§ 556.12 - Deposit assurance of direct deposit of social security payments.

(a) Under the Social Security Administration's “direct deposit program”, a social security beneficiary may designate a financial institution, including a Federal savings association, to receive the beneficiary's benefit payments. Thereafter, benefit payments are made directly to the financial institution in the form of checks or magnetic tape notices.

(b) The Office has concluded that giving “deposit assurance” in connection with the program is within a Federal savings association's implied powers under section 5 of the Home Owners’ Loan Act. Deposit assurance consists of the Federal savings association's undertaking to credit the beneficiary's account with a “deposit” in the amount of the benefit payment on the date it is due to be received, whether or not the Federal savings association actually receives the check or magnetic tape notice from the Treasury by that date. The Office has concluded, based on the unique nature of the social security direct-deposit program and the improbability of failure to receive payments on time, that the Federal savings association “constructively” receives payment on that date.

(c) The Office believes, however, that such deposit assurance may involve some risk for Federal savings associations participating in the program and that they must therefore institute adequate safeguards and controls in conjunction therewith.

(d) Electronic fund transfers. Any electronic fund transfer, as that term is defined by section 903 of the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) and § 205.2 of Regulation E of the Federal Reserve Board (12 CFR 205.2), made under this section, is subject to the provisions of the Electronic Fund Transfer Act and Regulation E.