The Bureau has received inquiries asking whether the establishment and operation of an LPO by a state-chartered bank would constitute the establishment and operation of a branch within the meaning of Section 5(d) of the Banking Code of 1969. The Comptroller of the Currency, the FDIC, and the Federal Reserve have issued interpretive rulings or indicated informally that the establishment and operation of an LPO does not constitute branch banking. For example, the Federal Reserve Board, in August 1968, issued an interpretation indicating the types of activities in which an LPO could engage without such activities constituting the lending of money. The Board stated:

"The Board considers that the following, individually or collectively, do not constitute the lending of money within the meaning of Section 5155 of the Revised Statutes: Soliciting loans on behalf of a bank (or a branch thereof), assembling credit information, making property inspections and appraisals, securing title information, preparing applications for loans (including making recommendations with respect to action thereon), soliciting investors to purchase loans from the bank, seeking to have such investors contract with the bank for servicing of such loans, and other similar agent-type activities. When loans are approved and funds disbursed solely at the main office or a branch of the bank, an office at which only preliminary and servicing steps are taken is not a place where "money (is) lent." Because preliminary and servicing steps of the kinds described do not constitute the performance of significant banking functions of the type that Congress contemplated should be performed only at governmentally approved offices, such office is accordingly not a branch." (12 CFR 250.141) (brackets in the original)

1. Soliciting loans on behalf of the bank or a branch thereof. This could involve buying loans or installment sales contracts or attracting loan customers.

2. Assembling credit information.

3. Making property inspections and appraisals.

4. Securing title information.

5. Preparing or receiving applications for loans.

6. Soliciting investors to purchase loans from the bank.

7. Seeking to have loan purchasers contract with the bank for the servicing of such loans.

8. Informing customers or potential customers of the terms and conditions of other services, including deposit accounts and trust accounts offered by the bank.

9. Referring customers to the main office, branch office or EFT facility for more information or for obtaining needed services.

10. Selling its investment securities (or an interest therein) under an agreement to repurchase. Note: Buying investment securities under an agreement to resell would be considered a loan and would not be permitted.

11. Offering safe deposit services.

12. Other similar agent-type or promotional activities.

1. Accepting funds for delivery to the main or a branch office at which one or more deposit accounts are credited.

2. Opening of deposit accounts.

3. Paying checks or drafts.

4. Honoring withdrawals or issuing checks or drafts which represent the proceeds of loans or in any way, disbursing loan proceeds.

5. Approving loans.

Banking Code. In view of the foregoing discussion on LPOs and of the language of Section 5(d) exempting EFT terminals, it is clear that the deployment of an LPO as definded herein or of an off-premise EFT terminal is permitted. That is, neither activity, by itself, would constitute the establishment and operation of a branch.

It is also clear that in the absence of the EFT Act and the companion law which excludes a terminal which is made available for sharing from the Banking Code definition of branch, an off-premise EFT terminal would be a branch. However, with the passage of the EFT Act and the companion act amending Section 5(d) of the Banking Code, a bank s off-premise EFT terminal which is made available for sharing would fall outside of the definition of branch.

Since an EFT terminal which is made available for sharing is not a branch, and since an LPO as defined and limited herein is not a branch, it follows that locating an EFT terminal at a place where activities permitted to an LPO are performed, would not constitute the establishment and operation of a branch. Thus, if a bank combines two unrelated and distinct services and neither service, by itself, constitutes a branch, then such combination of activities would not be a branch within the meaning of Section 5(d).

Banks should be advised that one or more EFT terminals used in conjunction with an LPO would be subject to the sharing requirements for EFT terminals set forth in Section 10 of Act No. 322 of the Public Acts of 1978. This interpretation is based on Section 10(1) and (2) of the EFT Act which states:

"Sec. 10(1) A financial institution may make available to its customers 1 or more electronic funds transer terminals anywhere in this state subject to this Section and Sections 12 to 28.

(2) The electronic funds transfer terminals may be made available by the financial institution solely to its customers if the terminals are located on the premises of its main office or approved branch. As used in this subsection "approved branch" does not include electronic funds transfer terminals located at a place where the financial institution carries on no other substanital financial function for its customers."

Signed:	Martha R. Seger, Ph.D., Commissioner
	Gifford Knudsen, Director, Bank & Trust Division
Dated:	October 13, 1982