Banking Interpretations

January 10, 2001

Claudia Callaway, Esq.
Paul, Hastings, Janofsky & Walker LLP
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2400

Dear Ms. Callaway:

Your letter to me dated December 5, 2000 asks that the Banking Department determine whether the new PayPal "Premier" service offered by your client, X.Com, would require any licensing under the Banking Law. In July 2000, this Department indicated to you that the PayPal service, as described in your July 13, 2000 letter, did not require a money transmission license in New York.

The description of the "Premier" service in your letter indicates that the new service is similar to the regular PayPal service. The differences appear to be that individuals utilizing the "Premier" service may receive payments via the Internet in an aggregate amount exceeding $500 or more in a six month period and such individuals are charged a fee for that service. Additionally, you note that "premier" users are eligible to use certain premium features of the PayPal service "that facilitate the integration of PayPal into the Premier user’s online or Web site sales." According to your letter, most of the "premier" customers are individuals who are using the PayPal system to receive payments for goods sold over the Internet.

In a letter to me dated December 13, 2000, you verified, at my request, that the company operating the PayPal system does not have any offices or agents in New York and does not maintain any bank accounts in New York. Consequently, the Banking Department reiterates its previous determination that it will interpose no objection at this time to your client offering PayPal services to New York customers. The introduction of the "Premier" option does not modify the prior opinion because the basic nature of the PayPal system remains unchanged. The Banking Department’s previous comment concerning the banking aspect of PayPal’s option to keep money on account for future use is also reaffirmed and we once again request that such option not be offered to New York customers.

I trust that this letter is of assistance to you.

Very truly yours,

Steven Barras
Assistant Counsel