2. See Selwyn Raab, Officials Say Mob Is Shifting Crimes to New Industries, N.Y. TIMES, Feb. 10, 1997, at A1.

3. See Gautum Naik, Sorry, Your Prepaid Phone Card Has Been Deactivated, WALL ST. J., July 16, 1996, at B1; Noreen Seebacher, Communications: Prepaid Calling Cards May Not Be Smartest Way to Stay in Touch, DET. NEWS, Nov. 14, 1996, at F5. See generally MCI's Top 10 Tips on How to Avoid Prepaid Telephone Card Scams, BUS. WIRE, Feb. 10, 1997.

4. See Omnibus Appropriations Act, 1997, Pub. L. No. 104-208, . 2601(c), 1996 U.S.C.C.A.N. (110 Stat.) 3009-1363, 3009-1363 to 1364 (1996).

5. See Omnibus Appropriations Act . 2601(c), 1996 U.S.C.C.A.N. at 3009-1364.

6. See Ira H. Parker, Fed's Stored Value Proposal Is a Blow for Card Industry, AM. BANKER, Apr. 17, 1996, at 3 (detailing concern that regulation will hurt SVC growth); Celia Viggo Wexler, Postpone Regulating Stored Value Cards, Bankers Urge Fed, AM. BANKER, Sept. 20, 1996, at 3 (describing bank opposition to SVC regulation).

7. See infra notes 8-25 and accompanying text (discussing various features that distinguish SVCs from traditional credit and debit cards).

8. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,698 (1996) (to be codified at 12 C.F.R. pt. 205) (proposed May 2, 1996); see also infra note 38 and accompanying text (noting that FDIC believes one type of SVC to be similar to debit cards).

9. See 61 Fed. Reg. at 19,698; see also David Goldberg, MARTA Plans Test of Cash Card, ATLANTA J. & CONST., Oct. 24, 1995, at A1 (discussing Atlanta's intention to introduce SVCs into transit system).

10. See 61 Fed. Reg. at 19,698; see also Angela G. King, Prepaid Phone Cards' Popularity Rises, ATLANTA J. & CONST., Aug. 25, 1996, at H6 (describing growth of prepaid phone card industry).

11. See 61 Fed. Reg. at 19,698.

12. See Advertisement, ATLANTA J. & CONST., Sept. 18, 1996, at E5.

13. See 61 Fed. Reg. at 19,698.

14. See id.; see also Valerie Block, Phone Alliance May Rival Banks in Electronic Cash, AM. BANKER, Oct. 23, 1996, at 10 [hereinafter Block, Phone Alliance] (discussing phone companies' attempt to challenge bank domination of SVC industry); Valerie Block, Amex Testing Its First Smart Card, with American Airlines, AM. BANKER, Oct. 17, 1996, at 17 [hereinafter Block, Amex Testing] (detailing plans to expand SVC use at airports); King, supra note 10, at H6 (describing growth of prepaid phone card industry).

15. See Patti Bond, Cash Cards Off to a Slow Start, ATLANTA J. & CONST., Aug. 2, 1996, at D1 (noting credit card industry's interest in SVCs); see also Parker, supra note 6, at 3 (describing Visa's version of stored value card).

16. See Advertisement for First Union Visa Cash Card, ATLANTA J. & CONST., Aug. 22, 1996, at C1.

17. See 61 Fed. Reg. at 19,698.

18. See id. at 19,698-99; Advertisement for First Union Visa Cash Card, ATLANTA J. & CONST., Apr. 14, 1996, at B5.

19. See 61 Fed. Reg. at 19,698.

20. See id.

21. See id.; Kelly Greene, NationsBank Puts Lock on Venue Cash, ATLANTA BUS. CHRON., May 17, 1996, at 1.

22. See 61 Fed. Reg. at 19,698; Deidre Sullivan, Smart Cards May Load "Cash" at Home, Form & Function: Where Does the ATM Go from Here?, AM. BANKER SUPP., Nov. 27, 1995, at 10A (detailing European system that allows cash access by phone).

23. See Prepaid Cards Could Dry Up Source of Treasury Income, AM. BANKER, Apr. 18, 1995, at 7.

24. See 61 Fed. Reg. at 19,698.

25. See id.; Jeffrey Kutler & Valerie Block, Mondex Gains U.S. Foothold with Smart Card Test at Wells, AM. BANKER, Aug. 3, 1995, at 15 (describing various uses for SVC). See generally David B. Lipkin, Stored Value Systems, in COMMERCIAL BANKING IN THE ELECTRONIC AGE 11 (American Bar Ass'n ed., 1996).

26. See Chris Roush & Matt Kemper, Cash Card Awareness, ATLANTA J. & CONST., July 27, 1996, at B2.

27. See id.

28. See id.

29. See id.

30. See 61 Fed. Reg. at 19,696.

31. See id. at 19,698.

32. Id. at 19,699.

33. Id.; see also Valerie Block, Bank of Hawaii Cash Card Targets Japanese Visitors, AM. BANKER, Oct. 16, 1996, at 16 (stating that prepaid cash card operates like bank debit card).

34. See 61 Fed. Reg. at 19,699.

35. See id.

36. Copies of the information printed on the cards issued by First Union, Wachovia, and NationsBank are on file with The American University Law Review.

37. See 12 C.F.R. pt. 205 (1996) (addressing issuance, liability for unauthorized transfers, disclosure, and procedures for resolving errors). Under the proposed amendment to Regulation E, most of the Regulation E provisions that apply to these issuse will be made inapplicable to most types of SVCs. See infra notes 122-83 and accompanying text.

38. FDIC General Counsel's Opinion No. 8; Stored Value Cards, 61 Fed. Reg. 40,490, 40,490 n.1 (1996).

39. Stored Value Cards and Other Electronic Payment Systems, 61 Fed. Reg. 40,494, 40,496 (1996).

40. See U.C.C. . 3-104 cmt. 4 (1995).

41. See FRED H. MILLER & ALVIN C. HARRELL, THE LAW OF MODERN PAYMENT SYSTEMS AND NOTES 1-10 to 1-11 (2d ed. 1992).

42. See infra notes 279-82 and accompanying text (identifying state statutes that require businesses to obtain licenses and make disclosures to customers).

43. Advertisement, ATLANTA J. & CONST., June 25, 1996, at A7.

44. See Valerie Block, Blockbuster Running Test of a Stored Value Card, AM. BANKER, Sept. 1, 1995, at 11; Mickey Higginbotham, Banks Scramble to Sign up Lucrative Cash Card Accounts, ATLANTA J. & CONST., Nov. 17, 1995, at H2.

45. See Block, supra note 44, at 11.

46. The agreement (on file with The American University Law Review) further provides that "NationsBank will transfer such funds promptly after expiration on your behalf, subject to a fee of up to $5.00 per Card."

47. Wachovia, for example, advertises that its Visa Cash Card dedicated to the Olympic athlete is "destined to become a collector's item." A copy of the brochure describing the card is on file with The American University Law Review.

48. See Judy Siegel, Telecard Collectors to Convene, JERUSALEM POST, Jan. 2, 1995, at 2 (noting that collectors appraised one of first cards issued in country at $3000). See generally MCI to Provide Prepaid Phone Cards and Services to Wal-Mart Stores, Inc., M2 PRESSWIRE, Oct. 25, 1996; NationsBank Sets up Card Collector Service, AM. BANKER, Nov. 27, 1996, at 11.

49. See Ellen Stark, Here's What You Should Know Before Making Electronic Payments, BUFF. NEWS, Jan. 27, 1997, at C2 (cautioning consumers that card issuers may not be required to replace malfunctioning SVCs); see also Block, supra note 33, at 16 (noting that Cash Card charges consumers $19 fee); Valerie Block, Canadian Banks to Test Belgian Stored Value System in Ontario College Town, AM. BANKER, June 28, 1996, at 10 [hereinafter Block, Canadian Banks] (describing annual fee range of $6 to $12); Valerie Block, Smart Cards off to a Bumpy Start, Critics Say, AM. BANKER, Jan. 17, 1996, at 14 (noting that consumers must pay for cards). But see James B. Arndorfer, Prepaid Telephone Cards Aren't Exactly Ringing Bells at the Country's Groups, AM. BANKER, Aug. 14, 1995, at 13 (detailing practice of many credit unions giving consumers free cards for promotional purposes).

50. See Higginbotham, supra note 44, at H2; Mickey Higginbotham, Smart Cards: Bank Delivers on Domino's Cashless Goal, ATLANTA J., Nov. 15, 1995, at E2 (explaining that First Union Bank charges one percent plus two cents for each transaction).

51. See Valerie Block, Bridge Sought Between Transit, Smart Cards, AM. BANKER, July 25, 1995, at 19.

52. See John Markoff, Potential Flaw in Cash Card Security Seen, N.Y. TIMES, Sept. 26, 1996, at D1.

53. See Steven A Bercu, Smart Card Technologies: Novel Privacy Concerns and the Legal Response, 10 J. PROPRIETARY RTS. 2,3 (1995); Bill McConnell, No Need Yet to Regulate Electronic Cash, Fed's Vice Chairman Tells Banking Panel, AM. BANKER, Oct. 12, 1995, at 1, 2.

54. FDIC insurance applies only to funds that remain credited to the consumer's account "until claims on such funds are made by payees." FDIC General Counsel's Opinion No. 8; Stored Value Cards, 61 Fed. Reg. 40,490, 40,492 (1996). Several issuers of pre-paid phone cards have gone out of business after selling tens of thousands of worthless SVCs. See Carol Angrisani, Group Reports Several Chains Got Nonworking Phone Cards, SUPERMARKET NEWS, Apr. 22, 1996, at 92; Judy Corcoran, Wrong Numbers: Prepaid Phone Card Industry Offering Limited Returns to Retailers, SUPERMARKET NEWS, July 15, 1996, at 47; Gautum Naik, Sorry, Your Prepaid Phone Card Has Been Deactivated, WALL ST. J., July 16, 1996 at B1; Noreen Seebacher, Prepaid Calling Cards May Not Be Smartest Way to Stay in Touch, DET. NEWS, Nov. 14, 1996, at F5.

55. See 61 Fed. Reg. at 40,492.

56. Advertisement, ATLANTA J. & CONST., Sept. 18, 1996, at E5.

57. Advertisement, ATLANTA J. & CONST., Aug. 8, 1996, at E1.

58. Rodney Ho, First Union Plans Launch of "Smart Cards" for Purchases, ATLANTA J., Mar. 21, 1995, at D1 (quoting David Caroll, President, First Union Bank of Georgia).

59. See 61 Fed. Reg. at 40,490 n.2 (explaining that information loaded on SVCs is not legal tender but constitutes right to be paid sum of money).

60. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,698 (1996) (to be codified at 12 C.F.R. pt. 205) (proposed May 2, 1996); see also Block, Canadian Banks, supra note 49, at 10; Valerie Block, Huntington Joins Sallie Mae in Smart Card Venture, AM. BANKER, Apr. 26, 1996, at 11; Beth Piskora, Texas Students Using Diebold's Combined Debit-ID Card, AM. BANKER, Mar. 27, 1995; Jeremy Quittner, B of A Card Lets Students Open Doors, Accounts, AM. BANKER, Aug. 7, 1996, at 14.

61. See, e.g., First Union advertisement, ATLANTA J. & CONST., Apr. 14, 1996, at B5.

62. See Glenn B. Canner & Ellen Maland, Basic Banking, 73 FED. RESERVE BULL. 255, 257 (1987). See generally EDWARD L. RUBIN & ROBERT COOTER, THE PAYMENT SYSTEM: CASES, MATERIALS AND ISSUES 228-42 (2d ed. 1994). The National Consumer Law Center filed comments on the FRB's proposed amendments to Regulation E that stressed the potential importance of stored value cards to low-income consumers. See Comments of the National Consumer Law Center on the Proposed Amendments to Regulation E (Sept. 5, 1996) (on file with The American University Law Review). Phone SVCs have been popular with lowest income consumers, with consumers in ethnic neighborhoods with many individuals from foreign countries, and with individuals who do not have regular phone service. Corcoran, supra note 54, at 47; Noreen Seebacher, Callers Beware: Some Firms' Prepaid Phone Cards in Trouble, DET. NEWS, Apr. 10, 1996, at J4.

63. See Higginbotham, supra note 44, at H2.

64. See Stored Value Cards and other Payment Systems, 61 Fed. Reg. 40,494, 40,496 (1996). "As a result of the potential widespread use of such [stored value] systems, it may be that the FDIC should determine that public confidence in these payment systems is critical to the safety and soundness of the banking system, such that deposit insurance is warranted." Id.

65. Jeffrey Kutler, Reed: Tech Revolution Won't Occur Overnight, AM. BANKER, Sept. 20, 1996, at 1-2.

66. Eugene A. Ludwig, Comptroller: Trust, Reliability Essential to Electronic Money, AM. BANKER, Sept. 27, 1996, at 4.

67. The FDIC "staff would expect the relationship between a stored value card customer and the institution to be clearly and conspicuously stated." 61 Fed. Reg. at 40,496. In addition, the FDIC expects issuers to disclose, when applicable, that funds in the card are not insured by the FDIC. See id. For discussion of the problems attendant to implementing disclosures, see infra notes 122-37 and accompanying text.

68. See 61 Fed. Reg. at 40,496. "The failure to provide deposit insurance in an instance where protection is reasonably expected by a consumer could, in the event of failure of an issuer, result in a loss of public confidence in these developing payment mechanisms." Id. The FDIC should take into consideration whether reasonable consumers "may be more likely to believe that a reloadable card gives rise to an insured deposit." Id.

69. SVCs look similar to credit and debit cards. Furthermore, some SVCs are functionally similar to debit cards and, in some systems, occupy the same card as credit and debit cards.

70. See supra notes 31-36 and accompanying text (discussing architecture of various SVC systems).

71. Such issues include initial disclosure to the consumer of the terms and liabilities associated with SVCs, the necessity of providing periodic statements and receipts, and the procedures available for resolving claims of error.

72. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,700-01 (1996) (to be codified at 12 C.F.R. pt. 205) (proposed May 2, 1996).

73. See Omnibus Appropriations Act, 1997, Pub. L. No. 104-208, . 2601, 1996 U.S.C.C.A.N. (110 Stat.) 3009-1363, 3009-1364 (1996).

74. See id.

75. See id.

76. See id.

77. Electronic Fund Transfers Act of 1978 . 903, 15 U.S.C. . 1693(a)(2) (1994).

78. See Block, Phone Alliance, supra note 14, at 10 (describing alliance of phone companies that utilize SVC cards); Block, Amex Testing, supra note 14, at 17 (discussing possibility of electronic airline ticketing); Scott D. Smith, Fed Exec: Regulation Unlikely for Nonbank Payment Firms, AM. BANKER, May 28, 1996, at 2 (discussing payment systems in which service provider is not responsible for deposits). Alton Gilbert, Vice President of the Federal Reserve Bank in St. Louis, predicted that "eventually 20% of payment services could take place outside the banking industry." Id.

79. See supra text accompanying note 18.

80. See 15 U.S.C. . 1693b(d) (providing that FRB "shall" regulate electronic fund transfer services offered by non-financial institutions as necessary to protect consumers).

81. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,699 (1996) (to be codified at 12 C.F.R. pt. 205) (proposed May 2, 1996)(stating that EFTA definition of asset accounts, which FRB has authority to regulate, includes money-market mutual funds, other broker-dealer held securities accounts, and government-established electronic benefit transfer programs).

82. 15 U.S.C. . 1693b(c); see also Mourning v. Family Publications Serv., 411 U.S. 356, 371 (1973) (finding that FRB possessed broad rule-making authority under Truth in Lending Act, 15 U.S.C. . 1604, to prevent merchant evasion of reporting requirements through concealment of credit charges, although specific remedial measure was not authorized explicitly under statute). See generally Expedited Funds Availability Act . 611, 12 U.S.C. . 4010(f) (1994) ("The Board is authorized to impose on or allocate among depository institutions the risks of loss and liability in connection with any aspect of the payment system . . . .") (emphasis added).

83. See 61 Fed. Reg. at 19,699 (discussing Senate Banking Committee's endorsement of liberal interpretation of EFTA).

84. Id. (emphasis added).

85. See id. (delineating SVC systems as either "off-line accountable stored value systems," "off-line unaccountable stored value systems," or "on-line stored value systems").

86. Id. at 19,702.

87. Id.

88. Id.

89. Id. The FRB found that on-line SVCs are the functional equivalent of a deposit account accessed by a debit card because in both "the transaction is authorized by means of on-line communication with a financial institution or central data facility." Id.

90. See id. at 19,703 (proposing exemption of on-line SVC from Regulation E if SVC is limited to $100).

91. Id. at 19,699.

92. See id.

93. See id. at 19,699-700 (explaining provisions of Regulation E that are not applicable to off-line accountable systems).

94. See id. at 19,699.

95. Id.

96. See id. at 19,701.

97. See id.

98. Id.

99. See id.

100. These differentiated features include determinations of whether a system is off-line or on-line, and if off-line, whether it is accountable or unaccountable.

101. See Parker, supra note 6, at 3 (arguing that consumers find no meaningful distinction between accountable and unaccountable cards). The American Bankers Association submitted a letter in response to the FRB's request for comments in which it stated: "[C]onsumers will be oblivious to the operational distinctions; regulatory protections and disclosures that vary substantially according to the card's architecture rather than their function will cause consumer confusion. The focus should be on how the card is used, not on its technological attributes." Letter from Nessa Eileen Feddis, Senior Federal Counsel, American Bankers Ass'n, to William W. Wiles, Secretary, Board of Governors of the Federal Reserve System 5 (Sept. 6, 1996) (on file with The American University Law Review).

102. See Stored Value Cards and Other Electronic Payment Systems, 61 Fed. Reg. 40,494, 40,496 (1996) (discussing whether FDIC should insure SVCs to maintain public confidence).

103. See id.

104. See id.

105. See supra text accompanying notes 26, 43-47, 56.

106. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,700 (196) (to be codified at 12 C.F.R. pt. 205) (proposed May 2, 1996) (discussing ways in which SVC providers may target and bring possible harm to consumers).

107. See id. at 19,702.

108. See id. (proposing that Regulation E exclude offline unaccountable systems from regulation).

109. See id. at 19,701.

110. See id.

111. Id.

112. See id.

113. See id.

114. Cf. Antoinette Coulton, Easy Credit for Students Teaching Hard Lessons, AM. BANKER, Oct. 17, 1996, at 16 (noting that rising education and living costs have forced students to rely on credit cards, but more student cardholders are paying late or not at all).

115. See supra notes 58-63 and accompanying text.

116. See Hope Viner Samborn, Going for Broke: Soaring Bankruptcies Prompt Calls for New Repayment Plan, A.B.A. J., Sept. 1996, at 16; see also Saul Hansell, Bankruptcies Surging as Economy Hums, N.Y. TIMES, Aug. 25, 1996, . 1, at 2.

117. The $100 exemption covers SVCs that are capable of holding a maximum of $100 "at a given time." 61 Fed. Reg. at 19,701. The exemption therefore applies to cards that can hold no more than $100 at any one time but that can be reloaded.

118. See Stored Value Cards and Other Electronic Payment Systems, 61 Fed. Reg. 40,494, 40,496-97 (1996) (stating that FDIC will consider fact that consumers may hold multiple cards of $100 value in deciding whether to treat such cards as deposit).

119. See 61 Fed. Reg. at 19,701.

120. Id.

121. See id. at 19,702.

122. Electronic Fund Transfers Act of 1978 . 902(a), 15 U.S.C. . 1693(a) (1994).

123. See id.

124. See Electronic Fund Transfers (Regulation E), 12 C.F.R. . 205.7 (1996).

125. 15 U.S.C. .. 2301-2312.

126. Id. .. 1601-1920.

127. 12 U.S.C. .. 4301-4313.

128. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,701 (1996) (to be codified at 12 C.F.R. pt. 205) (proposed May 2, 1996).

129. See id.

130. See id. at 19,700. Required disclosures would include consumer liability for unauthorized transactions, the types of transfers available, transaction charges, and error resolution procedures available, if any. See id.

131. Id.

132. See id. at 19,701.

133. See id.

134. See id. at 19,702.

135. See supra text accompanying notes 13-15.

136. See 61 Fed. Reg. at 19,700.

137. The card (copy on file with The American University Law Review) contains the following disclosures: "Card value cannot be refunded or credited in the event the card is lost or stolen. If you have any questions, including where to use your card, please call 1-800-922-4684."

138. Electronic Fund Transfers (Regulation E), 12 C.F.R. . 205.8 (1996).

139. See id.

140. See 61 Fed. Reg. at 19,700.

141. A copy of the NationsBank agreement is on file with The American University Law Review.

142. See 61 Fed. Reg. at 19,700.

143. See id.

144. See id.

145. The author is indebted to James Brown, Center for Consumer Affairs, University of Wisconsin-Milwaukee, for this insight.

146. See Electronic Fund Transfers (Regulation E), 12 C.F.R. . 205.9 (1996).

147. See id.

148. See id.

149. 61 Fed. Reg. at 19,700.

150. See id. at 19,700-01.

151. See id. at 19,701.

152. See id.

153. If the Board, nevertheless, permits a fee to be imposed for this information, the law should require disclosure of the amount of the fee and provide that any such fee be reasonable.

154. See 61 Fed. Reg. at 19,702.

155. See id. at 19,700.

156. See id. at 19,702.

157. At the very least, if the Board decides not to require account balances and histories on request and the issuer chooses not to provide consumers the right to receive such statements, the initial disclosure should so inform the consumer.

158. See Electronic Fund Transfers (Regulation E), 12 C.F.R. . 205.6 (1996).

159. See id.

160. See id.

161. See id.

162. See Truth in Lending (Regulation Z), id. . 226.12 (setting forth conditions of credit card holder liability for unauthorized use).

163. See FRB Commentary to Regulation E, id. pt. 205, Supp. II, Question 6-6.5.

164. See DONALD I. BAKER & ROLAND E. BRANDEL, THE LAW OF ELECTRONIC FUND TRANSFER SYSTEMS 6-14 to 6-16 (rev. ed. 1996) (observing that through process known as skimming, experts can decipher and transfer PIN recorded on original card to counterfeit card and then access funds using counterfeit card); see also Ognibene v. Citibank, N.A., 446 N.Y.S.2d 845, 847 (Small Cl. Ct. 1981) (explaining scam in which PINs were stolen and used to withdraw money from ATMs).

165. See BAKER & BRANDEL, supra note 164, at 12-40 (observing that "some incentive had to be produced to induce the cardholder to assume responsibility for safeguarding his or her card and providing notice if the card was stolen").

166. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,703 (1996).

167. See id. at 19,701 ("[T]here is an almost certain likelihood that lost or stolen cards could and would be used.").

168. See id.

169. See id.

170. See id.

171. Users of on-line SVCs, in contrast, would have the protection of the EFTA limits on liability. See id. at 19,699.

172. Even more confusing are the liability limits for cards that may be used as both a credit card and a debit card. See Electronic Fund Transfers (Regulation E), 12 C.F.R. . 205.6 (1996) (demonstrating complexity of regulation governing consumer liability for transfers not authorized properly); see also BARKLEY CLARK & BARBARA CLARK, THE LAW OF BANK DEPOSITS, COLLECTIONS AND CREDIT CARDS 15-25 (rev. ed. 1995) (describing confusion regarding debit and credit cards).

173. See supra text accompanying notes 113-18 (explaining flaws in assumption that $100 constitutes de minimis amount).

174. See Truth in Lending (Regulation Z), 12 C.F.R. . 226.12.

175. See Electronic Fund Transfers (Regulation E), id. . 205.6.

176. See 61 Fed. Reg. at 19,701.

177. See id.

178. See id.

179. See id. at 19,699 (noting lack of right to be informed).

180. See Electronic Fund Transfers (Regulation E), 12 C.F.R. . 205.7(a)(10) (providing for notice to consumers of error resolution service).

181. See id. . 205.11(d) (describing procedures financial institutions must undertake after completing investigation, including providing written explanation to consumers).

182. See id. . 205.11(c)(2)(i) (providing for provisional crediting).

183. See 61 Fed. Reg. at 19,701. But see supra text accompanying notes 171-79 (maintaining that $100 exemption is not justified and detailing problems in setting $100 threshold for protection).

184. FDIC General Counsel's Opinion No. 8; Stored Value Cards, 61 Fed. Reg. 40,490, 40,491 n.6 (1996).

185. See id. at 40,494.

186. See id. at 40,490 n.4.

187. See id. at 40,491-93 (analyzing term "deposit" as defined by 12 U.S.C. . 1813(l) (1994)).

188. The FDIC General Counsel categorized SVC systems as "Bank Primary-Reserve Systems," "Bank Secondary-Advance Systems," and "Bank Secondary-Pre-Acquisition Systems." Id. at 40,490.

189. See id. at 40,491.

190. See id. at 40,493.

191. See id. at 40,490. The FDIC General Counsel noted that SVCs "do not have the finality of cash," id., and are not "legal tender," id. at 40,490 n.2.

192. See supra text accompanying notes 43-70 (discussing certain misleading marketing strategies used to promote SVCs).

193. See 61 Fed. Reg. at 40,490 (noting that actual process by which SVCs function "may not be apparent to the consumer"); supra text accompanying notes 43-70 (noting potential for consumer confusion).

194. 61 Fed. Reg. at 40,491 n.6.

195. See Matt Schulz, Treasury: Include Smart Cards in Laundering Rules, AM. BANKER, June 27, 1996, at 13 (noting that Deputy Treasury Secretary Lawrence H. Summers argues that "the United States and other countries must adapt their anti-laundering rules to account for these new products").

196. See 61 Fed. Reg. at 40,494 ("[T]he FDIC would expect that institutions clearly and conspicuously disclose to their customers the insured or non-insured status of their stored value products, as appropriate.").

197. See Stored Value Cards and Other Electronic Payment Systems, 61 Fed. Reg. 40,494 (1996).

198. Id. at 40,495. The FDIC based its authority for such action on 12 U.S.C. . 1813(l)(5) (1994).

199. See 61 Fed. Reg. at 40,494.

200. Id.

201. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,699 (1996) (to be codified at 12 C.F.R. pt. 205) (proposed May 6, 1996) (discussing "the compliance burdens to financial institutions and the benefits to consumers").

202. 61 Fed. Reg. at 40,496.

203. Id.

204. See id. (discussing interrelationship between "public confidence" and "the expectations of depository institution customers").

205. See id.

206. See supra note 80 and accompanying text (noting that EFTA gives FRB power to regulate nonbank institutions that provide electronic fund accounts).

207. See 61 Fed. Reg. at 40,496.

208. See supra text accompanying notes 109-12 (noting that Federal Reserve Board chose to exempt stored value cards with values less than $100).

209. 61 Fed. Reg. at 40,496-97.

210. See id. at 40,497.

211. See id. at 40,496 ("[T]he [FDIC] would expect that the relationship between a stored value card customer and the institution to be clearly and conspicuously stated on the disclosures and agreements accompanying the card.").

212. FDIC General Counsel's Opinion No. 8; Stored Value Cards, 61 Fed. Reg. 40,490, 40,494 (1996).

213. 61 Fed. Reg. at 40,496.

214. See supra notes 18-25 and accompanying text.

215. 61 Fed. Reg. at 40,496.

216. Id.

217. See 61 Fed. Reg. at 40,494.

218. Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,700 (1996) (to be codified at 12 C.F.R. pt.205) (proposed May 2, 1996).

219. OCC Bulletin 96-48, available in LEXIS, BANKNG Library, ALLOCC File, (Sept. 10, 1996) [hereinafter OCC Bulletin].

220. Id.

221. Id. at 2.

222. See id. at 1. To compare the terms used by the FRB and the FDIC, see supra notes 85-95, 188 and accompanying text.

223. See id. at 2.

224. See id. at 4.

225. See id. at 5.

226. See id. at 6. A transaction authorizing bank is needed in those SVC systems in which merchants must obtain authorization before accepting SVCs.

227. See id. at 7.

228. See id. at 8. A transaction archiving bank keeps records of transactions using SVCs.

229. Id. at 9.

230. Id. at 10.

231. See id.

232. See supra text accompanying notes 109-12 (noting that FRB chose to regulate only stored value cards that cannot carry more than $100 at one time).

233. See OCC Bulletin, supra note 219, at 10.

234. See supra text accompanying notes 211-13 (noting that FDIC Request for Comment in part agrees with opinion of General Counsel that whether stored value card is insured should be disclosed).

235. See OCC Bulletin, supra note 219, at 10. The FDIC Request for Comment would require disclosure only if the value is not insured. See supra text accompanying note 216 (noting that FDIC Request for Comment is less stringent regarding insurance disclosure but still does not require disclosure if no insurance is provided).

236. OCC Bulletin, supra note 219, at 9.

237. See The Future of Money: Hearings Before the Subcomm. on Domestic and Int'l Monetary Policy of the House Comm. on Banking & Fin. Servs., 104th Cong. 6 (1995) (statement of Alan S. Blinder, Vice Chairman, Board of Governors of the Federal Reserve System) [hereinafter Hearings on the Future of Money] (discussing lack of legal protections and regulations for consumers in stored value card market).

238. A Commercial Lawyer's Take on the Electronic Purse: An Analysis of Commercial Law Issues Associated With Stored Value Cards and Electronic Money (Third Discussion Draft July 31, 1996), at 2-3 [hereinafter Task Force].

239. See supra text accompanying note 43 (discussing one marketing strategy utilized in Atlanta).

240. See FDIC General Counsel's Opinion No. 8; Stored Value Cards, 61 Fed. Reg. 40,490, 40,490 n.2 (1996).

241. See Task Force, supra note 238, at 30-31. The FDIC General Counsel concurs, characterizing the information in SVCs as "more in the nature of a right to be paid a sum of money." 61 Fed. Reg. at 40,490 n.2.

242. Task Force, supra note 238, at 38.

243. Id. at 41.

244. Id.

245. See generally Task Force, supra note 238. For example, the Discussion Draft points out the problems consumers might have in determining the obligor of the SVC. See id. at 46-48.

246. See id. at 38 (finding that value in SVCs is nothing more than promise to pay).

247. See id. at 46-48 (discussing difficulty and importance in determining who is obligor of SVC). "In the commercial world, a party that extends credit is usually willing to do so only because that party has sufficiently detailed knowledge about the debtor to conclude that when the debt is due it will be paid." Id. at 19. Several prepaid phone card companies have gone out of business after selling tens of thousands of worthless SVCs. See supra note 54.

248. See Task Force, supra note 238, at 46-48 (discussing importance of determining who is obligor of SVC). "The identification of the issuer is critical because it is the only way for potential users of the products to measure the credit risk associated with the new payment products; as stated earlier, the obligation is only as valuable as the issuer is credit worthy." Id. at 46.

249. See id. at 47 (finding that issuer of SVC may not be same entity as provider of stored obligation or reader making SVC transferrable).

250. See id. (finding that issuer's name may be one of many names on SVC).

251. See supra text accompanying note 237 (discussing legal vacuum confronting consumers on several crucial issues).

252. See supra text accompanying notes 31-37 (explaining structural flaws in proposed amendment to Regulation E by FRB).

253. See Electronic Fund Transfers (Regulation E), 12 C.F.R.. 205.7 (1996).

254. See supra Part II.A.3 (explaining Regulation E and its provisions applicable to SVCs).

255. For example, matters such as redeemability and expiration of the cards may be included in the agreement.

256. Task Force, supra note 238, at 57.

257. A copy of the First Union SVC is on file with The American University Law Review.

258. A copy of the NationsBank SVC is on file with The American University Law Review.

259. A copy of the agreement is on file with The American University Law Review.

260. See Electronic Fund Transfers (Regulation E), 12 C.F.R.. 205.8(a)(1) (1996).

261. In some types of SVCs, the issuer has no information about the identity of the consumer purchasing the card. One regulatory response is to exempt those types of cards from Regulation E; another response is to prohibit post-contract changes in terms unless the issuer notifies the initial purchaser. If an issuer chooses to sell cards to persons whose identities and addresses it does not obtain, that issuer forgoes the ability to change the terms of use of the card. This response should not pose a significant burden on issuers of disposable cards, as these cards generally are issued in small denominations and the value can be expected to be exhausted within a short period of time. It is unlikely, therefore, that a reputable issuer would need to change the terms within the period of use.

262. A copy of the agreement is on file with The American University Law Review.

263. See 12 C.F.R. . 205.6.

264. A copy of the agreement is on file with The American University Law Review.

265. See generally Hearings on the Future of Money, supra note 237, at 4-8 (statement of Alan S. Blinder, Vice Chairman, Board of Governors of the Federal Reserve System).

266. See Task Force, supra note 238, at 75-76 (discussing hypothetical regarding discharging of obligations pursuant to transfer of value from consumer to seller).

267. See id. at 75 (stating importance of addressing problems faced when insolvent issuer cannot honor its obligation to consumer).

268. See supra text accompanying note 16 (explaining how names of both bank and company associated with credit card may be found on SVC).

269. See Task Force, supra note 238, at 91.

270. Regulation E establishes a detailed error resolution procedure, see 12 C.F.R. . 205.11 (1996), but the FRB's proposed amendment to Regulation E would exempt most SVCs from this procedure. See supra text accompanying note 91 (discussing "off-line accountable" SVC).

271. The process that culminated in the revision of Articles 3 and 4 of the U.C.C., the portions of the U.C.C. that govern payment systems, began in 1974 and was not completed until 1990. See Fred H. Miller, U.C.C. Articles 3, 4 and 4A: A Study in Process and Scope, 42 ALA. L. REV. 405, 407 (1991).

272. Cf. Task Force, supra note 238, at 121 (using hypothetical involving different states in SVC transaction to underscore choice of law issues). See generally Peter Wallsten, PSC Calls Phone Debit Cards into Question, ST. PETERSBURG TIMES, Sept. 3, 1996, at 1B (reporting that Florida Public Service Commission proposes regulating phone SVCs).

273. See Stored Value Cards and Other Electronic Payment Systems, 61 Fed. Reg. 40,494, 40,496 (1996) (stating that consumers may be willing to pay higher price for FDIC insured cards; thus, banks that must provide such insurance might not be at competitive disadvantage in vying for customers against nonbanks). The American Bankers Association recommends that only regulated depository institutions should be allowed to issue third-party SVCs. By limiting the recommendation to third-party SVCs, they intend to exclude from this restriction two-party cards such as many types of fare and phone cards. American Bankers Ass'n Payments System Task Force, THE ROLE OF BANKS IN THE PAYMENTS SYSTEM OF THE FUTURE 18 (1996). The Hong Kong Monetary has established guidelines for non-bank SVC issuers. Guidelines Set for Stored Value Cards, S. CHINA MORNING POST, Dec. 18. 1996, at 4.

274. See U.C.C. arts. 3 & 4 (1990).

275. 12 U.S.C. .. 4001-4010 (1994).

276. 15 U.S.C. .. 1693-93 (1994).

277. Id. .. 1601-1920.

278. The Truth in Lending Act defines "card issuer" as "any person who issues a credit card." Id. . 1602(n). The Electronic Funds Transfer Act defines "financial institution" to include "any other person who, directly or indirectly, holds an account belonging to a consumer." Id. . 1693(a)(8).

279. See, e.g., N.Y. BANKING LAW arts. XIII-B & XIII-C (McKinney 1971 & Supp. 1996).

280. See, e.g., COLO. REV. STAT. . 12-55-109(5) (1991).

281. See, e.g., CAL. FIN. CODE . 33525 (West 1996) (requiring disclosure that travelers' checks are not covered by government insurance).

282. See, e.g., COLO. REV. STAT. . 12-55-109(5).

283. See Electronic Fund Transfers, 61 Fed. Reg. 19,696, 19,699 (1996) (to be codified at 12 C.F.R. pt. 205) (proposed May 2, 1996) (stating that FRB is not certain that definition of "account" covers off-line unaccountable systems).

284. See supra text accompanying notes 113-18 (explaining flaws in $100 exemption).

285. See supra text and accompanying notes 171-79 (asserting that holders of SVCs worth $100 or less should be informed of extent of their liability). If lawmakers insist on completely exempting low-value cards, the exception should be limited to disposable cards, that is, cards that cannot be reloaded. In addition, a $100 exemption does not relate to any amount with which consumers are familiar. A $50 limit at least relates to the $50 maximum of a consumer's liability when a credit card is lost or stolen and corresponds to the initial liability limit for lost or stolen debit cards. Consequently, consumers may understand in a somewhat vague and general way that there is a relationship between $50 and risk.

286. See 61 Fed. Reg. at 19,700.

287. Stored Value Cards and Other Electronic Payment Systems, 61 Fed. Reg. 40,494, 40,496 (1996).

288. See OCC Bulletin, supra note 219, at 10.

289. The OCC Bulletin merely suggests disclosing the name of the issuer. If different companies are assuming responsibility for different types of problems, the names, addresses, and telephone numbers of each should be disclosed. See id.

290. The FDIC Request for Comment and the OCC Bulletin are addressed only to banks and FDIC insurance. See generally 61 Fed. Reg. at 40,494; OCC Bulletin, supra note 219.

291. At a minimum, if payment does not result in discharge, that fact should be disclosed.

292. The OCC Bulletin suggests disclosure only of what happens if the card expires. See OCC Bulletin, supra note 219, at 10.

293. 15 U.S.C. . 1601(a) (1994).

294. See id. .. 1661-1665b.

295. See Task Force, supra note 238, at 30-31; see also supra text accompanying notes 239-44 (discussing misleading nature of characterizing SVC as money transfer).

296. See generally Griffith L. Garwood et al., Consumer Disclosure in the 1990s, 9 GA. ST. U. L. REV. 777 (1993) (discussing lessons learned from disclosure patterns and determining future trends for disclosure requirements).

297. See FDIC General Counsel's Opinion No. 8; Stored Value Cards, 61 Fed. Reg. 40,490, 49,491 (1996).

298. See, e.g., N.Y. BANKING LAW art. XIII-C (McKinney 1996).

299. See, e.g., Truth in Lending, 15 U.S.C. . 1640 (1994); Electronic Fund Transfers, id. . 1693m; Magnuson-Moss Warranty Act, id. . 2310(d).

300. See generally Mark E. Budnitz, Arbitration of Disputes Between Consumers and Financial Institutions: A Serious Threat to Consumer Protection, 10 OHIO ST. J. ON DISP. RESOL. 268 (1995) (discussing arbitration contracts currently used).

301. See supra text accompanying notes 279-82 (listing various state restrictions on companies that sell money orders and travelers' checks).