Complaint — PayServices v. FRBSF

Record facts

UNITED STATES DISTRICT COURT · No. 1:23-cv-00305-REP · Doc. 1 · 2023-06-27 · Docket on CourtListener

Summary

A complaint for declaratory and injunctive relief filed June 27, 2023 by PayServices Bank against the Federal Reserve Bank of San Francisco in the U.S. District Court for the District of Idaho, Case 1:23-cv-00305-REP, docketed as Document 1. It challenges the denial of PayServices' application for a Federal Reserve master account, alleging that as a depository institution under 12 U.S.C. § 461(b)(1)(A)(i) it is entitled to one. The complaint pleads jurisdiction under 12 U.S.C. § 632 and 28 U.S.C. § 1331 and a remedy under the Declaratory Judgments Act, 28 U.S.C. §§ 2201 et seq., and recounts an April 22, 2022 meeting with Federal Deposit Insurance Corporation and defendant officials. It claims deprivation of a property interest without due process under the Fifth Amendment and asks the Court to compel the defendant to grant the application and award fees under 28 U.S.C. § 2412.

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Full text

1
IN THE UNITED STATES DISTRICT COURT 
FOR THE DISTRICT OF IDAHO 
 
PAYSERVICES BANK, 
 
 
Plaintiff, 
vs. 
 
FEDERAL RESERVE BANK OF 
SAN FRANCISCO, 
 
 
Defendant. 
___________________________________ /  
COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF 
 
 
Plaintiff, PAYSERVICES BANK (“PayServices”), in the above-captioned 
matter, files this Complaint against the Federal Reserve Bank of San Francisco 
(“FRBSF” or “the Bank”) for the denial of an application for a Master Account and 
alleges as follows: 
INTRODUCTION 
1. 
This case involves FRSBF’s unlawful denial of an application for a master 
account. PayServices Bank is entitled to obtain the account as an eligible depository 
institution under federal law. Without such an account, PayServices cannot directly 
access the Federal Reserve and cannot provide transaction-related services for a variety 
of customers, including importers and exporters, that other banks with master accounts 
at the Federal Reserve presently provide. Without a master account, PayServices Bank 
is relegated to depending on an intermediary bank, which prevents it from managing 
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the settlement of transactions and services related to foreign trade that it has uniquely 
positioned itself to handle. 
PARTIES 
2. 
Plaintiff, PayServices, is a private banking corporation incorporated under 
the Idaho Bank Act, at Title 26 of Idaho Code. 
3. 
On August 3, 2022, the Idaho Department of Finance granted 
“preliminary approval” of PayServices’ application to establish a state-chartered bank 
in Idaho. 
4. 
PayServices is a “depository institution” within the meaning of the Federal 
Reserve Act. It is a “bank which is eligible to make application to become an insured 
bank,” 12 U.S.C. § 461(b)(1)(A)(i), as it will be “engaged in the business of receiving 
deposits,” 12 U.S.C. § 1815(a)(1). 
5. 
Defendant FRBSF is a private corporation created pursuant to an Act of 
Congress. It is subject to regulation pursuant to certain federal statutes, including but 
not limited to the Federal Reserve Act and the Deregulation and Monetary Control Act 
of 1980, as well as regulations issued under the authority of those statutes.  
6. 
In addition, the Bank conducts certain of its activities pursuant to 
delegated responsibilities from the Board of Governors of the Federal Reserve System.  
7. 
The Bank’s delegated responsibilities includes the approval of applications 
for and the issuance of Master Accounts. 
 
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JURISDICTION AND VENUE 
8. 
This Court has subject matter jurisdiction over this action under 12 U.S.C. 
§ 632, which provides that “all suits of a civil nature at common law or in equity to 
which any Federal Reserve bank shall be a party shall be deemed to arise under the laws 
of the United States, and the district courts of the United States shall have original 
jurisdiction of all such suits.” 
9. 
Pursuant to 28 U.S.C. § 1331, jurisdiction is proper in this Court as it is 
founded on the existence of a federal question.  
10. 
Plaintiff also seeks a remedy under the Declaratory Judgments Act, 28 
U.S.C. §§ 2201 et seq. This Court has the authority to grant such relief. 
11. 
Defendant FRBSF is the sole branch of the Federal Reserve, the Central 
Bank of the United States, that serves the State of Idaho. 
12. 
Pursuant to 28 U.S.C. §§ 1391(b)(1), venue is proper in this Court because 
the Plaintiff, PAYSERVICES BANK, is incorporated under the laws of the State of 
Idaho pursuant to a permit issued by the Idaho Department of Finance. The Bank 
reside in this District for purposes of 28 U.S.C. § 1391(c)(2). The Bank is an entity with 
the capacity to be sued. It is subject to this Court’s personal jurisdiction because they 
have purposefully availed themselves of the privileges of conducting business in this 
District, the claims herein arose in this District, many material witnesses are located in 
this District, and the Bank is subject to this Court’s jurisdiction under Idaho’s long-arm 
statute, Idaho Code § 5-514(a). 
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13. 
In addition, venue is proper under 28 U.S.C. § 1391(b)(2) because a 
substantial part of the events giving rise to this matter occurred in this district. 
14. 
Venue is also proper under 28 U.S.C. § 1391(e) because PayServices Bank 
resides in this district and a substantial part of the events or omissions giving rise to its 
claims occurred here. 
15. 
An actual controversy exists between the parties concerning the legality of 
FRBSF’s denial of PayServices’ master account application. The controversy is 
justiciable. PayServices is already suffering injury in account of FRBSF’s denial of  
PayServices’ master account application. 
FACTS 
16. 
On April 22, 2022, PayServices held a meeting with officials from the 
Federal Deposit Insurance Corporation (“FDIC”) and the Federal Reserve Bank of San 
Francisco (“FRBSF”). The meeting lasted close to two hours. Notably, the following 
individuals were present at the meeting: 
i. Wallace Young, Vice President of Credit Risk Management at FRBSF, 
ii. David Xu, Senior Manager at FRBSF, and 
iii. Debra Rhodes, Senior Financial Institution Examiner at FDIC. 
17. 
At the meeting, Debra Rhodes, representing the FDIC, concluded that  
PayServices’ business model did not warrant the need to carry FDIC insurance coverage 
of deposits because PayServices’ business model does not involve any type of credit 
product such as loans, mortgages, or investments. 
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18. 
At the meeting, the officials concluded that the likelihood of a bank failure 
at PayServices is not possible because, at PayServices, all deposits are available at all 
times because 100% of deposits are kept in reserve. As a result, there would never be a 
run on the bank or pose a risk of failure to due to a bank run for the FRBSF. 
19. 
At the meeting, David Xu, representing the FRBSF, concluded that  
PayServices’ business model is no different than an ATM card (either you have the 
money in your account, or you don’t) and for this reason, the only requirement – from 
an operational risk assessment – for the FRBSF – is that when a PayServices 
accountholder shows a balance of $0.00, no overdraft will be allowed. PayServices does 
not allow accountholders to incur an overdraft. Therefore, this matter is settled. 
20. 
At the meeting, Wallace Young, the most senior person representing the 
FRBSF, concluded that should PayServices present a preliminary approval from a state 
chartering authority within its district, that PayServices will be eligible to apply to 
request approval of a Master Account for PayServices to be connected to the U.S. 
payment system and that the FRBSF would be in a position to approve the request for 
a Master Account based on the business plan and business model that PayServices 
presented. 
21. 
On July 28, 2022, the Idaho Department of Finance (“IDF” or the 
“Department”) held a meeting with PayServices. IDF communicated to 
PAYSERVICES that their entire application, procedures and risk management 
framework was the most sophisticated they had seen to date. IDF proceeded to 
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communicate the conditions under which it was willing to issue a preliminary approval. 
Notably, those conditions included the requirement to meet all federal regulations and 
be subject to a yearly examination by the Department instead of one every 18 months 
as is normally the practice. PayServices deemed the conditions reasonable and accepted 
them.  
22. 
On August 3, 2022, the IDF issued a preliminary approval for PayServices 
to establish a banking corporation in the State of Idaho based on the business plan and 
business model that was presented to the FRBSF at the April 22nd meeting. 
23. 
On August 10, 2022, PayServices held a meeting with Thomas Doerr, 
FRBSF Senior Manager, Supervision & Credit, Credit Risk Management and formally 
requested a master account in accordance with the discussions from the April 22nd 
meeting. 
24. 
On August 16, 2022, FRBSF timely received a package of follow up 
documents that it had requested from PayServices for the processing of the request. 
25. 
On September 12, 2022, FRBSF timely received proof of PayServices’ 
registration with the Idaho Secretary of State as a banking corporation, which the 
FRBSF had requested in order to process the request to issue the Master Account. 
26. 
Between August 10, 2022 and May 31, 2023, PayServices has repeatedly 
reached out to the FRBSF and has repeatedly inquired as to the status of its approval 
request for a Fed Master Account. The FRBSF has repeatedly replied that “the review 
continues” and that they are “not sharing our process with you.” 
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27. 
All financial institutions must develop a risk management and compliance 
framework commensurate with their business plan and business model that conforms 
to the Bank Secrecy Act. 
28. 
PayServices developed a very comprehensive “Compliance Management 
System” to adhere to the provisions of, and comply with, the Bank Secrecy Act. 
29. 
PayServices complies with the Bank Secrecy Act. 
30. 
Any financial institution wishing to become licensed under the laws of any 
of the 50 states, must have its compliance framework reviewed and approved by a state 
chartering authority. 
31. 
PayServices submitted its compliance framework to the Department of 
Finance of Idaho. State law requires compliance with all Federal Regulations. The State 
deemed PayServices’ compliance framework as totally acceptable and compliant with 
both state and federal regulations. 
32. 
FRBSF, as the Federal Banking Agency responsible for the Supervision of 
state-member banks, has the power to request a financial institution under its 
supervision to improve its Compliance framework. 
33. 
However, the FRBSF was not granted the authority by Congress to deny 
an application. Congress, through the Federal Reserve Act, allows the FRBSF to engage 
in limited activities on its behalf. The issuance of a charter is not one of them. The 
approval of a compliance and/or risk management framework is not part of its 
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delegated authorities either. The FRBSF’s limited authority in this regard allows it to  
make recommendations. 
34. 
PayServices, on numerous occasions, asked the FRBSF if they deemed 
necessary to make any amendment to its Compliance Manage System framework, and 
if so, to identify which areas required improvements. 
35. 
FRBSF was never able to identify any area of PayServices’ extremely 
comprehensive Compliance and Risk Management framework that would possibly 
require any improvement. 
36. 
FRBSF’s denial letter states that due to PayServices’ intention to focus on 
one market segment – the commerce of commodities – it considers PayServices’ 
activities as an “unproven risk management framework” and as such is not able to grant 
a master account. 
37. 
This is a clear act of discrimination. FRBSF has had 9.5 months to notify 
PayServices of any deficiencies in its framework; but identified none. 
38. 
PayServices met and exceeds the requirements to qualify for a master 
account approval at the FRBSF. 
39. 
On almost every conversation that PayServices held with the FRBSF 
during the 9.5 months period, PayServices asked the FRBSF: 
i. Do you need any additional information?  
1. The FRBSF’s response was “No.” 
ii. Do you see anything that is of concern with the application?  
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1. The FRBSF’s response was “No.” 
iii. Do you foresee that any part of the procedures and policies for Bank 
Secrecy Act purposes need to be amended?  
1. The FRBSF’s response was “No.” 
iv. PayServices is amenable to have an “examiner in residence.”1 Will the 
FRBSF want to establish one?  
1. The FRBSF’s response was “No, it won’t be necessary.” 
v. Will you notify us if any of the above changes so that we can remedy? 
1. The FRBSF’s response was “Yes.”  
b. The FRBSF repeatedly agreed to work with PayServices to overcome any 
issue, should there be one that arises. 
40. 
On May 17, 2023, one of PayServices’ founders, a resident of Florida, 
requested the formal assistance of the office of U.S. Senator Marco Rubio (R-FL) in 
obtaining information regarding the excessive 9.5 months delay in processing the 
request.  
41. 
On May 18, 2023, Senator Rubio’s office reached out to the Federal 
Reserve Board asking for the FRBSF to act on PayServices’ approval request. 
 
1 An “examiner in residence” is a financial examiner that is employed by the Federal Reserve who goes 
to work every day at a designated financial institution to monitor bank operations as they happen. Examiners 
in residence are typically automatically mandated by law with institutions with assets in excess of $10 billion but 
they can also be designated with smaller institutions. In an abundance of precaution and to preempt any 
concerns about the soundness of the institution, PayServices offered one. 
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42. 
That same day, a few hours after this little bit of political pressure was 
generated by the inquiry from Senator Rubio’s office, Wallace Young from the FRBSF 
sent an email to PayServices to notify them that they are “wrapping everything up” and 
to expect an answer within two weeks. 
43. 
On May 31, 2023, Wallace Young issued a one-page letter to PayServices 
to notify them that due to its line of business which focuses almost exclusively on 
facilitating the trade of commodities through import and export of products from and 
to the United States, that it was unable to grant PayServices’ request because this line 
of business is a “novel business model” that is “unproven” and thus presents an “undue 
risk” to the Reserve Bank. 
A. Background on PayServices’ Business Model 
44. 
PayServices’ business model focuses almost exclusively on facilitating 
trade of commodities for the small to medium enterprises from and to the United 
States.  
45. 
Every bank licensed to operate in the United States is able in one capacity 
or another to facilitate the transmission of funds for the purposes of inter-state and 
inter-country commerce. Some focus more on retail customers (such as private deposits 
or local businesses), whereas others on wholesale customers (multi-national companies, 
foreign governments, etc.). 
46. 
The only differences between PayServices and other banks engaging in the 
same transactions are: 
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i. PayServices operates no physical branches. This is permitted both 
under State and Federal law. PayServices, because it is not a lender, 
does not focus its business on retail customers, and focuses almost 
exclusively on trade of commodities which transit through any lawful 
ports of entry and exit, has no need to operate a physical branch. 
ii. PayServices, because it is not a lender of moneys, and is not permitted 
(through its state permit) to invest customers’ deposits, is not required 
to, and does not, carry FDIC insurance coverage of the deposits. This 
is permitted both under State and Federal law. Both the FDIC, the 
FRBSF and the IDF agreed that PayServices’ model did not warrant 
the need for FDIC insurance coverage. 
iii. Because PayServices is not a lender, it is required to keep 100% of 
deposits in reserve. This practice safeguards the security of the 
customers’ deposits and the Federal Reserve System in case of a bank 
run where every depositor would get its money immediately without 
the need to tap into any emergency fund. This is permitted both under 
State and Federal law. 
iv. PayServices’ model is not “novel” in any shape or form, it is simply 
more focused and limited than other banks that offer additional 
financial products and services. 
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47. 
PayServices’ model is not that of a lender. PayServices brings a platform 
that eliminates the heighten risks and losses that traditional banks suffer as a result of 
malpractice in global commerce. Where a traditional bank enables the transmission of 
monies for commerce-related transactions without any verification of the actual 
merchandise and without good data about the parties, PayServices is able to do the 
same by linking the actual transaction to a physical verification of the merchandise by 
the customs agencies of both the United States and the equivalent agency of the 
receiving country.  
48. 
PayServices will only release the funds allocated for the transaction once 
it has received confirmation from the authorities that the transaction complies with 
applicable law and presents no danger to the public. This technological capability goes 
above and beyond the Bank Secrecy Act requirements and ensures more secure 
transactions with less friction and with more reliable trading partners. PayServices’ 
model focuses almost exclusively on one area, but does it extremely well.  
49. 
PayServices was founded by a small group of people with decades of 
banking, finance and trade commerce expertise both locally and internationally. 
PayServices’ Chief Financial Officer for the Bank - an important role for the soundness 
of any financial institution - is both a licensed Certified Bank Examiner and Certified 
Public Accountant with close to forty years in bank supervision, auditing, treasury 
management, and financial reporting. 
 
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B. Notable Bank With A Similar Business Model 
50. 
FRBSF’s claim that PayServices’ business model is “novel” and 
“unproven” is belied by the existence of other banks who operate in the same space 
and a very large bank that provides a similar set of services. 
51. 
Since 1934, Exim Bank, a federally operated uninsured bank, has focused 
exclusively on financing and guaranteeing import and export transactions with U.S. 
based and foreign companies, including in many developing countries with difficult 
trading and regulatory environments. 
52. 
In 2021, the U.S. trade to GDP ratio was 25.48% of its economy. Import 
and export trade and commerce represents one quarter of the U.S. economy. 
53. 
To take a local example, Idaho’s potatoes industry alone represents 15% 
of the state’s GDP. 
54. 
On May 11, 2023, Idaho’s entire congressional delegation – Senators Jim 
Risch and Mike Crapo and Representatives Mike Simpson and Russ Fulcher – sent a 
letter along with thirty-one other U.S. House and Senate members to the U.S. 
Department of Agriculture, urging the USDA to push Japanese officials to buy fresh 
potatoes.  
55. 
In other words, the trade of commodities with international merchants 
and friendly countries to the United States is at the core of the policy of the U.S. 
government. International commerce strengthens the U.S. economy and foreign 
relations. 
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56. 
The Executive Office of the President has a program through which they 
are currently spending $13 billion in grants and financing to foreign nations and 
developing countries that want to improve their bilateral relations with the U.S. and its 
companies.  
57. 
PayServices’ initiative to facilitate the entrance in the global economy of 
small to medium enterprises in the agriculture has been well received by all stakeholders 
because bigger financial institutions have disregarded this segment of the market to 
focus on more “lucrative” (in their view) lines of business in the financial marketplace. 
58. 
FRBSF alleges that PayServices presents an “undue risk” to its reputation. 
As of May 3, 2023, the Federal Reserve had roughly $8.5 trillion U.S. dollars of assets 
on its balance sheet. PayServices’ business plan projects to have about $1 billion dollars 
by the third year. To put things into perspective, based on today’s numbers 
(appropriately assuming that the Federal Reserve’s balance is most likely to keep 
growing) PayServices, after 3 years of operations, would represent 0.011% of the entire 
balance sheet of the Federal Reserve. The miniscule amount of transactions that 
PayServices will handle, compared to the Federal Reserve’s operations, refutes the claim 
of “undue risk” that FRBSF has put forward to justify denying PayServices a master 
account. 
59. 
PayServices does not engage in any speculative activity. PayServices 
focuses on the most secure transactions that involve a physical verification of 
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merchandises by government officials that are either United States personnel or 
personnel of ally and friendly countries of the United States. 
C. The Application Denial Is Inconsistent with State-Federal Partnership in 
Banking Regulation 
 
60. 
The FRBSF’s denial of PayServices’ application for a master account runs 
afoul of the system of dual chartering and state-level banking regulation and raises 
serious federalism concerns. 
61. 
The United States operates a dual banking system, under which banks may 
be chartered by a state or the federal government. The dual chartering system divides 
regulatory responsibility about state and federal authorities stands as an excellent 
example of federalism.  
62. 
Under the current dual chartering system, national banks are chartered 
and primarily regulated by the OCC, while banks with state charters are principally 
overseen by the state’s banking regulatory authority. State-chartered banks may choose 
to become members of the Federal Reserve System, but are not required to do. A state 
bank that joins the Federal Reserve System is known as a “state member bank.” Those 
that do not are known as “nonmember banks.” State-chartered nonmember banks are 
regulated by the state banking agency and may also be regulated by the Federal Deposit 
Insurance Corporation (“FDIC”). 
63. 
While most states require state-chartered banks to obtain FDIC insurance, 
several states do not require FDIC insurance in part because they recognize that various 
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types of banking business models do not warrant the issuance of deposit insurance, 
particularly where the business model does not involve loans, credit, or mortgages. 
Idaho is one of several states that allows but does not require a state-chartered bank to 
obtain FDIC insurance. See Idaho Code § 26-217. 
64. 
Nonetheless, PayServices has agreed to comply with all FDIC regulations 
applicable to its business model. IDF shall enforce and oversee compliance under its 
regulatory authority. IDF’s preliminary approval issued to PayServices Bank provides 
in relevant part that “PayServices must adhere to all federal regulations applicable to 
FDIC-insured financial institutions, unless the Director [of the Idaho Department of 
Finance] explicitly waives this requirement for specific regulations that are not 
consistent with PayServices’ business model.” 
D. Federal Law Requires the Issuance of Master Accounts to Eligible 
Depository Institutions 
 
65. 
In 1980, Congress passed the Depository Institutions Deregulation and 
Monetary Control Act (“MCA”), which mandates that nonmember depository 
institutions like PayServices Bank be allowed to access Federal Reserve System bank 
services, regardless of whether the institution chooses to become a member of the 
Federal Reserve and regardless of whether the institution is insured by the FDIC.  
66. 
The MCA was a watershed moment which provided that the Federal 
Reserve could not discriminate against state-chartered depository institutions in the 
provision of Federal Reserve bank services. See 12 U.S.C. § 248(c)(2). The MCA follows 
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the tradition of dual chartering and the state-federal partnership upon which the U.S. 
banking regulatory system is premised. 
67. 
The end of discrimination against state-chartered depository institutions 
is also consistent with opening up access to banking services for the broader public. 
PayServices’ model also permits unbanked populations in underserved areas of the 
country to establish a banking relationship.  
68. 
It is estimated by the Federal Reserve that 63 million people in the United 
States are either unbanked or underbanked2, meaning that they either have no bank 
account or very limited access to one. This is the result of “banking deserts” in parts of 
the country where no bank has a branch and of a practice known as “redlining.”3 
69. 
In furtherance of these principles, the MCA mandated that “[a]ll Federal 
Reserve bank services covered by the fee schedule shall be available to nonmember depository 
institutions . . . .” 12 U.S.C. § 248a(c)(2) (emphasis added). The services subject to the fee 
schedule include among others “check clearing and collection services,” “currency and 
coin services,” and “wire transfer services” – all of which require a master account.  
 
2 Fed. Res. Sys. Bd. of Governors, Report on the Economic Well-Being of U.S. Households in 2018 - May 2019 
(May 2019), https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-
2018-banking-and-credit.htm; Emily Guy Birken, The Costs of Being Unbanked or Underbanked, Forbes (updated 
Dec. 
2, 
2022, 
10:31 
am), 
https://www.forbes.com/advisor/banking/costs-of-being-unbanked-or-
underbanked/.  
3 
See, 
e.g., 
Candace 
Jackson, 
What 
Is 
Redlining?, 
N.Y. 
Times 
(Aug. 
17, 
2021), 
https://www.nytimes.com/2021/08/17/realestate/what-is-redlining.html (“The term [redlining] has come to 
mean racial discrimination of any kind in housing, but it comes from government maps that outlined areas 
where Black residents lived and were therefore deemed risky investments.”); see also Richard Rothstein, THE 
COLOR OF LAW: A FORGOTTEN HISTORY OF HOW OUR GOVERNMENT SEGREGATED AMERICA (2017) 
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70. 
Without a master account, PayServices, a nonmember depository 
institution, cannot access Federal Reserve services. Such deprivation prevents 
PayServices from operating as designed and is inconsistent with the exercise of 
regulatory authority by the Idaho Department of Finance.  
71. 
The power to deny a master account to a bank chartered by the State of 
Idaho would have the effect of rendering the state’s power to issue charters for the 
establishment of banks meaningless.  
72. 
There are currently about a dozen banks chartered under the Idaho Bank 
Act – the same act under which PayServices received its permit. All of them have a 
master account at the FRBSF. PayServices Bank should be treated no differently. 
COUNT I 
Violation of APA, 5 U.S.C. § 706(2) 
Claim for Unlawful Denial of Master Account Application Against FRBSF 
 
73. 
Plaintiff repeats and realleges the allegations set forth in paragraphs 1 
through 72 as if fully set forth herein. 
74. 
The federal Administrative Procedures Act (“APA”) provides in relevant 
part that “[t]o the extent necessary to decision and when presented, the reviewing court 
shall decide all relevant questions of law, interpret constitutional and statutory 
provisions, and determine the meaning or applicability of the terms of an agency action. 
The reviewing court shall . . . hold unlawful and set aside agency action, findings, and 
conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise 
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not in accordance with law” or “in excess of statutory jurisdiction, authority, or 
limitations, or short of statutory right[.]” 5 U.S.C. § 706(2)(A) & (C). 
75. 
The APA defines an agency, with certain exceptions not applicable here, 
as “each authority of the Government of the United States, whether or not it is within 
or subject to review by another agency.” 5 U.S.C. § 551(1); 5 U.S.C. § 701(b)(1). 
76. 
The affairs of the FRBSF are conducted under the close supervision and 
ultimate control of the Federal Reserve System Board of Governors, an independent 
federal regulatory agency. 
77. 
The Board is authorized “[t]o examine at its discretion the accounts, 
books, and affairs of each Federal reserve bank . . . and to require such statements and 
reports as it may deem necessary,” 12 U.S.C. § 248(a), “[t]o suspend or remove any 
officer or director of any Federal reserve bank,” id. § 248(f), “[t]o suspend, for the 
violation of any of the provisions of [the Act], the operations of any Federal reserve 
bank, to take possession thereof, administer the same during the period of suspension, 
and, when deemed advisable, to liquidate or reorganize such bank,” id. § 248(h), and 
“[t]o exercise general supervision over [the] Federal reserve banks,” id. § 248(j). 
78. 
Indeed, in August 2022, the Board issued “Guidelines Covering Access to 
Accounts and Services at Federal Reserve Banks (Account Access Guidelines)” – the 
very Guidelines upon which FRBSF based its denial of PayServices’ master account 
application - citing its general supervisory authority under Section 248(j). Fed. Res. Sys. 
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Bd. of Governors, Guidelines for Evaluating Account and Services Requests, 87 Fed. Reg. 
51099, 51106 (Aug. 19, 2022). 
79. 
The Board’s Rules of Procedure, 12 C.F.R. § 262 (1981), indicate that 
many applications for the approval of action by the Board are to be filed with and acted 
upon pursuant to delegated authority by a Federal Reserve Bank.  
80. 
The Board has delegated substantial decision-making authority to the 
Federal Reserve Banks. Thus, FRBSF possesses substantial independent authority in 
the exercise of specific functions and has authority in law to make decisions. As such, 
FRBSF may be considered an “agency” within the meaning of the APA. 
81. 
As an agency, the FRBSF has a non-discretionary duty to make available 
Federal Reserve bank services through master accounts to nonmember depository 
institutions under the MCA. 12 U.S.C. § 248a(c)(2). 
82. 
It is undisputed that PayServices Bank is eligible to maintain a master 
account in the form of a state-chartered depository institution.  
83. 
FRBSF never presented any specific barriers to approval prior to the 
issuance of a denial and recognized that the application was properly filed. 
84. 
In light of the facts alleged herein, FRBSF’s “agency action” in denying 
PayServices’ master account application is “arbitrary, capricious, an abuse of discretion, 
or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). 
85. 
In the denial of PayServices’ request for a master account approval, 
FRBSF relied upon the guidelines that it adopted from the Federal Reserve Board.  
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21 
86. 
Those guidelines have not been approved by Congress. 
87. 
The guidelines adopted by the FRBSF are identical to discriminatory 
redlining maps that categorize areas based on color. Instead of colors, the FRBSF makes 
use of “tiers”. Where redlining maps have 3 colors: blue, yellow and red; the FRBSF 
has 3 tiers: Tier 1, Tier 2, and Tier 3. 
Unlawful Redlining maps 
Guidelines Congress did not approve 
Best 
Tier 1 
Tolerable 
Tier 2 
Not desirable 
Tier 3 
 
88. 
FRBSF, by qualifying PayServices has a Tier 3 financial institution, has 
discriminated against PayServices by putting it in the basket of those that are not 
desirable because PayServices do not conform to the criteria of preference of the 
FRBSF; but the law is clear: there is no room for emotions or preferences. The law 
must be equal to all and applied equally to all. Congress created one law – the Federal 
Reserve Act – and that is the only law of the land that regulates the FRBSF. 
89. 
Furthermore, FRBSF’s “agency action” lacks statutory authority under 5 
U.S.C. § 706(2)(C) to the extent Section 248a(c)(2) requires that “all Federal Reserve 
bank services . . . shall be available to nonmember depository institutions” (emphasis 
added) and the use of those services requires a master account. 
WHEREFORE, Plaintiff respectfully requests that the Court: 
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a. Order a speedy hearing on this action, thereby advancing this action on the 
Court’s calendar; 
b. Grant declaratory relief, declaring that PayServices has a right, as an eligible 
depository institution, to have a master account and to use that master 
account to access Federal Reserve bank services in a non-discriminatory 
manner; 
c. Grant Plaintiff all monetary damages permissible under law;  
d. Grant Plaintiff costs, fees, and other expenses under the Equal Access to 
Justice Act, 28 U.S.C. § 2412; and 
e. Grant any other and further relief that the Court deems just and proper. 
COUNT II 
Relief Under the Mandamus Act, 28 U.S.C. § 1361 
Claim for Mandamus Against FRBSF 
 
90. 
Plaintiff repeats and realleges the allegations set forth in paragraphs 1 
through 72 as if fully set forth herein. 
91. 
Under 28 U.S.C. § 1361, “[t]he district courts shall have original 
jurisdiction of any action in the nature of mandamus to compel an officer or employee 
of the United States or any agency thereof to perform a duty owed to the plaintiff.” 
92. 
In this action, PayServices is seeking a writ of mandamus to the FRBSF 
directing that it promptly rescind the denial of PayServices’ master account application 
and instead grant the application so that PayServices can access Federal Reserve bank 
services. 
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23 
93. 
This Court has jurisdiction over PayServices’ action under the Mandamus 
Act. 
94. 
The FRBSF’s President is an “officer[] . . . of the United States” and is 
subject to the Court’s mandamus power. 
95. 
Mandamus is appropriate here because PayServices has a clear and certain 
claim to have its master account application granted. Under the MCA, Federal Reserve 
banking services “shall be available” on a non-discriminatory basis to eligible depository 
institutions. 12 U.S.C. § 248a(c)(2) (emphasis added).  
96. 
Despite PayServices’ valid Idaho bank charter approval and its conceded 
eligibility, FRBSF still denied PayServices’ master account application.  
97. 
Mandamus is necessary in this case because FRBSF has left PayServices 
with no other adequate remedies. It denied PayServices’ master account application on 
May 31, 2023, and PayServices has no other method by which it can access Federal 
Reserve services. 
98. 
Without a master account, PayServices will incur unnecessary costs, 
encounter otherwise avoidable risks (such as risks involving the settlement of 
transactions by relying on an intermediary bank), and will lose ground to competitors 
that already have a master account. Ultimately, PayServices cannot complete its banking 
operations or operate as designed without a master account. 
WHEREFORE, Plaintiff respectfully requests that the Court: 
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24 
a. Order a speedy hearing on this action, thereby advancing this action on the 
Court’s calendar; 
b. Enter an order compelling the FRBSF to rescind the denial of PayServices’ 
master account application and instead grant the application; 
c. Grant Plaintiff all monetary damages permissible under law;  
d. Grant Plaintiff costs, fees, and other expenses under the Equal Access to 
Justice Act, 28 U.S.C. § 2412; and 
e. Grant any other and further relief that the Court deems just and proper. 
COUNT III 
Violation of Due Process Clause of the Fifth Amendment 
Claim for Relief Against FRBSF 
 
99. 
Plaintiff repeats and realleges the allegations set forth in paragraphs 1 
through 72 as if fully set forth herein. 
100. FRBSF has violated PayServices’ right to procedural and substantive due 
process under the Fifth Amendment to the U.S. Constitution 
101. FRBSF has deprived PayServices of a protectible property interest – 
namely, access to a Federal Reserve master account. 
102. PayServices has a legitimate claim of entitlement to the benefit, not an 
abstract need or a unilateral expectation. 
103. As noted above, Section 248a requires the issuance of master accounts to 
eligible depository institutions. Consequently, PayServices has a legitimate property 
interest in a master account. 
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WHEREFORE, Plaintiff respectfully requests that this Court: 
a. Order a speedy hearing on this action, thereby advancing this action on the 
Court’s calendar; 
b. Declare that PayServices has a right, as an eligible depository institution, to 
have a master account and to use that master account to access Federal 
Reserve bank services in a non-discriminatory manner; 
c. Enter an order compelling the FRBSF to rescind the denial of PayServices’ 
master account application and instead grant the application. 
d. Grant Plaintiff all monetary damages permissible under law;  
e. Grant Plaintiff costs, fees, and other expenses under the Equal Access to 
Justice Act, 28 U.S.C. § 2412; and 
f. Grant any other and further relief that the Court deems just and proper. 
JURY DEMAND 
Plaintiff demands a jury on all issues so triable. 
 
Dated: June 23, 2023 
 
Respectfully submitted, 
 
/s/ Asa D. Brown, Esq. 
Asa D. Brown Esq. 
Managing Attorney 
The Law Offices of Asa D. Brown, PLLC 
315 N. Monroe St. 
Moscow, Idaho 83843 
asa@asabrownlaw.com 
(904) 477-7900 (cell) 
ID Bar # 11990 
 
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