[Federal Register Volume 73, Number 6 (Wednesday, January 9, 2008)]
[Proposed Rules]
[Pages 1560-1565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-22]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 210
RIN 1510-AB00
Federal Government Participation in the Automated Clearing House
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Notice of proposed rulemaking with request for comment.
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SUMMARY: We are proposing to amend our regulation which governs the use
of the Automated Clearing House (ACH) system by Federal agencies. That
regulation adopts, with some exceptions, the ACH Rules developed by
NACHA--The Electronic Payments Association (NACHA) as the rules
governing the use of the ACH Network by Federal agencies. We are
issuing this proposed rule to address changes that NACHA has made to
the ACH Rules since the publication of NACHA's 2005 ACH Rules book. We
are proposing to adopt, with one exception, all of the changes that
NACHA has approved since the issuance of the 2005 ACH Rules book, as
reflected in the 2007 ACH Rules book.
In addition, the proposed rule would provide two exceptions to the
deposit account requirement in the regulation. The regulation requires
that an ACH credit entry representing a Federal payment other than a
vendor payment be deposited into a deposit account at a financial
institution in the name of the recipient. On April 21, 2005, Treasury
waived this requirement in order to allow some or all of the amount to
be reimbursed to a Federal employee for official travel credit card
charges to be disbursed directly to the credit card issuing bank. The
proposed rule would codify this waiver. The proposed rule would also
provide an exception from the requirements in cases where a Federal
payment is to be disbursed through a debit card, stored value card,
prepaid card or similar payment card program established by the
Financial Management Service (Service).
DATES: Comments on the proposed rule must be received by March 10,
2008.
ADDRESSES: You can download this proposed rule at the following Web
site: http://www.fms.treas.gov/ach. You may also inspect and copy this
proposed rule at: Treasury Department Library, Freedom of Information
Act (FOIA) Collection, Room 1428, Main Treasury Building, 1500
Pennsylvania Avenue, NW., Washington, DC 20220. Before visiting, you
must call (202) 622-0990 for an appointment.
In accordance with the U.S. government's eRulemaking Initiative,
the Service publishes rulemaking information on www.regulations.gov.
Regulations.gov offers the public the ability to comment on, search,
and view publicly available rulemaking materials, including comments
received on rules.
Comments on this rule, identified by docket FISCAL-FMS-2007-2008,
should only be submitted using the following methods:
Federal eRulemaking Portal: www.regulations.gov. Follow
the instructions on the Web site for submitting comments.
Mail: Bill Brushwood, Financial Management Service, 401
14th Street, SW., Room 400A, Washington, DC 20227.
The fax and e-mail methods of submitting comments on rules
to the Service have been retired.
Instructions: All submissions received must include the agency name
(``Financial Management Service'') and docket number FISCAL-FMS-2007-
0008 for this rulemaking. In general, comments will be published on
Regulations.gov without change, including any business or personal
information provided. Comments received, including attachments and
other supporting materials, are part of the public record and subject
to public disclosure. Do not enclose any information in your comment or
supporting materials that you consider confidential or inappropriate
for public disclosure.
FOR FURTHER INFORMATION CONTACT: Bill Brushwood, Financial Program
Specialist, at (202) 874-1251 or [email protected]; or
Natalie H. Diana, Senior Counsel, at (202) 874-6680 or
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
Title 31 CFR part 210 (Part 210) governs the use of the ACH Network
by Federal agencies. The ACH Network is a nationwide electronic fund
transfer (EFT) system that provides for the inter-bank clearing of
electronic credit and debit transactions and for the exchange of
payment related information among participating financial institutions.
Part 210 incorporates the ACH Rules adopted by NACHA, with certain
exceptions. From time to time we amend part 210 in order to address
changes that NACHA periodically makes to the ACH Rules or to revise the
regulation as otherwise appropriate.
We are proposing to amend part 210 to address changes that NACHA
has made to the ACH Rules since the publication of the 2005 ACH Rules.
We are publishing this proposed rule in order to indicate which
amendments to the ACH Rules we are planning to accept and which
amendments we are planning to reject. We are requesting comment on the
proposed amendments.
We are also proposing to amend part 210 to codify a waiver allowing
for split disbursements of Federal employee travel payments. Currently,
section 210.5 requires that an ACH credit entry representing a Federal
payment to a payee (other than a vendor payment) be deposited into a
deposit account at a financial institution in the name of the
recipient. On August 5, 2005, the Office of Management and Budget (OMB)
revised Circular No. A-123 (Management's Responsibility for Internal
Control). This revision became effective in fiscal year 2006 (October
1, 2005). OMB Circular No. A-123, Appendix B (Improving the Management
of Government Charge Card Programs), sec. 4.4 requires, as a general
matter, that Federal executive branch agencies implement split
disbursement when reimbursing employees for official travel charges.
This requirement applies when the individual cardholder is responsible
for making payment to the charge card vendor, i.e., the travel card
issuing bank. Split disbursement ``is the process of dividing a travel
voucher reimbursement between the charge card vendor and traveler.''
OMB Circular No. A-123, Appendix B, sec. 4.4.1. Under split
disbursement, the ``balance owed to each is sent directly to the
appropriate party.'' Id.
In April 2005, the Department of the Treasury, under the authority
of 31 CFR 210.5(b)(3), waived the section 210.5 requirement that an ACH
entry be deposited into a deposit account at a financial institution in
the name of the recipient for purposes of permitting split
disbursement. This was necessary in order to implement OMB's split
disbursement policy since an account
[[Page 1561]]
maintained by the travel card issuing bank in the name of an employee
is not a deposit account at a financial institution within the meaning
of section 210.5. We are proposing to amend section 210.5 to codify the
terms of the split disbursement waiver into the rule.
The waiver issued by the Department of the Treasury in april 2005
also waived the sister deposit account regulation codified at 31 CFR
part 208 (Management of Federal Agency Disbursements). We will issue a
separate Notice of Proposed Rulemaking in the Federal Register for the
purpose of amending Part 208 to codify the terms of the split
disbursement waiver into that rule as well.
The government's disbursing officials disburse travel reimbursement
payments, including split disbursements, in accordance with the terms
of payment certification vouchers submitted by executive branch Federal
agencies. See 31 U.S.C. 3325 (providing that disbursing officials shall
``disburse money only as provided by a voucher certified'' by a Federal
executive agency) and 31 U.S.C. 3528 (setting forth certification
voucher requirements). The proposed rule will permit disbursing
officials to use the ACH system to disburse split disbursement payments
to the travel card issuing bank's account for credit to the employee,
as directed by Federal certifying agencies. As such, the primary
purpose of the proposed rule is to facilitate the continued
implementation of the OMB guidance mandating split disbursement.
From a general cash management perspective, the Service supports
split disbursement because it may benefit Federal agencies by reducing
the number of travel card delinquencies. Split disbursement may also
benefit Federal employee travelers by facilitating payment of their
travel card liabilities (although employees remain responsible for
having their accounts current).
The proposed rule is not intended to, and would not, establish or
amend substantive Federal regulations or policies pertaining to Federal
employee travel or reimbursement for official travel expenses. Such
regulations and policies are established by, among other authorities,
the Federal Travel Regulation (FTR), 41 CFR parts 300-304. The FTR is
within the purview of the General Services Administration (GSA). GSA
issued GSA Bulletin FTR 05-08 on December 2, 2005, which advised
Federal agencies of OMB Circular No. A-123 requirements, including the
requirement for split disbursement.
In addition to amending section 210.5 to allow for split
disbursement, we are proposing to amend section 210.5 to provide that
where a Federal payment is to be disbursed through a debit card, stored
value card, prepaid card or similar payment card program established by
the Service, the Federal payment may be deposited to an account at a
financial institution designated a financial or fiscal agent, and the
Service may specify the title, access terms and other provisions
governing the account. The requirement that an account to which Federal
payments are delivered be a deposit account in the name of the
recipient is designed to ensure that a payment reaches the intended
recipient. In some cases in which the Service directs its financial or
fiscal agent banks to set up a card program to facilitate the delivery
of Federal payments, the most effective approach may be to utilize an
account in which each card holder's interest is recorded, but each
individual's name is not included in the account title. In these
programs, the Service can ensure that the beneficial interests of
Federal payment recipients are protected because the Service controls
the terms and conditions of the programs. The section 210.5
requirements serve little purpose in this context, and add to the
complexity of operating these programs. We are therefore proposing to
adopt an exception to section 210.5 which would provide the Service
with greater flexibility in setting up payment card programs.
II. Summary of Rule Changes
Since we last addressed changes to the ACH Rules in 2005, NACHA has
published two sets of changes to the ACH Rules. The first set of
changes was published in NACHA's 2006 ACH Rules book and a subsequent
set of changes was published in NACHA's 2007 ACH Rules book. We are
proposing to adopt all of the changes set forth in the 2006 and 2007
ACH Rules books except those relating to the self-audit provisions of
the ACH Rules, which we have previously determined not to incorporate
in part 210. The rule changes that we are proposing to adopt consist
primarily of modifications to the ACH Rules that have a minimal impact
on participants in the ACH Network and that we believe will not
significantly affect Federal agencies' use of the ACH Network. However,
there are a few rule changes that could have a significant impact on
the Federal government's use of the ACH Network.
A. Changes to ACH Rules Published in 2006 ACH Rules Book
The changes published in the 2006 ACH Rules book include a number
of minor operational efficiency and return issues changes, and a more
significant rules change related to the identification of business
checks ineligible for conversion to ACH entries for Accounts Receivable
(ARC) entries and Point-of-Purchase (POP) entries. The more significant
rule change amended the ACH Rules to enable Receivers \1\ to identify
business checks that are not to be converted to ARC or POP entries. For
ARC entries, the rule change allows a Receiver to notify the Originator
\2\ directly that the Receiver's checks are not to be converted, or to
utilize checks that include an identifier within the Auxiliary On-Us
Field within the MICR line. For POP entries, Receivers may opt out
either by utilizing checks that include an identifier within the
Auxiliary On-Us Field within the MICR line, or by refusing to sign the
required written authorization.
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\1\ In an ARC or POP transaction, the Receiver is the person or
entity making the payment (i.e., the remitter or payor) by
presenting the check that is converted to an ACH debit.
\2\ In an ARC or POP transaction, the Originator is the person
or entity originating the debit entry to the account of the payor by
accepting the payor's check and converting it to an ACH debit.
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Part 210 allows agencies to convert business checks at points-of-
purchase and lockboxes by using the Corporate Credit or Debit (CCD)
entry format. However, the great majority of checks converted by
agencies are consumer checks, and in 2004 we indicated that as we
continued to implement check conversion we would not convert business
checks at new over-the-counter or lockbox locations. NACHA's rule
change provides a way for agencies to clearly identify, in an automated
fashion, whether a business check is ineligible for conversion to an
ARC or POP entry.\3\ We believe the rule change solves a problem that
the ACH rules previously presented for agencies: how to identify
business checks that are ineligible for conversion that are received in
collection streams. Because NACHA's rule change eliminates the need to
address the conversion of business checks in part 210, we are proposing
to delete those provisions from the regulation. The proposed rule
[[Page 1562]]
change does not mean that we intend to begin converting all eligible
business checks to ACH entries. Rather, the proposed rule change allows
for greater flexibility in determining the most advantageous way for
the government to handle business checks. Thus, we may continue to
process business checks by using image presentment or presenting the
original items, as appropriate, but we will also have the option of
converting eligible business checks in situations where it is more
efficient and cost-effective to do so.
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\3\ In 2007, NACHA adopted a rule change to implement a new
application for converting checks received at points-of-purchase and
manned bill payment locations to ACH debit entries in a back-office
environment (see discussion below). As with POP and ARC, Receivers
may opt out of back-office conversion by utilizing checks that
include an identifier within the Auxiliary On-Us Field within the
MICR line.
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The minor rule changes published in the 2006 Rules book include:
Changes related to the Company Name Field definition for
ARC entries;
A requirement for the Originating Depository Financial
Institution (ODFI) to enter into a contractual relationship with Third-
Party Senders;
Removal of redundant language regarding use of encryption
technology for Internet-initiated (WEB) entries;
Inclusion of language with respect to an ODFI's liability
for breach of specific Telephone-initiated (TEL) warranties;
Addition of definitions for Automated Accounting Advice
(ADV) and Notification or Change (COR) entries;
Minor modifications of definitions associated with various
Return Reason codes; and
Consolidation of Dishonored Return Reason codes.
We are proposing to adopt all the foregoing rule changes, which we
believe improve the operation of the ACH Network and the clarity of the
ACH Rules.
B. Changes to ACH Rules Published in 2007 ACH Rules Book
The rule changes published in NACHA's 2007 Rules book involve a
number of changes that have a minimal impact on ACH Network
participants, as well as three rule amendments with a significant
impact either on the private sector or on Federal agencies. Those three
amendments are: Changes to NACHA's voting and funding requirements;
changes to the requirements for ARC entries and POP entries; and
changes to implement a new application for converting checks received
at points-of-purchase and manned bill payment locations to ACH debit
entries in a back-office environment.
Voting and Funding Requirements
Effective January 1, 2007, NACHA amended the ACH Rules to provide
for the assessment of new Network administration fees to cover the
costs related to management of the ACH Network. These fees include a
per-entry fee for each commercial, inter-bank or Federal Government
entry transmitted or received by the participating Depository Financial
Institution (DFI). The amount of the transaction fee will be
established from time to time by the NACHA Board of Directors based on
projected costs and volumes. For calendar year 2007, the per-entry fee
is $.0001. In addition to providing for fees, NACHA also modified the
procedures for the amendment of the ACH Rules to clarify the specific
allocation of votes required for approval of an amendment by the voting
membership.
We support this rule change because of its importance in providing
for the long term funding of NACHA's Network management activities,
including risk management and the advancement of rules supporting the
ability of entities to convert check payments received into ACH
entries. The Service will pay these fees on behalf of agencies for
which we disburse and collect payments.
ARC and POP Entries
NACHA has amended its check conversion rules to keep the rules in
sync with Regulation E (12 CFR part 205) and its associated commentary,
which the Federal Reserve revised by amendments effective January 1,
2007. NACHA's rule changes ensure that the ACH Rules are consistent
with the mandatory changes required by Regulation E by making
corresponding changes to the electronic check applications supported by
the ACH Rules. Specifically, NACHA's amendment (1) modifies the ACH
Rules with respect to the notice requirement for ARC entries, and (2)
incorporates a notice obligation into the authorization requirements
for POP Entries. This amendment also includes other minor revisions to
the ACH Rules to clarify that (1) an ARC source document may not be
presented for payment unless the ARC entry is returned by the Receiving
Depository Financial Institution (RDFI); (2) ARC entries for which the
Receiver opted out of check conversion constitute a valid reason for
recredit to the Receiver and return by the RDFI; and (3) a POP entry is
considered to be unauthorized if the requirements for both written
authorization and notice were not met. In addition, effective March 16,
2007, the requirement that ARC source documents be destroyed within 14
days of the settlement of the entry has been deleted. A new rule has
been added to provide that Originators must use commercially reasonable
methods to securely store all source documents until destruction, as
well as all banking information relating to ARC entries. Finally, NACHA
(1) modified the ARC and POP rules governing requirements for MICR
capture of source document information, and (2) made corresponding
modifications/additions to the audit requirements regarding MICR
capture obligations for ARC and POP entries to ensure consistency of
wording among various electronic check applications.
The ACH rule changes incorporate Regulation E safe harbor language
for the notice required to be provided to Receivers whose checks are
converted using ARC entries. Under the newly revised ACH Rules,
agencies would be required to use the following language, or language
that is substantially similar, for their notices.
``When you provide a check as payment, you authorize us either
to use information from your check to make a one-time electronic
fund transfer from your account or to process the payment as a check
transaction.''
Until January 1, 2010, the following, or substantially similar,
additional language must also be included: ``When we use information
from your check to make an electronic fund transfer, funds may be
withdrawn from your account as soon as the same day we receive your
payment, and you will not receive your check back from your financial
institution.''
The new ACH Rule changes provide that an Originator may convert a
check presented at a point-of-purchase, provided that a required notice
is posted in a prominent and conspicuous location, and that a copy of
the notice is provided to the Receiver at the time of the transaction.
The notice and copy of the notice must include the following or
substantially similar language:
``When you provide a check as payment, your authorized us either
to use the information from your check to make a one-time electronic
fund transfer from your account or to process the payment as a check
transaction.''
Until January 1, 2010, the following or substantially similar
additional language must be included in the notice: ``When we use
information from your check to make an electronic fund transfer, funds
may be withdrawn from your account as soon as the same day you make
your payment.''
Agencies are currently required by part 210 to use specifically
worded disclosures for POP and ARC check conversion. Those disclosures,
which are set out in Appendices A, B, and C to part 210, are
substantially similar to (but much longer than) the foregoing POP and
ARC required notices. We are
[[Page 1563]]
proposing to delete Appendices A, B, and C from part 210, which would
mean that agencies could either continue to use the same disclosures
they are currently using or, alternatively, begin using the shorter
disclosures now required under the ACH Rules.
Back Office Conversion Entries
Effective March 16, 2007, NACHA established a new electronic check
conversion application, Back Office Conversion (BOC) entries, that will
allow retailers and billers to accept checks at the point-of-purchase
or at manned bill payment locations and convert the checks to ACH
debits during back office processing. In order to use a check to
originate a BOC entry, the Originator must post a notice in a prominent
and conspicuous location that states: ``When you provide a check as
payment, you authorize us either to use the information from your check
to make a one-time electronic fund transfer from your account or to
process the payment as a check transaction. For inquiries, please call
[retailer phone number].'' Until January 1, 2010, the posted notice
must also state: ``When we use information from your check to make an
electronic fund transfer, funds may be withdrawn from your account as
soon as the same day you make your payment, and you will not receive
your check back from your financial institution.'' A copy of the
notice, or language that is substantially similar, must be provided to
the Receiver at the time of the transaction. In addition, the
Originator must provide the Receiver the ability to opt out of the
conversion of his check to an ACH debit entry. To opt out, the Receiver
must notify the Originator at the time of purchase that a particular
check does not authorize an ACH debit entry.
We are proposing to adopt most of the ACH rule changes implementing
the BOC application. In 2003, we amended part 210 to allow agencies to
convert checks to ARC entries in certain circumstances that fall
outside typical accounts receivable and point-of-purchase settings. Our
rule enabled Federal agencies to convert checks in circumstances in
which check conversion would not have been possible under NACHA's then-
existing ARC and POP rules. For example, when Army pay officers travel
to remote, off-base locations in order to cash checks for soldiers, pay
officers cannot bring along the necessary equipment to scan and return
voided checks, as is required by the ACH rules governing POP entries.
Nor could these checks be converted to ARC entries under ACH rules,
because a pay officer's acceptance of checks in these circumstances
does not constitute an accounts receivable (lockbox) setting. To
provide for the conversion of checks in a variety of circumstances
falling outside typical accounts receivable and point-of-purchase
settings, we adopted in part 210 a provision to allow agencies to
convert checks delivered in person in circumstances in which an agency
cannot contemporaneously image and return the check.
Because the BOC application addresses the Government's need for
flexibility in these situations, there is no longer a need to retain
this provision in Part 210. Instead, agencies can now convert these
checks using the BOC application. We therefore propose to adopt the
rule changes implementing the BOC application, with the exception of
the audit requirements associated with the BOC entry type as reflected
within Appendix Eight (Rule Compliance Audit Requirements), Sections
8.2 and 8.3 of the ACH Rules. We are proposing not to adopt the audit
requirements, consistent with our previous position exempting Federal
agencies from the requirements of ACH Rules associated with enforcement
of the ACH Rules (Appendix Eight and Appendix Eleven).
Treasury needs to make the programming and operational changes
necessary to implement the BOC application. Accordingly, we expect that
for some period of time after the adoption of a final rule, it will be
necessary to continue our existing process of converting items to ARC
entries in circumstances other than typical lockbox and point-of-
purchase settings.
Rules With a Minor Impact on the ACH Network
NACHA published in the 2007 Rules book the following amendments
that have a minor impact on the ACH Network:
Description of Corrected Data Within Contested Dishonored
Return Reason Code R74--Previously, the description of Return Reason
Code R74 (Corrected Return), related to the correction of the
Individual Identification Number/Identification Number Field within the
Entry Detail Record, did not reflect all applicable SEC Codes that
contain these fields. This amendment modified the description of Return
Reason Code R74 within Appendix Five, Section 5.4 (Table of Return
Reason Codes), as it relates to the Individual Identification Number/
Identification Number, to add the following additional SEC Codes to be
consistent with current industry practice; CBR, CTX, DNE, ENR, PBR,
TEL, TRX, and WEB.
Direct Financial Institution and Payment Association
Definitions--The Terms ``Direct Financial Institution'' and ``Payment
Association'' were referenced within the procedures for amendment of
the ACH Rules in Article Thirteen but not defined within the ACH Rules.
This amendment added definitions for these terms to Article Fourteen
(Definition of Terms) of the ACH Rules.
Time Frame to Re-initiate Entries--Previously, the ACH
Rules defined under what conditions an ACH entry that is returned may
be re-initiated, but did not prescribe any limitations on the time
period within which such re-initation must occur. To preclude attempts
to re-initiate extremely stale entries, NACHA amended the rules to
establish the period of time after which returned entries cannot be re-
initiated. Specifically, an entry may not be re-initiated more than 180
days after the settlement date of the original transaction.
Available ACH Characters--This amendment modified the
definition of ``alphameric'' within Article Fourteen and the data
specification requirements within Appendix One to clarify that
lowercase alpha characters are permitted within ACH entries, except
where explicitly noted otherwise.
Name and Definition of Cash Concentration or Disbursement
(CCD) Standard Entry Class Code--This amendment modified the name and
description of the CCD format to clarify that CCD entries can be used
more broadly than just for intra-corporate payments. The name of the
CCD format was changed from ``Cash Concentration or Disbursement'' to
``Corporate Credit or Debit'' and the description was revised to
indicate that this code may also be used for a transfer of funds from
the account of one organization to the account of another organization.
Formatting Requirements for TEL (Telephone-Initiated) and
WEB (Internet-Initiated) Entries--This amendment redefined the
Individual Name Field within the Entry Detail Record of both TEL and
WEB entries (and related returns) from Required to Mandatory to
facilitate ACH Operators' use of various risk filters to monitor the
field for possible fraudulent content. Operator edits within Appendix
Three, as they relate to Return Reason Code R26 (Mandatory Field
Error), were also modified to permit the return of any TEL or WEB entry
within which this field contains all spaces or all zeros.
Additional Addenda Code for Dishonored Return Reason Code
R69--
[[Page 1564]]
This amendment added, under the description of Return Reason Code R69
(Field Errors), an additional criterion under which an entry containing
incorrect information may be dishonored. This change enables an ODFI to
dishonor a return if the original Effective Entry Date was incorrectly
copied from the forward entry.
We support the foregoing ACH Rules changes. The changes clarify
certain ACH Rules that were previously unclear or ambiguous, and
provide greater flexibility and operational efficiency for users of the
ACH Network. We believe these changes are beneficial and propose to
incorporate them into part 210.
III. Section-by-Section Analysis
In order to incorporate in part 210 the ACH rule changes that we
are accepting, the only change necessary to the current regulation is
to replace references to the 2005 Rules book with references to the
2007 ACH Rules book. No change to part 210 is necessary in order to
exclude the amendments to the audit provisions, since part 210 already
provides that the ACH audit requirements do not apply to Federal agency
ACH transactions.
Section 210.2(d)
We are proposing to amend the definition of applicable ACH Rules at
Sec. 210.2(d) to reference the rules published in NACHA's 2007 Rules
book rather than the rules published in NACHA's 2005 Rules book.
Section 210.3(b)
We are proposing to amend Sec. 210.3(b) by replacing the
references to the ACH Rules as published in the 2005 Rules book with
references to the ACH Rules as published in the 2007 Rules book.
Section 210.5
We are proposing to amend Sec. 210.5(b) by adding a new paragraph
(b)(3) to allow for the issuance of part or all of a Federal employee's
travel reimbursement to the employee's travel card account at the card
issuing bank. We are also proposing to add a new paragraph (b)(4),
which would provide that where a Federal payment is to be disbursed
through a debit card, stored value card, prepaid card or similar
payment card program established by the Service, the Federal payment
may be deposited to an account at a financial institution designated as
a financial or fiscal agent. The Service may specify the account title,
access terms, and other account provisions, and thereby protect the
interest of payment recipients. This paragraph would apply in those
cases when the Service directs its financial or fiscal agent bank to
set up a card program.
Section 210.6(g)
We are proposing to revise current Sec. 210.6(g) to reflect the
revision of the ACH Rules governing POP entries. We believe that, as
revised, the ACH Rules governing POP entries are appropriate in most
respects for agencies. Unlike the ACH Rules, however, part 210 will
continue to allow agencies to originate POP entries without a written
authorization, as long as the notice required by the ACH Rules is
posted and the Receiver is provided with a copy of the notice. This
approach is consistent with the authorization requirements of
Regulation E.
Section 210.6(h)
We are proposing to delete the text of current Sec. 210.6(h). We
believe that, as revised, the ACH Rules governing accounts receivable
check conversion are appropriate for agencies, and therefore, a
separate rule within part 210 is no longer necessary. We are proposing
to revise the text of current Sec. 210.6(i) and renumber it as Sec.
210.6(h). The revision would clarify that in order to debit a
Receiver's account for an insufficient funds service fee, the agency
must have independent authority to collect fees for items returned due
to insufficient funds. An agency that has such authority may originate
an ACH debit entry to collect a one-time service fee in connection with
an ARC, POP or BOC entry that is returned due to insufficient funds,
provided that the agency discloses the service fee in the notices
required for the ARC, POP or BOC entry. The required disclosure is
unchanged, but has been relocated from Appendices A, B, and C, which we
are proposing to remove from the regulation.
IV. Procedural Requirements
Request for Comment on Plain Language
Executive Order 12866 requires each agency in the Executive branch
to write regulations that are simple and easy to understand. We invite
comment on how to make the proposed rule clearer. For example, you may
wish to discuss: (1) Whether we have organized the material to suit
your needs; (2) whether the requirements of the rules are clear; or (3)
whether there is something else we could do to make these rules easier
to understand.
Regulatory Planning and Review
The proposed rule does not meet the criteria for a ``significant
regulatory action'' as defined in Executive Order 12866. Therefore, the
regulatory review procedures contained therein do not apply.
Regulatory Flexibility Act Analysis
It is hereby certified that the proposed rule will not have a
significant economic impact on a substantial number of small entities.
The proposed changes to the regulation related to ARC, POP, and BOC
check conversion will not result in significant costs for individuals
or financial institutions affected by the changes, including financial
institutions that are small entities. New ACH fees will be borne by the
government, and will not affect other parties sending or receiving
Federal ACH transactions, including small entities. Accordingly, a
regulatory flexibility analysis under the Regulatory Flexibility Act (5
U.S.C. 601 et seq.) is not required.
Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.
1532 (Unfunded Mandates Act), requires that the agency prepare a
budgetary impact statement before promulgating any rule likely to
result in a Federal mandate that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. If a budgetary
impact statement is required, section 205 of the Unfunded Mandates Act
also requires the agency to identify and consider a reasonable number
of regulatory alternatives before promulgating the rule. We have
determined that the proposed rule will not result in expenditures by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. Accordingly,
we have not prepared a budgetary impact statement or specifically
addressed any regulatory alternatives.
List of Subjects in 31 CFR Part 210
Automated Clearing House, Electronic funds transfer, Financial
institutions, Fraud, and Incorporation by reference.
Words of Issuance
For the reasons set out in the preamble, we propose to amend 31 CFR
part 210 as follows:
PART 210--FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED
CLEARING HOUSE
1. The authority citation for part 210 continues to read as
follows:
Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 U.S.C. 321, 3301,
3302, 3321, 3332, 3335, and 3720.
[[Page 1565]]
2. Revise Sec. 210.2(d) to read as follows:
Sec. 210.2 Definitions.
* * * * *
(d) Applicable ACH Rules means the ACH Rules with an effective date
on or before September 21, 2007, as published in Parts II, III and VI
of the ``2007 ACH Rules: A Complete Guide to Rules & Regulations
Governing the ACH Network'' except:
(1) ACH Rule 1.1 (limiting the applicability of the ACH Rules to
members of an ACH association);
(2) ACH Rule 1.2.2 (governing claims for compensation);
(3) ACH Rules 1.2.4 and 2.2.1.12; Appendix Eight; and Appendix
Eleven (governing the enforcement of the ACH Rules, including self-
audit requirements);
(4) ACH Rules 2.2.1.10; 2.6; and 4.8 (governing the reclamation of
benefit payments);
(5) ACH Rule 9.3 and Appendix Two (requiring that a credit entry be
originated no more than two banking days before the settlement date of
the entry--see definition ``Effective Entry Date'' in Appendix Two);
(6) ACH Rule 2.11.2.3 (requiring that originating depository
financial institutions (ODFIs) establish exposure limits for
Originators of Internet-initiated debit entries); and
(7) ACH Rule 2.13.3 (requiring reporting regarding unauthorized
Telephone-initiated entries).
* * * * *
3. Revise Sec. 210.3(b) to read as follows:
Sec. 210.3 Governing law.
* * * * *
(b) Incorporation by reference--applicable ACH Rules.
(1) This part incorporates by reference the applicable ACH Rules,
including rule changes with an effective date on or before September
21, 2007, as published in parts II, III, and VI of the ``2007 ACH
Rules: A Complete Guide to Rules & Regulations Governing the ACH
Network.'' The Director of the Federal Register approves this
incorporation by reference in accordance with 5 U.S.C. 552(a) and 1 CFR
part 51. Copies of the ``2007 ACH Rules'' are available from NACHA--The
Electronic Payments Association, 13450 Sunrise Valley Drive, Suite 100,
Herndon, Virginia 20171. Copies also are available for public
inspection at the Office of the Federal Register, 800 North Capital
Street, NW., Suite 700, Washington, DC 20002; and the Financial
Management Service, 401 14th Street, SW., Room 400A, Washington, DC
20227.
(2) Any amendment to the applicable ACH Rules that is approved by
NACHA--The Electronic Payments Association after January 1, 2007 shall
not apply to Government entries unless the Service expressly accepts
such amendment by publishing notice of acceptance of the amendment to
this part in the Federal Register. An amendment to the ACH Rules that
is accepted by the Service shall apply to Government entries on the
effective date of the rulemaking specified by the Service in the
Federal Register notice expressly accepting such amendment.
* * * * *
4. Redesignate paragraph Sec. 210.5(b)(3) as Sec. 210.5(b)(5) and
add new paragraphs (b)(3) and (b)(4) to read as follows:
Sec. 210.5 Account requirements for Federal payments.
* * * * *
(b) * * *
(3) Where an agency is issuing part or all of an employee's travel
reimbursement payment to the official travel card issuing bank, as
authorized or required by Office of Management and Budget guidance or
the Federal Travel Regulation, the ACH credit entry representing the
payment may be deposited to the account of the travel card issuing bank
for credit to the employee's travel card account at the bank.
(4) Where a Federal payment is to be disbursed through a debit
card, stored value card, prepaid card or similar payment card program
established by the Service, the Federal payment may be deposited to an
account at a financial institution designated by the Service as a
financial or fiscal agent. The account title, access terms and other
account provisions may be specified by the Service.
6. In Sec. 210.6, revise paragraphs (g) and (h) to read as
follows, and remove paragraph (i):
Sec. 210.6 Agencies.
* * * * *
(g) Point-of-purchase debit entries. An agency may originate a
Point-of-Purchase (POP) entry using a check drawn on a consumer or
business account and presented at a point-of-purchase unless the
Receiver opts out in accordance with the ACH Rules. The requirements of
ACH Rules 2.1.2 and 3.12 shall be met for such an entry if the Receiver
presents the check at a location where the agency has posted the notice
required by the ACH Rules and has provided the Receiver with a copy of
the notice.
(h) Returned item service fee. An agency that has authority to
collect returned item service fees may do so by originating an ACH
debit entry to collect a one-time service fee in connection with an
ARC, POP or BOC entry that is returned due to insufficient funds. An
entry originated pursuant to this paragraph shall meet the requirements
of ACH Rules 2.1.2 and 3.5 if the agency includes the following
statement in the required notice(s) to the Receiver: ``If the
electronic fund transfer cannot be completed because there are
insufficient funds in your account, we may impose a one-time fee of
$[--------] against your account, which we will also collect by
electronic fund transfer.''
Appendices A, B and C [Removed]
7. Remove Appendices A, B and C from this part.
Dated: December 27, 2007.
Kenneth R. Papaj,
Commissioner.
[FR Doc. 08-22 Filed 1-8-08; 8:45 am]
BILLING CODE 4810-35-M