BB 92-24
BANKING ISSUANCE

Comptroller of the Currency
Administrator of National Banks
Type: Banking Bulletin
Subject: Merchant Processing

TO:  Chief Executive Officers of all National Banks, Deputy
     Comptrollers, District Administrators, Department and Division Heads
     and all Examining Personnel

Attached is a temporary insert to the Comptroller's Handbook for National
Bank Examiners. It contains guidance for examiners concerning merchant
processing of credit card receivables and presents the OCC's general
policy on the subject. It should be filed as a separate section in the
Handbook, following Section 212, Credit Card Plans.
 
Merchant processing is the settlement of credit card sales transactions
for merchants. It is a separate and distinct business line from credit
card issuing. Electronic technology enables both small and large banks to
process millions of dollars in merchant receivables. Most merchant
processing is off-balance sheet, and significant risks are involved if the
activity is not properly controlled. Banks can incur losses through
merchant fraud, merchant bankruptcy, or poor product pricing. Any bank
participating in merchant processing must be fully aware of the risks
involved. The attached examination guidance will help both bankers and
examiners understand those risks and control their effect.






Donald G. Coonley
Chief National Bank Examiner
 
Date:  May 5, 1992