February 10, 2011
Dear Mr. [---]:
This is in response to your letter requesting that the New York State Banking Department (the "Banking Department") concur with your conclusion that [---](the "Corporation") is not required to be licensed as a money transmitter under New York Banking Law (the "Banking Law") Section 640 et seq. based on its proposed [---].
The Corporation proposes to create a service called [---], which will allow customers to make cash payments at a designated retail location for goods or services from participating merchants, billers and creditors (the "Payee") that designate the Corporation as their payment agent.
The Corporation originally proposed to be the agent of the Payee, while the retail locations would be agents of the Corporation. The Department rejected this arrangement because the retail locations would not be deemed to be agents of the Payee. After conversations with you, the Corporation has amended its Processing Agreements such that the Corporation and retail locations are effectively deemed to be agents of the Payee, although the term "as agent" is omitted when referencing the agency relationship between the Payee and the retail locations. You advised us that the Corporation did not want to create an express agency between the Payee and the retail locations for various tax purposes; however, the current language in the Processing Agreements may be read to create an implied agency in which the retail locations are agents of the Payee. Under current case law, an implied agency is just as effective as an actual agency relationship. Continental Oil Co. v. Baxter, 59 S.W.2d 463.
Because (1) the amended Processing Agreement to be signed by each Payee will include a schedule that names each retail location agreed to by the Payee, (2) all amendments to the schedule will be agreed to by the Payee, and (3) in the Processing Agreement, the Payee will agree that receipt of funds from a customer by the Corporation and/or a retail location is deemed receipt of funds from the customer, then each listed retail location is an implied agent of the Payee and neither the Corporation nor the retail location must be registered as a money transmitter.
Please note that this opinion is limited to the facts as described above. Any change made to the [---] service may require a money transmitter license. As such, the Banking Department should be notified of any structural changes to the [---] service in order to determine if a money transmitter license is required.If you have any questions, please do not hesitate to contact me.
Very truly yours,
Monique E. Holmes
cc: Marjorie Gross, Esq.
Mr. Angelo Sigismondo