Account Relationships with Third-Party Payment Processors

FDIC Clarifying Supervisory Approach to Institutions Establishing Account Relationships with Third-Party Payment Processors

On July 28th 2014, the FDIC issued a Financial Institution Letter (FIL-41-2014) that clarifies the supervisory approach to institutions establishing account relationships with third-party payment processors. As part of this clarification, the FDIC is removing the lists of examples of merchant categories from its official guidance and informational article.

This FIL applies to all FDIC-supervised institutions, including community banks and focuses on ensuring that institutions have adequate procedures for conducting due diligence, underwriting, and ongoing monitoring of third-party payment processor relationships.

The FDIC encourages insured depository institutions to serve their communities and recognizes the importance of services they provide. It is the FDIC’s policy that insured institutions that properly manage customer relationships are neither prohibited nor discouraged from providing services to any customer operating in compliance with applicable law.

In an effort to further clarify its position, the FDIC is reissuing certain publications in order to remove lists of examples of merchant categories that had been associated by the payments industry with higher-risk activity. The FDIC has suspicions that these lists have led to misinterpretation regarding the FDIC’s supervisory approach to third-party payment processors, creating the misperception that the listed examples were prohibited or discouraged.

Link to FDIC FIL-41-2014:  https://www.fdic.gov/news/news/financial/2014/fil14041.html