97-19

January 30, 1997

Re: Sale of Travelers Checks Through ________

Dear Ms. _________:

This responds to your letter of November 20, 1996, in which you asked whether _________ may sell travelers checks issued by it through its subsidiary, _________. As discussed below, it is our view that ________ may appoint ________ Remittance as an agent with authority to sell travelers checks issued by ________ at any California office of ________ Remittance.

We understand the circumstances to be as follows: ________ is a bank organized under the laws of the Philippines, which is licensed pursuant to Article 3 (commencing with Section 1750), Chapter 13.5, Division 1 of the Financial Code to operate a wholesale branch office in Los Angeles, California. ________ desires to appoint its indirect subsidiary, ________ Remittance, as its agent for the purpose of selling travelers checks issued by ________. Such sales would take place at the various business locations operated by ________ Remittance in California. Those offices are not licensed agency or branch offices of ________ .

Section 1853 of the Travelers Checks Act (Chapter 14A (commencing with Section 1851) of the Financial Code) provides that, “[n]o person shall engage in the business of issuing travelers checks without having first obtained a license hereunder.” Section 1854 of the Travelers Checks Act exempts from the licensing requirement of Section 1853 certain financial institutions, including, any foreign (other nation) bank that is licensed under Article 3 (commencing with Section 1750), Chapter 13.5 of the Financial Code (“Article 3”) to maintain a branch or agency office in California. As a foreign (other nation) bank licensed to maintain an agency in California under Article 3, ________ is clearly authorized to sell in California travelers checks issued by it.

The issue is whether Financial Code Section 1750 prohibits ________ from appointing an agent to sell such instruments at locations other than ________ ‘s licensed agency office. Section 1750 of the Financial Code provides that no foreign (other nation) bank shall transact business in the state, “except at an agency or branch office that it is licensed to maintain and at which it is permitted by this chapter to transact the business transacted.” Viewing Section 1750 in light of circumstances at the time of its enactment, it should not be construed as barring a foreign (other nation) bank that is licensed to maintain an agency or branch office in California from selling travelers checks through agents at locations other than the agency or branch offices of the bank.

The Travelers Checks Act provides that a person licensed thereunder may appoint agents to sell travelers checks issued by the licensee. (See e.g., Section 1856(g), which requires an applicant for a license to identify the offices of its agents, and Sections 1869 through 1875, which regulate the relationship between licensees and their agents.) Nothing in the Travelers Checks Act indicates that persons exempt from the licensing requirements of the statute were intended to be deprived of the opportunities available to licensees to expand their businesses by marketing their services though agents. Indeed, it appears that, at the time of the enactment of the Travelers Checks Act in 1978, it was understood that banks generally were entitled to sell money orders at locations other than their licensed branches. (See, e.g., 12 C.F.R. Section 7.1014, which reenacted long standing policies of the Office of the Comptroller of the Currency to the effect that a national bank may designate bonded agents to sell the bank’s money orders at nonbanking outlets (61 FR 4849), 12 C.F.R. Section 208.116, which holds likewise with respect to state member banks, and 41 Ops.Cal.Atty.Gen. 169, which holds similarly with respect to both national and state-chartered banks.) In this respect, money orders and travelers checks have been viewed as indistinguishable. We believe that the Travelers Checks Act was intended to incorporate this historically recognized right of banks, both foreign and domestic.

Accordingly, we do not believe that Section 1750 of the Financial Code should be viewed as barring a foreign (other nation) bank licensed to maintain an agency or branch office in California from appointing agents to sell the bank’s travelers checks at nonbanking outlets.

If you have any questions, please feel free to call me at (415) 263-8512.

Very truly yours,

CONRAD W. HEWITT
Superintendent of Banks

By

THOMAS M. LOUGHRAN
Senior Counsel

TML:lca

bcc: W. J. Mix
J. F. Carrig