[Federal Register: September 10, 2008 (Volume 73, Number 176)]
[Rules and Regulations]
[Page 52578-52584]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10se08-5]
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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: Final rule.
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SUMMARY: We are amending our regulation governing the use of the
Automated Clearing House (ACH) system by Federal agencies. The rule
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
[[Page 52579]]
agencies. We are issuing this rule to address changes to the ACH Rules
set forth in NACHA's 2006 ACH Rules book and 2007 ACH Rules book. We
are adopting all of the changes that NACHA published in the 2006 ACH
Rules book and 2007 ACH Rules book, except certain changes to the self-
audit provisions of the ACH Rules, which we have previously determined
are not appropriate for the Federal government. This rule follows
publication of a January 9, 2008 proposed rule and adopts the
provisions of the proposed rule without change.
In addition, the rule provides two exceptions to existing deposit
account requirements. Generally, an ACH credit entry representing a
Federal payment other than a vendor payment must be deposited into a
deposit account at a financial institution in the name of the
recipient. On April 25, 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 rule codifies this
waiver. The rule also provides an exception from existing deposit
account 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: This rule is effective October 10, 2008. The incorporation by
reference of the publication listed in the rule is approved by the
Director of the Federal Register as of October 10, 2008.
ADDRESSES: You can download this rule at the following Web site: http:/
/www.fms.treas.gov/ach.
FOR FURTHER INFORMATION CONTACT: Bill Brushwood, Financial Program
Specialist, at (202) 874-1251 or bill.brushwood@fms.treas.gov; or
Natalie H. Diana, Senior Counsel, at (202) 874-6680 or
natalie.diana@fms.treas.gov.
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.
Proposed Rulemaking
On January 9, 2008, we published a notice of proposed rulemaking
(NPRM) requesting comment on a number of proposed amendments to Part
210. 73 FR 1560. We proposed to amend Part 210 to address changes to
the ACH Rules set forth in the 2006 ACH Rules book and the 2007 ACH
Rules book. We also proposed to amend Part 210 to codify a waiver
allowing for split disbursements of Federal employee travel payments.
In addition, we proposed to amend Part 210 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 by the Service to operate the program
as Treasury's financial or fiscal agent, and the Service may specify
the title, access terms and other provisions governing the account.
We received two comment letters on the NPRM. NACHA submitted a
comment letter generally supporting the amendments. NACHA requested
clarification that the proposed amendments relating to payment card
programs and split disbursement of Federal employee travel
reimbursements would not impose any express or implied requirement on
financial institutions to match the name on the entry to the name on
the account. As discussed in Section II below, neither of these
amendments in any way affects the right of financial institutions to
rely on account numbers alone in posting entries.
The Association for Financial Professionals (AFP) also commented on
the NPRM. AFP's comment letter primarily addressed the conversion of
business checks to ACH debits. AFP supported the proposed incorporation
of the ACH Rules regarding the conversion of checks at accounts
receivable and back office locations. However, AFP expressed concern
that the proposed rule would permit the conversion of business checks
at points-of-purchase without written authorization. AFP pointed out
that business staff persons paying for purchases at points-of-purchase
may not be authorized to make decisions about payment methods and may
not be educated about the need to read posted notices. Although the
Service recognizes that corporate staff may not be authorized to make
decisions about payment methods at a point-of-purchase, businesses that
do not want checks converted at points-of-purchase can prevent
conversion by utilizing an identifier within the Auxiliary On-Us Field
within the MICR line of the check. Accordingly, we do not believe that
the unauthorized conversion of corporate checks at points-of-purchase
is likely to be a significant problem.
Final Rule
We are adopting, without change, all of the changes to Part 210
that were proposed in the NPRM. Those changes consist of the following:
The codification of a waiver allowing for split
disbursements of Federal employee travel payments;
The adoption of a provision stating 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, and
the Service may specify the title, access terms and other provisions
governing the account; and
The adoption of all changes to the ACH Rules set forth in
the 2006 ACH Rules book and the 2007 ACH Rules book, except changes to
the self-audit rules.
II. Discussion of Amendments to Part 210
Split Travel Reimbursements
Section 210.5 generally 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
[[Page 52580]]
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 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
amending section 210.5 to codify the terms of the split disbursement
waiver into the rule.\1\
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\1\ 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
plan to 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.
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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 final rule does 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 chapters 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 its comment letter on the proposed rule, NACHA requested
clarification that the use of split travel disbursements by agencies
does not affect the right of financial institutions to rely on account
numbers alone in crediting those entries. As is the case with any entry
representing a Federal payment, financial institutions may rely on
account numbers alone when posting entries.
Card Programs Established by the Service
In addition to amending section 210.5 to allow for split
disbursement, we are amending 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 by the Service to operate the program
as Treasury's financial or fiscal agent, and the Service may specify
the title, access terms and other provisions governing the account.
This provision applies only in those cases when the Service directs its
financial or fiscal agent bank to set up a card program.
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
cardholder'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 adopting an exception to section 210.5 which will provide the
Service with greater flexibility in setting up payment card programs.
We are also confirming, as requested by NACHA in its comment letter,
that financial institutions may rely on account numbers alone when
posting entries representing Federal payments to a card account.
ACH Rule Changes
Since we last addressed changes to the ACH Rules in 2005, NACHA has
made a number 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.\2\ We are
adopting 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 adopting 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.
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\2\ NACHA has promulgated additional rule changes since the
publication of the 2007 ACH Rule book. We plan to address those
changes in a future rulemaking.
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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 rule 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 \3\ 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
\4\ 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.\5\
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\3\ 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.
\4\ 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.
\5\ Part 210 does not require written authorization for POP
entries originated by Federal agencies. Consumers who wish to opt
out of POP at an agency location may do so utilizing checks that
include an identifier within the Auxiliary On-Us Field within the
MICR line or by utilizing another payment method.
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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
[[Page 52581]]
fashion, whether a business check is ineligible for conversion to an
ARC or POP entry.\6\ 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 deleting
those provisions from the regulation. The rule change does not mean
that we intend to begin converting all eligible business checks to ACH
entries. Rather, the 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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\6\ 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 in Section II(B)). 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 of Change (COR) entries;
Minor modifications of definitions associated with various
Return Reason codes; and
Consolidation of Dishonored Return Reason codes.
We are adopting 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, Back Office Conversion (BOC)
entries, 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 2008, 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. 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
consistent 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 Regulation E by making corresponding changes to the
check conversion applications established 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 are 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, as well as all banking information
relating to ARC entries, until destruction. 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
rule wording among various check conversion 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 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, you authorize us either
to use information from your check to make a one-time electronic
fund transfer from your account or
[[Page 52582]]
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, and you will not receive your check back from your
financial institution.''
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 deleting Appendices A, B and C from part
210, which means that agencies may either continue to use the same
disclosures they are currently using or, alternatively, begin using the
shorter disclosures published in 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 the check being
used to make payment does not authorize an ACH debit entry.
We are adopting 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 the 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 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.
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-initiation 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
[[Page 52583]]
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--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 are
incorporating them into part 210.
III. Section-by-Section Analysis
In order to incorporate in part 210 the ACH rule changes that we
are accepting, we are replacing references to the 2005 Rules book with
references to the 2007 ACH Rules book.
Sec. 210.2(d)
We are amending 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.
Sec. 210.3(b)
We are amending 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.
Sec. 210.5
We are amending 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 adding a new paragraph (b)(4), which provides 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.
Sec. 210.6(g)
We are revising 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 a 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.
Sec. 210.6(h)
We are deleting 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 revising the text of
current Sec. 210.6(i) and renumbering it as Sec. 210.6(h). The
revision clarifies 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 that must be given in order
to debit an account for an insufficient funds service fee is unchanged,
but has been relocated to Sec. 210.6(h) from Appendices A, B, and C,
which we are removing 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 rule clearer. For example, you may wish to
discuss: (1) Whether we have organized the material to suite 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 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 rule will not have a significant
economic impact on a substantial number of small entities. The 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
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 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
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For the reasons set out in the preamble, we are amending 31 CFR part
210 as follows:
[[Page 52584]]
PART 210--FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED
CLEARING HOUSE
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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.
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2. In Sec. 210.2, revise paragraph (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 of ``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).
* * * * *
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3. In Sec. 210.3, revise paragraph (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, http://www.nacha.org. Copies also are
available for public inspection at the Financial Management Service,
401 14th Street, SW., Room 400A, Washington, DC 20227, (202) 874-1251,
or at the National Archives and Records Administration (NARA). For
information on the availability of this material at NARA, call 202-741-
6030, or go to: http://www.archives.gov/federal_register/code_of_
federal_regulations/ibr_locations.html.
(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 obtaining approval of the amended incorporation by
reference from the Director of the Federal Register and publishing an
amendment to this part in the Federal Register. An amendment to the ACH
Rules that is accepted by the Service and approved by the Director of
the Federal Register for incorporation by reference shall apply to
Government entries on the effective date specified by the Service in
the Federal Register rulemaking expressly accepting such amendment.
* * * * *
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4. In Sec. 210.5, redesignate paragraph (b)(3) as paragraph (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.
* * * * *
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5. 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 Through C to Part 210 [Removed]
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6. Remove Appendices A, B and C.
Dated: August 27, 2008.
Kenneth E. Carfine,
Fiscal Assistant Secretary, Department of the Treasury.
[FR Doc. E8-20575 Filed 9-9-08; 8:45 am]
BILLING CODE 4810-35-P