Federal Government Participation in the Automated Clearing House, 52578-52584 [E8-20575]

Agencies

• Fiscal Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 73, Number 176 (Wednesday, September 10, 2008)]
[Rules and Regulations]
[Pages 52578-52584]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-20575]


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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

0
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, https://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: https://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