[Federal Register Volume 63, Number 224 (Friday, November 20, 1998)]
[Rules and Regulations]
[Pages 64544-64554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31089]
[[Page 64543]]
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Part III
Department of the Treasury
_______________________________________________________________________
Fiscal Service
_______________________________________________________________________
31 CFR Parts 317, 351, 353, and 370
Regulations Governing Agencies for the Issue and Offering of United
States Savings Bonds, Including Sales by Electronic Means; Final Rule
Federal Register / Vol. 63, No. 224 / Friday, November 20, 1998 /
Rules and Regulations
[[Page 64544]]
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Parts 317, 351, 353, and 370
Regulations Governing Agencies for the Issue and Offering of
United States Savings Bonds, Including Sales by Electronic Means
AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.
ACTION: Final rule.
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SUMMARY: The Department of the Treasury hereby publishes a final rule
governing the issue and offering of United States Savings Bonds. The
final rule creates new categories of savings bond issuing agents and
clarifies and expands the means by which savings bonds may be sold,
including electronic means.
DATES: Effective November 20, 1998.
ADDRESSES: This final rule can be downloaded from the Bureau of the
Public Debt at the following World Wide Web address: http://
www.savingsbonds.gov>. It also is available for public inspection and
copying at the Treasury Department Library, Freedom of Information Act
(FOIA) Collection, Room 5030, Main Treasury Building, 1500 Pennsylvania
Ave. NW, Washington, D.C. 20220. Individuals wishing to visit the
library should call (202) 622-0990 for an appointment.
FOR FURTHER INFORMATION CONTACT: Wallace L. Earnest, Director, Division
of Staff Services, Savings Bond Operations Office, Bureau of the Public
Debt, at (304) 480-6319 or wearnest@bpd.treas.gov>; Troy D. Martin,
Senior Program Analyst, Savings Bond Operations Office, Bureau of the
Public Debt, Division of Staff Services, at (304) 480-6545 or
tmartin@bpd.treas.gov>; Edward C. Gronseth, Deputy Chief Counsel,
Bureau of the Public Debt, at (304) 480-5192 or
egronseth@bpd.treas.gov>; or Gregory J. Till, Attorney-Adviser, Office
of the Chief Counsel, Bureau of the Public Debt, at (202) 219-3320 or
gtill@bpd.treas.gov>.
SUPPLEMENTARY INFORMATION:
I. Background
The growth of electronic commerce and the World Wide Web have led
to a flourishing of financial service providers and new payment
methods. However, the Bureau of the Public Debt has been unable to take
full advantage of these developments in the sale of United States
Savings Bonds because of apparent restrictions in existing regulations.
On April 30, 1998, the Department of the Treasury published a
proposed rule addressing the issue and offering of United States
Savings Bonds. The publication proposed to create new categories of
savings bond issuing agents and clarify and expand the means by which
savings bonds may be sold, including electronic means. Three written
comment letters were received in response to the proposed rule. The
proposed rule and comments can be downloaded from the Bureau of the
Public Debt at the following World Wide Web address: http://
www.savingsbonds.gov>. Treasury found the comments extremely useful in
making revisions. Although some minor comments are not addressed, all
comments have been considered in the formulation of this final rule.
The comments are addressed below on a section-by-section basis.
The most important aspects of the final rule are directed at four
areas in title 31 of the Code of Federal Regulations. First, changes in
Secs. 317.2 and 317.3 amend the regulations used to determine which
organizations may serve as issuing agents and the procedures used to
qualify these organizations as issuing agents. Second, changes to
Sec. 351.5 expand the means by which issuing agents may sell savings
bonds. Third, a new subpart in part 370 addresses the use of Automated
Clearing House debit entries for the sale of savings bonds issued
through the Bureau of the Public Debt. Fourth, another new subpart in
part 370 addresses the electronic submission of transaction requests
through the Bureau of the Public Debt.
II. Summary of Amendments
A. Regulations Governing Agencies for Issue of Savings Bonds (31 CFR
Part 317)
(1) Definitions (Sec. 317.1)
The revised definition of ``issuing agent'' notes the authority of
the Commissioner of the Public Debt to qualify issuing agents, as
explained in Sec. 317.2. The definition also clarifies that an issuing
agent acts as an agent of the purchaser in handling the remittance. The
language addressing the handling of the remittance is consistent with
current practice. The Secretary of the Treasury collects purchase funds
from issuing agents, not the public. If an issuing agent discovers that
the remittance is uncollectible or must be returned after the issuance
of a savings bond, the Secretary is nonetheless entitled to payment
from the issuing agent. The issuing agent bears the risk of loss for
non-collection or return of the remittance.
(2) Organizations Eligible To Serve as Issuing Agents (Sec. 317.2)
In the past, issuing agent eligibility has been limited to
financial institutions (such as banks and credit unions), agencies of
the United States and state and local governments, and employers
operating payroll savings plans. This final rule expands the types of
organizations that are eligible to serve as issuing agents.
One change, in Sec. 317.2(c), allows organizations that operate
payroll savings plans on behalf of employers to issue bonds and serve
as issuing agents. The change is designed to bolster payroll savings
plan sales from small businesses, which often do not have the resources
to maintain such plans themselves. As is the case with employer
organizations, an organization operating a payroll savings plan on
behalf of an employer organization will be eligible for issuing agent
fees only if it inscribes savings bonds.
Another addition, set out in Sec. 317.2(d), gives the Commissioner
of the Bureau of the Public Debt the authority to qualify issuing
agents when doing so is in the public interest. The Commissioner can
use such process as deemed to be appropriate in selecting the issuing
agent. The selected issuing agent also will be subject to such
conditions as deemed to be appropriate.
The new Sec. 317.2(d) will be used for the selection of entities to
sell savings bonds in unique ways as new methods of sales emerge. In
particular, this provision will facilitate the qualification of issuing
agents to sell savings bonds through electronic methods, such as those
offered by financial services providers through World Wide Web access.
In qualifying issuing agents under this provision, the Commissioner
will balance the convenience and cost-effectiveness of using new
purchase methods against the need to insure the security and
reliability of those methods.
In its comment letter, the American Bankers Association indicated
its general support for most of the changes being proposed but
expressed concern over Section 317.2(d), stating, ``There is no
demonstrable need to add this text given the capabilities and interest
of currently eligible organizations.'' Treasury recognizes the long-
standing service of financial institutions as issuing agents of savings
bonds and the significant contribution that financial institutions have
made toward the success of the savings bond program.
[[Page 64545]]
Treasury also looks forward to cooperating with financial institutions
in selling savings bonds in new ways. In particular, Treasury is
interested in selling savings bonds through home banking packages
offered by financial institutions and exploring other new methods which
may evolve over time. However, changes are taking place rapidly in
other sectors of the savings bonds market place, and in particular, in
portions of the market place not exclusively the domain of financial
institutions which makes necessary the flexibility afforded by section
317.2(d). Therefore, Treasury respectfully disagrees with the position
that the flexibility to be gained through section 317.2(d) would not
benefit the savings bond program, and has decided to retain the
provision in the final rule.
(3) Procedures for Qualifying and Serving as an Issuing Agent
(Sec. 317.3)
In the past, designated Federal Reserve Banks have processed
applications from prospective issuing agents. The section has been
amended to state that an organization that seeks qualification because
of its status as an organization operating a payroll savings plan on
behalf of an employer under Sec. 317.2(c) or under the general ``public
interest'' provision of Sec. 317.2(d) will apply directly to the
Commissioner of the Bureau of the Public Debt. The application shall be
supplemented by such other information as the Bureau of the Public Debt
may request.
(4) Issuance of Bonds (Sec. 317.6)
The issuing agent fee provision has been simplified by removing
unnecessary detail. The section continues to emphasize that fee
schedules are set out not in the regulations, but through a separate
publication in the Federal Register. The changes have no effect on the
current fee structure, though the Bureau of the Public Debt reserves
the right to create new categories of fees as new ways of selling
savings bonds develop.
(5) Appendix to Sec. 317.8--Remittance of Sales Proceeds and
Registration Records, Department of the Treasury Circular, Public Debt
Series No. 4-67 (Third Revision), Fiscal Service, Bureau of the Public
Debt
The appendix has been revised, primarily for changes in
terminology. For instance, the definition of ``issuing agent'' has been
redefined to reflect the changes to that term in Sec. 317.2. The term
``over-the-counter'' has been redefined to reflect the expanded meaning
given to that term in Sec. 351.5 of this chapter. Among other minor
changes, paragraph (3) of subpart B has been removed because that
provision no longer has application.
B. Offering of United States Savings Bonds, Series EE (31 CFR Part 351)
(1) Governing Regulations for Series EE Bonds (Sec. 351.1)
This section has been amended to note that the regulations
governing the transfer of funds by electronic means on account of
United States securities in part 370 of this chapter apply to
transactions for the purchase of savings bonds issued through the
Bureau of the Public Debt. The regulations in part 370 have no
application to transactions for the purchase of savings bonds
accomplished through issuing agents generally, unless and to the extent
otherwise directed by the Commissioner of the Bureau of the Public
Debt. Furthermore, because these regulations are intended to be the
source of the terms and conditions of Series EE bonds, Treasury does
not warrant the correctness of representations that in any way conflict
with these regulations.
(2) Purchase of Bonds (Sec. 351.5)
The categories of savings bond sales provided for in this section
have been revised. The section previously provided for four categories
of sales: (1) ``payroll plans''; (2) ``over-the-counter/mail''; (3)
``bond-a-month plan''; and (4) ``employee thrift, savings, vacation,
and similar plans.'' Because some of these categories are limited and
outdated, they may actually have inhibited rather than facilitated
sales.
Furthermore, a comparison of this section to the appendix to
Sec. 317.8 of this chapter (discussing the remittance of sales proceeds
and registration records by issuing agents) showed a lack of
consistency in the categories and terminology used to define savings
bond sales. In discussing savings bond sales, the appendix did not
mirror Sec. 351.5 but rather combined the four categories of sales
described in Sec. 351.5 into two categories: (1) ``payroll sale''; and
(2) ``over-the-counter sale.'' The term ``payroll sale'' was not used
in Sec. 351.5. Also, the term ``over-the-counter'' had an expanded
meaning in the appendix to Sec. 317.8 as compared to its use in
Sec. 351.5, making the regulations more difficult to understand.
The final rule revises Sec. 351.5 (as well as the appendix to
Sec. 317.8), essentially using the two categories in the appendix to
Sec. 317.8: (1) ``payroll sales''; and (2) ``over-the-counter sales.''
The payroll sales category includes sales through ``payroll savings
plans'' and ``employee thrift, savings, vacation, and similar plans,''
the provisions of which are largely unchanged. The final rule also
states that employers and the organizations operating payroll savings
plans on behalf of employers are allowed to sell savings bonds only
pursuant to payroll savings plans. These types of issuing agents are
not allowed to sell savings bonds over-the-counter.
Over-the-counter sales are all sales that are not payroll sales.
For over-the-counter sales, the section provides that ``the purchase
application and remittance may be submitted to an issuing agent by any
means acceptable to the issuing agent.'' This broad provision ensures
that issuing agents have the flexibility to sell savings bonds through
new channels. For instance, the final rule authorizes issuing agents to
sell savings bonds through electronic means such as the World Wide Web.
Both the application and remittance can be submitted and signed through
electronic methods agreed upon by the parties.
The final rule does not impose limitations on the types of
remittances that an issuing agent may accept. As always, however, the
issuing agent bears the burden of collection and risk of non-collection
for remittances it accepts. The Secretary of the Treasury takes payment
from the issuing agent, not the purchaser. The Secretary of the
Treasury has no obligation to return funds received from an issuing
agent after issuance of a savings bond if the issuing agent cannot
collect or must return the remittance. However, as Treasury qualifies
new types of issuing agents under the revised section 317.2 of this
chapter, Treasury will examine carefully the types of remittances each
new issuing agent will accept and the protections that will be
necessary to insure that a purchaser's funds reach Treasury in proper
fashion.
Finally, although the changes have no effect on the current issuing
agent fee structure, the Bureau of the Public Debt reserves the right
to make changes to the fee structure as new ways of selling savings
bonds develop.
C. Regulations Governing United States Savings Bonds, Series EE and HH
(31 CFR Part 353)
(1) Payment to Judgment Creditors (Sec. 353.21)
This section is amended to state that savings bonds registered in
coownership form may be subject to levy by the Internal Revenue
Service.
[[Page 64546]]
(2) Application for Relief--Non-receipt of Bond (Sec. 353.27)
The regulations have provided little guidance as to the status of
savings bond purchases if the Secretary of the Treasury does not
receive payment. While not likely, an issuing agent may fail after
receiving the remittance from a purchaser but before the Secretary
collects the sales proceeds from the issuing agent.
If an issuing agent has inscribed a savings bond, the Secretary
will honor the savings bond even if the Secretary cannot collect the
sales proceeds from the issuing agent. This policy is consistent with
existing regulations, which note that the registration of an issued
savings bond generally is conclusive of ownership. If a savings bond
has not been inscribed, the final rule states that the Secretary is
authorized to issue savings bonds to preserve the public's confidence
in dealing with issuing agents, even if the Secretary cannot collect
the sales proceeds from the issuing agent.
D. Regulations Governing Electronic Transactions and the Transfer of
Funds by Electronic Means on Account of United States Securities (31
CFR Part 370)
(1) Applicability (Sec. 370.0)
This section is amended to clarify that to the extent the
regulations in part 210 of this title apply to the purchase or payment
of interest and principal on United States securities, the regulations
in this part 370 apply in the event of any inconsistencies.
Furthermore, to the extent that Regulations E (12 CFR part 205) and Z
(12 CFR part 226) of the Board of Governors of the Federal Reserve
System (``Federal Reserve Board'' or ``Board'') apply to transactions
accomplished pursuant to this part, those Federal laws are unaffected
by this part. Regulations E and Z govern consumer rights for electronic
funds transfers and credit card transactions, among other things. This
part 370 is designed to compliment, not preempt, the rights a person
has by recourse to the person's financial institution under Regulation
E, to the extent that Regulation E applies.
A determination of whether Regulation E applies to a transaction
for the purchase of a United States security frequently depends upon
whether the security is held in book-entry or definitive form.
Regulation E excludes from its coverage ``[a]ny transfer of funds the
primary purpose of which is the purchase or sale of a security * * *
[h]eld in book-entry form by a Federal Reserve Bank or federal
agency,'' at 12 CFR 205.3(c)(4)(iii). This exclusion was added by the
Federal Reserve Board in a final rule published in the Federal Register
on May 2, 1996, beginning at page 19661. In discussing this exclusion,
the Board listed as an example transactions involving book-entry
securities held in TREASURY DIRECT. Because savings bonds currently
available for purchase primarily are held in definitive rather than
book-entry form, the strict language of this exclusion does not extend
to most transactions involving savings bonds available for purchase.
(2) Definitions (Sec. 370.1)
Several definitions have been added or changed in this section. The
definition of ``Automated Clearing House (ACH) entry'' refers to
transactions accomplished in accordance with the Operating Rules and
Guidelines of the National Automated Clearing House Association
(``NACHA Rules''), as modified by these and other regulations and law.
The definition of ``deposit account'' principally is taken from
Regulation E. The definition of ``financial institution'' is the same
as that included in a proposed rule to amend part 208 of this title,
``Management of Federal Agency Disbursements,'' published in the
Federal Register on September 16, 1997, beginning at page 48714. The
definitions of ``originator'' and ``person'' are derived from the NACHA
Rules. Also, the definition of ``payment'' has been amended to state
that it applies only to subpart B of this part, which addresses credit
entries. The limited definition of a payment as a deposit from the
Treasury to the account of the owner only has application in subpart B
and may have caused confusion by its application throughout part 370.
The section also lists five definitions that have application
primarily to subpart E of this part, addressing the electronic
submission of transaction requests through the Bureau of the Public
Debt. As noted in the discussion to Sec. 370.50, Treasury has looked to
a number of sources in drafting these provisions. The most fundamental
of these definitions is that of a ``signature.'' A signature is ``any
symbol or method executed or adopted by a party with present intention
to be bound,'' which is a traditional legal definition of a signature.
The definition encompasses a signature manifested through electronic or
similar means, which separately is referred to as an ``electronic
signature.'' Case law on signatures indicates that almost anything can
constitute a signature, from printed and typewritten names to account
numbers, if executed with an intent to be bound. Electronic signatures
are no different from other forms of signatures in this regard.
In addition, the section includes a definition of ``digital
signature,'' which is a type of electronic signature. Treasury will use
digital signatures in its sales of savings bonds over the Internet. A
digital signature uses ``public-key encryption'' and a ``message digest
function'' in transforming an electronic ``record.'' The definitions of
these terms largely are taken from model, proposed, or existing
authorities.
Public-key encryption is a process that relies upon an algorithm to
produce two mathematically related but different keys. If public-key
encryption is implemented securely, it is computationally infeasible to
derive one key from the other. The keys can be used for several
purposes, including the creation and verification of digital
signatures. One key (the private key) is kept private and can be used
to create a digital signature, while the other key (the public key) may
be distributed to anyone and can be used by a relying party to verify a
digital signature. The association of a public key (and by implication,
its corresponding private key) to the identity of a particular person
is accomplished through the use of digital certificates, issued by
certification authorities.
The use of a message digest function (also known as a hash
function) is an essential element in the creation and verification of a
digital signature. A message digest function is an algorithm that
typically provides a shortened, mathematical version of a longer
electronic record. Even a small change to an electronic record can
result in a dramatic change to a message digest, aiding in the
verification of a digital signature and any electronic record to which
the signature is attached. The signer uses the signer's private key to
encrypt the short message digest, rather than the entire electronic
record. This digital signature (the message digest, encrypted by the
signer's private key) is sent to the recipient, along with a copy of
the electronic record.
Upon receipt of the digital signature and electronic record, the
recipient uses the signer's public key to decrypt the digital signature
and recover the message digest. The recipient then runs the received
copy of the electronic record through the same message digest function
used to create the received message digest. If the two results are
identical, the recipient knows that the electronic record was encrypted
by the signer's private key and that the electronic record was not
tampered with
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from the time the signer created the digital signature.
(3) Scope (Sec. 370.30)
This section states that subpart D establishes regulations for
debit entries to a purchaser's account to buy savings bonds issued by
the Bureau of the Public Debt. The subpart also establishes the
exclusive liability of the Bureau of the Public Debt for such entries.
This subpart applies only to transactions for the purchase of savings
bonds issued through the Bureau of the Public Debt. These regulations
do not apply to transactions for the purchase of savings bonds
accomplished through issuing agents generally, unless and to the extent
the Commissioner of the Bureau of the Public Debt deems otherwise.
It is anticipated that purchasers will authorize an entity named on
an approved paper-based authorization form to be an originator for the
debit entries. This entity will forward collected funds to Treasury
(unless the Bureau of the Public Debt chooses to name itself as the
originator). The Bureau of the Public Debt will then issue the savings
bonds through a Federal Reserve Bank acting as a fiscal agent for the
United States.
(4) Authorization (Sec. 370.31)
This section states that all debit authorizations must be
accomplished through an authorization form approved by the Bureau of
the Public Debt. The purchaser must name a deposit account from which
the purchaser is entitled to withdraw funds, and the purchaser (as well
as any other necessary persons named on the deposit account) must sign
the authorization form. Except to the extent required by the Bureau of
the Public Debt, the originator will not be required to verify the
identity of the purchaser or the authenticity of any signatures.
Recurring debits may or must be authorized if the form so provides.
Also, a purchaser's subsequent authorization will cancel a previous
authorization.
The Bureau of the Public Debt retains the right to name a successor
to the originator without additional notice to the purchaser, though it
may ask the successor to provide such notice as a customer service.
This provision is drawn from the official staff interpretation of the
Federal Reserve Board to 12 CFR 205.10(b) (Regulation E), which states
that ``successor institutions'' may assume an originator's role without
notice or a new authorization.
In their comment letters, the Federal Reserve Board and NACHA
speculated that Treasury may eventually allow the submission of debit
authorizations through electronic means. Part 370 could allow for the
submission of debit authorizations through electronic means.
The Board and NACHA referenced provisions in Regulation E and the
NACHA Rules addressing the electronic submission of debit
authorizations. Neither Regulation E nor the NACHA Rules appear to
allow for the electronic signature of debit authorizations. Regulation
E requires that debit ACH authorizations be in a ``writing signed or
similarly authenticated by the consumer,'' at 12 CFR 205.10(b). Section
2.1.2 of the NACHA Rules uses identical language. Under Regulation E
and the NACHA Rules, an electronic debit ACH authorization is not
``signed,'' but rather is ``similarly authenticated.''
Treasury is not inclined to add the words ``similarly
authenticated'' to this final rule. Treasury believes that its
definition of ``signature'' would encompass electronic means which also
would qualify under the ``similarly authenticated'' category of
Regulation E and the NACHA Rules. Treasury recognizes that the Federal
Reserve Board may interpret the definition of ``similarly
authenticated'' more strictly than Treasury in its definition of
``signature.'' To address this concern, Sec. 370.0 of this part has
been amended to note that transactions accomplished under this part are
subject to Regulation E, when applicable. Thus, even if a debit
authorization for the purchase of a definitive savings bond could be
electronically signed under this part, the electronic signature would
have to meet the ``similarly authenticated'' requirements of Regulation
E.
(5) Prenotification (Sec. 370.32)
The section leaves the requirement of a prenotification message to
the discretion of the Bureau of the Public Debt. A financial
institution that fails to respond to a prenotification warrants that
the deposit account number and the type of account contained in the
message is accurate as of the time of receipt of the prenotification.
The proposed rule also would have left the time period in which a
financial institution must respond to a prenotification up the Bureau
of the Public Debt. In its comment letter, NACHA expressed the view
that Treasury should not deviate from the NACHA Rules in setting its
own time frame for a response. Treasury agrees with this suggestion and
has changed this provision in the final rule to state that the time
period for a response shall be that which is set out by NACHA.
(6) Warranties of Financial Institution (Sec. 370.33)
This section states that a financial institution's acceptance and
handling of a debit entry or failure to reject a prenotification made
with respect to a security covered by this subpart shall constitute its
agreement to the provisions of this subpart. Also, a financial
institution that agrees to this subpart warrants that it has the
authority to receive entries and to comply with any requirements
imposed upon Receiving Depository Financial Institutions under the
Operating Rules and Operating Guidelines of the National Automated
Clearing House Association, as modified by these and other regulations
and law.
(7) Responsibilities of Financial Institution (Sec. 370.34)
This section states that a financial institution that receives a
debit entry on behalf of its customer must debit the customer's account
on the settlement date. If the financial institution is unable to debit
the designated account, it shall return the entry by no later than the
next business day after receipt, with an electronic message or other
response explaining the reason for the return.
(8) Termination or Suspension by the Bureau of the Public Debt
(Sec. 370.35)
This section states that the Bureau of the Public Debt can
terminate or suspend the availability of debit entries at any time, and
its decision to do so will be final.
(9) Termination or Suspension by Purchaser or Deposit Account Owner by
Notice to the Originator (Sec. 370.36)
Under this section, a purchaser or deposit account owner will be
able to cancel or suspend debit entries for the purchase of savings
bonds by providing written or oral notice to the originator, which must
be received by the originator within three days of the debit. The
originator may require the person to give written confirmation within
14 days of an oral notice. An oral notice ceases to be effective if the
written confirmation is not received by the end of the 14-day period. A
suspension will remain in effect for the duration specified by the
purchaser, but for no more than six months. As noted in Sec. 370.53 of
this part, a written notice can be accomplished through electronic
means.
The proposed rule was similar, but would have required written
notice in all cases. In its comment letter, the Federal Reserve Board
suggested that Treasury follow the stop-payment provisions in
Regulation E, at 12 CFR
[[Page 64548]]
Sec. 205.10(c). The provision noted by the Federal Reserve Board allows
for the option of oral notice. Treasury finds this approach to be more
flexible and agrees with the Federal Reserve Board recommendation. The
substance of 12 CFR Sec. 205.10(c), including provisions for oral
notice, has been incorporated into the final rule.
(10) Changes and Error Resolution (Sec. 370.37)
This section provides that while responding to an oral or written
notice from a person relating to the propriety of issuance information
or a debit entry involving the person's deposit account, the originator
may suspend further debit entries. In response to an oral notice, the
originator may require the person to give written notice, to be
received by the originator within 10 business days of an oral notice.
The originator promptly will investigate and correct any error, but is
not bound to complete the investigation or correct the error within 10
business days if the person fails to provide the requested written
confirmation. As noted in Sec. 370.53 of this part, a written notice
can be accomplished through electronic means.
In its comment letter, the Federal Reserve Board focused on a
provision of the proposed rule that would have allowed the originator
to ignore an oral notice that was not received within 30 days of a
written notice. The Board expressed the view that this provision varied
from the error resolution procedures in Regulation E, at 12 CFR
Sec. 205.11. Treasury has decided to drop this questioned provision.
Treasury also has changed the time frame for a written confirmation to
10 business days, consistent with Regulation E.
(11) Liability (Sec. 370.38)
This section states that the Bureau of the Public Debt is not
liable in disputes arising out of debit entries, unless the Bureau of
the Public Debt names itself or a fiscal or financial agent as the
originator. Disputes arising out of debit entries are the
responsibility of the originator. Also, unless the Bureau of the Public
Debt designates itself or a fiscal or financial agent as the
originator, the originator serves as the agent of the purchaser in
handling the remittance. At most, liability of the Bureau of the Public
Debt is limited to the amount of the improper debit, less any losses
caused by the failure of a claimant to exercise due diligence.
(12) Scope (Sec. 370.50)
This section states that subpart E establishes provisions for the
electronic submission of transaction requests through the Bureau of the
Public Debt. The subpart also sets out the exclusive liability of the
Bureau of the Public Debt for transactions completed pursuant to this
subpart. These regulations do not apply to transactions requests
accomplished through savings bond issuing agents generally, unless and
to the extent the Commissioner of the Bureau of the Public Debt deems
otherwise.
It is important to note the limited scope and extent of this
subpart E. This subpart only sets out Federal contract law provisions
for electronic dealings with the Bureau of the Public Debt. For
instance, a person who purchases a security from or opens a securities
account with the Bureau of the Public Debt agrees to these provisions.
The subpart does not apply to savings bond sales accomplished through
issuing agents such as banks and employers offering payroll savings
plans. The regulations leave unchanged the right of states to determine
their own rules for electronic and digital signatures and does not
address any issues related to certification authorities. Furthermore,
the regulations are relatively brief, at least in comparison to work
done by the American Bar Association, the National Conference of
Commissioners on Uniform State Laws, the American Law Institute, the
United Nations Commission on International Trade Law, and many states,
among others.
(13) Requirements (Sec. 370.51)
An electronically signed transaction request cannot be accepted by
the Bureau of the Public Debt unless the signature has been
accomplished through a method that has been approved for specific
purposes by the Bureau of the Public Debt.
(14) Time of Acceptance (Sec. 370.52)
Acceptance of a transaction request by the Bureau of the Public
Debt will be effective no earlier than upon receipt of the message by
the Bureau of the Public Debt, and no later than upon the transmittal
of a message of acceptance by the Bureau of the Public Debt.
(15) Point of Transaction (Sec. 370.53)
The point of transaction for a transaction request submitted
electronically under this subpart will be Parkersburg, West Virginia.
(16) Effect of Electronic Signature (Sec. 370.54)
This section states that an electronic signature and any electronic
record to which it is affixed shall not be denied legal effect,
including legal effect as a signature, a writing, or an original,
solely because the signature or record is in electronic form. Some
provisions of law, such as the Statute of Frauds, require evidence of
an agreement to be in writing. Other provisions of law require that an
original record be produced in court, rather than a copy, or require
that a record be signed. However, there seems little reason to use
these doctrines to preclude the admissibility of electronically signed
records. These records are equivalent to signed writings, each copy of
which is identical to the original.
(17) Admissibility of Digital Signature (Sec. 370.55)
This section addresses the legal requirement that an item be
authenticated before being introduced into evidence. ``Authentication''
is a term that has a technical meaning specifically linked to the
security of electronic signatures, but also has a separate meaning in
the law of evidence, at which this section is directed.
Under Rule 901 of the Federal Rules of Evidence, ``The requirement
of authentication * * * as a condition precedent to admissibility is
satisfied by evidence sufficient to support a finding that the matter
in question is what its proponent claims.'' For instance, under Rule
901(b)(2), this evidentiary requirement may be met in regard to a
handwritten record by nonexpert testimony as to the genuineness of
handwriting. Although there have not as yet been any cases on the
matter, the requirement of authentication for digital signatures likely
can be met under Rule 901(b)(9), which allows for the sufficiency of
``[e]vidence describing a process or system used to produce a result
and showing that the process or system produces such a result.''
However, in some situations authentication evidence is not required
as a condition precedent to admissibility. As noted under Rule 902 of
the Federal Rules of Evidence, extrinsic evidence of authenticity is
not necessary for certified birth and death certificates, newspapers
and periodicals, trade inscriptions, commercial paper, and notarized
records, among other things. Because these items are likely to be
authentic, a strict adherence to preliminary authentication procedures
unnecessarily would expend a court's time and resources. Accordingly,
the items are considered to be self-authenticating and--barring other
objections to the evidence--may be admitted into evidence without
additional preliminary review.
The section states a limited self-authentication provision for
digital
[[Page 64549]]
signatures. This section begins by noting that authentication of a
purported digital signature may be accomplished by evidence sufficient
to support a finding that a digital signature exists. However,
extrinsic evidence of authenticity is unnecessary to establish that a
digital signature corresponds to a public key pair, as well as that an
electronic record to which a digital signature is affixed has not been
altered from its original form.
There are several reasons that support the insertion of a limited
self-authentication clause into this final rule. If public-key
encryption has been properly implemented, the risk of a successful
forgery or alteration of a digital signature is extremely remote, and
is significantly less than the risk of forgery or alteration for paper
records. Furthermore, although a legal showing of authenticity in the
absence of a self-authentication provision almost certainly could be
accomplished, such a showing would require considerable time and
resources. Among other things, it would entail extensive scientific
testimony on encryption, leading to an expensive and unproductive
``battle of the experts.'' Use of a self-authentication provision
avoids this wasteful problem.
In almost all cases, the existence of a digital signature should be
beyond reasonable dispute. The most likely challenges to a digital
signature and an electronic record to which it is affixed will turn not
on whether a digital signature exists, but on whether the digital
signature should be attributed to a particular person. These challenges
frequently will focus on the issuance, protection, or revocation of the
digital certificates used to link a digital signature and accompanying
record to a particular person. This section does nothing to prevent
such challenges, for the self-authentication provision does not tie a
digital signature to a particular person. Extrinsic evidence tying the
public key pair used in the creation of a digital signature to a
particular person still will have to be provided before a digital
signature and a record to which it has been affixed could be
admissible. Furthermore, this section would have no application at all
in criminal cases.
Finally, even to the extent that a self-authenticated digital
signature and accompanying record could be introduced into evidence
under this section, this section in no way prevents a party against
whom a digital signature is asserted from contesting the existence or
authenticity of the signature. However, any arguments would go to the
weight of the evidence, not to its admissibility.
(18) Negligence Contributing to Forged Signature (Sec. 370.56)
This section states that a person whose failure to exercise
ordinary care substantially contributes to the creation or submission
of a forged signature is precluded from disavowing the forged
signature. Furthermore, the burdens are on the person against whom a
signature is asserted to produce evidence that ordinary care was
exercised and to persuade a trier of fact that it is more likely than
not that the person exercised ordinary care. However, in asserting a
signature under this section the Bureau of the Public Debt first will
have to establish that it exercised ordinary care in relying upon the
signature.
This section is drawn in part from section 3-406 of the Uniform
Commercial Code (UCC) (``Negligence Contributing to Forged Signature or
Alteration of Instrument.''). The responsibilities imposed upon persons
in regard to the technology used to create and submit electronic
signatures and accompanying electronic records are similar to those
imposed under the UCC in regard to rubber signature stamps used to sign
checks. Official Comment 3 to UCC section 3-406 is enlightening in this
regard. If a person's rubber signature stamp and checks, kept in an
unlocked drawer, are stolen and used by a party to forge a check, a
bank may successfully be able to argue that the person is precluded
from disavowing the forged signature because the person's lack of
ordinary care substantially contributed to the forgery. Similarly,
under the final rule if a person fails to take adequate security
precautions to protect access to electronic signature technology (such
as by not safekeeping a computer password, for instance) and this
failure substantially contributes to the creation or submission of a
forged signature, the person is precluded from disavowing the
signature.
By looking to the UCC provision, this section attempts to find
middle ground between varying approaches in current law as to how
liability should be distributed between the parties for unauthorized
transactions. For instance, a person can be held accountable for all
unauthorized calls from that person's telephone number, without regard
to whether ordinary care was exercised by the person. At the other end
of the spectrum, a person cannot be held accountable beyond $50 in
unauthorized transactions on that person's credit card, regardless of
whether the consumer exercised ordinary care in protecting the card or
in promptly reporting a loss or theft of the card.
Treasury believes that if pursued in these regulations, a provision
that allows the assertion of a forged signature against a person even
if the person exercised ordinary care would unfairly punish consumers
and discourage electronic commerce. At the same time, if a person's
fault has led to the creation of a forged signature, a provision that
limits or precludes the assertion of the signature against the person
does little to encourage the exercise of ordinary care. This section
allows the assertion of a forged signature only if the person's failure
to exercise ordinary care substantially contributed to the creation of
the signature.
This section places the burdens of production and persuasion upon
the person against whom the signature would be asserted to show that
the person exercised ordinary care. Because an electronic signature is
not created in the presence of the person accepting the signature, the
person accepting the signature typically does not have best access to
the evidence needed to establish the forgery and the exercise of
ordinary care. It is appropriate to require the person against whom the
signature would be asserted to make this showing. Also, in asserting a
signature under this section the Bureau of the Public Debt will have to
establish that it exercised ordinary care in relying upon the
signature. The evidence needed to establish that it used ordinary care
will be within the control of the Bureau of the Public Debt and so it
is fair to require the Bureau of the Public Debt to make this showing.
In its comment letter, the Federal Reserve Board expressed concern
that this section might be used to avoid the limitations of Regulation
Z. As alluded to above, Regulation Z caps cardholder liability for
unauthorized credit card use at $50. This section does not seek to
encroach upon Regulation Z. To the extent this section might apply to
unauthorized savings bond purchases involving credit cards, Treasury
would be seeking to recover on a savings bond contract, not a credit
card debt. In any event, Treasury has amended section 370.0 of this
part to emphasize that to the extent Regulation Z applies to
transactions accomplished pursuant to this part, the consumer
protections extended by Regulation Z are unaffected.
(19) Liability (Sec. 370.57)
This section limits the Bureau of the Public Debt's liability for
claims involving this subpart E to the amount
[[Page 64550]]
of the transaction, less any losses caused by the failure of a claimant
to exercise due diligence. For instance, this section could have
application to claims involving errors in the handling of otherwise
properly authorized transactions.
III. Procedural Requirements
This final 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.
This final rule relates to matters of public contract and
procedures for United States securities. The notice and public
procedures requirements of the Administrative Procedure Act are
inapplicable, pursuant to 5 U.S.C. 553(a)(2).
As no notice of proposed rulemaking is required, the Regulatory
Flexibility Act (5 U.S.C. 601, et seq.) does not apply.
There are no new collections of information contained in this final
rule. Therefore, the Paperwork Reduction Act (44 U.S.C. 3507) does not
apply.
List of Subjects in 31 CFR Parts 317, 351, 353, and 370
Bonds, Electronic Funds Transfers, Government Securities.
For the reasons set forth in the preamble, 31 CFR parts 317, 351,
353, and 370 are amended as follows:
PART 317--REGULATIONS GOVERNING AGENCIES FOR ISSUE OF UNITED STATES
SAVINGS BONDS
1. The authority citation for part 317 is revised to read as
follows:
Authority: 2 U.S.C. 901; 5 U.S.C. 301; 12 U.S.C. 391; 12 U.S.C.
1767; 31 U.S.C. 3105.
2. Revise Sec. 317.1 to read as follows:
Sec. 317.1 Definitions.
(a) Bond(s) means Series EE United States Savings Bonds and Series
I United States Savings Bonds.
(b) Federal Reserve Bank refers to the Federal Reserve Bank or
Branch providing savings bond services to the district in which the
issuing agent or the applicant organization is located. See
Sec. 317.9(a).
(c) Issuing agent refers to an organization that has been qualified
by a designated Federal Reserve Bank or the Commissioner of the Bureau
of the Public Debt to sell savings bonds. An issuing agent acts as an
agent of the purchaser in handling the remittance. The definition
encompasses:
(1) Each organization that accepts and processes purchase orders
for bonds sold over-the-counter, but does not inscribe bonds, and
(2) Each organization that is authorized to inscribe bonds sold
over-the-counter or through payroll savings plans.
(d) Offering circular refers to Department of the Treasury
Circular, Public Debt Series No. 1-80, current revision, for Series EE
savings bonds, and to Department of the Treasury Circular, Public Debt
Series No. 1-98 for Series I savings bonds.
(e) Organization means an entity, as described in Sec. 317.2, that
may qualify as an issuing agent of bonds.
3. Revise Sec. 317.2 to read as follows:
Sec. 317.2 Organizations authorized to act.
Organizations eligible to apply for qualification and serve as
issuing agents are the following:
(a) Banks, Federal credit unions in good standing, trust companies,
and savings institutions chartered by or incorporated under the laws of
the United States, or those of any State or Territory of the United
States, the District of Columbia, or the Commonwealth of Puerto Rico.
(b) Agencies of the United States and State and local governments.
(c) Employers operating payroll savings plans for the purchase of
United States Savings Bonds, as well as organizations operating payroll
savings plans on behalf of employers.
(d) Other organizations specifically and individually qualified by
the Commissioner of the Bureau of the Public Debt whenever the
Commissioner deems such a qualification to be in the public interest.
In selecting an issuing agent, the Commissioner may use such process
that the Commissioner deems to be appropriate. The selected issuing
agent will be subject to such conditions that the Commissioner deems to
be appropriate.
Sec. 317.3 [Amended]
4. Amend Sec. 317.3 as follows:
A. Revise the introductory text to paragraph (a) to read as
follows:
Sec. 317.3 Procedure for qualifying and serving as issuing agent.
(a) Execution of application agreement. An organization seeking
issuing agent qualification generally shall obtain from and file with a
designated Federal Reserve Bank an application-agreement form. However,
if an organization seeks qualification under Sec. 317.2(d) or because
of its status as an organization operating a payroll savings plan on
behalf of an employer under Sec. 317.2(c), it shall make application
directly to the Bureau of the Public Debt for approval by the
Commissioner of the Bureau of the Public Debt. An application-agreement
sent directly to the Bureau of the Public Debt shall be supplemented by
such other information as the Bureau of the Public Debt may request.
* * * * *
B. Add the words ``or the Bureau of the Public Debt'' after the
words ``Federal Reserve Bank'' in paragraphs (b) and (c).
5. Revise Sec. 317.6(b) to read as follows:
Sec. 317.6 Issuance of bonds.
* * * * *
(b) Fees. Each issuing agent, other than a Federal agency, will be
paid fees. Only issuing agents are eligible to collect fees. With prior
approval, agents that are authorized to inscribe bonds and receive fee
payments will also be paid a bonus for presorting savings bond
mailings. Schedules reflecting the amount of the fees and presort
bonuses, and the basis on which they are computed and paid, will be
published separately in the Federal Register.
* * * * *
6. Amend the appendix to Sec. 317.8 as follows:
A. Revise the section heading to the appendix to read as set out
below;
B. Remove paragraph 3 of subpart B;
C. Revise paragraphs 2(c) and 2(e) of subpart A, all of subpart C,
and paragraphs 2(a)(i) and 2(b) of subpart D to read as follows:
Sec. 317.8 Remittance of sales proceeds and registration records.
* * * * *
Appendix to Sec. 317.8--Remittance of Sales Proceeds and
Registration Records, Department of the Treasury Circular, Public
Debt Series No. 4-67, Third Revision (31 CFR Part 317), Fiscal
Service, Bureau of the Public Debt
Subpart A--General Information
* * * * *
2. Definition of terms. As used in this appendix:
* * * * *
(c) Over-the-counter sale means any sale of savings bonds other
than payroll sales.
* * * * *
(e) Issuing agent, as provided in Sec. 317.1(c) of the Circular,
refers to an organization that has been qualified by a designated
Federal Reserve Bank or the Commissioner of the Bureau of the Public
Debt to sell savings bonds.
* * * * *
[[Page 64551]]
Subpart C--Remittance of Payroll Sales Proceeds
1. Application of requirements. The remittance requirements for
payroll sales apply only to issuing agents. An employer that maintains
a payroll savings plan but does not issue bonds shall be notified by
the servicing issuing agent that it must remit sales proceeds to the
issuing agent in sufficient time to permit compliance with the
requirements.
2. Remittance of payroll sales deductions. Issuing agents shall
remit sales proceeds throughout the month shown in the issue date as
soon as the full amount of the purchase price of the bonds has been
received or accumulated. In no case should such proceeds be remitted
later than the second business day of the month following the month
shown in the issue date. The issuing agent shall ensure that its system
properly accounts for and recognizes when the full purchase price has
been received, or has been accumulated, so that timely remittance can
be made. The issuing agent shall transmit registration records in an
electronically processible format within thirty (30) days following the
month shown on the issue date.
Subpart D--Interest on Late Remittances
* * * * *
2. * * *
(a) Bonds inscribed by issuing agent--(i) Payroll sales. If, during
any three (3) month period, the interest assessed on an issuing agent's
late remittance of proceeds from payroll savings plan sales or thrift,
savings, vacation, or similar plan sales accumulates to less than $50
for each type of sales, the interest assessed for the first month will
be waived. The interest assessed for each type of sales for the
remaining two (2) months will then be carried forward to the next
period of three (3) consecutive months.
* * * * *
(b) Bonds inscribed by the designated Federal Reserve Bank. The
interest assessed on late remittance of all sales proceeds transmitted
during a given month will be waived if it is less than $25.
* * * * *
PART 351--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES EE
1. The authority citation for part 351 continues to read as
follows:
Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.
2. Revise Sec. 351.1 to read as follows:
Sec. 351.1 Governing regulations.
Series EE bonds are subject to the regulations of the Department of
the Treasury, now or hereafter prescribed, governing United States
Savings Bonds of Series EE and HH, contained in Department of the
Treasury Circular, Public Debt Series No. 3-80 (part 353 of this
chapter). Treasury expressly disclaims the effect of, and does not
warranty the correctness of, any representations or warranties
regarding Series EE bonds, wherever made, that in any way conflict with
the terms and conditions of Series EE bonds, as set out in these and
other regulations and other applicable law. The regulations in part 370
of this chapter apply to transactions for the purchase of United States
Savings Bonds issued through the Bureau of the Public Debt. The
regulations in part 370 do not apply to transactions for the purchase
of bonds accomplished through issuing agents generally, unless and to
the extent otherwise directed by the Commissioner of the Bureau of the
Public Debt.
3. Revise Sec. 351.5 to read as follows:
Sec. 351.5 Purchase of bonds.
(a) Payroll sales--(1) Payroll savings plans. Bonds in $100 and
higher denominations may be purchased through deductions from the pay
of employees of organizations that maintain payroll savings plans. The
bonds must be issued by an authorized issuing agent.
(2) Employee thrift, savings, vacation, and similar plans. Bonds
registered in the names of trustees of employee plans may be purchased
in book-entry form in $100 multiples through a designated Federal
Reserve Bank after Bureau of the Public Debt approval of the plan as
eligible for the special limitation under Sec. 353.13 of this chapter,
also published as Sec. 353.13 of Department of the Treasury Circular,
Public Debt Series No. 3-80.
(b) Over-the-counter sales--(1) Eligible issuing agents. Bonds may
be purchased through any issuing agent, except that an organization
serving as an issuing agent because of its status as an employer or an
organization operating an employer's payroll savings plan under
Sec. 317.2(c) of this chapter may sell bonds only through payroll
savings plans.
(2) Manner of sale. An application for the purchase of a bond must
be accompanied by a remittance to cover the issue price. The purchase
application and remittance may be submitted to an issuing agent by any
means acceptable to the issuing agent. An application may authorize
purchases on a recurring basis. The issuing agent bears the burden of
collection and the risk of loss for non-collection or return of the
remittance.
PART 353--REGULATIONS GOVERNING UNITED STATES SAVINGS BONDS, SERIES
EE AND HH
1. The authority citation for part 353 is revised to read as
follows:
Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105, 3125.
Sec. 353.6 [Amended]
2. Remove the word ``deduction'' in Sec. 353.6(b)(4), and add, in
its place, the word ``savings.''
Sec. 353.13 [Amended]
3. Add the phrase ``, as amended'' after the word ``1954'' in
Sec. 353.13(c)(3).
4. Revise paragraph (a) of Sec. 353.21 to read as follows:
Sec. 353.21 Payment to judgment creditors.
(a) Purchaser or officer under levy. The Department of the Treasury
will pay (but not reissue) a savings bond to the purchaser at a sale
under a levy or to the officer authorized under appropriate process to
levy upon property of the registered owner or coowner to satisfy a
money judgment. Payment will be made only to the extent necessary to
satisfy the money judgment. The amount paid is limited to the
redemption value 60 days after the termination of the judicial
proceedings. Except in a case of a levy by the Internal Revenue
Service, payment of a bond registered in coownership form pursuant to a
judgment or a levy against only one coowner is limited to the extent of
that coowner's interest in the bond. That interest must be established
by an agreement between the coowners by judgment, decree, or order of a
court in a proceeding to which both coowners are parties. Payment of a
bond registered in coownership form pursuant to levy by the Internal
Revenue Service will be made if the levy is against either coowner on
the bond.
5. Revise Sec. 353.27 to read as follows:
Sec. 353.27 Application for relief--Non-receipt of bond.
If a bond issued on any transaction is not received, the issuing
agent must be notified as promptly as possible and given all
information about the non-receipt. An appropriate form and instructions
will be provided. If the application is approved, relief will be
granted by the issuance of a bond bearing the same issue date as the
bond that was not received. Also, relief is authorized for the issuance
of bonds for
[[Page 64552]]
which the Secretary has not received payment, in order to preserve
public confidence in dealing with issuing agents.
PART 370--REGULATIONS GOVERNING ELECTRONIC TRANSACTIONS AND THE
TRANSFER OF FUNDS BY ELECTRONIC MEANS ON ACCOUNT OF UNITED STATES
SECURITIES
1. The authority citation for part 370 is revised to read as
follows:
Authority: 12 U.S.C. 391; 31 U.S.C. chapter 31.
2. The heading of part 370 is revised to read as set forth above.
3. Revise subpart A to read as follows:
Subpart A--General Information
Sec.
370.0 Applicability.
370.1 Definitions.
Subpart A--General Information
Sec. 370.0 Applicability.
The regulations in this part apply to electronic transactions and
the transfer of funds by electronic means as employed by the Bureau of
the Public Debt in connection with United States securities, except as
varied by agreement or as otherwise provided. To the extent that the
regulations in part 210 of this title apply to the purchase or payment
of interest and principal on United States securities, the regulations
in this part 370 apply in the event of any inconsistencies. Among other
things, the written authorization of the Financial Management Service
is not necessary for the issuance of routing numbers by a Federal
Reserve Bank or for the receipt, origination, or reversal of any credit
or debit entry accomplished pursuant to this part. Finally, to the
extent that Regulation E (12 CFR part 205) and Regulation Z (12 CFR
part 226) of the Board of Governors of the Federal Reserve System may
apply to transactions authorized by this part, those Federal laws are
unaffected by this part.
Sec. 370.1 Definitions.
Automated Clearing House (ACH) entry means a transaction in
accordance with applicable Operating Rules and Operating Guidelines of
the National Automated Clearing House Association, as modified by these
and other regulations and law. The regulations in this part control in
the event of any inconsistencies with the applicable Operating Rules
and Operating Guidelines.
Credit entry means an ACH entry for the deposit of money to a
deposit account.
Debit entry means an ACH entry for the payment of money from a
deposit account.
Deposit account means a demand deposit (checking), savings, or
asset account (other than an occasional or incidental credit balance in
a credit plan) held directly or indirectly by a financial institution.
Digital signature means a type of electronic signature. A digital
signature uses public-key encryption and a message digest function to
transform an electronic record. A person who has the initial electronic
record and the signer's public key can verify:
(1) Whether the transformation was accomplished by the private key
that corresponds to the signer's public key; and
(2) Whether the initial record has been altered since the
transformation was made.
Electronic signature means a signature manifested through
electronic or similar means, including digital and biometric methods.
Financial institution means:
(1) An entity described in section 19(b)(1)(A), excluding
subparagraphs (v) and (vii), of the Federal Reserve Act (12 U.S.C.
461(b)(1)(A)). Under section 19(b)(1)(A) of the Federal Reserve Act and
for purposes of this part only, the term ``depository institution''
means:
(i) Any insured bank as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813) or any bank that is eligible to make
application to become an insured bank under section 5 of such Act (12
U.S.C. 1815);
(ii) Any mutual savings bank as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) or any bank that is eligible to
make application to become an insured bank under section 5 of such Act
(12 U.S.C. 1815);
(iii) Any savings bank as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) or any bank that is eligible to
make application to become an insured bank under section 5 of such Act
(12 U.S.C. 1815);
(iv) Any insured credit union as defined in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752) or any credit union that is
eligible to make application to become an insured credit union pursuant
to section 201 of such Act (12 U.S.C. 1781);
(v) Any savings association as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) that is an insured depository
institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is
eligible to apply to become an insured depository institution under the
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
(2) Any agency or branch of a foreign bank as defined in section
1(b) of the International Banking Act, as amended (12 U.S.C. 3101).
Message digest function means an algorithm mapping or translating
one sequence of bits into another, generally smaller, set such that:
(1) An electronic record yields the same message digest result
every time the algorithm is executed using the same electronic record
as input;
(2) It is computationally infeasible that an electronic record can
be derived or reconstituted from the message digest result produced by
the algorithm; and
(3) It is computationally infeasible that two electronic records
can be found that produce the same message digest using the algorithm.
Originator means an entity authorized by a person to initiate debit
or credit entries to the person's deposit account and that also has an
agreement with a financial institution to transmit the debit or credit
entries to the person's deposit account.
Owner means the person(s) in whose name(s) a security is
registered.
Payment means, for the purpose of subpart B of this chapter, the
deposit of money from the Department of the Treasury to the deposit
account of the owner.
Person means any natural person or organization.
Public-key encryption means a process which generates and employs a
key pair consisting of a private key and its mathematically related
public key, in which one use of the public key is to verify a digital
signature created by the private key.
Record means information that is inscribed on a tangible medium or
that is stored in an electronic or other medium and is retrievable in
perceivable form.
Security means any obligation issued by the United States that, by
the terms of the applicable offering circular, is made subject to this
part.
Settlement date means the date an exchange of funds with respect to
an entry is reflected on the books of the Federal Reserve Bank(s). For
a security held in the TREASURY DIRECT system, the issue date will in
most cases be the same as the settlement date. For United States
Savings Bonds, the issue date will in most cases be the first day of
the month in which settlement takes place.
Signature means any symbol or method executed or adopted by a party
with present intention to be bound.
[[Page 64553]]
4. Revise the heading of subpart C to read as follows:
Subpart C--Debit ACH Entries for the Sale of Securities in TREASURY
DIRECT
* * * * *
Subpart D--Redesignated
5. Redesignate subpart D as subpart F and Secs. 370.30 and 370.31
as Secs. 370.60 and 370.61.
6. Add subparts D and E to read as follows:
Subpart D--Debit ACH Entries for the Sale of United States Savings
Bonds Issued Through the Bureau of the Public Debt
Sec.
370.30 Scope.
370.31 Authorization.
370.32 Prenotification.
370.33 Warranties of financial institution.
370.34 Responsibilities of financial institution.
370.35 Termination or suspension by the Bureau of the Public Debt.
370.36 Termination or suspension by purchaser or deposit account
owner by notice to the originator.
370.37 Changes and error resolution.
370.38 Liability.
Subpart O--Debit ACH Entries for the Sale of United States Savings
Bonds Issued Through the Bureau of the Public Debt
Sec. 370.30 Scope.
This subpart provides regulations for Automated Clearing House
debit entries used for the sale of United States Savings Bonds issued
through the Bureau of the Public Debt. This subpart also establishes
the exclusive liability of the Bureau of the Public Debt for such
entries. This subpart does not apply to transactions for the sale of
United States Savings Bonds accomplished through savings bond issuing
agents generally, unless and to the extent the Commissioner of the
Bureau of the Public Debt directs otherwise.
Sec. 370.31 Authorization.
(a) General. The purchaser of a security shall authorize an
originator to initiate Automated Clearing House debit entries and shall
designate a deposit account at a financial institution to receive such
entries. An authorization shall be accomplished only through a form
approved by the Bureau of the Public Debt.
(b) Persons to sign. The signatures of the purchaser and any other
persons whose signatures ordinarily are required to withdraw funds from
the designated deposit account are necessary for the authorization to
be effective. Except to the extent required by the Bureau of the Public
Debt, the originator will not be required to verify the identity of the
purchaser or the authenticity of the signatures.
(c) Recurring debit entries. A single authorization may allow or
require debit entries to be made to a deposit account on a recurring
basis, if the approved authorization form so provides.
(d) Subsequent authorizations. A purchaser's subsequent
authorization cancels a previous authorization.
(e) Successor originator. The Bureau of the Public Debt reserves
the right to name a successor to the originator named on the debit
authorization form. The designation of a successor shall be effective
without additional notice to the purchaser.
Sec. 370.32 Prenotification.
The requirement of a prenotification prior to the initiation of any
debit entry is left to the discretion of the Bureau of the Public Debt.
If sent, the receiving financial institution must respond within the
time frame for such responses established by the National Automated
Clearing House Association. If a prenotification is sent and the
receiving financial institution does not reject or otherwise respond to
the prenotification message within the specified time period, the
financial institution shall be deemed to have warranted to Treasury and
the originator that the information as to the deposit account number
and the type of account contained in the message is accurate as of the
time of receipt of the prenotification.
Sec. 370.33 Warranties of financial institution.
A financial institution's acceptance and handling of a debit entry
or failure to timely reject a prenotification made with respect to a
security covered by this subpart shall constitute its agreement to the
provisions of this subpart. In addition to warranties referred to in
Sec. 370.32, a financial institution that agrees to this part also
warrants that it has the authority to receive entries and to comply
with any requirements imposed upon Receiving Depository Financial
Institutions under the Operating Rules and Operating Guidelines of the
National Automated Clearing House Association, as modified by these and
other regulations and law.
Sec. 370.34 Responsibilities of financial institution.
A financial institution that receives a debit entry on behalf of
its customer must debit the customer's account on the settlement date.
If the financial institution is unable to debit the designated account,
it shall return the entry by no later than the next business day after
receipt, with an electronic message or other response explaining the
reason for the return.
Sec. 370.35 Termination or suspension by the Bureau of the Public
Debt.
The Bureau of the Public Debt may terminate or suspend the
availability of debit entries as a means of purchase for savings bonds
at any time. A decision to terminate or suspend the availability of
debit entries as a means of purchase is in the sole discretion of the
Bureau of the Public Debt and shall be final.
Sec. 370.36 Termination or suspension by purchaser or deposit account
owner by notice to the originator.
A purchaser of a security or a deposit account owner may terminate
or suspend debits by notifying the originator orally or in writing at
least three business days before the scheduled date of the transfer. In
response to an oral notice, the originator may require the consumer to
give written notice, to be received by the originator within 14 days of
an oral notice. An oral notice ceases to be binding after 14 days if
the purchaser fails to provide the required written confirmation. A
suspension will remain in effect for the duration specified by the
purchaser, but for no more than six months. The termination and
revocation methods need not be recited in the authorization.
Sec. 370.37 Changes and error resolution.
While responding to an oral or written notice from a person
relating to the propriety of security issuance information or a debit
entry involving the person's deposit account, the originator may
suspend further debit entries. In response to an oral notice, the
originator may require the person to give written notice, to be
received by the originator within 10 business days of an oral notice.
The originator promptly will investigate the allegation and provide
relief for any error, but is not bound to complete the investigation or
correct the error within 10 business days if the requested written
confirmation is not provided.
Sec. 370.38 Liability.
(a) Scope of liability. Unless the Bureau of the Public Debt has
designated itself or a fiscal or financial agent as an originator, the
Bureau of the Public Debt shall not be liable for any unauthorized,
erroneous, duplicative, or otherwise improper debit entries, and shall
not be liable for a failure to debit a deposit account. Unless the
Bureau of the Public Debt has designated itself or
[[Page 64554]]
a fiscal or financial agent as the originator, the originator serves as
the agent of the purchaser in handling the remittance. Any claims must
be pursued against the originator. The Bureau of the Public Debt shall
not be liable for its choice of an originator. The Bureau of the Public
Debt shall not be liable to any Automated Clearing House association.
(b) Extent of liability. For any claim involving this subpart that
may proceed against the Bureau of the Public Debt, the Bureau of the
Public Debt's liability is limited to the amount of the improper debit
and does not extend to other damages or costs, including consequential
damages, punitive damages, the costs of litigation, or payment of
attorney fees. The liability of the Bureau of the Public Debt also
shall be reduced by the amount of the loss resulting from a failure of
the claimant to exercise due diligence, including a failure to follow
standard commercial practices.
Subpart E--Electronic Submission of Transaction Requests Through the
Bureau of the Public Debt
Sec.
370.50 Scope.
370.51 Requirements.
370.52 Time of acceptance.
370.53 Point of transaction.
370.54 Effect of electronic signature.
370.55 Admissibility of digital signature.
370.56 Negligence contributing to forged signature.
370.57 Liability.
Subpart E--Electronic Submission of Transaction Requests Through
the Bureau of the Public Debt
Sec. 370.50 Scope.
This subpart provides general regulations for the electronic
submission of transaction requests through the Bureau of the Public
Debt. This subpart also establishes the exclusive liability of the
Bureau of the Public Debt for transactions accomplished under this
subpart. This subpart does not apply to transactions for the sale of
United States Savings Bonds accomplished through savings bond issuing
agents generally, unless and to the extent the Commissioner of the
Bureau of the Public Debt directs otherwise.
Sec. 370.51 Requirements.
An electronically signed transaction request cannot be accepted by
the Bureau of the Public Debt unless the signature has been
accomplished through a method that has been approved for specific
purposes by the Bureau of the Public Debt.
Sec. 370.52 Time of acceptance.
A transaction request submitted electronically, including an offer
to purchase a security, is accepted no earlier than at the moment the
request is received by the Bureau of the Public Debt and no later than
at the moment a message of acceptance is sent by the Bureau of the
Public Debt, regardless of the method used to transmit the message of
acceptance.
Sec. 370.53 Point of transaction.
For jurisdiction and venue purposes, the point of transaction for a
transaction request handled pursuant to this subpart is Parkersburg,
West Virginia, regardless of from where the transaction request is
transmitted or where the transaction request is actually processed.
Sec. 370.54 Effect of electronic signature.
An electronic signature and any electronic record to which it is
affixed or attached may not be denied legal effect, including legal
effect as a signature, a writing, or an original, solely because the
signature or record is in electronic form.
Sec. 370.55 Admissibility of digital signature.
The requirement of authentication or identification as a condition
precedent to admissibility is satisfied by evidence sufficient to
support a finding that a digital signature exists. However, in
asserting a digital signature against a particular person in any civil
litigation or dispute, extrinsic evidence of authenticity as a
condition precedent of admissibility shall not be necessary to
establish that a digital signature corresponds to a specific public key
pair and that an electronic record to which the digital signature is
affixed has not been altered from its original form.
Sec. 370.56 Negligence contributing to forged signature.
A person whose failure to exercise ordinary care substantially
contributes to the creation or submission of a forged signature is
precluded from disavowing the forged signature. The burden of
production and the burden of persuasion is on the person against whom
the signature is asserted to establish the exercise of ordinary care.
However, in asserting a signature under this section, the Bureau of the
Public Debt bears the burden of production and the burden of persuasion
in establishing that it exercised ordinary care in relying upon the
signature.
Sec. 370.57 Liability.
For any claim involving this subpart that may proceed against the
Bureau of the Public Debt, the Bureau of the Public Debt's liability is
limited to the amount of the transaction and does not extend to other
damages or costs, including consequential damages, punitive damages,
the costs of litigation, or payment of attorney fees. The liability of
the Bureau of the Public Debt shall also be reduced by the amount of
the loss resulting from a failure of the claimant to exercise due
diligence, including a failure to follow standard commercial practices.
Dated: November 10, 1998.
Donald V. Hammond,
Fiscal Assistant Secretary.
[FR Doc. 98-31089 Filed 11-19-98; 8:45 am]
BILLING CODE 4810-39-P
