| November 25, 1997 |
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Thomas A. Plant, Esq. Dear Mr. Plant: This is in response to your request regarding data processing services provided by subsidiaries of National City Corporation, Cleveland, Ohio ("National City"), to health care insurers and airline companies. Revenues derived from these services are currently subject to the 30 percent limitation on revenues derived from processing and transmitting data that are not financial, banking, or economic under section 225.28(b)(14)(ii) of the Board's Regulation Y (12 C.F.R. 225.28(b)(14)(ii)). You contend that three of these services are permissible data processing activities under the Board's precedents and, accordingly, should not be subject to the 30 percent revenue limitation. The facts as we understand them from your correspondence and conversations with Board staff are as follows. One service involves data entry that is performed for health care insurers in connection with bill payments. These insurers employ National City to receive claims for payment that are submitted by health care providers. [Sentence deleted.] The insurer thereafter determines which claims should be paid and pays the claims by check or electronic funds transfer. The second service involves bill collection and credit card processing performed for several airlines. National City receives ticket sales data from travel agents on behalf of several airlines. For cash transactions, National City effects an electronic transfer of funds from the accounts of the travel agents to the accounts of the airlines. For credit card transactions by travel agents and by the airlines directly, National City submits the charge data to the credit card issuing banks and transfers payments to the airlines. The third service involves providing data processing support for the bookkeeping, accounting, and recordkeeping of several airlines. [Two sentences deleted.] The health care claim processing activities are an integral part of billing services. The airline ticket processing activities involve providing electronic payment, credit card, and settlement services as well as bookkeeping and accounting services. All these activities have been previously approved by the Board as permissible data processing activities.1 The Board also has permitted bank holding companies to provide reports or manipulate data for a client's use in its general operations where providing the reports is incidental to and the reports are generated in connection with the collection and processing of financial, banking, or economic data.2 In this light, and based on all the facts of record, we believe that the three identified activities are within the scope of data processing activities that have been determined by the Board to be permissible activities for bank holding companies under section 4(c)(8) of the BHC Act and section 225.28 of Regulation Y. Consequently, we believe that revenue generated from these activities need not be counted against the 30 percent limit on non-financial data processing activities permitted under Regulation Y. This opinion is limited solely to the data processing activities described above, and does not address the treatment of any other activities or authorize National City to engage in any other activities. Any material change in the data processing activities described above may require this opinion to be reconsidered and should be communicated immediately to Board staff. If you have any questions concerning this matter, please contact Gordon Miller (202/452-2534) of the Board's Legal Division.
Sincerely,
(Signed) J. Virgil Mattingly
J. Virgil Mattingly
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Footnotes
1. See Compagnie Financi�re de Paribas, 82 Federal Reserve Bulletin 348 (1996) (billing services and account reconciliation services); Banc One Corporation, 80 Federal Reserve Bulletin 139 (1994) ("Banc One/Croghan") (electronic payment services). Return to text 2. See Banc One Corporation, 79 Federal Reserve Bulletin 1158 (1993) (retail sales reports); Banc One/Croghan at 142 (statistical medical claims reports).Return to text |
