has been referred to me for reply. As we understand it, your client,
[ ] ("Corporation"), a business corporation having its principal office in [ ], which will become qualified to do business in New York, has entered into an agreement whereby it will act as a loan disbursement agent for [ ] ("Bank"), whereby customers ("Customers") of [ ] who are eligible for a tax refund may apply to the Bank for a refund anticipation loan ("RAL") not to exceed five thousand dollars.
Once a Customer who applies for a RAL from the Bank is approved, [ ], acting on behalf of the Bank, will give the Customer the option of using the Corporation's Disbursement Machine ("DM"), which will be located in the offices of a participating [ ]. The Customer will log onto the DM by entering his social security number, a password, and the answers to several security-related questions. The Customer will then be given the option of receiving the proceeds of the RAL as either a check drawn on the Bank or cash.
A Customer who selects the check option will receive from the DM a check printed out by the DM, but which will not be "cashed" or otherwise negotiated on the [ ] office premises. If the Customer selects the cash option, the DM will immediately disburse the proceeds of the Customer's RAL, less a service fee of two percent of the amount disbursed, which is retained by the Corporation as a service fee. The DM is not an automated teller machine in that it will not accept bank cards, credit cards or debit cards from a Customer or anyone else for the purpose of receiving cash, transferring funds between bank accounts at a depository institution, paying bills or for any other purpose except to distributed the proceeds of RAL loans.
You have asked whether the Corporation is required to be licensed as a check casher, under Article IX-A of the Banking Law or as a Money Transmitter, under Article XIII-B of the Banking Law. The Corporation, as noted above, is merely disbursing the check to a Customer or, if the Customer so chooses, the proceeds of the RAL from the Bank. As such, the Corporation is merely the agent of the Bank. Since there is no risk to the Customer, we conclude that it is not necessary for the Corporation to be licensed under either Article IX-A or Article XIII-B.
An issue does arise concerning branching by the Bank. However, given the fact that the Bank is a federal thrift, the Banking Department has, to date, not raised a challenge under the applicable laws relating to branching.
I trust this letter as been of assistance to you.