American Express Adds FIDC Insurance to Bluebird Cards

by Ben Jackson 0

American Express and Walmart announced onTuesday that Bluebird accounts will be eligible for insurance fromthe Federal Deposit Insurance Corp. and that Bluebird customers canorder Bluebird checks to use to pay bills or make purchases.

From the press release:

FDIC Insurance Coverage: Funds in allpermanent Bluebird Accounts will now be eligible for FDICinsurance, which allows members to arrange for direct deposit ofU.S. government payments. Temporary account funds will not be FDICinsured. Other restrictions may apply. For more information seewww.bluebird.com/fdic.

“No Overdraft” Check Writing: Starting today, Bluebird Memberswill have the ability to order Bluebird checks that they can use topay bills and make purchases without worrying about insufficientfunds or incurring overdraft fees because a Member’s funds are setaside during the pre-authorization process.
Bluebird cardholders can request one free checkbook until August2013. After that point, Bluebird cardholders who have set up directdeposit can get their first checkbook of 50 checks at no charge;non-direct deposit users can order a book of 50 checks for $26,according to the press release.

According to an article in American Banker,American Express is putting the Bluebird deposits into an accountwith Wells Fargo in order to get the FDIC insurance:

Amex is working with Wells Fargo, which willhold all the deposits, says Schulman, in order to provide theinsurance. Wells Fargo has long partnered with American Express,but was not involved in the Bluebird account untiltoday.
Based on the information available, it appears that both WellsFargo and the American Express Centurion Bank will hold the fundseven as Travel Related Services remains the issuer of the Bluebirdcards. This situation complicates the how the FDIC insurance ispassed through to the cardholder since neither bank is the issuer,however American Express has attempted to clarify the pass throughin its explanation at www.bluebird.com/fdic. The specific mechanism maybe this FDIC opinion:

In some cases, in an agency or custodialcapacity, the distributor of the access mechanisms (or agent onbehalf of the distributor) might open a pooled account for allholders of the access mechanisms. In such cases, the FDIC mayprovide “pass-through” insurance coverage (i.e., coverage that”passes through” the agent to the holders). See 12 CFR 330.7. Suchcoverage is not available, however, unless certain requirements aresatisfied. First, the account records of the insured depositoryinstitution must disclose the existence of the agency or custodialrelationship. See 12 CFR 330.5(b)(1). This requirement can besatisfied by opening the account under a title such as thefollowing: “ABC Company as Custodian for Cardholders.” Second, therecords of the insured depository institution or records maintainedby the custodian or other party must disclose the identities of theactual owners and the amount owned by each such owner.
American Express has updated its Bluebird Web sites to explain howthe pass through insurance works.

When you add funds to your Bluebird Account,the funds will be placed by us into one or more custodial accounts(“Custodial Account(s)”) we maintain for the benefit of BluebirdMembers at one or more FDIC-insured banks (currently Wells FargoBank, N.A. and American Express Centurion Bank).
Read the Bluebird FAQ.

FDIC pass-through insurance protects fundsplaced on behalf of a Bluebird Member against the risk of loss (upto the then applicable FDIC deposit insurance limits) should anyFDIC-insured bank(s) where we maintain Custodial Account(s) fail.FDIC pass-through insurance does not protect you against the riskof our insolvency. In the unlikely event of our insolvency, fundswe place in a Custodial Account should be protected from claims byour creditors; however, it is possible that funds that we holdbefore placement in a Custodial Account will not be protected fromclaims by our creditors. Even if funds in your Bluebird Account(whether held by us or held in a Custodial Account) are protectedfrom claims by our creditors, in the unlikely event of ourinsolvency, it is possible that you will not have access to thosefunds while court or other legal proceedings areongoing.
Read additional Bluebird disclosure.

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