99-18919. Regulations Governing U.S. Savings Bonds, Series A, B, C, D, E, F, G, H, J, and K, and U.S. Savings Notes; Regulations Governing United States Savings Bonds, Series EE and HH; Regulations Governing Book- Entry Treasury Bonds, Notes and ...  

  • [Federal Register Volume 64, Number 142 (Monday, July 26, 1999)]
    [Rules and Regulations]
    [Pages 40484-40491]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 99-18919]
    
    
    
    [[Page 40483]]
    
    _______________________________________________________________________
    
    Part V
    
    
    
    
    
    Department of the Treasury
    
    
    
    
    
    _______________________________________________________________________
    
    
    
    Fiscal Service
    
    
    
    _______________________________________________________________________
    
    
    
    31 CFR Parts 315, 353, 357, and 370
    
    
    
    Regulations Governing U.S. Savings Bonds, U.S. Savings Notes; Book-
    Entry Treasury Bonds, Notes and Bills; and Electronic Transactions and 
    Funds Transfers Related to U.S. Securities; Final Rule
    
    Federal Register / Vol. 64, No. 142 / Monday, July 26, 1999 / Rules 
    and Regulations
    
    [[Page 40484]]
    
    
    
    DEPARTMENT OF THE TREASURY
    
    Fiscal Service
    
    31 CFR Parts 315, 353, 357, and 370
    
    
    Regulations Governing U.S. Savings Bonds, Series A, B, C, D, E, 
    F, G, H, J, and K, and U.S. Savings Notes; Regulations Governing United 
    States Savings Bonds, Series EE and HH; Regulations Governing Book-
    Entry Treasury Bonds, Notes and Bills; and Electronic Transactions and 
    Funds Transfers Related to U.S. Securities
    
    AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.
    
    ACTION: Final rule.
    
    -----------------------------------------------------------------------
    
    SUMMARY: We're publishing a final rule on electronic transactions and 
    funds transfers relating to United States securities. In particular, 
    we've eliminated redundant provisions that address our use of Automated 
    Clearing House entries.
    
    DATES: Effective July 26, 1999.
    
    ADDRESSES: You can download this
    final rule at the following World
    Wide Web address:
    http://www.publicdebt.treas.gov>. You may also inspect and copy this 
    final rule at: Treasury Department Library, Freedom of Information Act 
    (FOIA) Collection, Room 5030, Main Treasury Building, 1500 Pennsylvania 
    Ave., NW, Washington, DC 20220. Before visiting, you must 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>
     Maureen Parker, Director, Division of Securities Systems, 
    Office of Securities and Accounting Services, Bureau of the Public 
    Debt, at (304) 480-7761 or mparker@bpd.treas.gov>
     Susan J. Klimas, Attorney-Adviser, Office of the Chief 
    Counsel, Bureau of the Public Debt, at (304) 480-3688 or 
    sklimas@bpd.treas.gov>
     Gregory J. Till, Attorney-Adviser, Office of the Chief 
    Counsel, Bureau of the Public Debt, at (202) 219-3320 or 
    gtill@bpd.treas.gov>
     Edward C. Gronseth, Deputy Chief Counsel, Bureau of the Public 
    Debt, at (304)480-3688 or egronset@bpd.treas.gov>
    SUPPLEMENTARY INFORMATION:
    
    I. Background
    
        On November 20, 1998, we published a final rule in the Federal 
    Register (63 FR 64543). The final rule amended the regulations at 31 
    CFR part 370 that governed the transfer of funds on account of United 
    States securities. In particular, the final rule provided for the use 
    of Automated Clearing House (ACH) debit entries for the sale of savings 
    bonds. At the time, we made no attempt to consolidate these provisions 
    with other debit entry provisions already in 31 CFR part 370.
        This final rule consolidates the previously separate debit entry 
    provisions in 31 CFR part 370. We've also eliminated redundant credit 
    entry provisions that were found in 31 CFR parts 315, 353, and 357, in 
    favor of unified provisions in part 370. We've also rewritten part 370 
    in plain language.
    
    II. Summary of Amendments in 31 CFR Part 370
    
    Subpart A--General Information
    
    What Special Terms Do I Need To Know To Understand This Part? 
    (Sec. 370.1)
    
        We've made several changes to this section. We've amended the 
    definition of ``electronic signature'' to be consistent with the 
    definition given by Congress in the Government Paperwork Elimination 
    Act, or title XVII of Public Law 105-277 (October 21, 1998). Congress 
    passed this act to facilitate the use and acceptance of electronic 
    signatures by executive agencies. Consistent with the Act, the final 
    rule defines an electronic signature as a signature of an electronic 
    message that:
        (1) identifies and authenticates a particular person as the source 
    of the electronic message; and
        (2) indicates such person's approval of the information contained 
    in the electronic message.
        The definition of ``investor account'' mirrors that which we will 
    use in an upcoming revision to the TreasuryDirect regulations in 31 CFR 
    part 357. We've amended the definition of ``payment'' for greater 
    accuracy. In addition, we've added definitions of ``we'' and ``you.'' 
    We've added these definitions, as well as slightly revised a handful of 
    other definitions, to help us write this final rule in plain language.
    
    Subpart B--Credit ACH Entries
    
    How Can I Appoint a Financial Institution To Receive Payments on My 
    Behalf? (Sec. 370.5)
    
        This section has been amended to require that you name a financial 
    institution and deposit account to receive payments through the ACH 
    method, using an approved form. The former section (b) has been moved 
    to 370.15, relating to limitations on liability.
    
    What Requirements Apply to a Financial Institution That Handles a 
    Credit Entry? (Sec. 370.6)
    
        This section has been amended by eliminating unnecessary 
    provisions, and by adding a provision that a financial institution, by 
    accepting and handling a credit entry initiated by us, agrees to comply 
    with the Operating Rules of the National Automated Clearing House 
    Association (NACHA Rules), as modified by our regulations.
    
    Are There Any Requirements Related to a Prenotification Entry? 
    (Sec. 370.8)
    
        This section is amended to provide that we may, in our discretion, 
    send a prenotification message before we send a credit entry or 
    whenever there is a change in the payment instructions. Paragraph (b) 
    requires that the financial institution respond to prenotification 
    messages within the time frame of the National Automated Clearing House 
    Association (NACHA). If the financial institution does not respond to a 
    prenotification message, we may interpret the nonresponsiveness as 
    agreement to this subpart, and that the deposit account information 
    contained in the prenotification message is accurate.
    
    How Can My Payment Instructions Be Changed? (Sec. 370.9)
    
        This section provides that payment instructions will continue until 
    you or your financial institution asks us to change them.
    
    What Can Cause My Payments To Be Suspended? (Sec. 370.10)
    
        This section is amended to provide that payments will be suspended 
    if we receive notice that your deposit account has been closed, that 
    someone named on your account is dead or has been declared legally 
    incompetent, that there is a change in the title of your deposit 
    account which alters your interest, or if a corporation has been 
    dissolved. In addition, we will suspend payments if there are changes 
    in the status of the bond, security, or investor account. Payments will 
    continue in suspension until we receive evidence satisfactory to us as 
    to who is entitled to receive payments.
    
    What Must My Financial Institution Do When It Receives a Payment? 
    (Sec. 370.11)
    
        This former Sec. 370.10 is redesignated as Sec. 370.11.
    
    [[Page 40485]]
    
    What Happens if an Error Is Made in a Credit Entry, or if a Duplicate 
    Credit Entry Is Made? (Sec. 370.12)
    
        This former Sec. 370.11 is redesignated as Sec. 370.12. The former 
    Sec. 370.12 has been deleted as an unnecessary provision.
    
    What Limitations Exist on Liability? (Sec. 370.15)
    
        This section is the former Sec. 370.16, which has been redesignated 
    as Sec. 370.15. The former Sec. 370.15 has been deleted as unnecessary. 
    Paragraphs (a) and (b) are substantively unchanged. Section (c) has 
    been moved from Sec. 370.5 and is substantively unchanged.
    
    Subpart C--Debit ACH Entries
    
    What Requirements Apply if I Want To Authorize a Debit Entry to My 
    Deposit Account? (Sec. 370.20)
    
        This section sets out requirements on debit entry authorizations. 
    The provisions of this section are somewhat complicated by the various 
    ways that we use debit entries for the sale of securities, depending on 
    the type of security involved.
        We currently accept debit entry authorizations for sales of book-
    entry (electronic) Treasury securities held in our TreasuryDirect 
    system. We also accept debit entry authorizations for sales of 
    definitive (paper) savings bonds sold directly by us through the United 
    States Savings Bond EasySaver PlanTM. (Savings bonds also 
    are sold by savings bond issuing agents, but part 370 has no 
    application to them). We also will accept debit authorizations for 
    collection of fees.
        Under this section, we require that if you purchase a book-entry 
    security held in TreasuryDirect, you must be named on the investor 
    account that holds the security. On the other hand, we do not impose a 
    similar requirement for our sales of definitive savings bonds, because 
    these are not held in investor accounts.
        Also under this section, we limit you to authorizing only single-
    entry debits for purchases of book-entry securities held in 
    TreasuryDirect. On the other hand, debit entries for purchases of 
    definitive savings bonds must be recurring.
        For purchases of book-entry Treasury securities, a debit entry 
    authorization may be completed electronically. For instance, for 
    purchases of securities held in TreasuryDirect, you must open an 
    investor account; once there is an existing relationship, you may 
    electronically authorize a debit entry to a designated deposit account 
    for the purchase of a book-entry Treasury security by providing some 
    personal identification information. By contrast, the debit entry 
    authorization for definitive savings bonds only may be completed if 
    signed on paper. This difference between the securities is not explicit 
    in the regulations. Rather, it simply reflects how we currently do 
    business.
        The section requires that all debit entry authorizations must be 
    signed. We've defined the word ``signature'' as ``any symbol or method 
    executed or adopted by a person with present intention to be bound.'' 
    This is a traditional legal definition of a signature.
        Special consideration has been given to authorizations completed by 
    electronic means. As noted above, a signature may be an electronic 
    signature. However, as stated in section 370.35, not every 
    electronically signed debit entry authorization automatically is 
    acceptable to us. Instead, the electronic signature must be 
    accomplished through a method that we've approved. For instance, we 
    require you to enter your TreasuryDirect account number and taxpayer 
    identification number to access our TreasuryDirect electronic services. 
    We consider the entry of this information to be an electronic signature 
    that expresses your intent to be bound by any debit entry authorization 
    that you may submit while accessing our electronic services.
        In determining what types of electronic signatures are acceptable 
    to us, we will look to how electronic signatures are treated under 
    other law and in the private sector. We also will be bound by whatever 
    procedures may be imposed upon executive agencies governing the use of 
    digital signatures.
        Our approach on authorizations completed by electronic means 
    diverges from the approach taken by the Board of Governors of the 
    Federal Reserve (``the Board'') and the National Automated Clearing 
    House Association (``NACHA''). The Board is responsible for Regulation 
    E (12 CFR part 205), which sets out consumer rights in electronic funds 
    transfers such as debit entries. NACHA is responsible for the Operating 
    Rules (``the NACHA Rules'') that govern the handling of debit entries. 
    These authorities state that a debit entry authorization must be in a 
    ``writing signed or similarly authenticated by the consumer.'' Under 
    Regulation E, this requirement applies only to debit entry 
    authorizations for recurring debits; under the NACHA Rules, this 
    requirement applies to all debit entry authorizations.
        Under Regulation E and the NACHA Rules, the meaning of ``signed'' 
    appears to be limited to a signature completed in longhand, and does 
    not extend to an electronic signature. Neither Regulation E nor the 
    NACHA Rules recognize the term ``electronic signature.'' Instead, a 
    debit ACH authorization that is completed electronically must be 
    ``similarly authenticated.''
        The Board and NACHA have interpreted ``similarly authenticated'' as 
    allowing authentication by use of a PIN or digital signature. On the 
    other hand, the use of an account number and taxpayer identification 
    number may not be sufficient for the Board and NACHA. Thus, our current 
    means of allowing the electronic submission of a debit entry 
    authorization in TreasuryDirect may differ from that allowed by the 
    Board and NACHA.
        We have decided not to adopt the ``similarly authenticated'' 
    language used by the Board and NACHA, for two reasons. First, in the 
    Government Paperwork Elimination Act, Congress defined the term 
    ``electronic signature.'' Congress also stated its intent that 
    executive agencies use and accept such signatures. Of course, we wish 
    to be consistent with Congress. Second, by not adopting the ``similarly 
    authenticated'' language, we reserve some right to determine what 
    constitutes an acceptable means of electronically submitting a debit 
    entry authorization. In deciding what qualifies as an approved 
    ``electronic signature,'' we will be influenced, but not bound, by the 
    Board and NACHA's interpretation of ``similarly authenticated.''
        We can differ from Regulation E on this point because 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.'' 
    Transactions involving book-entry securities held in TreasuryDirect 
    fall within this exclusion. As noted above, it only is for these types 
    of securities that the Bureau of the Public Debt allows debit entry 
    authorizations to be completed electronically.
        Even without this exclusion, we are consistent with Regulation E. 
    The ``signed or similarly authenticated'' language in Regulation E 
    applies only to authorizations for recurring debit entries. However, 
    all electronically submitted debit authorizations in TreasuryDirect are 
    for single-entry debits. Accordingly, to the extent that we allow debit 
    entry authorizations to be electronically signed, the ``signed or 
    similarly authenticated'' requirement of Regulation E is not triggered.
    
    [[Page 40486]]
    
        In the future, we may wish to accept electronically submitted debit 
    entry authorizations for our sales of definitive savings bonds. As 
    opposed to book-entry securities, Regulation E applies to debit entry 
    transactions involving definitive securities. Thus, an authorization of 
    recurring debit entries for the sale of definitive savings bonds may 
    have to qualify as ``signed or similarly authenticated'' under 
    Regulation E, though single-entry authorizations may not have to so 
    qualify. If we decide to pursue sales of definitive savings bonds 
    through electronic debit entry authorizations, we would consider making 
    the ``signed or similarly authenticated'' requirement explicit in our 
    regulations. However, no such electronic transactions are currently 
    planned for definitive savings bonds.
        We can differ from the NACHA Rules because the NACHA Rules are 
    private law. More importantly, today's final rule is consistent with 
    Regulation E, which has carved out an exclusion for transactions 
    involving certain book-entry Treasury securities. Furthermore, although 
    the ``signed or similarly authenticated'' language in the NACHA Rules 
    applies to single-entry debit authorizations, we note that this 
    application was inspired by NACHA's desire to protect consumers from 
    aggressive telemarketers. This is an admirable purpose but one that has 
    little meaning with regard to consumer dealings with Treasury. We 
    believe we're justified in not following the NACHA Rules on this point.
        No matter how an electronic signature of a debit entry 
    authorization may be completed, we have at our disposal several 
    measures to prevent fraud. For instance, for a book-entry security held 
    in TreasuryDirect, we reserve the right to prevent the owner from 
    disposing of the security for up to thirty days after purchase. If 
    fraud is reported during this time, we can cancel the security, 
    preventing the fraud from succeeding. Also, even after this thirty-day 
    period, any attempt to transfer out or otherwise collect the value of a 
    security requires the owner to provide identification, in person, to a 
    bank or other institution. In other words, a person attempting a fraud 
    cannot do it anonymously; instead, he must identify himself. Finally, 
    to the extent that fraud may occur, the United States is better capable 
    of prosecuting cases than may be a small, private entity.
        In addition, the section states that credit and debit entries with 
    respect to a security must be made to the same deposit account. This is 
    another security feature. The provision helps ensure that funds are 
    placed back into the same deposit account from which the funds were 
    drawn, rather than going to an improper account.
    
    What Rights Do I Have To Terminate or Suspend Debit Entries? 
    (Sec. 370.25)
    
        This section is amended to state that if you submit a debit entry 
    authorization in conjunction with a Treasury auction tender for the 
    purchase of a book-entry security, you cannot terminate or suspend a 
    debit entry after the auction closes. This is to prevent a person from 
    unfairly withdrawing the remittance if the person receives an 
    unfavorable yield at an auction.
    
    What Limitations Exist on Liability? (Sec. 370.26)
    
        This section is amended to state that our liability does not extend 
    beyond the amount of the debit entry. Furthermore, if a financial 
    institution causes us a loss because it fails to follow this part, the 
    financial institution cannot be liable to us for more than the amount 
    of the debit.
    
    Can I Be Held Accountable if My Negligence Contributes to a Forged 
    Signature? (Sec. 370.40)
    
        This section is amended to state that it has no application in any 
    dispute involving a debit authorization or credit card transaction. 
    Instead, we will rely upon the error resolution procedures of the NACHA 
    Rules, credit card association rules, and the Board's regulations.
    
    What Is the Status of a Security if the Remittance Cannot Be Collected? 
    (Sec. 370.45)
    
        This new section states that if we cannot promptly collect all of 
    the remittance for a security, we may in our discretion cancel the 
    security unless it has been legally transferred for value to a third 
    person who had no knowledge of the improper debit entry at the time of 
    the transfer.
    
    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.
        We ask for no new collections of information in this final rule. 
    Therefore, the Paperwork Reduction Act (44 U.S.C. 3507) does not apply.
    
    List of Subjects
    
    31 CFR part 315
    
        Government Securities, Federal Reserve System, Banks and Banking.
    
    31 CFR part 353
    
        Bonds, Electronic Funds Transfers, Government Securities.
    
    31 CFR part 357
    
        Bonds, Electronic funds transfer, Federal Reserve System, 
    Government securities, Securities.
    
    31 CFR part 370
    
        Bonds, Electronic Funds Transfers, Government Securities, 
    Securities.
    
        For the reasons set forth in the preamble, 31 CFR parts 315, 353, 
    357, and 370 are amended as follows:
    
    PART 315--REGULATIONS GOVERNING U.S. SAVINGS BONDS, SERIES A, B, C, 
    D, E, F, G, H, J, AND K, AND U.S. SAVINGS NOTES
    
        1. The authority citation for part 315 continues to read as 
    follows:
    
        Authority: 31 U.S.C. 3105 and 5 U.S.C. 301.
    
        2. Amend Sec. 315.31 as follows:
        a. Remove the last two sentences of paragraph (b);
        b. Remove the last sentence of paragraph (c);
        c. Revise paragraph (h)(1) to read as set forth below.
        d. Remove paragraph (h)(2);
        e. Redesignate paragraphs (h)(3), (h)(4), (h)(5), and (h)(6) as 
    (h)(2), (3), (4), and (5);
        f. Revise redesignated paragraph (h)(5) to read as set forth below.
        g. Remove paragraph (h)(7);
        h. Redesignate paragraph (h)(8) as (h)(6) and revise redesignated 
    paragraph (h)(6) to read as set forth below.
        i. Redesignate paragraph (i) as (h)(7) and revise redesignated 
    paragraph (h)(7) to read as set forth below.
    
    
    Sec. 315.31  Series H bonds.
    
    * * * * *
        (h) * * *
        (1) Payments on same account. Payments on all Series H bonds 
    assigned to the same account maintained by the Bureau will be made to 
    the same deposit account at a financial institution.
    * * * * *
    
    [[Page 40487]]
    
        (5) Cancellation of ACH arrangement. An ACH arrangement shall 
    remain in effect until it is terminated by a request from the owner or 
    coowner submitted to the Bureau of the Public Debt, Parkersburg, WV 
    26102-1328.
        (6) Rules. Series H interest payments made by the ACH method are 
    governed by the regulations at 31 CFR part 370.
        (7) Nonreceipt or loss of interest payment. The Bureau of the 
    Public Debt, Parkersburg, WV 26102 should be notified if:
        (i) An interest check is not received or is lost after receipt or
        (ii) An ACH payment is not credited to the designated account and 
    the financial institution has no record of receiving it. The notice 
    should include the owner or coowner's name and taxpayer identifying 
    number and the interest payment date.
    
    PART 353--REGULATIONS GOVERNING UNITED STATES SAVINGS BONDS, SERIES 
    EE AND HH
    
        1. The authority citation for part 353 continues to read as 
    follows:
    
        Authority: 31 U.S.C. 3105 and 5 U.S.C. 301.
    
        2. Amend Sec. 353.31 as follows:
        a. Remove the third sentence of paragraph (b);
        b. Revise the last sentence of paragraph (b) to read as set forth 
    below.
        c. Redesignate paragraph (c)(1) as paragraph (c) and remove the 
    last sentence from the redesignated paragraph (c);
        d. Remove paragraphs (c)(2), (d), and (e);
        e. Redesignate paragraphs (f) and (g) as paragraphs (d) and (e), 
    respectively;
        f. Redesignate paragraph (h) as (f);
        g. Revise redesignated paragraph (f)(1) to read as set forth below.
        h. Remove redesignated paragraph (f)(2);
        i. Redesignated paragraphs (f)(3), (f)(4), (f)(5) and (f)(6) are 
    further redesignated as (f)(2), (f)3), (f)(4), and (f)(5), 
    respectively.
        j. Revise redesignated (f)(5)(ii) to read as set forth below.
        k. Remove redesignated paragraph (f)(7).
        l. In redesignated paragraph (f), further redesignate paragraph 
    (f)(8) as (f)(6) and revise to read as set forth below.
        m. Redesignate paragraph (i) as (f)(7) and revise to read as set 
    forth below.
    
    
    Sec. 353.31  Series HH bonds.
    
    * * * * *
        (b) * * * Series H interest payments made by the ACH method are 
    governed by the regulations at 31 CFR part 370.
    * * * * *
        (f) * * *
        (1) Submission of deposit account information. Payments on all 
    Series HH bonds assigned to the same account maintained by the Bureau 
    must be made to the same deposit account at a financial institution.
    * * * * *
        (5) * * *
        (ii) Bonds issued prior to October 1, 1989. An ACH arrangement 
    established for Series HH bonds issued prior to October 1, 1989, shall 
    remain in effect until it is terminated by a request from the owner or 
    coowner submitted to the Bureau of the Public Debt, Parkersburg, WV 
    26102-1328
        (6) Rules. Series HH interest payments made by the ACH method are 
    governed by the regulations at 31 CFR part 370.
        (7) Nonreceipt or loss of interest payment. The Bureau of the 
    Public Debt, Parkersburg, WV 26102 should be notified if:
        (i) An interest check is not received or is lost after receipt or
        (ii) An ACH payment is not credited to the designated account and 
    the financial institution has no record of receiving it. The notice 
    should include the owner or coowner's name and taxpayer identifying 
    number and the interest payment date.
    
    PART 357--GENERAL REGULATIONS GOVERNING BOOK-ENTRY TREASURY BONDS, 
    NOTES AND BILLS.
    
        1. The authority citation for part 357 continues to read as 
    follows:
    
        Authority: 31 U.S.C. 31, 5 U.S. 301 and 12 U.S.C. 391.
    
        2. Amend Sec. 357.26 as follows:
        a. Revise the section heading as set forth below.
        b. Revise paragraph (a) to read as set forth below.
        c. Revise the heading for paragraph (b) to read as set forth below.
        d. Remove paragraphs (b)(1)(i), (b)(1)(iv), (b)(2), (b)(3), (c) and 
    (d);
        e. Redesignate paragraph (b)(1)(ii) as paragraph (b);
        f. Redesignate paragraph (b)(1)(iii) as paragraph (c) and add a 
    heading to read as set forth below.
        g. Redesignate paragraph (b)(1)(v) as paragraph (d) and add a 
    heading to read as set forth below.
        h. Redesignate paragraph (b)(1)(vi) as paragraph (e) and add a 
    heading to read as set forth below.
    
    
    Sec. 357.26.  Direct Deposit.
    
        (a) General. A payment by the Department with respect to a security 
    shall be by direct deposit unless it is deemed necessary by the 
    Department to make payment by another means. Direct Deposit payments 
    are governed by the regulations at 31 CFR part 370.
        (b) Names on account. * * *
        (c) Inquiry to financial institution. * * *
        (d) Payments to master account. * * *
        (e) Deposit account. * * *
        3. Revise Sec. 357.30 to read as follows.
    
    
    Sec. 357.30  Cases of delay or suspension of payment.
    
        If evidence required by the Department in support of a transaction 
    request is not received by the Department at least ten (10) business 
    days before the maturity date of the security, or if payment at 
    maturity has been suspended pursuant to 31 CFR 370.10, in cases of 
    reinvestment, the Department will redeem the security and hold the 
    redemption proceeds in the same form of registration as the security 
    redeemed, pending further disposition. No other interest shall accrue 
    or be paid on such proceeds after the security is redeemed.
        1. Revise part 370 to read as follows:
    
    PART 370--ELECTRONIC TRANSACTIONS AND FUNDS TRANSFERS RELATING TO 
    UNITED STATES SECURITIES
    
    Subpart A--General Information
    
    Sec.
    370.0  What does this part cover?
    370.1  What special terms do I need to know to understand this part?
    
    Subpart B--Credit ACH Entries
    
    370.5  How can I appoint a financial institution to receive payments 
    on my behalf?
    370.6  What requirements apply to a financial institution that 
    handles a credit entry?
    370.7  How can my financial institution change my designated deposit 
    account?
    370.8  Are there any requirements related to a prenotification 
    entry?
    370.9  How can my payment instructions be changed?
    370.10  What can cause my payments to be suspended?
    370.11  What must my financial institution do when it receives a 
    payment?
    370.12  What happens if an error is made in a credit entry, or if a 
    duplicate credit entry is made?
    370.13  Can time limits for taking an action on a credit entry be 
    extended?
    370.14  Can substitute payment procedures be used?
    370.15  What limitations exist on liability?
    
    [[Page 40488]]
    
    Subpart C--Debit Entries
    
    370.20  What requirements apply if I want to authorize a debit entry 
    to my deposit account?
    370.21  Are there any requirements related to a prenotification 
    entry?
    370.22  What requirements apply to a financial institution that 
    debits a deposit account?
    370.23  What other requirements apply to a financial institution?
    370.24  What right does the Bureau of the Public Debt have to 
    terminate or suspend debit entries?
    370.25  What rights do I have to terminate or suspend debit entries?
    370.26  What limitations exist on liability?
    
    Subpart D--Electronic Submission of Transaction Requests Through the 
    Bureau of the Public Debt
    
    370.35  Does the Bureau of the Public Debt accept all electronically 
    signed transaction requests?
    370.36  When does a transaction request become effective?
    370.37  Where is the point of transaction for an electronically 
    submitted transaction request?
    370.38  What is the legal effect of an electronic signature?
    370.39  To what extent is a digital signature admissible in any 
    civil litigation or dispute?
    370.40  Can I be held accountable if my negligence contributes to a 
    forged signature?
    370.41  What limitations exist on liability?
    
    Subpart E--Additional Provisions
    
    370.45  What is the status of a security if the remittance cannot be 
    collected?
    370.46  Are there any situations in which the Bureau of the Public 
    Debt may waive these regulations?
    370.47  To what extent may the Bureau of the Public Debt change 
    these regulations?
    
        Authority: 12 U.S.C. 391; 31 U.S.C. chapter 31.
    
    Subpart A--General Information
    
    
    Sec. 370.0  What does this part cover?
    
        (a) Scope. This part applies to the transfer of funds by the 
    Automated Clearing House method as used by us in connection with United 
    States securities. This part also provides regulations for the 
    electronic submission of transaction requests through us, except as 
    varied by agreement or as otherwise provided. This part does not apply 
    to transactions for the sale of United States Savings Bonds 
    accomplished through savings bond issuing agents generally, except and 
    to the extent we direct otherwise.
        (b) Operating Rules of the National Automated Clearing House 
    Association and Regulations of the Financial Management Service. The 
    Operating Rules of the National Automated Clearing House Association 
    generally apply to these transactions. However, the Operating Rules do 
    not apply to the extent that the Operating Rules are preempted entirely 
    and excluded specifically by application of Financial Management 
    Service regulations in part 210 of this chapter. In the event of any 
    inconsistencies between this part 370 and either the Operating Rules or 
    part 210, this part 370 applies.
        (c) Regulations of the Board of Governors of the Federal Reserve. 
    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 
    apply to transactions authorized by this part, those Federal laws are 
    unaffected by this part 370.
        (d) Variance by agreement. The terms of this part may be varied by 
    agreement.
    
    
    Sec. 370.1  What special terms do I need to know to understand this 
    part?
    
        Automated Clearing House (ACH) entry means a transaction in 
    accordance with the Operating Rules of the National Automated Clearing 
    House Association, as modified by these regulations and other law. The 
    regulations in this part control in the event of any inconsistencies 
    with the applicable Operating Rules.
        Credit entry means an ACH entry for the payment of money to a 
    deposit account.
        Debit entry means an ACH entry for the collection 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 signer 
    creates a digital signature by using public-key encryption to transform 
    a message digest of an electronic message. If a recipient of the 
    digital signature has an electronic message, message digest function, 
    and the signer's public key, the recipient can verify:
        (1) whether the transformation was accomplished with the private 
    key that corresponds to the signer's public key; and
        (2) Whether the electronic message has been altered since the 
    transformation was made.
        Electronic message means information that is stored in an 
    electronic medium and is retrievable in perceivable form.
        Electronic signature means a signature of an electronic message 
    that:
        (1) identifies and authenticates a particular person as the source 
    of the electronic message; and
        (2) indicates such person's approval of the information contained 
    in the electronic message.
        Financial institution means:
        (1) 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);
        (2) 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);
        (3) 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);
        (4) 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);
        (5) 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 that act or is eligible to apply to become an 
    insured depository institution under that act; and
        (6) any Federal branch or agency of a foreign bank as defined in 
    section 1(b) of the International Banking Act, as amended (12 U.S.C. 
    3101).
        Investor account is our record of your TreasuryDirect holdings, 
    including a list of your total security holdings, the exact form of 
    registration of your account, your mailing address, your TreasuryDirect 
    account number, your social security account number or employer 
    identification number, and your deposit account instructions.
        Message digest function means an algorithm that transforms an 
    electronic message into a seemingly unintelligible, generally smaller, 
    result called the message digest. A message digest function has these 
    qualities:
        (1) the same electronic message yields the same message digest 
    every time the algorithm is executed;
        (2) it is computationally infeasible that an electronic message can 
    be derived from the message digest result produced by the algorithm; 
    and
        (3) it is computationally infeasible that two electronic messages 
    can be
    
    [[Page 40489]]
    
    found that produce the same message digest using the algorithm.
        Payment means, for the purpose of this part, funds paid by us to 
    you.
        Person means any natural person or organization.
        Public-key encryption means a cryptographic process which generates 
    and employs a key pair, consisting of a public key and a different but 
    mathematically related private key. One use of the public key is to 
    verify a digital signature created by the private key.
        Security means an obligation offered by the Secretary of the 
    Treasury.
        Settlement date means the date an exchange of funds with respect to 
    an ACH entry is reflected on the books of the Federal Reserve Bank(s).
        Signature means any symbol or method executed or adopted by a 
    person with present intention to be bound.
        We (or ``us'') refers to the Secretary of the Treasury and the 
    Secretary's delegates at the Treasury Department and Bureau of the 
    Public Debt. The term also extends to any fiscal or financial agent 
    acting on behalf of the United States when designated to act by the 
    Secretary or the Secretary's delegates. The term does not extend to 
    United States Savings Bond issuing and paying agents.
        You means a deposit account owner, in subparts B and C, unless 
    stated otherwise. The word ``you'' means a person who electronically 
    submits transaction requests through us, in subpart D.
    
    Subpart B--Credit ACH Entries
    
    
    Sec. 370.5  How can I appoint a financial institution to receive 
    payments on my behalf?
    
        You must name a financial institution to receive payments through 
    credit entries using the ACH method. You also must identify the deposit 
    account to which payments are to be made. To do this, you must use a 
    form approved by us.
    
    
    Sec. 370.6  What requirements apply to a financial institution that 
    handles a credit entry?
    
        A financial institution that accepts and handles a credit entry 
    initiated by us agrees to the provisions of this subpart, and warrants 
    that it will comply with all requirements imposed upon Receiving 
    Depository Financial Institutions under the Operating Rules of the 
    National Automated Clearing House Association, as modified by these 
    regulations and other law.
    
    
    Sec. 370.7  How can my financial institution change my designated 
    deposit account?
    
        If your financial institution requests us to make a change in your 
    deposit account number or type of your account, we will change the 
    information without requiring any confirmation from you. The request 
    from the financial institution must be made following the Operating 
    Rules of the National Automated Clearing House Association. The 
    financial institution's request will be deemed an agreement by the 
    institution to indemnify us and you for any loss resulting from the 
    requested change.
    
    
    Sec. 370.8  Are there any requirements related to a prenotification 
    entry?
    
        (a) Use of prenotification in our discretion. In our discretion, we 
    may initiate a prenotification entry to a financial institution before 
    we send a credit entry. We may also send a prenotification message 
    whenever there is a change in the payment instructions. If we send a 
    prenotification message, we will follow the time frames as established 
    by the Operating Rules of the National Automated Clearing House 
    Association. A prenotification is a zero-dollar ACH entry that can help 
    us determine whether there might be problems with sending a subsequent 
    credit entry.
        (b) Requirements placed upon financial institution that receives a 
    prenotification. A financial institution must respond to a 
    prenotification within the time frame for such responses as established 
    by the Operating Rules of the National Automated Clearing House 
    Association. If the receiving financial institution does not respond to 
    the prenotification message within the specified time period, we may 
    interpret the nonresponsiveness as the financial institution's 
    agreement to this subpart. Furthermore, a financial institution 
    warrants by its nonresponsiveness that the deposit account number and 
    the type of account contained in the prenotification entry message was 
    accurate as of the moment the financial institution received it.
    
    
    Sec. 370.9  How can my payment instructions be changed?
    
        Your payment instructions will continue to apply until either you 
    or your financial institution requests us to make a change.
    
    
    Sec. 370.10  What can cause my payments to be suspended?
    
        (a) Change in deposit account. We will suspend payments if we 
    receive notice that your deposit account has been closed, that someone 
    named on your deposit account is dead or has been declared legally 
    incompetent, that there is a change in the title of your deposit 
    account that alters your interests; or, if a corporation is the owner, 
    that it has been dissolved.
        (b) Change in status of owner. We will suspend payments when we 
    receive notice that an owner of a bond, security, or investor account 
    is dead or has been declared legally incompetent, or in any case where 
    we receive notice of a change in the name or status of an organization 
    or representative named on a bond, security, or investor account.
        (c) Continuation of Suspension. Payments will continue to be 
    suspended until we receive satisfactory evidence as to who is 
    authorized or entitled to receive payments.
    
    
    Sec. 370.11  What must my financial institution do when it receives a 
    payment?
    
        An institution which receives a payment on behalf of its customer 
    must:
        (a) Upon receipt, make the payment available to you on the payment 
    date. If a scheduled payment date is not a business day for the Federal 
    Reserve Bank of the district in which the institution is located, 
    payment will be made on the next-succeeding business day. If the 
    institution is unable to make a credit entry to the designated account, 
    it must return the payment in accordance with the Operating Rules of 
    the National Automated Clearing House Association.
        (b) Promptly notify us when your account has been closed, or when 
    it is on notice of the death or legal incapacity of you or any other 
    individual named on your account, or when it is on notice of the 
    dissolution of a corporation in whose name the deposit account is held. 
    The institution must return all payments received along with an 
    explanation for the return.
    
    
    Sec. 370.12  What happens if an error is made in a credit entry, or if 
    a duplicate credit entry is made?
    
        If we make an erroneous credit entry under this part, we will make 
    a corrected credit entry to your account. We will then take action to 
    recover the erroneous credit entry, or any duplicate credit entry, as 
    follows:
        (a) Return of amount of erroneous or duplicate credit entry by 
    financial institution. We will send a notice to the financial 
    institution to which the erroneous or duplicate credit entry was sent. 
    When it receives this notice, the financial institution must 
    immediately return to the appropriate Federal Reserve Bank an amount 
    equal to the credit entry. If the institution is unable to do this, the 
    institution must immediately notify us, and provide any
    
    [[Page 40490]]
    
    information that it has about the matter. We reserve the right to 
    request the return of a partial amount of an erroneous or duplicate 
    credit entry.
        (b) Collection of amount of unreturned erroneous or duplicate 
    credit entry. Where the erroneous or duplicate credit entry has not 
    been returned, we will undertake any other actions that are 
    appropriate. To the extent permitted by law, the collection action may 
    include deducting the amount owed from future credit entries made to 
    the deposit account to which the erroneous or duplicate credit entry 
    was made.
        (c) Authorization of Debit to collect unreturned dulicate or 
    erroneous credit entry. If a financial institution has not responded 
    within 60 calendar days of the notice, its acceptance of the credit 
    entry will be considered an authorization for a debit in the amount of 
    the entry. The debit will be made from the account maintained or 
    utilized by the financial institution at the Federal Reserve Bank to 
    which the entry was made. An institution designated by a financial 
    institution to receive payment on its behalf, in permitting the usage, 
    is deemed to have authorized a debit. The debit will be made from its 
    account maintained at the Federal Reserve Bank to which the entry was 
    made. The institution to which the credit entry has been directed is 
    deemed to have agreed to provide information and assistance to recover 
    any erroneous or duplicate entry. You are also deemed to have agreed to 
    provide information and assistance, and to take any action provided by 
    law to recover an erroneous or duplicate credit entry.
    
    
    Sec. 370.13  Can time limits for taking an action on a credit entry be 
    extended?
    
        If we or your financial institution are delayed beyond applicable 
    time limits in taking any action with respect to a credit entry because 
    of circumstances beyond our control, then the time for taking that 
    action will be extended as necessary until the cause of the delay ends.
    
    
    Sec. 370.14  Can substitute payment procedures be used?
    
        We may use substitute payment procedures, instead of ACH, if we 
    consider it to be necessary. Any such action is final.
    
    
    Sec. 370.15  What limitations exist on liability?
    
        (a) We may rely on the information provided by you or anyone else 
    authorized to provide information concerning your financial institution 
    or deposit account to which payments are to be made. We do not need to 
    verify this information. We are not liable for any action we may take 
    in reliance on the information furnished.
        (b) Our liability does not extend beyond the amount of the payment 
    due.
        (c) When you name a financial institution to receive payments on 
    your behalf, you are appointing that institution as your agent for the 
    receipt of payments. When a credit entry is made to your financial 
    institution for deposit to your account following your instructions, we 
    no longer have any further responsibility for that payment. Where your 
    financial institution has arranged with the Federal Reserve Bank to 
    have payments made through another financial institution, the crediting 
    of your payment to that institution relieves us of any further 
    responsibility for that payment.
    
    Subpart C--Debit Entries
    
    
    Sec. 370.20  What requirements apply if I want to authorize a debit 
    entry to my deposit account?
    
        (a) General. You may pay for a security and related fees by 
    authorizing us to initiate one or more debit entries to your deposit 
    account. For a purchase of a book-entry security to be held in an 
    investor account maintained by us, you must be named on the investor 
    account. The authorization must be accomplished only through forms or 
    means approved by us.
        (b) Single-entry and recurring debit entries. You only may 
    authorize single-entry debits for purchases of book-entry securities 
    held in TreasuryDirect. You only may authorize recurring debit entries 
    for purchases of definitive savings bonds.
        (c) Credit entries to be made to same deposit account. To the 
    extent that payments by us with respect to a security are to be made 
    through credit entries, you must receive debit and credit entries in 
    the same deposit account.
        (d) Signature. The authorization must have your signature and that 
    of any other person whose signature is required to withdraw funds from 
    the deposit account. We need not verify your identity or the 
    authenticity of your signature.
    
    
    Sec. 370.21  Are there any requirements related to a prenotification 
    entry?
    
        (a) Use of prenotification in our discretion. In our discretion, we 
    may initiate a prenotification entry to a financial institution prior 
    to sending a debit entry. A prenotification is a zero-dollar ACH entry 
    that can help us determine whether there might be problems with sending 
    a subsequent debit entry.
        (b) Requirements placed upon financial institution that receives a 
    prenotification. If sent, a financial institution must respond to a 
    prenotification within the time frame for such responses as established 
    by the National Automated Clearing House Association. If the receiving 
    financial institution does not respond to the prenotification message 
    within the specified time period, we may interpret the 
    nonresponsiveness as the financial institution's agreement to this 
    subpart. Furthermore, a financial institution warrants by its 
    nonresponsiveness that the deposit account number and the type of 
    account contained in the prenotification entry message was accurate as 
    of the moment the financial institution received it.
    
    
    Sec. 370.22  What requirements apply to a financial institution that 
    debits a deposit account?
    
        A financial institution that debits a deposit account upon 
    receiving a debit initiated by us agrees to the provisions of this 
    subpart. A financial institution that does so also warrants that it has 
    the authority to receive debit entries.
    
    
    Sec. 370.23  What other requirements apply to a financial institution?
    
        The financial institution warrants that it will comply with all 
    requirements imposed upon Receiving Depository Financial Institutions 
    under the Operating Rules of the National Automated Clearing House 
    Association, as modified by these regulations and other law.
    
    
    Sec. 370.24  What right does the Bureau of the Public Debt have to 
    terminate or suspend debit entries?
    
        We may terminate or suspend the availability of one or more debit 
    entries in any case or class of cases, and may do so without notice at 
    any time. A decision to terminate or suspend the availability of debit 
    entries is in our sole discretion and is final.
    
    
    Sec. 370.25  What rights do I have to terminate or suspend debit 
    entries?
    
        (a) General. If you are an investor account owner or deposit 
    account owner, you generally may terminate or suspend one or more debit 
    entries by notifying us orally or in writing at least three business 
    days before the scheduled date of a transfer. In response to an oral 
    notice, we may require you to give written notice, to be received by us 
    within fourteen days of an oral notice. An oral notice ceases to be 
    binding after fourteen days if you fail to provide the required written 
    confirmation. A suspension will remain in effect for the duration you 
    specify, but for no more
    
    [[Page 40491]]
    
    than six months. The termination and suspension methods need not be 
    recited in the authorization. These termination or suspension rights 
    are in addition to those that you may have through your financial 
    institution under Regulation E of the Board of Governors of the Federal 
    Reserve System (12 CFR part 205).
        (b) Exception. If you submit a debit entry authorization in 
    conjunction with a Treasury auction tender for the purchase of a book-
    entry security, you cannot terminate or suspend a debit entry after the 
    auction closes.
    
    
    Sec. 370.26  What limitations exist on liability?
    
        If we sustain a loss because a financial institution fails to 
    handle an entry in accordance with this part, the financial institution 
    is liable to us for the loss, but not beyond the amount of the debit 
    entry. In no instance does our liability extend beyond the amount of 
    the debit entry.
    
    Subpart D--Electronic Submission of Transaction Requests Through 
    the Bureau of the Public Debt
    
    
    Sec. 370.35  Does the Bureau of the Public Debt accept all 
    electronically signed transaction requests?
    
        An electronic signature will not be accepted if it has not been 
    accomplished through a method that has been approved for specific 
    purposes by us.
    
    
    Sec. 370.36  When does a transaction request become effective?
    
        Except for auction bids of U.S. securities or unless otherwise 
    agreed, a transaction request becomes effective at the moment we send a 
    confirmation message. In no instance does a transaction request become 
    effective before we actually receive the request.
    
    
    Sec. 370.37  Where is the point of transaction for an electronically 
    submitted transaction request?
    
        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. 370.38  What is the legal effect of an electronic signature?
    
        An electronic signature and any electronic message 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. 370.39  To what extent is a digital signature admissible in any 
    civil litigation or dispute?
    
        In asserting a digital signature against you in any civil 
    litigation or dispute, extrinsic evidence of authenticity as a 
    condition precedent of admissibility (such as testimony about the 
    scientific validity of digital signatures) is not necessary to 
    establish:
        (a) That a digital signature corresponds to a specific public key 
    pair, and;
        (b) That an electronic message to which the digital signature is 
    affixed has not been altered from its original form.
    
    
    Sec. 370.40  Can I be held accountable if my negligence contributes to 
    a forged signature?
    
        (a) General. If your failure to exercise ordinary care 
    substantially contributes to the submission of a forged signature, then 
    you cannot claim that the signature is a forgery. However, we cannot 
    invoke this section against you if we cannot first establish that we 
    were reasonable in relying upon the signature. If we can do so, you 
    bear the burden of production and the burden of persuasion in 
    establishing your exercise of ordinary care. If you cannot do so, then 
    you cannot claim that the signature is a forgery.
        (b) Exception. This section has no application in any dispute 
    involving a debit authorization or credit card transaction.
    
    
    Sec. 370.41  What limitations exist on liability?
    
        In no instance does our liability extend beyond the amount of the 
    transaction.
    
    Subpart E--Additional Provisions
    
    
    Sec. 370.45  What is the status of a security if the remittance cannot 
    be collected?
    
        If we cannot promptly collect all of the remittance for a security, 
    we may in our discretion cancel the security unless it has been legally 
    transferred for value to a third person who had no knowledge of the 
    improper debit entry at the time of the transfer.
    
    
    Sec. 370.46  Are there any situations in which the Bureau of the Public 
    Debt may waive these regulations?
    
        We reserve the right, in our discretion, to waive any provision of 
    these regulations in any case or class of cases. We may do so if such 
    action is not inconsistent with law and will not subject the United 
    States to substantial expense or liability.
    
    
    Sec. 370.47  To what extent may the Bureau of the Public Debt change 
    these regulations?
    
        Any aspect of this part may be changed at any time and without 
    notice. You assume the risk that a change may terminate a provision 
    that was to your advantage. Nothing in this part creates vested rights 
    in your favor.
    
        Dated: June 28, 1999.
    Donald V. Hammond,
    Fiscal Assistant Secretary.
    [FR Doc. 99-18919 Filed 7-23-99; 8:45 am]
    BILLING CODE 4810-39-P
    
    
    

Document Information

Effective Date:
7/26/1999
Published:
07/26/1999
Department:
Fiscal Service
Entry Type:
Rule
Action:
Final rule.
Document Number:
99-18919
Dates:
Effective July 26, 1999.
Pages:
40484-40491 (8 pages)
PDF File:
99-18919.pdf
CFR: (64)
31 CFR 370.1
31 CFR 370.5
31 CFR 370.6
31 CFR 370.7
31 CFR 370.8
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