Federal Government Participation in the Automated Clearing House, 75528-75534 [2013-29202]

Agencies

• Fiscal Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Proposed Rules]
[Pages 75528-75534]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29202]



[[Page 75528]]

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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 210

RIN 1510-AB32


Federal Government Participation in the Automated Clearing House

AGENCY: Bureau of the Fiscal Service, Treasury.

ACTION: Notice of proposed rulemaking with request for comment.

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SUMMARY: The Department of the Treasury, Bureau of the Fiscal Service 
(Service) is proposing to amend its regulation governing the use of the 
Automated Clearing House (ACH) system by Federal agencies. Our 
regulation adopts, with some exceptions, the NACHA Operating Rules 
developed by NACHA--The Electronic Payments Association (NACHA) as the 
rules governing the use of the ACH Network by Federal agencies. We are 
issuing this proposed rule to address changes that NACHA has made to 
the NACHA Operating Rules since the publication of NACHA's 2009 ACH 
Rules book. These changes include amendments set forth in NACHA's 2010, 
2011, 2012 and 2013 Operating Rules books.

DATES: Comments on the proposed rule must be received by February 10, 
2014.

ADDRESSES: Comments on this rule, identified by docket FISCAL-FMS-2013-
0002, should only be submitted using the following methods:
     Federal eRulemaking Portal: www.regulations.gov. Follow 
the instructions on the Web site for submitting comments.
     Mail: Ian Macoy, Bureau of the Fiscal Service, 401 14th 
Street SW., Room 400B, Washington, DC 20227.
    The fax and email methods of submitting comments on rules to the 
Service have been decommissioned.
    Instructions: All submissions received must include the agency name 
(Bureau of the Fiscal Service) and docket number FISCAL-FMS-2013-0002 
for this rulemaking. In general, comments received will be published on 
Regulations.gov without change, including any business or personal 
information provided. Comments received, including attachments and 
other supporting materials, are part of the public record and subject 
to public disclosure. Do not disclose any information in your comment 
or supporting materials that you consider confidential or inappropriate 
for public disclosure.
    You can download this proposed rule at the following Web site: 
https://www.fms.treas.gov/ach. You may also inspect and copy this 
proposed rule at: Treasury Department Library, Freedom of Information 
Act (FOIA) Collection, Room 1428, Main Treasury Building, 1500 
Pennsylvania Avenue NW., Washington, DC 20220. Before visiting, you 
must call (202) 622-0990 for an appointment.
    In accordance with the U.S. government's eRulemaking Initiative, 
the Service publishes rulemaking information on www.regulations.gov. 
Regulations.gov offers the public the ability to comment on, search, 
and view publicly available rulemaking materials, including comments 
received on rules.

FOR FURTHER INFORMATION CONTACT: Ian Macoy, Supervisory Financial 
Program Specialist, at (202) 874-6835 or ian.macoy@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 NACHA Operating Rules, with certain 
exceptions. From time to time we amend Part 210 in order to address 
changes that NACHA periodically makes to the NACHA Operating Rules or 
to revise the regulation as otherwise appropriate.
    Currently, Part 210 incorporates the NACHA Operating Rules as set 
forth in the 2009 NACHA Operating Rules book. NACHA has adopted a 
number of changes to the NACHA Operating Rules since the publication of 
the 2009 NACHA Operating Rules book. We are proposing to incorporate in 
Part 210 most, but not all, of these changes.
    We are requesting public comment on all the proposed amendments to 
Part 210.

II. Summary of Proposed Rule Changes

A. 2010 NACHA Operating Rules Book Changes

1. Authorization and Returns
    This NACHA Operating Rules amendment revised the requirements for 
obtaining a Receiver's authorization for an ACH payment and modified 
the processes by which Receiving Depository Financial Institutions 
(RDFIs) handle Receivers' claims of unauthorized debits. Specifically, 
the amendment (1) clarified the requirements for authorization of ACH 
entries, adopting the language of Regulation E that an authorization 
must be ``clear and readily understandable;'' (2) clarified that a 
purported authorization that is not clear and readily understandable is 
not considered a valid authorization; (3) eliminated the requirement 
that Receiver's written statement regarding an unauthorized debit be 
made under penalty of perjury; (4) established minimum information 
requirements for and revised timing requirements related to the written 
statement; and (5) expanded the use of R39 (Improper Source Document) 
for duplicate check/check conversion payments. We are proposing to 
accept this amendment.
2. Stop Payments and Regulation E
    This amendment revised specific language within the NACHA Operating 
Rules regarding the application and expiration of a stop payment order 
so as to re-align the NACHA Operating Rules with the requirements of 
Regulation E. The amendment (1) eliminated the six-month time period 
after which a stop payment order placed by a consumer lapses; (2) 
provided that, where the stop payment order applies to more than one 
debit entry, the order remains in effect until all such entries have 
been stopped; (3) provided that RDFIs may require, in cases where the 
Receiver desires to block all future payments related to a specific 
authorization/Originator, that the Receiver confirm in writing that the 
Receiver revoked the authorization; and (4) simplified the description 
of Return Reason Code R08 (Payment Stopped). We are proposing to accept 
this amendment.
3. Direct Access Registration
    This amendment modified the NACHA Operating Rules to require 
Originating Depository Financial Institutions (ODFIs) to register their 
Direct Access status with NACHA, and imposed certain requirements in 
connection with registration of Direct Access status. We are proposing 
to accept this amendment.
 4. Risk Management and Assessment
    This amendment updated the NACHA Operating Rules to codify 
additional risk management, due diligence and monitoring practices that 
ODFIs must follow with respect to Originators and Third-Party Senders. 
We are proposing not to incorporate this amendment in Part 210, since 
the Federal government's origination of entries through the ACH

[[Page 75529]]

Network does not involve the conventional roles of Originator/ODFI and 
does not present the risks that this amendment seeks to address.

B. 2011 NACHA Operating Rules Book Changes

1. Mobile ACH Payments
    This rule established a framework for mobile-initiated ACH debit 
entries. It expanded the definition of Internet-Initiated Entries (WEB) 
to include ACH debits authorized or initiated via wireless networks. In 
addition, it applied all the provisions of the WEB SEC Code to mobile 
debit entries. The purpose of the rule was to provide clear information 
on how the NACHA Operating Rules apply to mobile payments and to create 
a more stable environment within which to develop payment products and 
services. We are proposing to accept this rule.
2. Elimination of the Opt Out Requirements of ARC and BOC Entries
    This amendment eliminated the requirement that Originators of 
Accounts Receivable Entries (ARC) and Back Office Conversion Entries 
(BOC) establish and maintain procedures to enable Receivers to opt out 
of check conversion activity. The amendment reflected the fact that opt 
out rates were generally 0.1 percent or lower, indicating that consumer 
concern about check conversion either did not exist or had dissipated 
over time. We are proposing to accept this amendment.
3. Collection of Return Fees
    This rule amendment established a Return Fee Entry as a specific 
type of ACH entry, to be used only for the purpose of collecting return 
fees for certain ACH debits to consumer accounts that are returned for 
insufficient funds or other qualifying checks that are returned NSF/
UCF. The rule allows Originators to obtain authorization for a Return 
Fee Entry by providing the Receiver/check writer with notice that 
conforms to the requirements of Regulation E.
    Part 210 currently provides that agencies with authority to 
collected returned item services fees may do so by originating an ACH 
debit entry following notice to the Receiver. We are proposing to 
accept this rule change, which will enable agencies with authority to 
collect returned item fees by utilizing the Return Fee Entry.
4. Expanded Use of the XCK Application
    This amendment expanded the scope of the Destroyed Check Entry 
(XCK) application to permit its use for certain damaged checks that 
cannot be imaged, or for other check images that cannot be processed. 
The expanded scope allows use of XCK for (1) a check that is missing 
part of the MICR line but that can be sufficiently repaired to create 
an ACH debit; (2) a check that, in whole or in part, is unreadable, 
obscured or mutilated in a manner that prevents automated check 
processing or creating of an image that may be used to produce a 
``substitute check'' under the Check 21 Act, but has an intact MICR 
line; and (3) a check that does not pass standard quality tests for 
creation of an image that may be used to produce a substitute check 
under Check 21. We are proposing to accept this rule change.
5. Recurring TEL
    This amendment revised the definition of, and the general rule for, 
TEL Entries to allow both one-time (Single Entry) and recurring debit 
Entries authorized orally via the telephone. Prior to the amendment, 
only Single Entries were permitted to be authorized via the telephone. 
The amendment expanded the specific authorization language to address 
authorization requirements for recurring TEL Entries in conformance to 
the requirements of Regulation E. Under the amendment, authorizations 
for recurring TEL Entries must meet the writing and signature 
requirements of Regulation E for preauthorized transfers, which can be 
done by conforming to the e-Sign Act. We are proposing to accept this 
rule change.

C. 2012 NACHA Operating Rules Book Changes

1. IAT Modifications and Refinements
    Effective September 18, 2009, the NACHA Operating Rules were 
amended to require ODFIs and Gateway Operators to identify all 
international payment transactions transmitted via the ACH Network for 
any portion of the money trail as International ACH Transactions using 
a new Standard Entry Class Code (IAT). IAT transactions must include 
the specific data elements defined within the Bank Secrecy Act's (BSA) 
``Travel Rule'' so that all parties to the transaction have the 
information necessary to comply with U.S. law, including the laws 
administered by OFAC. We accepted the IAT rule for Federal payments, 
except that we delayed the effective date for certain government 
transactions and excluded tax payments from the IAT rule.
    Since that time, NACHA has made a number of changes clarify and 
enhance the Rules where appropriate to support more efficient 
processing of IAT Entries. We are proposing to accept, except as to tax 
payments, all of these changes, which include the following:
 Minimum Description Standards for IAT Entries
    Under the original IAT rule, the RDFI of an inbound IAT Entry to a 
consumer account was required to provide the consumer with certain 
descriptive information in accordance with the requirements of the 
NACHA Operating Rules and Regulation E. With the implementation of IAT, 
however, the minimum description standards within the NACHA Operating 
Rules were not modified to explicitly state that IAT Entries also 
contain information related to terminal city, terminal state, terminal 
identification code/location, and check serial number for certain types 
of payments, and that, when such information is present in an IAT 
Entry, it must be included on the consumer's bank statement. This 
amendment codified these expectations regarding IAT statement 
requirements within the NACHA Operating Rules.
 Gateway Notification of Rejected Inbound International Payment
    This amendment established a requirement that a Gateway notify the 
intended RDFI when an inbound international payment has been blocked 
and/or rejected because the origination of an IAT Entry for such a 
transaction would violate U.S. law. The amendment requires a Gateway 
that rejects an inbound payment transaction to provide the intended 
RDFI with the names and complete addresses of both the Originator and 
the Receiver, the date of the payment transaction, and the dollar 
amount of the intended payment. The Gateway must provide such 
information to the RDFI within five Banking Days of blocking or 
rejecting the payment.
 Transaction Type Code To Identify Remittances
    This amendment expanded the list of code values for use within the 
Transaction Type Code field in the First IAT Addenda Record to identify 
international payments originated by a natural person through a 
remittance product or service. The amendment added a new code for 
remittances initiated by a natural person to facilitate the 
identification and tracking of such payments.
 IAT Entries and the Effect of Illegality
    This amendment clarified that a Participating Depository Financial 
Institution (DFI) must process each IAT Entry in accordance with all 
requirements of the NACHA Operating

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Rules. A DFI is excused from its obligation to comply with specific 
requirements under the NACHA Operating Rules only when the processing 
of an IAT Entry would cause the DFI to be in violation of U.S. law. The 
DFI must, therefore, comply with its obligations under the NACHA 
Operating Rules unless it identifies an IAT as a suspect transaction. 
For domestic RDFIs that receive inbound IATs, these obligations include 
the timely provision of funds and the timely transmission of returns.
 Clarification of Rules Exceptions for IAT Entries
    This amendment clarified the conditions and circumstances under 
which specific provisions of the NACHA Operating Rules do not apply to 
certain IAT Entries. These changes were not substantive in nature, but 
rather more accurately reflect the application of the provisions to 
actual IAT processing.
    Exceptions for Outbound IAT Entries: This amendment revised, as 
appropriate, the list of provisions that do not apply to Outbound IAT 
Entries and clarified that certain functional processes (e.g., 
Prenotifications, NOCs, reversals, etc.) apply to Outbound IAT Entries 
only to the extent that they are supported by the laws and payment 
system rules of the foreign receiving country.
    This amendment also incorporated clearer Originator/ODFI 
obligations with respect to authorization requirements for the 
origination of Outbound IAT Entries, noting that, while such payments 
must be authorized under the Rules, the form and content of such an 
authorization are governed by the laws and payment system rules of the 
foreign receiving country. The amendment also clarified that the 
Gateway for an Outbound IAT Entry assumes specific responsibilities and 
warranties of an RDFI, but that the Rules do not govern the Gateway's 
rights and obligations with respect to the foreign Receiver of the 
Outbound IAT Entry.
    Exceptions for Inbound IAT Entries: This amendment incorporated a 
new subsection that identifies exceptions to the NACHA Operating Rules 
for Inbound IAT Entries, listing NOCs as applicable to Inbound IAT 
Entries only to the extent that NOCs are supported by the laws and 
payment system rules of the foreign originating country. However, 
because accurate payment information is critical to the successful 
processing of any ACH Entry (including any IAT Entry), this amendment 
also requires a Gateway that receives an NOC related to an Inbound IAT 
to pass the correct payment information to its contact in the foreign 
country (i.e., the Foreign Gateway or the Originator in the foreign 
country). Unlike the domestic NOC process, the Gateway (as ODFI) would 
have no obligation to ensure that future Inbound IAT Entries bear the 
corrected information.
 Required Gateway Agreements and Authorizations for Outbound 
IAT Entries
    This amendment requires a Gateway to have an agreement in place 
with either the ODFI or its own customer (i.e., its own account holder 
or another party) before transmitting Outbound IAT Entries 
internationally. Similarly, this amendment also requires the Gateway to 
obtain authorization from either the ODFI or its own customer 
(whichever has the agreement with the Gateway) to (i) transmit outbound 
IAT Entries, (ii) arrange for settlement of such Entries with the 
Foreign Gateway, and (iii) arrange for further transmission of such 
Entries to the foreign receiving financial institution and settlement 
of such payments to the foreign Receiver's account. The rule also 
expands the scope of Return Reason Code R81 (Non-Participant in IAT 
Program) to facilitate the return of an IAT Entry where these required 
agreements/authorizations are not in place.
    Prior to this amendment, the requirements for these specific 
agreements and authorizations by a Gateway did not address alternative 
international payments models in which the Gateway's own account holder 
or customer (rather than the ODFI) has established an arrangement and 
entered into an agreement with the Gateway to move funds out of the 
U.S. for further credit to a foreign account.
 Return of Outbound IAT Entry by Foreign Gateway--Transmission 
of ACH Return by Gateway to ODFI
    This amendment clarified the timeframe for a Gateway to transmit an 
ACH Return Entry for any Outbound IAT Entry that was properly returned 
to it by a Foreign Gateway.
 Identification of the Foreign Funding Financial Institution 
Within an IAT Entry
    This amendment revised the descriptions of several fields in the 
Fourth IAT Addenda Record to clarify that this information, when 
contained in an Inbound IAT Entry, must identify the foreign financial 
institution that provides the funding for the transaction.
 Clarification of Originator Identification Field
    This amendment revised the description of the Originator 
Identification Field to address how the field must be populated in 
various circumstances. Three specific conditions addressed by this 
change are:
    Originators Not Established Under the Laws of a State or the United 
States: The NACHA Operating Rules require the Originator Identification 
field to contain an identification number defined by Section 326 of the 
USA PATRIOT Act for any Originator that is not a natural person and is 
not established or organized under the laws of a State or the United 
States. However, the U.S. Treasury has not defined such a numbering 
scheme, leaving a gap within the Rules as to how to identify a foreign 
Originator within the ACH record. To close this gap, this amendment 
established the same methodology used in the wire transfer system, 
which defines the DDA account number at the foreign financial 
institution as the Originator Identification Number.
    Use of Leading Characters as Part of the Originator Identification 
Number: This change explicitly permits Originators and ODFIs to include 
a one-digit alphameric code in the first position of the Originator 
Identification Field to allow for further identification and handling 
of the payment by the ODFI.
    Identification of Third-Party Senders in IAT Entries: This 
amendment broadened the definition of the Originator Identification 
Field to permit inclusion of the tax identification number of either 
the Originator or the Third-Party Sender when the ODFI has the 
contractual relationship with the Third-Party Sender rather than the 
Originator of the Entry.
 Return Reason Codes R80-R84: Clarification of Use for Outbound 
IAT Entries Only
    This amendment revised the descriptions of Return Reason Codes R80-
R84 (which are used solely by a Gateway) to clarify that these codes 
are applicable only to Outbound IAT Entries.
 Expansion of Return Reason Code R84 (Entry Not Processed by 
Gateway Operator)
    This amendment broadened the scope of Return Reason Code R84 (Entry 
Not Processed by Gateway) to accommodate a Gateway's return of an 
Outbound IAT Entry when it is unable to process the transaction because 
the payment system in the foreign receiving country does not

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support a particular rule or function defined as part of the domestic 
ACH Network.
2. Minor Impact Issues
    These NACHA Operating Rules changes include editorial changes to 
grammar, clarifications of intent, changes that involve minor software 
modifications and so forth, including the following:
     Modification of the Definition of XCK Ineligible Items
     Clarification of Recurring TEL Authorization Retention 
Requirements
     Correction to payment Type Code for TEL Entries
     Correction to Definition of Improper ARC and BOC Debit 
Entries
    We are proposing to accept all the foregoing minor impact changes.
3. Risk Management Enhancements
    This amendment extended the deadline by which an audit of 
compliance with the NACHA Operating Rules must be completed. We are 
proposing not to accept this amendment because the compliance and audit 
requirements of the NACHA Operating Rules are not incorporated in Part 
210.
4. Pain Points in the Rules--Phase Two
     Elimination of WEB Exposure Limits. This amendment removed 
the requirement that ODFIs establish separate WEB exposure limits for 
Originators and Third-Party Senders. This amendment does not affect 
Federal agencies because the WEB exposure limits are not incorporated 
in Part 210.
     Modification of Accounts Receivable (ARC) Entries to 
Permit the Conversion of Checks Tendered in Person for the Payment of a 
Bill at a Manned Location. This amendment modified the scope of the ARC 
application to permit the conversion of checks tendered in person for 
the payment of a bill at a manned location. The rule also requires 
Originators accepting bill payments in this in-person environment to 
provide a copy of the authorization notice to the Receiver at the time 
of the transaction. We are proposing to accept this rule change.

D. 2013 NACHA Operating Rules Book Changes

1. IAT Modifications
    Several amendments to the IAT rule were enacted in the 2013 NACHA 
Operating Rules book. We are proposing to adopt all the amendments, as 
follows:
 Use of Return Reason Code R16 to Identify OFAC-Related Returns
    This amendment expanded the title and description of Return Reason 
Code R16 (Account Frozen) to accommodate this code's use for an RDFI's 
return of an Entry based on an instruction from OFAC.
 Return Reason Code and Change Code for Gateway Use With 
Incorrectly-Coded International Payments
    This amendment established two new codes--one Return Reason Code 
and one Change Code--for use by Gateways to advise ODFIs and 
Originators that funds related to a domestically-coded Entry (i.e., 
PPD, CCD, etc.) are being moved out of the country and that the Entry 
should have been formatted as an IAT Entry. LIST NEW CODES The new 
codes enable the Gateway to process or return the payment, depending on 
its risk tolerance, while conveying critical payment information back 
to the ODFI.
 Corrected Data for IAT Entries--NOC Code Descriptions
    This amendment corrected the descriptions of Change Codes C04 
(Incorrect Individual Name/Receiving Company Name) and C09 (Incorrect 
Individual Identification Number) as they relate to IAT Entries.
 ODFI Warranties--Compliance With Foreign Payment System Rules
    This amendment narrowed the scope of the ODFI warranty of 
compliance with foreign payment system rules for outbound IAT entries 
to focus only on authorization of the entry when such authorization is 
required by the laws or payment system rules of the receiving country.
2. Stop Payments
    Effective September 20, 2013, the NACHA Operating Rules will be 
amended to incorporate two additional conditions under which a stop 
order relating to a debit entry to a non-Consumer account would lapse. 
Under the amendment, a stop order would expire if withdrawn by the 
Receiver or if the debit entry to which the order relates is returned. 
The amendment, which we are proposing to accept, incorporates current 
industry practice into the NACHA Operating Rules.
3. Originator Obligations With Respect to Notifications of Change for 
Single Entries
    Effective September 20, 2013, the NACHA Operating Rules will be 
amended to make optional the Originator's response to Notifications of 
Change for Single Entry payments. Specifically, Originators will no 
longer be required to make changes requested within Notifications of 
Change identified as Single Entry items. We are proposing to accept 
this amendment.
4. Health Care Payments Via ACH
    Effective September 20, 2013, the NACHA Operating Rules will be 
amended to support health plans' and health care providers' use of the 
ACH Network by adopting processing enhancements that address requests 
made by the health care industry, as well as specific transaction 
identification and formatting requirements for health care claim 
payments. The amendments operate in combination with health care 
industry operating rules for electronic funds transfers (EFT) and 
electronic remittance advice (ERA) developed by the Council on 
Affordable Quality Healthcare (CAQH) Committee on Operating Rules for 
Information Exchange (CORE), in collaboration with NACHA, and the 
designation by the Department of Health and Human Services (HHS) of the 
CCD entry as the health care EFT standard transaction. Taken together, 
these sets of rules provide for the efficient and standardized 
electronic payment of health care claims, and the reassociation of the 
payments with health care remittance information (``reassociation''), 
resulting in administrative simplification by health plans and health 
care providers.
    The NACHA Rule amendments will enable financial institutions to be 
ready to send and receive health care CCD entries for health plans and 
health care providers, which in turn will be working toward 
implementation of HHS' January IFC and August IFC by their January 1, 
2014 compliance deadline. Originators and ODFIs could begin using the 
transaction identification and formatting standards within this Rules 
earlier than the effective date; use of the standards will not cause 
any processing problems for RDFIs and Receivers. Similarly, RDFIs that 
do not do so already could begin offering an electronic option for the 
delivery or provision of payment related information as soon as they 
are ready.
    The five major components of the Health Care EFT rule changes are 
as follows:
     Unique Identification of Health Care EFTs
     Additional Formatting Requirements for Health Care EFT 
Transactions
     Delivery of Payment Related Information (Reassociation 
Number)

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     Addition of New EDI Data Segment Terminator
     Health Care Terminology within the NACHA Operating Rules
    We are proposing to accept all of the NACHA Operating Rules changes 
related to Health Care EFTs.
 5. ACH Security Framework
    This amendment to the NACHA Operating Rules created a Security 
Framework aimed at protecting the security and integrity of certain ACH 
data throughout its lifecycle. The Security Framework establishes 
minimum data security obligations for ACH Network participants to 
protect ACH data within their purview by:
     Requiring non-consumer Originators, Participating DFIs, 
Third Party Service Providers, and Third-Party Senders to establish, 
implement, and, as appropriate, update security policies, procedures, 
and systems related to the initiation, processing, and storage of 
Entries. These policies, procedures, and systems must:
    [cir] Protect the confidentiality and integrity of Protected 
Information;
    [cir] Protect against anticipated threats or hazards to the 
security or integrity of Protected information; and
    [cir] Protect against unauthorized use of Protected Information 
that could result in substantial harm to a natural person
     Requiring each Participating DFI, Third-Party Service 
Provider, and Third-Party Sender to verify, as part of its annual ACH 
Rules Compliance Audit, that it has established, implemented, and 
updated the data security policies, procedures, and systems required by 
the Security Requirements rules.
     Requiring ODFIs to use a commercially reasonable method to 
establish the identity of each non-Consumer Originator or Third-Party 
Sender with which the ODFI enters into an Origination Agreement.
    We are proposing not to accept the Security Framework requirements 
in Part 210 because Part 210 does not incorporate the rules compliance 
and audit requirements that the Security Framework expands. Federal 
agencies are subject to various Federal requirements governing data and 
systems security and the protection of sensitive information, such that 
additional NACHA Operating Rules requirements would be unduly 
burdensome and unnecessary.
6. Data Passing (Risk Management)
    This amendment prohibited sharing of certain customer information 
by Originators, Third-Party Service Providers and ODFIs for the purpose 
of initiating debit Entries that are not covered by the original 
authorization. We are proposing to accept this amendment.
7. ODFI Return Rate Reporting (Risk Management)
    This amendment reduced the ODFI Return Rate Reporting period from 
60 days to 30 days for reducing return rates below the return rate 
threshold before initiation of a NACHA Operating Rules enforcement 
proceeding. This amendment does not affect Federal agencies because 
Part 210 does not incorporate the NACHA Operating Rules enforcement 
provisions.
8. Incomplete Transactions (Risk Management)
    This amendment allows the return of a debit Entry to a Consumer 
Account within 60 days of the Settlement Date for an ``Incomplete 
Transaction,'' which is defined as a transaction for which a Third 
Party Sender debits a consumer's account to collect funds, but does not 
complete the corresponding payment to the party to which payment is 
owed. We are proposing to accept this amendment.

III. Section-by-Section Analysis

    In order to incorporate in Part 210 the NACHA Rule changes that we 
are accepting, we are replacing references to the 2009 ACH Rules book 
with references to the 2013 NACHA Operating Rules and Guidelines book. 
For those NACHA Rule changes that we are not incorporating 
(specifically, amendments to the rules enforcement provisions), Part 
210 already provides that the rules enforcement provisions of Appendix 
11 of the NACHA Operating Rules do not apply to Federal agency ACH 
transactions. See Sec.  210.2(d)(3) The reference to Appendix 11 is 
being replaced with a reference to Appendix 10 to reflect numbering 
changes to the rule.

Sec. 210.2

    We are proposing to amend the definition of ``applicable ACH 
Rules'' at Sec.  210.2(d) to reference the rules published in NACHA's 
2013 Rules book rather than the rules published in NACHA's 2009 Rules 
book. The definition has been updated to reflect the reorganization and 
renumbering of the NACHA Operating Rules. The changes to the definition 
are not substantive except:
    (1) The deletion of the reference to ACH Rule 2.11.2.3, which 
required ODFIs to establish exposure limits for Originators of 
Internet-initiated debit entries. That requirement has been eliminated 
by NACHA;
    (2) The exclusion from the definition of Section 2.2, which 
generally requires ODFIs to enter into agreements with Originators and 
Third-Party Senders and perform certain due diligence with respect to 
those entities; and
    (3) The elimination of a temporary exclusion from the IAT rules for 
debit entries originated by agencies and for certain entries delivered 
to Mexico, Canada and Panama through the FedGlobal \SM\ ACH Payment 
Service. Those references have been deleted because the temporary 
exclusion has now expired.
    We are proposing to amend the definition of ``Service'' at Sec.  
210.2(p) to reflect the renaming of the Financial Management Service to 
the Bureau of the Fiscal Service.

Sec. 210.3(b)

    We are proposing to amend Sec.  210.3(b) by replacing the 
references to the ACH Rules as published in the 2009 Rules book with 
references to the ACH Rules as published in the 2013 NACHA Operating 
Rules and Guidelines book.

Sec. 210.6

    References to ACH Rules 2.2.3, 2.4.5, 2.5.2, 4.2 and 8.7.2 have 
been replaced by references to Subsections 2.4.4, 2.8.4, 4.3.5, 2.92, 
3.2.2, and 3.13.3 to reflect re-numbering of the NACHA Operating Rules.
    In subsection (g), references to ACH Rules 2.1.2 and 3.12 have been 
replaced by references to Subsections 2.3.2.2 and 2.5.10.1 to reflect 
re-numbering of the NACHA Operating Rules.
    Subsection (h), which addressed return item service fees, has been 
revised. This subsection currently provides that an agency that had 
authority to collect returned item service fees can 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, provided a notice was given to the receiver. Prior 
to 2011, the NACHA Operating Rules did not permit return item fees to 
be collected without the receiver's written authorization. In 2011, the 
NACHA Operating Rules were amended to include a new Entry type, Return 
Fee Entry, that may be used to collect return fees for certain ACH 
debits and qualifying checks that are returned NSF, subject to the 
provision of notice to the Receiver [ACH Rule 2.14]. Subsection (h) is 
revised to reflect this change.

Sec. 210.8

    The references to ACH Rules 2.2.3, 2.4.5, 2.5.2, 4.2, and 8.7.2 
have been replaced with references to ACH Rules

[[Page 75533]]

Subsections 2.4.4, 2.8.4, 4.8.5, 2.9.2, 3.2.2, and 3.13.3 to reflect 
re-numbering of the ACH Rules. In addition, the regulatory citation to 
Regulation E has been updated to reflect its re-codification at 12 CFR 
Part 1005.

IV. Procedural Analysis

Request for Comment on Plain Language

    Executive Order 12866 requires each agency in the Executive branch 
to write regulations that are simple and easy to understand. We invite 
comment on how to make the proposed rule clearer. For example, you may 
wish to discuss: (1) Whether we have organized the material to suit 
your needs; (2) whether the requirements of the rule are clear; or (3) 
whether there is something else we could do to make these rule easier 
to understand.

Regulatory Planning and Review

    The proposed rule does not meet the criteria for a ``significant 
regulatory action'' as defined in Executive Order 12866. Therefore, the 
regulatory review procedures contained therein do not apply.

Regulatory Flexibility Act Analysis

    It is hereby certified that the proposed rule will not have a 
significant economic impact on a substantial number of small entities. 
The proposed rule imposes on the Federal government a number of changes 
that NACHA, The Electronic Payments Association, has already adopted 
and imposed on private sector entities that utilize the ACH. The 
proposed rule does not impose any additional burdens, costs or impacts 
on any private sector entities, including any small entities. 
Accordingly, a regulatory flexibility analysis under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq) is not required.

Unfunded Mandates Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 
1532 (Unfunded Mandates Act), requires that the agency prepare a 
budgetary impact statement before promulgating any rule likely to 
result in a Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. If a budgetary 
impact statement is required, section 205 of the Unfunded Mandates Act 
also requires the agency to identify and consider a reasonable number 
of regulatory alternatives before promulgating the rule. We have 
determined that the proposed rule will not result in expenditures by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. Accordingly, 
we have not prepared a budgetary impact statement or specifically 
addressed any regulatory alternatives.

List of Subjects in 31 CFR Part 210

    Automated Clearing House, Electronic funds transfer, Financial 
institutions, Fraud, and Incorporation by reference.

Words of Issuance

    For the reasons set out in the preamble, we propose to amend 31 CFR 
part 210 as follows:

PART 210--FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED 
CLEARING HOUSE

0
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.

0
2. Revise Sec.  210.2, 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, 2013, as published in ``2013 NACHA Operating 
Rules and Guidelines: A Complete Guide to Rules Governing the ACH 
Network'' and supplements thereto, except:
    (1) Subsections 1.2.2, 1.2.3, 1.2.4, 1.2.5 and 1.2.6; Appendix 
Seven; Appendix Eight; Appendix Nine and Appendix Ten (governing the 
enforcement of the ACH Rules, including self-audit requirements, and 
claims for compensation);
    (2) Section 2.10 and Section 3.6 (governing the reclamation of 
benefit payments);
    (3) The requirement in Appendix Three that the Effective Entry Date 
of a credit entry be no more than two Banking Days following the date 
of processing by the Originating ACH Operator (see definition of 
``Effective Entry Date'' in Appendix Three);
    (4) Section 2.2 (setting forth ODFI obligations to enter into 
agreements with, and perform risk management relating to, Originators 
and Third-Party Senders) and Section 1.6 (Security Requirements);
    (5) Section 2.17 (requiring reporting and reduction of high rates 
of entries returned as unauthorized); and
    (6) The requirements of ACH Rule 2.11 (International ACH 
Transactions) shall not apply to entries representing the payment of a 
Federal tax obligation by a taxpayer.
* * * * *
    (p) Service means the Bureau of the Fiscal Service, Department of 
the Treasury.
* * * * *
0
3. Revise Sec.  210.3, 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, 2013, as published in the ``2013 NACHA Operating Rules and 
Guidelines: A Complete Guide to Rules Governing the ACH Network,'' and 
supplements thereto. 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 ``2013 NACHA Operating Rules and Guidelines'' 
are available from NACHA--The Electronic Payments Association, 13450 
Sunrise Valley Drive, Suite 100, Herndon, Virginia 20171. Copies also 
are available for public inspection at the Office of the Federal 
Register, 800 North Capitol Street NW., Suite 700, Washington, DC 
20002; and the Bureau of the Fiscal Service, 401 14th Street SW., Room 
400A, Washington, DC 20227.
    (2) Any amendment to the applicable ACH Rules that is approved by 
NACHA--The Electronic Payments Association after September 21, 2013 
shall not apply to Government entries unless the Service expressly 
accepts such amendment by publishing notice of acceptance of the 
amendment to this part in the Federal Register. An amendment to the ACH 
Rules that is accepted by the Service shall apply to Government entries 
on the effective date of the rulemaking specified by the Service in the 
Federal Register notice expressly accepting such amendment.
0
4. Revise Sec.  210.6 to read as follows:


Sec.  210.6  Agencies.

    Notwithstanding any provision of the ACH Rules, including 
Subsections 2.4.4, 2.8.4, 4.3.5, 2.92, 3.2.2, and 3.13.3, agencies 
shall be subject to the obligations and liabilities set forth in this 
section in connection with Government entries.
    (a) Receiving entries. An agency may receive ACH debit or credit 
entries only with the prior written authorization of the Service.
    (b) Liability to a recipient. An agency will be liable to the 
recipient for any loss sustained by the recipient as a result of the 
agency's failure to originate a credit or debit entry in accordance

[[Page 75534]]

with this part. The agency's liability shall be limited to the amount 
of the entry(ies).
    (c) Liability to an originator. An agency will be liable to an 
originator or an ODFI for any loss sustained by the originator or ODFI 
as a result of the agency's failure to credit an ACH entry to the 
agency's account in accordance with this part. The agency's liability 
shall be limited to the amount of the entry(ies).
    (d) Liability to an RDFI or ACH association. Except as otherwise 
provided in this part, an agency will be liable to an RDFI for losses 
sustained in processing duplicate or erroneous credit and debit entries 
originated by the agency. An agency's liability shall be limited to the 
amount of the entry(ies), and shall be reduced by the amount of the 
loss resulting from the failure of the RDFI to exercise due diligence 
and follow standard commercial practices in processing the entry(ies). 
This section does not apply to credits received by an RDFI after the 
death or legal incapacity of a recipient of benefit payments or the 
death of a beneficiary as governed by subpart B of this part. An agency 
shall not be liable to any ACH association.
    (e) Acquittance of the agency. The final crediting of the amount of 
an entry to a recipient's account shall constitute full acquittance of 
the Federal Government.
    (f) Reversals. An agency may reverse any duplicate or erroneous 
entry, and the Federal Government may reverse any duplicate or 
erroneous file. In initiating a reversal, an agency shall certify to 
the Service that the reversal complies with applicable law related to 
the recovery of the underlying payment. An agency that reverses an 
entry shall indemnify the RDFI as provided in the applicable ACH Rules, 
but the agency's liability shall be limited to the amount of the entry. 
If the Federal Government reverses a file, the Federal Government shall 
indemnify the RDFI as provided in the applicable ACH Rules, but the 
extent of such liability shall be limited to the amount of the entries 
comprising the duplicate or erroneous file. Reversals under this 
section shall comply with the time limitations set forth in the 
applicable ACH Rules.
    (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. The requirements 
of ACH Rules Subsections 2.3.2.2 and 2.5.10.1 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) Return Fee Entry. An agency that has authority to collect 
returned item service fees may do so by originating a Return Fee Entry 
if the agency provides notice to the Receiver in accordance with the 
ACH Rules.''
0
5. Amend Sec.  210.8 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  210.8  Financial institutions.

    (a) Status as a Treasury depositary. The origination or receipt of 
an entry subject to this part does not render a financial institution a 
Treasury depositary. A financial institution shall not advertise itself 
as a Treasury depositary on such basis.
    (b) Liability. Notwithstanding ACH Rules Subsections 2.4.4, 2.8.4, 
4.8.5, 2.9.2, 3.2.2, and 3.13.3, if the Federal Government sustains a 
loss as a result of a financial institution's failure to handle an 
entry in accordance with this part, the financial institution shall be 
liable to the Federal Government for the loss, up to the amount of the 
entry, except as otherwise provided in this section. A financial 
institution shall not be liable to any third party for any loss or 
damage resulting directly or indirectly from an agency's error or 
omission in originating an entry. Nothing in this section shall affect 
any obligation or liability of a financial institution under Regulation 
E, 12 CFR part 1005, or the Electronic Funds Transfer Act, 12 U.S.C. 
1693 et seq.
* * * * *

    Dated: December 3, 2013.
Richard L. Gregg,
Fiscal Assistant Secretary.
[FR Doc. 2013-29202 Filed 12-11-13; 8:45 am]
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