[Federal Register Volume 59, Number 189 (Friday, September 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-23009]
[[Page Unknown]]
[Federal Register: September 30, 1994]
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Part IV
Department of the Treasury
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Fiscal Service
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31 CFR Part 210
Federal Government Participation in the Automated Clearing House;
Proposed Rule
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 210
RIN Number 1510-AA39
Federal Government Participation in the Automated Clearing House
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Proposed rule.
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SUMMARY: This document proposes to revise regulations which define the
responsibilities and liabilities of the Federal Government
(Government), Federal Reserve Banks, financial institutions, Receivers
and Originators doing business with the Government through the
Automated Clearing House (ACH) system. This revision proposes
substantive changes to the existing regulations and supersedes the
savings allotment provisions of Part 209 because savings allotment and
recurring benefit payments formerly under the terms of Part 209 are
made by the ACH method under the terms of Part 210.
These revisions are intended to provide a regulatory basis for
broader use of the ACH system to meet the future payment, collection,
and information flow needs of the Government. These revisions also are
intended to bring Government regulations more in line with financial
industry rules so as to eliminate, as much as possible, the need for
the financial industry to operate under two sets of rules for
processing ACH transactions. In general, these revisions accept the
private industry ACH Rules as promulgated by the National Automated
Clearing House Association (NACHA), unless it is determined that, in
its role of protecting the public trust, it is not in the best
interests of the Government to do so. The exceptions to the ACH Rules
are cited in these regulations. The Government already uses ACH Rules
transaction formats and applies many ACH Rules to Government entries.
These regulations will continue to provide provisions which protect the
substantive rights of participants and enumerate their liabilities.
The major reasons for the proposed changes are to provide a clearer
and broader framework, and greater leeway for the Department of the
Treasury, Financial Management Service (the Service), to make ongoing
modifications to policies, Government operating instructions, and
interpretations of this regulation. This will permit the Service to
manage effectively the transition to fully electronic processing,
respond more rapidly to changes in commercial rules and operating
procedures, and utilize commercial ACH processes or rules, unless it is
determined not to be in the best interest of the Government. It also
will provide the Service a regulatory basis for working with the
financial community to develop or enhance ACH products and services as
they become available in the banking industry, if they are consistent
with the terms of the regulation described in this part. This requires
a complete rewording of Subpart A and Subpart B.
DATES: Comments must be received on or before November 29, 1994.
ADDRESSES: Comments may be mailed to the Cash Management Policy and
Planning Division, Financial Management Service, U.S. Department of the
Treasury, Room 511, Liberty Center, 401 14th Street SW., Washington, DC
20227.
FOR FURTHER INFORMATION CONTACT: John Galligan (202) 874-6935
(Director, Cash Management Policy and Planning Division); or Margaret
Roy (Principal Attorney) (202) 874-6680.
SUPPLEMENTARY INFORMATION:
Background
Part 210 of Title 31 of the Code of Federal Regulations sets forth
the rights and liabilities of the Government, Federal Reserve Banks,
financial institutions and recipients where recipients of Government
payments authorize the payments to be made by the ACH method. The
regulations in this part were promulgated in 1975 and revised in 1976,
1984, 1987, 1989, and 1993.
The Service is revising these regulations to provide the framework
necessary to achieve its ACH development strategy which involves the
following three objectives: (1) Broaden the use of the ACH network for
payments and collections; (2) move closer to industry standards to
easily expand Government services within existing networks; and, (3)
pursue a paperless environment.
The Service proposes to increase the use of the ACH network by
adapting the regulatory framework of Part 210 to the emerging body of
ACH products and services. This requires an expansion of the regulation
to cover activities that are, or in the future may be, handled over the
ACH network, including collections and the movement of information
related to monetary transactions. In this way, the Service and Federal
program agencies will be in a position to take full advantage of the
ACH network to move as many of the Government's transactions as
possible to ACH.
Moving closer to industry standards, as set forth by NACHA through
the ACH Rules, also will enable the Government to expand its use of the
ACH network. This will give the Service the flexibility to adopt, when
in the best interest of the Government and consistent with legal
requirements, those ACH practices and procedures that are proven viable
in the commercial sector, and to work within industry rulemaking
practices to introduce new practices and procedures. This requires a
complete reworking of Subpart A and Subpart B.
The Service, in its pursuit toward a paperless environment, will be
able to streamline and automate such diverse payment-related
information processes as change requests, authorization activities, and
reclamations. In the past, these have been expensive paper-based
ancillary ACH activities. Advances in the ACH network have shown the
efficiency of automating these processes.
The following methods were used by the Service to determine which
revisions to the rules were necessary to achieve its ACH development
strategy. First, an ACH work group was established to identify the
major differences between the Government and private industry. The work
group wrote issue papers discussing the differences along with options
for resolving them. Second, a rules impact assessment was developed to
determine how the differences in rules affected financial institutions.
The assessment involved asking representatives from financial
institutions about the impact of the current Government ACH rules and
procedures, and an analysis of their responses. Third, the Service
conducted a series of Federal agency forums to discuss options to
resolve the differences. These efforts provided the basis for making
the proposed revisions.
The Service is proposing:
(1) Clarification of the authorization and revocation processes to
offer additional consumer protection and to facilitate automated or
streamlined authorization procedures, including procedures to authorize
debits.
(2) Clarification of the liability of participants with regard to
authorizations, revocations, prenotification entries, notification of
change entries, and commercial-to-Government entries.
(3) That liabilities be associated with failure to examine and act
upon prenotifications that may be originated by the Government.
(4) A regulatory framework for equitable adjustments when a
financial institution either has been enriched, or harmed, as a result
of erroneous ACH entries. The provision will allow Federal agencies to
abide by industry rules if they have independent authority and choose
to do so.
(5) That after due consideration of commercial practices, the
Service may publish procedures under which it may authorize reversing
entries to correct duplications or errors.
(6) Improvements to the reclamation of post-death benefits portion
of the regulation, and a framework for paperless processing of the
information and money associated with these transactions.
(7) To substitute certain terms used in the ACH Rules for terms
which the Government uses in the same way as those defined in the ACH
Rules, and to include those terms the Government uses differently from
the ACH Rules or which are not contained in the ACH Rules. For example,
current Part 210 uses the term ``payment date,'' while the ACH Rules
use the term ``settlement date.'' Since both of these terms are used in
the same way, the Service will use the term ``settlement date.''
The Service will accept or reject amendments to the NACHA Operating
Rules and NACHA Operating Guidelines which may affect Government ACH
transactions. Therefore, Section 210.2(a)(4) proposes that ``The
Service will indicate its acceptance or rejection of amendments to
NACHA Operating Rules and NACHA Operating Guidelines in effect on
September 27, 1994, by publishing a notice in the Federal Register
prior to the effective date of the amendments.''
Rulemaking Analysis
Treasury has determined that this regulation is not a significant
regulatory action as defined in Executive Order 12866. Accordingly, a
regulatory assessment is not required. It is hereby certified that this
revision will not have a significant economic impact on a substantial
number of small entities. Accordingly, a regulatory flexibility
analysis is not required. The included changes are expected to result
in improvements to the ACH process with advantages to institutions and
recipients.
List of Subjects in 31 CFR Part 210
Automated Clearing House, banks, banking, electronic funds
transfer, Federal Reserve Banks, financial institution, Government
employees, wages.
Accordingly, Part 210 of Title 31 of the code of Federal
regulations is proposed to be revised, as follows:
PART 210--FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED
CLEARING HOUSE
Subpart--A General
Sec.
210.1 Scope of regulations.
210.2 General.
210.3 Authorizations and revocations of authorizations.
210.4 The Government.
210.5 Federal Reserve Banks.
210.6 Financial institutions.
210.7 Fraud.
Subpart B--Reclamations
210.8 General terms of reclamations.
210.9 Knowledge of death or legal incapacity of Receiver or death
of entitled beneficiary.
210.10 Liabilities/limitations.
210.11 Notice to Account Holders.
210.12 Erroneous death information, restitution and over
recoveries.
Subpart C--Discretionary Salary Allotments
210.13 General.
Subpart D--Savings Allotments
210.14 General.
Subpart E--Definitions
210.15 Definitions.
Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 U.S.C. 321, 3301,
3302, 3321, 3335 and other provisions of law.
Subpart A--General
Sec. 210.1 Scope of regulations.
This part governs the way the Federal Government (Government) uses
the Automated Clearing House (ACH) network to effect electronic credits
and debits, and non-value transactions. This part supersedes the
savings allotment provisions of Part 209 of this title by including
provisions for savings allotments (available hereunder only to Federal
civilian employees). These transactions are made by the ACH payment
method under the terms of this part. Regulations requiring the
collection and disbursement of all ACH Federal funds via Electronic
Funds Transfer (EFT), when cost effective, practicable, and consistent
with existing statutes, can be found at Part 206 of this title.
Regulations promulgated by the Bureau of the Public Debt governing
payments made by the ACH method for principal and interest on
Government securities can be found at Part 370 of this title.
Sec. 210.2 General.
(a) Governing law. Federal payments and collections made through
the ACH method are governed by the terms of this part, the instructions
issued under this part, Federal statutes and Regulation E. Federal
payments and collections also are governed by the operating rules and
guidelines promulgated by the National Automated Clearing House
Association (NACHA), in effect on September 27, 1994, only to the
extent they do not conflict with this part, the instructions issued
under this part, Federal statutes and Regulation E.
(1) This part furthers the Government's obligation to protect the
public trust, limits the financial liability of the Government, and
ensures clarity in the application of the ACH Rules to Government
participants.
(2) The Department of the Treasury, Financial Management Service
(the Service), is responsible for publishing operating policies,
procedures and guidelines for Government payment and collection
transactions using the ACH method. These instructions will be published
by the Service in its Treasury Financial Manual (TFM) and/or other
operating guidelines.
(3) The NACHA operating guidelines may be found in the ACH Rules
book, published by NACHA and distributed through regional ACH
associations.
(4) The Service will indicate its acceptance or rejection of
amendments to NACHA Operating Rules and NACHA Operating Guidelines in
effect on September 27, 1994, by publishing a notice in the Federal
Register prior to the effective date of the amendments. Failure to
accept or reject prior to the effective date of the amendments will be
deemed a rejection of such amendments.
(b) Breach of warranty, compensation for breach of warranty or
errors. Each participant named under this part warrants to all other
parties that it has handled entries in accordance with the requirements
stated in this part. This warranty shall be limited to the amount of
the payment, with one exception: Agencies may use the compensation
rules found in Appendix VIII of the ACH Rules. Use of the compensation
rules shall be preceded by a written agreement. Funding, authority, and
agreements for any such payments will be the responsibility of the
agency, not the Department of the Treasury or the Service.
(c) Arbitration rules in cases of dispute. Agencies may use
arbitration requirements found in Appendix IX of the ACH Rules. Use of
the arbitration provisions shall be preceded by a written agreement for
their use. Funding for any expenses incurred in following the
arbitration requirements will be the responsibility of the agency, not
the Department of the Treasury or the Service.
Sec. 210.3 Authorizations and revocations of authorizations.
(a) Requirements for authorization. The requirements for
authorization to originate and receive credit and debit transactions
are as follows:
(1) Every Government Originator shall obtain prior authorization
from the Receiver for ACH transactions originated by the Government.
The Government Originator shall exercise due diligence in verifying the
identity of any Receiver who presents an authorization to the
Government.
(2) All Originators sending ACH credits with a value greater than
zero to the Government shall enter into an agreement with the
Government entity to which the credit is directed prior to transmitting
the first credit. Specifications for the agreement can be found in the
TFM.
(3) A Receiving Depository Financial Institution (RDFI) shall
verify the identity of any Receiver who initiates or executes an
authorization through the RDFI to receive credits or debits originated
by the Government. The RDFI shall exercise due diligence in such
identification, at a minimum applying the standards used for
negotiation of financial instruments.
(4) The title of the account designated to receive a payment shall
include the name of the Receiver, except as provided as follows:
(i) In the case of discretionary allotments, the allotter may
authorize a credit to any other Receiver. The Receiver's agreement is
not required for the authorization or revocation;
(ii) In the case of a master account/sub-account structure, the
accounts need not include the name of the Receiver. However, a clearly
traceable audit trail to the payment shall exist in the sub-account,
and the Receiver must retain control over the funds.
(5) Government benefit payments shall be deposited only into a
consumer account except under conditions stated in
Sec. 210.3(a)(4)(ii). The definition of consumer account includes non-
participating depository financial institutions that receive Government
payments.
(6) Unless expressly authorized in writing, Originators and
Originating Depository Financial Institutions (ODFIs) shall not
initiate, under any circumstances, debit entries to the Government.
ODFIs shall be subject to the liabilities in Sec. 210.6(e)(2) for any
unauthorized debits.
(b) Terms of Receiver authorizations. By executing an authorization
for a Government ACH participant to initiate credits or debits, a
Receiver agrees:
(1) To the provisions of this part;
(2) To provide accurate information;
(3) To verify their identity to the satisfaction of the RDFI or
Government Originator, whichever has accepted the authorization;
(4) That any new authorization pertaining to a credit or debit
supersedes any previous authorization pertaining to the same credit or
debit;
(5) That the Government reserves the right to use reversal entries
in the event that it originates duplicate files or makes entries in
error; and,
(6) That Government benefits shall be sent to a designated RDFI and
that the full amount of the Government benefit shall be credited to
either a checking or a savings account, but not both.
(c) Termination and revocation of authorizations. An ACH
authorization shall remain valid until it is terminated or revoked by--
(1) Receipt by the Government Originator of a written request from
the Receiver, unless a later effective date is requested by the
Receiver;
(2) A change in the title of an account which removes or adds the
name of a Receiver, or otherwise alters the interest of the Receiver of
Government credits, except as provided in Sec. 210.3(a)(4)(i) & (ii) of
this part;
(3) The death of a Receiver or the death of a beneficiary on whose
behalf the Receiver is accepting credits;
(4) Closing of the Receiver's account at the RDFI by the Receiver
or by the RDFI. If the RDFI is closing the account, it shall provide 30
days written notice to the Receiver before it takes any action;
(5) Inability of the RDFI to process the item correctly or properly
because of incorrect transaction instructions;
(6) Failure to meet any of the conditions specified in the terms of
the authorization;
(7) A determination by the Government Originator that the
conditions of authorization have changed and accordingly, the
authorization is void as of the time of the changed condition;
(8) Return by the RDFI of one or more debit entries originated by
the Government for reasons of insufficient funds, stop payment orders,
or other similar reasons; or,
(9) The RDFI's insolvency, closure by any State or Federal
regulatory authority or by corporate action, or appointment of a
receiver, conservator, liquidator or other officer. In each event, the
authorization shall remain valid if a successor is named. At the
Service's discretion, the Government may temporarily transfer
authorizations to another RDFI. The transfer is valid until either a
new authorization is executed by the Receiver, or 120 days have elapsed
since the insolvency, closure or appointment, whichever occurs first.
(d) Assignment of benefit payments prohibited. Except as authorized
by law, an ACH authorization shall not be used to assign benefits to a
party other than the beneficiary, or someone designated by the
Government Originator to act on behalf of the beneficiary.
Sec. 210.4 The Government.
(a) Timeliness of entries. Government ACH participants shall
forward all ACH transactions they prepare to an ACH Operator site
designated by the Federal Reserve Bank. Government ACH participants
shall conform with the timing requirements of the Federal Reserve Bank.
(b) Authorization to receive ACH entries. Government participants
may receive ACH credit entries with a value greater than zero. Prior
written authorization from the Service is required, and the Service
will direct the Federal Reserve Bank to take appropriate actions.
Government participants shall require ODFIs to initiate such credits to
the General Account of the Department of the Treasury at a Federal
Reserve Bank designated by the Government Participant in the
authorization agreement.
(c) Requirement to post or return ACH entries. Government
participants shall review all ACH credit entries with a value greater
than zero, that they receive. If the entries do not balance, are
incomplete, are clearly incorrect, or, are incapable of being
processed, the Government participants shall advise the Federal Reserve
Bank to take appropriate action. Timing of the advice shall be
according to Federal Reserve Bank deadlines and instructions. In the
event of an unauthorized debit to the Government, the Government
participant shall transmit a Return entry to the designated Federal
Reserve Bank, in time to effect same-day settlement.
(d) Timing of settlement by the Government. Government participants
shall make their authorized ACH transactions effective on the
designated settlement date.
(e) Prenotifications. Government participants may originate ACH
Prenotification entries prior to origination of the first ACH credit to
a Receiver. Government participants shall originate a Prenotification
prior to origination of the first debit to a Receiver. A Government
participant that is a Receiver of Prenotifications will verify and
respond to Prenotifications according to the ACH Rules.
(f) Notification of Change. Government participants shall originate
and receive Notification of Change entries and Refused Notification of
Change entries, except where the Government does not recognize a
particular change code. A list of acceptable change codes can be found
in the TFM.
(g) Limited liability of the Government. The Government will be
liable to a Receiver or Originator only for a failure to effect the
appropriate credit or debit entries to the Receiver's account. The
Government's total liability is limited to the amount of the payment
entry, unless the exception in Sec. 210.2(b) applies. The Government
will not be liable to any ACH association.
(h) Losses sustained by financial institutions. The Government will
be liable to financial institutions for losses sustained in processing
ACH credit and debit entries originated by a Government participant.
The Government's total liability is limited to the amount of the
payment entry, unless the exception in Sec. 210.2(b) applies. Financial
institutions shall have exercised due diligence, using standard
commercial practices, in following the transaction instructions
associated with the entry. The provisions of this subsection do not
apply to credits and debits received by the RDFI after the death or
legal incapacity of the beneficiary. Such credits and debits shall be
governed by Sec. 210.10 of this part.
(i) Acquittance. The appropriate crediting of the amount of an
entry to a Receiver's account shall constitute full acquittance of the
Government for the amount of the entry. The crediting of the amount of
an entry received by the Federal Reserve Bank and posted to Treasury's
General Account shall constitute full acquittance of the ODFI for the
amount of the entry. Full acquittance of the ODFI shall not occur if
the entries do not balance, are incomplete, are clearly incorrect, or,
are incapable of being processed.
Sec. 210.5 Federal Reserve Banks.
(a) Fiscal Agent role. Each Federal Reserve Bank serves as a Fiscal
Agent of the Government and is authorized to act as the Government's
ACH Operator.
(b) Routing and Transit Numbers. All routing and transit numbers
issued to Government participants require the prior approval of the
Service.
(c) Delivery and funds availability. The Federal Reserve Banks
shall make the Government's ACH entry information available to a
financial institution or its agent no later than the opening of
business for the financial institution on the settlement date. The
Federal Reserve Banks shall make funds available to the financial
institution for credit entries at the opening of business for the
Federal Reserve Banks on the settlement date as prescribed by the Board
of Governors of the Federal Reserve System. The Federal Reserve Banks
shall prescribe the medium which will be used.
(d) Authorization of Federal Reserve Banks to debit or credit
financial institutions. A financial institution that utilizes an
account at a Federal Reserve Bank and that transmits ACH transactions
to or from a Government participant, shall be deemed to authorize the
Federal Reserve Bank to use the account for settlement purposes.
(e) Federal Reserve Bank liability. Each Federal Reserve Bank shall
be responsible only to the Treasury and shall not be liable to any
other party for any loss resulting from the Federal Reserve Bank's
action under this part.
Sec. 210.6 Financial institutions.
(a) Acceptance of the terms of this part. Financial institution
acceptance or transmittal of ACH entries to or from participating
Government participants constitutes the financial institution's
agreement to the terms of this part, regardless of whether it has
executed an authorization.
(b) Funds availability. RDFIs shall make Government consumer credit
entries available to the Receiver for withdrawal not later than the
opening of business (the later of 9:00 a.m. local time or the time the
teller facilities, including automatic teller machines, are available
for customer account withdrawals).
(c) RDFI action in response to Government-originated
Prenotifications. Government Originators may send Prenotification
transactions to the RDFIs prior to the start of authorized credit or
debit entries.
(1) In addition to the responsibilities outlined in the ACH Rules,
the RDFI shall verify the entry by examining the Receiver's account
number and at least one other identifying data element. An example of
an identifying data element is the authorizing Receiver's name.
(2) RDFIs that fail to act upon proper and timely Government
Prenotifications, and RDFIs that fail to fully verify the identity of
the Receiver, shall be held liable to the Government. This liability
shall be the lesser of the Government's loss or the amount of the
credit or debit transaction(s) in question.
(d) Financial institution is not designated a Government
depositary. RDFIs to which a Government ACH entry is sent do not
become, by such action, a Government depositary and shall not advertise
themselves as Government depositaries.
(e) Financial institution liabilities. Financial institution
liabilities are as follows:
(1) A financial institution shall be liable to the Government for
losses sustained by the Government if the Government has correctly
handled the entry(ies). This liability is limited to the amount of the
entry(ies).
(2) ODFIs shall be liable for all unauthorized debits to the
Treasury General Account regardless of timeliness of the return entry.
As a remedy, the Service may instruct the Federal Reserve Bank to debit
the account utilized by the financial institution.
(3) Financial institutions will be held harmless for the
Government's losses if the financial institution notifies the
Government Originator of erroneous entries originated by the
Government. Such notification shall be by Notification of Change entry.
This relief from liability only applies to credits and debits received
by the financial institution 10 or more business days after a
Notification of Change is provided to the Government Originator.
Sec. 210.7 Fraud.
Identification of Receivers. An RDFI that executes an authorization
in which the Receiver's signature is forged or in which other
information is falsified, shall be liable to the Government for all
payments or collections made in reliance on the authorization. The
provisions of Sec. 210.3(a) also apply.
Subpart B--Reclamations
Sec. 210.8 General terms of reclamations.
(a) General. Credits originated by Government participants
subsequently may be determined to be erroneous because of the death or
legal incapacity of the Receiver or death of the beneficiary. The
Government reserves the right to recover these credits and hold the
RDFI liable for these funds. The terms ``reclamation'' and ``reclaim''
refer to the Government's action to recover these benefit payments.
Reclamation actions are strictly limited to circumstances that meet the
following criteria:
(1) The credit being reclaimed was a benefit payment to a Receiver
or beneficiary; and,
(2) The Receiver was deceased or legally incapacitated, or the
beneficiary was deceased, on or before the last day of the entitlement
period to which the credit applies; and,
(3) The Government participant that originated the entry has
requested reclamation; and,
(4) The credit has not been previously remitted to the Government
by any source.
(b) Reclamation by non-Government Originators. The Government will
not accept or be liable for reclamation entries received from non-
Government Originators.
Sec. 210.9 Knowledge of death or legal incapacity of Receiver or death
of beneficiary.
(a) Knowledge of death or legal incapacity by an RDFI. When an RDFI
first learns of the death or incapacity of a customer who is a Receiver
of Government ACH benefit payments or the death of a customer who is a
beneficiary, it shall take the actions required under this part.
Knowledge of the death or incapacity may occur by, but is not limited
to, any communication with an executor of the deceased Receiver's or
beneficiary's estate, family member, or other third party; or any form
of notification from the Government. RDFIs are not obligated to
undertake extraordinary efforts that fall outside normal business
practices to learn of a death or legal incapacity. Extraordinary
measures include, but are not limited to, reviewing newspaper obituary
notices.
(b) Actions required when RDFIs are notified of a death or legal
incapacity. When notified of the death or legal incapacity of a
Receiver, or the death of a beneficiary, a RDFI shall either return or
refuse any ACH entries subsequently received from Government
Originators. If an RDFI returns either full or partial payments by
check, the Service may assess an administrative fee to cover the
expense of processing. Failure to return credits in accordance with
these rules shall result in forfeiture of the RDFI's right to limit its
liability under the provisions of this part.
(c) Recovery involving multiple credits that are subject to
reclamation. If the Government erroneously originates a number of
credits after the death or legal incapacity of a Receiver or the death
of a beneficiary, the sequence of effective recovery of credits does
not affect the RDFI's liability.
Sec. 210.10 Liabilities/limitations.
(a) Rules pertaining to type of account. There is no exemption from
liability for recovery of payments issued erroneously after the
Receiver's death or legal incapacity or the beneficiary's death based
on the type of account to which the Government credits are made.
(b) RDFI liability and right to limit liability. An RDFI shall be
liable to the Government for the total amount of each credit received
after the death or legal incapacity of the Receiver or the death of the
beneficiary, except as provided in paragraphs (e) and (f) of this
section. An RDFI may limit its liability if:
(1) The RDFI did not have knowledge of the death or legal
incapacity on the effective settlement date of the entry in question,
or at the time of withdrawal of credits made after the death or legal
incapacity; and
(2) The RDFI fulfills the requirements of this subpart and any
relevant procedures published by the Service.
(c) Determination of the amount of an RDFI's liability. Except as
provided in paragraph (f) of this section, if limitation of liability
is available to an RDFI, the amount of its liability for erroneous
Government credits received shall be as follows:
(1) The RDFI is liable for the amount of any Federal Government
entries settled within 45 days of the Receiver's death or legal
incapacity, or the beneficiary's death, minus any amount recovered by
the Government Originator;
(2) In addition, the RDFI's liability extends to Federal Government
entries settled more than 45 days after the death or legal incapacity
of the Receiver or the death of the beneficiary. This additional
liability is the lesser of:
(i) An amount equal to the amount of the entries which settled more
than 45 days after the death or legal incapacity of the Receiver or the
death of the beneficiary;
(ii) An amount equal to the amount in the Receiver's or
beneficiary's account as defined in Sec. 210.10(i)(2)(ii).
(d) Reclamation actions are not directed toward Receiver's account.
This part does not authorize or direct an RDFI to debit the account of
a Receiver or any other customer, living or deceased, for the RDFI's
liability to the Government under Secs. 210.8 through 210.12. The
amount in the Receiver's account is only a measure of the RDFI's
liability. Nothing in this part shall be construed to affect any right
an RDFI may have under State law or the RDFI's contract with a customer
to recover amounts equal to those returned to the Government in
compliance with this part. A withdrawer may deposit funds to an account
and authorize the RDFI to return such monies to the Government.
(e) Exception to liability rule--person entitled to Government
benefits is deceased at the time of authorization. An RDFI shall not be
liable for ACH credit entries sent to a Receiver acting as a fiduciary
on behalf of a beneficiary, if the beneficiary was deceased at the time
the authorization was executed and the RDFI had no knowledge of the
death. The verification and liability provisions of Secs. 210.3(a)(3)
and 210.7 shall apply.
(f) Requirement that Government Originators act on notice of death.
An RDFI return of credits to the Government by ACH because of the death
of the Receiver or beneficiary will constitute effective notice of
death to the Government Originator. The RDFI shall not be liable for
any future ACH transaction for that individual from the same Government
Originator if the settlement date is more than 10 business days after
the settlement date of the return entry.
(g) Time limit to initiate reclamation actions. The Government may
initiate reclamation actions to recover erroneous credits within 12
months after the date that the Originator receives notice that the
Receiver died or became legally incapacitated, or that the beneficiary
died. The amount Government Originators can reclaim is the total of all
payments made during the 6 years following the date of death or legal
incapacity of the Receiver or death of the beneficiary.
(h) Actions to recover funds from withdrawers. The RDFI's liability
under this part is not affected by any unsuccessful action taken by the
Government to recover funds from any party.
(i) Payment to the Government for reclaimed amounts. The payments
subject to reclamation are:
(1) If the RDFI had knowledge on the settlement date of the death
or legal incapacity of the Receiver or the death of the beneficiary and
did not timely and properly return the payment(s) by ACH return entry
to the Government, the RDFI shall be liable for that entry(ies) and
shall return an equal amount to the Government.
(2) If the RDFI had no knowledge on the settlement date of the
death or legal incapacity of the Receiver or the death of beneficiary,
the RDFI shall be liable for the lesser of:
(i) An amount equal to the amount of the payment(s); or
(ii) An amount equal to the amount in the deceased or legally
incapacitated Receiver's account, or the deceased beneficiary's
account, up to the amount of the payment. The amount in the account is
defined as the account balance when the RDFI received notice of the
death or legal incapacity and had reasonable time to take action on it,
plus any other additions to the account balance made before the RDFI
returns the payment(s). For purposes of this paragraph, action is taken
within a reasonable time if it is taken not later than the close of the
business day following the receipt of the reclamation entry(ies). When
determining the amount in the account, the RDFI's liability shall not
be reduced for debit card withdrawals, automated withdrawals, pre-
authorized debits, non-Government reclamations, and forged checks or
other comparable instruments, made after the RDFI had knowledge of the
death or legal incapacity.
(j) List of withdrawers. If the amount paid by the RDFI is less
than the full amount of the reclamation, the RDFI shall provide the
Government:
(1) A list of withdrawers of any post-death payments and their most
recent addresses;
(2) Certification that the RDFI has returned an amount equal to the
amount in the account as defined in Sec. 210.10(i)(2)(ii); and,
(3) Certification that the RDFI had no knowledge of the Receiver's
death or legal incapacity, or the beneficiary's death, prior to
receiving the credit entry(ies) in question.
Sec. 210.11 Notice to account holders.
(a) Requirement to notify account holder(s). When the RDFI receives
a reclamation, it shall send written notification to the account
holder(s) stating that a collection action may be or has been
initiated. This notice should be sent no later than the date the RDFI
recovers funds from the account.
(b) Forfeiture of right to limit liability for failure to notify
account holder(s). Failure to provide notice to account holders, as
prescribed in Sec. 210.11 shall result in the forfeiture by the RDFI of
its ability to limit its liability under this part. The Government may
require the RDFI to provide proof that written notice was mailed to
joint account holders. Proof may include, but is not limited to, a file
copy of the notice, a certified mail receipt, or documentation
pertaining to the standard operating procedure of the RDFI that such a
notice is routinely sent. If an RDFI is not able to furnish proof of
notice in response to a request by the Government, it shall forfeit any
right it may have to limit its liability for that payment(s) and the
Government may request the Federal Reserve Bank to debit the account of
the RDFI for any otherwise unrecovered amount.
Sec. 210.12 Erroneous death information, restitution and over
recoveries.
(a) Reporting corrections or errors to the Government. If the RDFI
learns that the Receiver or beneficiary is not deceased or legally
incapacitated, or that the date of death is incorrect, the RDFI shall
inform the Government of the error immediately. Until the RDFI is
notified otherwise, however, it remains liable for Government credits
as specified in Sec. 210.10 of this part.
(b) Relief from or reduction in liability--error in fact or error
in date of death. The Government Originator will determine whether the
report of an error in the fact of a Receiver's death or legal
incapacity, or the date of death, is correct. After its review, the
Government Originator will certify its determination in writing to the
RDFI and inform the RDFI of relief from or change to its liability. If
the Government Originator agrees that the original notice of death or
legal incapacity was incorrect, or the date of death is materially
different from the original notice, it shall stop further reclamation
activity that it determines to be inappropriate.
(c) Restitution by the Government of RDFI funds improperly
reclaimed. When appropriate, the Government Originator will remit to
the RDFI any funds incorrectly returned or otherwise received from the
RDFI.
(d) Over/under recoveries. In the event of an over recovery by the
Government for an erroneous credit, the Government Originator will
return immediately the excess amount, by appropriate means, to the
party suffering the loss. In the event of either an over or under
recovery, the Service may instruct the Federal Reserve Bank to credit
or debit the reserve account of a financial institution.
Subpart C--Discretionary Salary Allotments
Sec. 210.13 General.
(a) Scope. This subpart applies only to Government discretionary
allotments. This part does not supersede, and shall not be used to
circumvent, the requirements of particular statutes, Executive Orders
or other executive branch regulations; for example, the Office of
Personnel Management regulations at 5 CFR Part 550, Subpart C,
implementing 5 U.S.C. 5525.
(b) Required use of the Automated Clearing House method.
Discretionary allotments shall be made by ACH entry, except when the
Service determines that other means are more appropriate.
``Discretionary allotment'' as used herein means an amount the
employing agency permits a Government employee to request be deducted
from his/her net salary amount and paid to a Receiver. The aggregate
amount of discretionary allotments may not exceed the net pay due the
employee for each pay period after all deductions required by law are
subtracted.
(c) Head of Government originating agency determines discretionary
allotment policy. Discretionary allotments may be made for any purpose
determined appropriate by the head of a Government participant and
which are consistent with Title 5, Chapter 55, subchapter III, United
States Code, and Title 5, Chapter 1, Part 550, subpart C, Code of
Federal Regulations.
(d) Timing of discretionary allotments. Discretionary allotment
payments shall be made in accordance with the schedule established by
the Government Originator, provided such allotment credits are not
effected until the related earnings have accrued.
(e) Payment of discretionary allotments. Discretionary allotments
shall be made following the policy and procedures outlined in Subpart A
for non-benefit payments, and in conformance with other requirements
published by the Service.
Subpart D--Savings Allotments
Sec. 210.14 General.
(a) Scope. This subpart applies only to savings allotments.
Provisions for certain other types of allotments, for example, dues to
labor organizations, can be found in 5 CFR part 550, subpart C. The
regulations in this part do not supersede, and shall not be used to
circumvent, the requirements of particular statutes, Executive Orders
or other executive branch regulations.
(b) Required use of the Automated Clearing House method. Savings
allotments shall be made by ACH entry, when cost effective,
practicable, and consistent with current statutory authority.
(c) Policy for savings allotments for Government employees. Any
employee whose place of employment is within the boundaries of the
United States or its territories may authorize an allotment of pay for
a savings account under the regulations in this part. ``Savings
account'' as used herein means an account (single or joint) for the
purchase of shares (other than shares of stock) or for the deposit of
savings in any RDFI. The title of the account shall include the name of
the authorizing employee. The head of the employing Government
participant shall honor requests for allotment of pay for savings
accounts if:
(1) The Government employee provides the Government participant
with an authorization; and,
(2) The authorization has not been canceled by the employee, in
writing, or otherwise terminated or revoked; and,
(3) Not more than two such allotments for any employee are in
effect at any time; and,
(4) The amount of salary or wages becoming due an employee for any
pay period thereafter is sufficient to cover the allotment(s). In
making any determination under this paragraph, all payroll deductions
otherwise required shall have precedence over those authorized by this
section; and,
(5) The purpose of the allotment is not to circumvent statutes,
Executive Orders, and other executive branch regulations, regardless of
the manner in which the allotment for savings will be disposed of by
the employee (which is at the employee's discretion).
Subpart E--Definitions
Sec. 210.15 Definitions.
As used in this part, unless the context otherwise requires:
Allotment means a recurring specified deduction from pay of a
Government employee for a legal purpose authorized by the employee.
Allotter means the employee from whose pay an allotment is made.
Automated Clearing House or ACH means a funds transfer system which
provides for the interbank clearing of electronic entries for
participants.
Beneficiary means a natural person who is entitled to receive a
benefit payment, or portion thereof, from the Government.
Benefit Payment is a credit of funds for any Federal entitlement
program or annuity, originated by a Government participant. Benefit
payments may be either one-time disbursements or recurring payments. A
list of benefit payments is published by the Service in operating
guidelines. Only benefit payments are subject to the reclamation
provisions of this part.
Erroneous Payment means a benefit payment made after the death or
legal incapacity of a Receiver or the death of a beneficiary. Erroneous
payment is an operational term used by Government participants to refer
to the payments described in the preceding sentence. Erroneous payments
are subject to the 45-day liability rule of Sec. 210.10 and the
reclamation provisions of Secs. 210.8 through 210.12.
Government means any department, independent establishment, board,
office, commission, or other establishment in the executive,
legislative (except the Senate and House of Representatives), or
judicial branch of the Federal Government, including any wholly-owned
or controlled Federal Government corporation, responsible for
authorizing and initiating an ACH entry.
Government Participant means any Government agency or entity that
sends ACH transactions to an ACH operator or receives ACH transactions
from an ACH operator.
National Automated Clearing House Association or NACHA means the
national association of regional member ACH associations, ACH Operators
and participating financial institutions located in the United States.
NACHA is a rulemaking body for commercial ACH transactions. The rules
promulgated by NACHA can be found in the ACH Rules published by NACHA
and distributed through regional ACH associations. For further
information on the ACH Rules, call (703) 742-9190 or write to NACHA,
607 Herndon Parkway, Suite 200, Herndon, VA 22070.
Receiver means a natural person, corporation, or other public or
private entity which is authorized by the Government Originator to
receive ACH credit or debit entries from the Government.
Treasury Financial Manual (TFM) means the manual issued by the
Service containing procedures to be observed by all Government agencies
in relation to central accounting, financial reporting, and other
Government-wide fiscal responsibilities of the Department of the
Treasury. Copies of the TFM are available free to Government agencies.
Others who are interested in ordering a copy may call (202) 208-1819 or
write the Directives Management Branch, Financial Management Service,
Department of the Treasury, Liberty Center (UPC-741), Washington, DC
20227 for further information.
Dated: July 28, 1994.
Russell D. Morris,
Commissioner.
[FR Doc. 94-23009 Filed 9-29-94; 8:45 am]
BILLING CODE 4810-35-P