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The Federal Deposit Insurance Corp. will insure funds held at insured depository institutions that issue network-branded prepaid cards, the FDIC notes in a general counsel's opinion filed in the Federal Register last week. Card managers often store prepaid funds in pooled accounts, so each cardholder would not have a separate account. In such cases, deposit-insurance coverage would pass through to cardholders if the pooled accounts are custodial accounts and the identities and amounts of individual cardholders are available either from the bank or program manager, Sara A. Kelsey, FDIC general counsel, wrote in the opinion. The FDIC still does not insure merchant gift cards because the merchant is paid for the cards and does not create an account at an insured financial institution for the funds on the cards, Kelsey wrote. The opinion comes almost two months after the Consumers Union, the nonprofit publisher of Consumers Reports magazine, and several other consumer-advocacy groups sent the FDIC a letter asking it to clarify deposit- insurance coverage for prepaid cards (CardLine, 9/19). The FDIC did not return CardLine calls for comment by deadline.
