The Federal Bank Service Company Act (See, 12 U.S.C. 1867) requires financial institutions to give their primary federal regulator written notice of contracts or relationships with third parties that provide certain services to the institutions. Under § 1 of the Act, the term “bank service company” means: any corporation organized to perform services authorized by the Act and all of the capital stock of which is owned by one or more insured banks; and any limited liability company organized to perform services authorized by the Act and all of the members of which are one or more insured banks.
Typical third-party services that trigger the notice requirements include technology-related services (e.g., electronic banking/Internet banking services), data processing services, check and deposit sorting and posting, computation and posting of interest and other credits and charges and preparation and mailing of checks, statements, notices and similar items or any other clerical, bookkeeping, accounting, statistical or similar functions performed for a bank (See, § 3 of the Act).
The required notice must be given within 30 days after entering into the contract or relationship or within 30 days of the initial performance of the service, whichever occurs first (See, § 7(c)(2) of the Act). FDIC has drafted a form (FDIC 6120/06) for the use of FDIC-supervised institutions (at the institution’s option) in complying with the required notice, although an institution may file the required report in any format so long as it contains the required information. The form may be obtained from FDIC’s Website (www.fdic.gov) as an attachment to FIL-49-99 (June 3, 1999).