[Federal Register Volume 74, Number 188 (Wednesday, September 30, 2009)]
[Rules and Regulations]
[Pages 50105-50108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-23407]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 74, No. 188 / Wednesday, September 30, 2009 /
Rules and Regulations
[[Page 50105]]
FEDERAL RESERVE SYSTEM
12 CFR Part 219
[Regulation S; Docket No. R-1325]
Reimbursement for Providing Financial Records; Recordkeeping
Requirements for Certain Financial Records
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Final rule.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
has approved amendments to Subpart A of Regulation S, which implements
the requirement under the Right to Financial Privacy Act (RFPA) that
the Board establish the rates and conditions under which payment shall
be made by a government authority to a financial institution for
assembling or providing financial records pursuant to RFPA. These
proposed amendments update the fees to be charged and takes account of
recent advances in electronic document productions.
DATES: Effective Date: January 1, 2010.
FOR FURTHER INFORMATION CONTACT: Jason Gonzalez, Counsel (202/452-
3275), Legal Division, Board of Governors of the Federal Reserve
System, Washington, DC 20551. For users of the Telecommunication Device
for the Deaf (TDD), please call (202) 263-4869.
SUPPLEMENTARY INFORMATION:
Background
Section 1115 of the RFPA (12 U.S.C. 3415) requires the Board to
establish, by regulation, the rates and conditions under which payment
is made by a Government authority to a financial institution for
searching for, reproducing, or transporting data required or requested
under the RFPA. Shortly after the RFPA was adopted, the Board issued
Regulation S (12 CFR Part 219) to implement this provision (44 FR
55812, September 28, 1979). These provisions were subsequently
designated Subpart A of Regulation S. In June 1996, the Board revised
Regulation S by updating the fees financial institutions could charge
and streamlining the Subpart generally. (61 FR 29638, June 12, 1996).
Since the last revision, two significant changes have occurred that
now require further amendments to Subpart A of Regulation S. First,
increases in salary and benefits have caused the fees chargeable for
reproducing financial records to become outdated. Furthermore, in
recent years, the production of electronically stored information
during investigations and in litigation has become increasingly
common.\1\ Many government agencies now prefer to receive information
in digital formats, thereby easing handling and analysis. In addition,
many agency document requests now require that information be submitted
in electronic form.
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\1\ Charles Alan Wright, Arthur R. Miller & Richard L. Marcus,
Federal Practice & Procedure, Sec. 2218 at 449 (2d ed. 2006).
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Proposed Amendments
In response to these developments, the Board proposed in August
2008 issuing amendments designed to update the existing rates to be
paid for personnel costs, to provide a reimbursement scheme that more
accurately reflects the costs of producing electronically stored
information in digital formats, and making minor clarifying changes (73
FR 47854, August 15, 2008). Specifically, the proposed amendments
substantially increased the labor rates, added a third job category for
specialized computer support, included an automatic adjustment every
five years for changes in labor rates, precluded reimbursement on a
per-page basis for production of paper documents that had been stored
electronically unless the requesting government agency sought
production of paper documents, and replaced the $5.00 ``per diskette''
charge with a $5.00 fee for electronic transmissions, per request. The
Federal Register Notice accompanying the proposed amendments also
sought comments on whether the existing fees for microfiche or
microfilm-based productions should be eliminated as outmoded.
Summary and Analysis of the Comments
The Board received eleven comments on the proposed revisions, most
of which were supportive of the Board's effort to update the
regulation.
Personnel Labor Rates
Most of the comments strongly supported increasing the labor rates
found in Subpart A. Four comments asserted that the new rates were too
low, but none suggested an alternative benchmark for salary and
benefits that would be more reliable than what is contained in the
Occupational Employments Statistics (``OES'') program maintained by the
Bureau of Labor Statistics (``BLS''), which provided the basis for the
labor wage rates in the proposed amendments.
None of the comments objected to the Board's mechanism for
periodically updating the labor rates found in the regulation; however,
three comments urged the Board to consider updating the rates more
frequently than every five years, such as annually, bi-annually, or
every three years. Under the proposed rule, the labor rates would be
adjusted on April 1, 2012, and every five years thereafter. In May
2009, the BLS issued new data under the OES program, but the new data
did not result in any changes to the personnel reimbursement rates set
forth in the proposed amendments. The Board has modified the schedule
in the final rule to provide for updated labor rates every three years,
beginning September 30, 2012. The Board believes that a three-year
schedule provides an appropriate balance between the convenience of
having financial institutions and agencies using the same rates for an
extended period of time against the benefit of relying on more recent
wage data. The September 30 date is appropriate because the BLS data
are typically released in May, which will provide the Board with an
adequate lead time to incorporate the recent data to into the
reimbursement rate schedules and publicize these changes to the
industry.
Three comments suggested adding language that would permit the
Board to designate an equivalent source of wage data in the event the
BLS substantially changes or eliminates the relevant job
[[Page 50106]]
categories found in the OES program. The final rule accepts this
suggestion so that a full rulemaking proceeding does not need to be
initiated just to make a technical conforming change to the calculation
of the labor rates.
Limitations on per-Page Reimbursement for Paper Documents
One trade group raised several issues about the provision that
would prevent financial institutions from being reimbursed on a per-
page basis for paper copies of electronically stored documents, unless
the government agency seeking the documents requested production of the
information on paper. The trade group questioned whether the Board has
the authority to limit reimbursement in this fashion. Section 1115 of
the RFPA (12 U.S.C. 3415) requires the Board to issue regulations ``to
establish the rates and conditions'' for reimbursement of ``such costs
as are reasonably necessary and which have been directly incurred in
searching for, reproducing or transporting the books, papers, records
or other data required or requested * * *'' (emphasis added). The Board
interprets this statutory language not to require additional
reimbursement to financial institutions for the creation of paper
records when the information is stored in electronic form, paper
documents are not required in order for the financial institution to
comply with the government agency's request, and reimbursement is
available for personnel and certain out-of-pocket costs incurred while
searching for, reproducing, and delivering the information to the
requesting agency in digital form. In such a case, costs incurred for
production of paper records are not reasonably necessary to comply with
the government agency request.
The trade group that opposed the conditions on per-page
reimbursement for paper copies also asserted that some financial
institutions will need to devote resources to converting their
electronic information to usable formats in order to comply with a
government document request, and that such conversion may be complex or
costly, but not be reimbursed. The Board believes that some such costs
are likely to be incurred in any event because an increasing proportion
of document requests (governmental and nongovernmental) now require
that information be provided in electronic formats. See Fed. R. Civ.
Proc. 45(d)(1)(B)(electronically stored information must be produced in
format specified, or, if not specified, in the form in which it is
ordinarily maintained or in a reasonably usable form). Moreover,
Regulation S permits institutions to receive reimbursement, ``[i]f
itemized separately [for] the actual cost of extracting information
stored by computer in the format in which it is normally produced,
based on computer time and necessary supplies.'' 12 CFR 219.4(b)(2).
Accordingly, such conversion costs are reimbursable according to the
terms of the regulation. Finally, under the terms of the amended
regulation, a government agency may agree to accept paper copies in
lieu of an electronic production, and the financial institution will be
reimbursed on a per-page basis.
The trade group and a financial institution also expressed concern
that production of customer information in electronic form could raise
privacy issues and the possibility of data breaches, as well as
evidentiary issues in subsequent proceedings. While privacy protection
is a significant issue, financial institutions generally are required
to have policies and procedures to safeguard customer data under other
laws. The Board also notes that production of customer information in
paper form is among the least secure media, without password protection
or encryption. As discussed below, the amended regulation also provides
that financial institutions may be reimbursed for the actual cost of
storage media, which may include encryption technologies. Financial
institutions may also be reimbursed for delivery costs, which may
include reasonable measures taken to insure against a data breach, such
as the use of registered mail or courier services as required.
Additional concerns about customer privacy and safeguards against data
breaches may be addressed by the requesting government agency and the
financial institution producing the information. Similarly, any issues
about authentication of electronic data as opposed to paper documents
may be addressed between the requesting agency and the financial
institution. A government agency that is concerned about authentication
of electronically produced information may request production in paper
form, which entitles the financial institution to reimbursement on a
per-page basis.
Alternatively, the trade group requested that the implementation of
the amended rule be delayed for a year to enable financial institutions
to revamp their systems to produce documents electronically. The Board
has determined that January 1, 2010, should be the effective date. This
effective date is more than a year after the amended rule was first
proposed. Financial institution reimbursements for personnel costs will
significantly increase as a result of the amendments, which are likely
to offset in whole or in part any reduction in reimbursement amounts
attributable to the inability to charge on a per-page basis for paper
documents.
Proposed $5.00 Fee for ``Electronic Productions, per Request''
Several comments indicated that there was ambiguity concerning the
proposed $5.00 reimbursement for ``Electronic Productions, per
request.'' This reimbursement provision was designed to replace the
$5.00 ``per diskette'' charge in the existing regulation, because
diskettes are no longer widely used, having been replaced by other
storage media. The comments also noted that there was ambiguity as to
whether ``per request'' meant each account requested by an agency, each
customer whose information was being sought, or each production of
electronic information. One commenter also noted that some storage
media (such as encrypted flash storage devices or ``memory sticks'')
cost more than $5.00.
In response to these comments and to eliminate any ambiguity, the
Board is revising the provision and eliminating the $5.00 fixed fee for
electronic transmissions. In the final version, the schedule in
Appendix A specifically contemplates reimbursement for the actual
acquisition price to the financial institution of the storage medium
(CD, flash storage device, etc.) used to transmit the data. No fixed
reimbursement will be available for transmittal made by electronic mail
(``e-mail''), because it does not appear to be practical to quantify
the costs directly incurred (if any) for making e-mail transmissions.
Financial institutions may be reimbursed, however, for the personnel
costs and other identified costs incurred related to making e-mail
transmissions. Whether transmission of customer data by e-mail is
acceptable on information security and evidentiary grounds is a matter
between the requesting government agency and the financial institution.
Reimbursement for Microfiche and Microfilm Productions
Three comments urged the Board to keep the provisions regarding
microfilm and microfiche duplication. Apparently, although use of these
media is declining, a significant number of financial institutions
continue to maintain records in these formats. Accordingly, the final
rule will continue to allow financial institutions to charge $0.25 (per
frame) for photocopying microfiche and $.50 (per microfiche) for
duplicating microfiche.
[[Page 50107]]
Fees for Delivery and Transportation Costs
Two commenters requested that the regulation set out that costs for
delivery of the information be reimbursable, such as postage, or
courier costs. Reimbursement for these items is already covered by the
existing regulation, 12 CFR 219.3(d). However, in light of the
comments, the Board is clarifying the language of section 219.3(d) to
make explicit that it includes reimbursement for reasonable delivery-
related costs.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires an agency that is
issuing a final rule to prepare and make available a regulatory
flexibility analysis that describes the impact of the final rule on
small entities. 5 U.S.C. 603(a). The RFA provides that an agency is not
required to prepare and publish a regulatory flexibility analysis if
the agency certifies that the final rule will not have a significant
economic impact on a substantial number of small entities. 5 U.S.C.
605(b).
Pursuant to section 605(b), the Board certifies that this final
rule will not have a significant economic impact on a substantial
number of small entities. The rule implements the reimbursement
requirement under the RFPA and will benefit small institutions as a
result of the increases in the reimbursement schedule for personnel
costs associated with the requirement to assemble and reproduce
financial records. The impact on institutions of converting their
electronic information to a usable format, at the request of a
government agency, would be positive because institutions may be
reimbursed for personnel costs in searching for and processing a
request for information that is stored electronically, including the
personnel time directly incurred in converting the information to a
format that the government agency requires. There are no new reporting,
recordkeeping, or other compliance requirements associated with this
rule.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Ch. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the final rule
under the authority delegated to the Board by the Office of Management
and Budget. No collections of information pursuant to the Paperwork
Reduction Act are contained in the proposed rule.
List of Subjects in 12 CFR Part 219
Banks, banking, Currency, Federal Reserve System, Foreign banking,
Reporting and recordkeeping requirements.
Authority and Issuance
0
For the reasons set out in the preamble, 12 CFR Part 219 is amended as
set forth below.
PART 219--REIMBURSEMENT FOR PROVIDING FINANCIAL RECORDS;
RECORDKEEPING REQUIREMENTS FOR CERTAIN FINANCIAL RECORDS
(REGULATION S)
0
1. The authority citation for part 219 continues to read as follows:
Authority: 12 U.S.C. 3415.
0
2. In Sec. 219.3, paragraphs (a), (b)(2), (c), and (d) and appendix A
to Sec. 219.3 are revised and paragraph (b)(3) is added to read as
follows:
Sec. 219.3 Cost Reimbursement
(a) Fees payable. (1) Except as provided in Sec. 219.4 of this
part, a government authority seeking access to financial records
pertaining to a customer, by written request, through:
(i) A court order;
(ii) A subpoena issued pursuant to the Federal Rules of Criminal
Procedure or the Federal Rules of Civil Procedure; or
(iii) Other agency administrative procedures, including
administrative subpoenas, voluntary requests, or other process shall
reimburse the financial institution for reasonably necessary costs
directly incurred in searching for, reproducing or transporting books,
papers, records, or other data as set forth in this section.
(2) The reimbursement schedule for a financial institution is set
forth in Appendix A to this section. If a financial institution has
financial records that are stored at an independent storage facility
that charges a fee to search for, reproduce, or transport particular
records requested, these costs are considered to be directly incurred
by the financial institution and may be included in the reimbursement.
(b) * * *
(2) If itemized separately, search and processing costs may include
the actual cost of extracting electronically stored records, based on
computer time and necessary supplies; however, personnel time for
computer searches may be paid for at the rates set for computer support
specialist, specified in Appendix A to this section, but only when
compliance with the request for information requires that the financial
institution use programming or other higher level technical services of
a computer support specialist in order to reproduce electronically
stored information in the format requested by the government authority.
(3) Rates for Search and Processing in Appendix A shall be
recalculated as follows on October 1, 2012, and on October 1 of each
subsequent three-year period utilizing Bureau of Labor Statistics
(``BLS'') data or equivalent data (as so designated by the Board) by
replacing the existing hourly rates with the sum of:
(i) Base labor rate recalculation--Using the most recently
available wage data from the Occupational Employment Statistics program
(http://www.bls.gov/oes/home.htm) for the BLS industry category
``Credit Intermediation and Related Activities'' (NAICS Code Number
522000) (or successor category):
(A) [Clerical/Technical category] the average of the median hourly
rates for the ``Information and Records Clerk'' and ``Computer
Operator'' job categories (SOC Code Number 43-4199 and 43-9011) (or any
successor job categories);
(B) [Manager/Supervisor category] the median hourly rate for the
``first-line supervisors/managers of office'' job category (SOC Code
Number 43-1011) (or successor category), and
(C) [Computer Support Specialist category] the median hourly rate
for the ``computer support specialist'' job category (SOC Code Number
15-1041) (or successor category); plus
(ii) Benefits Adjustment--an amount for each hourly rate category
that is equal to the product of:
(A) The hourly rates set forth in paragraph (b)(3)(i) of this
section, and
(B) The most recently available ``percent of total compensation''
represented by ``total benefits'' for the ``Credit Intermediation and
Related Activities'' industry category (private sector) set out in the
Employment Cost Trends section of the National Compensation Survey
(http://data.bls.gov/PDQ/outside.jsp?survey=cm); and
(iii) If the recalculated rates for Search and Processing
(including the Base labor rate and the benefits adjustment) are not a
multiple of $1, the recalculated rates shall be rounded up to the next
multiple of $1.
(c) Reproduction costs. The reimbursement rates for reproduction
costs for requested information are set forth in Appendix A to this
section, subject to the Conditions for Payment set forth in Sec. 219.5
of this part. Copies of photographs, films and other materials not
listed in Appendix A to this section are reimbursed at actual cost.
(d) Transportation or delivery costs. Reimbursement for
transportation or
[[Page 50108]]
delivery costs shall be for the reasonably necessary costs directly
incurred to transport personnel to locate and retrieve the requested
information, and to deliver such material to the place of examination.
Appendix A to Sec. 219.3--Reimbursement Schedule
Reproduction:
Photocopy, per page.................... $0.25
Paper copies of microfiche, per frame.. 0.25
Duplicate Microfiche, per microfiche... 0.50
Storage media.......................... Actual cost.
Search and Processing:
Clerical/Technical, hourly rate........ 22.00
Computer Support Specialist, hourly 30.00
rate.
Manager/Supervisory, hourly rate....... 30.00
0
3. In Sec. 219.5, revise paragraph (a) to read as follows:
Sec. 219.5 Conditions for payment.
(a) Direct costs. Payment shall be made only for costs that are
both directly incurred and reasonably necessary to provide requested
material. Search and processing, reproduction, and transportation or
delivery costs shall be considered separately when determining whether
the costs are reasonably necessary. Photocopying or microfiche charges
are reasonably necessary only if the institution has reproduced
financial records that were not stored electronically (i.e., where the
information requested was stored only on paper or in microfiche), or
where the government authority making the request has specifically
asked for printed copies of electronically stored records.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, September 23, 2009.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E9-23407 Filed 9-29-09; 8:45 am]
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