PayPal is kicking butt and taking no prisoners. Going UP! :)
FDIC Legal Opinion Holds That Funds Deposited by PayPal on Behalf of Customers At FDIC Member Institutions Would Qualify for Insurance On a Per-Customer Basis
PALO ALTO, Calif., March 12 /PRNewswire-FirstCall/ -- PayPal, Inc. (Nasdaq: PYPL, news, msgs) today announced that it has received a final advisory opinion from the FDIC Legal Department to the effect that, when PayPal acts as agent for customers and places PayPal customer funds with well-capitalized FDIC member banks, those funds will qualify for federal deposit insurance up to $100,000 per customer, per bank, in the event of a failure of a bank at which the funds were placed. This "pass-through" insurance for customers does not apply to funds that PayPal customers choose to invest in the PayPal Money Market Fund, to liabilities of PayPal itself, nor if PayPal was deemed by the FDIC not to be acting as an agent for its customers. In order to ensure that PayPal is treated as an agent for its customers, PayPal places all customer funds not invested in the PayPal Money Market Fund in accounts at FDIC-insured banks and has adopted internal procedures intended to maintain its status as agent for its customers.
"We are delighted to be able to enhance the safety of customer funds as they move through our payment service," said PayPal CEO Peter Thiel. "While customers will continue to be able to request a withdrawal by check or electronic funds transfer at any time, those who do not immediately request a withdrawal have two attractive options: a nightly sweep into a money market fund where their funds earn a rate of return, or a deposit on their behalf at a financial institution where it is eligible for FDIC insurance."
PayPal also requested an opinion from the FDIC that it is not taking deposits for purposes of the Federal Deposit Insurance Act. The FDIC Legal Department noted that because PayPal is not a bank or savings association for purposes of the Federal Deposit Insurance Act, it would not address the request. The FDIC opinion noted, however, that "PayPal does not physically handle or hold funds placed into the PayPal service." The FDIC opinion does not cover state law issues, but PayPal believes that the opinion's analysis on PayPal's status as an agent for its customers and treatment of customer funds could be considered relevant by some state authorities in their review of whether PayPal is engaged in the business of banking under state law. Notwithstanding the opinion, PayPal will continue its applications for state money services licenses where appropriate.
About PayPal
PayPal enables any business or consumer with email to send and receive online payments securely, conveniently and cost-effectively. PayPal's account-based network builds on the existing financial infrastructure of bank accounts and credit cards to create a global payment system. PayPal has more than 14 million member accounts, including more than 3 million business accounts. In 2001, PayPal processed over $3.5 billion in payments.
Based in Palo Alto, California, PayPal is available to users in 37 countries including the United States. Further information about the company can be found at www.paypal.com.
Funds placed at FDIC-member banks are subject to a $100,000 limit per bank and may be aggregated with other funds held by a customer at the same bank. A list of banks at which PayPal places customer funds is available at www.paypal.com. Funds placed in the PayPal Money Market Fund are not FDIC insured, not guaranteed by any bank and may lose value. A prospectus to the PayPal Money Market Fund is available at www.paypal.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, projections of our future financial performance, our anticipated growth and anticipated trends in our business. Such forward-looking statements include, among others, those statements including the words "expects," "anticipates," "intends," "believes" and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, rulings by states on PayPal's regulatory status. You should carefully review the risks described in other documents we file from time to time with the Securities and Exchange Commission. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this release. |
