The Financial Institutions Bureau (FIB) has become aware of the plans by several Michigan banks to participate in interstate electronic funds transfer (EFT) networks whereby customers of a participating bank who have received the appropriate access materials under an agreement with their bank may utilize EFT terminals of any bank participating in the interstate system to:

1. Withdraw from deposit accounts
   
2. Obtain advance on credit card accounts
   
3. Transfer between accounts in the same institution
   
4. Inquire as to balances in deposit accounts

Since the FIB's earlier position was taken, it has become clear that the customer convenience associated with the operation of an EFT program will sooner or later mandate interstate systems similar to the intrastate systems that now exist and are available for sharing by all depository financial institutions. Accordingly, the FIB has again reviewed the concept of interstate EFT systems and hereby adopts the policy stated herein based upon the reasons given.

It is clear that federal law applicable to national banks requires the conclusion that an EFT terminal or a Customer Bank Communication Terminal (CBCT) is a branch. The leading case, which discusses the meaning of 12 U.S.C 36, relating to EFT branches of national banks is Independent Bankers Association of America v. Smith 534 F. 2d 921 (1976) certificate denied, 10/4/76. (IBAA) It was found that:

"...any facility that performs the traditional bank functions of receiving or disbursing funds is a "branch" of a national bank within the meaning of Section 36(f) if (1) the facility is established (i.e., owned or rented) by the national bank, and (2) it offers the bank's customers a convenience that gives the bank a competitive advantage over the banks (national or state) that do not operate similar facilities." supra, 951, 952.

The state statute which regulates EFT facilities is the Electronic Funds Transfer Act, supra. Section 10 of this act allows a financial institution to make EFT terminals available to its customers anywhere in this state if made available for sharing by other financial institutions.

The designation of an EFT facility as a branch pursuant to federal law is not solely determinative of the EFT issue because of the language in the IBAA case which appears to distinguish the "establishment" of an EFT branch from the mere sharing or utilization of such a branch. In the first instance, the bank which owns or rents the EFT terminal is the bank which establishes the branch and must obtain regulatory approval. In the second instance, a bank which shares or utilizes the facility pursuant to an agreement to pay a transaction or activity fee or some other form of payment for using the services without owning or renting the EFT terminal is not establishing a branch.

In the interests of providing the broadest base of customer service and eliminating the necessity for multiple EFT branch applications, this argument is very appealing. This concept of minimal regulatory requirements is also evidenced in the Michigan Electronic Funds Transfer Act supra, where it is necessary only to give notice to the FIB of participation in a shared EFT facility.

Michigan law regulating branches is found in Section 171 of the Banking Code, supra. Section 171 is similar to 12 U.S.C. 36 in that approval of the Bureau is necessary for any bank to "establish and operate a branch". Therefore, it can be argued that a state-chartered bank which does not own or rent an EFT facility is not "establishing" a branch. While this argument is not necessary in connection with intrastate, off-premise EFT terminals because of the exception found in Section 5, supra, defining branches, it is useful in connection with an interstate off-premise facility. Accordingly, it is the Bureau's position that for a state-chartered bank, an EFT facility is not a branch if shared and located within the state and it is an illegal branch if located outside the state only if the terminal is owned or rented by the bank.

As indicated above, the benefits that inure to bank customers dictate that interstate EFT facilities be made available. Furthermore, the proposed system would be limited as indicated above. Functionally the withdrawal of cash from a deposit account at a EFT termial is, from the customer's viewpoint, indistinguishable from cashing a check at a retail store. There is not a significant opportunity to obtain a competitive advantage if all banks are given an opportunity to participate in such a system.

Therefore, it is the position of the FIB that a state-chartered bank may participate in an interstate EFT system if:

1. The bank doesn't establish (own or rent) an ATM not located in Michigan.

2. The functions are limited to:
   1. withdrawals from deposit accounts.
      
   2. advances on credit card accounts.
      
   3. transfers between accounts at same institution.
      
   4. balance inquiry.

3. The interstate system is available for participation by all banks on a non-discriminatory basis.

4. The terminals not located in Michigan do not accept deposits.

5. The state wherein the EFT terminal is located does not prohibit such an interstate system.