98-11153. Regulations Governing Agencies for the Issue and Offering of United States Savings Bonds, Including Sales by Electronic Means  

  • [Federal Register Volume 63, Number 83 (Thursday, April 30, 1998)]
    [Proposed Rules]
    [Pages 23695-23703]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 98-11153]
    
    
    =======================================================================
    -----------------------------------------------------------------------
    
    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: Proposed rule.
    
    -----------------------------------------------------------------------
    
    SUMMARY: The Department of the Treasury hereby publishes a proposed 
    rule governing the issue and offering of United States Savings Bonds. 
    This document proposes changes to create new categories of savings bond 
    issuing agents and to clarify and expand the means by which bonds may 
    be sold, including electronic means.
    
    DATES: Submit comments on or before June 1, 1998.
    
    ADDRESSES: Comments should be sent to the attention of Wallace L. 
    Earnest, Director, Division of Staff Services, Room 507, Bureau of the 
    Public Debt, 200 3rd St., Parkersburg, WV 26106-1328. Additionally, 
    comments may be sent by e-mail to the following address: 
    <>[email protected]>. When sending comments by e-mail, please 
    provide your full name and mailing address, and send the comments in 
    ASCII format. Comments received will be 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. Copies 
    of this proposed rule can be downloaded from the Bureau of the Public 
    Debt at the following World Wide Web address: http://
    www.savingsbonds.gov>.
    
    FOR FURTHER INFORMATION CONTACT: Wallace L. Earnest, Director, Division 
    of Staff Services, at (304) 480-6319 or by e-mail at 
    wearnest@bpd.treas.gov>; Troy D. Martin, Senior Program Analyst, 
    Division of Staff Services, at (304) 480-6545 or by e-mail at 
    tmartin@bpd.treas.gov>; Edward C. Gronseth, Deputy Chief Counsel, at 
    (304) 480-5192 or by e-mail at egronset@bpd.treas.gov>; or Gregory J. 
    Till, Attorney-Adviser, Office of the Chief Counsel, at (202) 219-3320 
    or by e-mail at 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. 
    This document proposes changes to create new categories of savings bond 
    issuing agents and to clarify and expand the means by which bonds may 
    be sold, including electronic means.
        The most important proposed changes are directed at four areas in 
    title 31 of the Code of Federal Regulations. First, changes in 
    Secs. 317.2 and 317.3 would amend the rules 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 would expand the means by which issuing agents may sell 
    savings bonds. Third, a new subpart in part 370 would address the use 
    of Automated Clearing House debit entries for the sale of bonds issued 
    through the Bureau of the Public Debt. Fourth, another new subpart in 
    part 370 would address the electronic submission of purchase 
    applications and remittances for the sale of bonds issued through the 
    Bureau of the Public Debt. This second new subpart in part 370 would 
    facilitate Treasury's intention to sell savings bonds through 
    remittances by credit cards at the World Wide Web site of 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'' would note the 
    authority of the Commissioner of the Public Debt or the Commissioner's 
    designee to qualify issuing agents, as explained in Sec. 317.2. The 
    definition also would clarify that an issuing agent acts as an agent of 
    the purchaser in handling the remittance. The proposed 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 
    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)
        Currently, issuing agent eligibility is 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 document proposes to expand the types of 
    organizations that are eligible to serve as issuing agents.
        One proposed change, in Sec. 317.2(c), would allow organizations 
    that operate payroll savings plans on behalf of employers to serve as 
    issuing agents. The proposed 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 service 
    plan on behalf of an employer organization would be eligible for 
    issuing agent fees under the proposed rule only if it inscribes savings 
    bonds.
        Another proposed addition, set out in Sec. 317.2(d), would give the 
    Commissioner of the Bureau of the Public Debt or the Commissioner's 
    designee the authority to qualify issuing agents when to do so would be 
    in the public interest. The Commissioner or the Commissioner's designee 
    could use such process as deemed to be appropriate in selecting the 
    issuing agent. The selected issuing agent would also be subject to such 
    conditions as deemed to be appropriate.
        The new Sec. 317.2(d) would be used for the selection of entities 
    to sell bonds in unique ways as new methods of sales emerge. In 
    particular, this provision would 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.
    
    [[Page 23696]]
    
        In qualifying issuing agents under this provision, the Commissioner 
    or the Commissioner's designee would balance the convenience and cost-
    effectiveness of using new purchase methods against the need to insure 
    the security and reliability of those methods.
    (3) Procedures for Qualifying and Serving as an Issuing Agent 
    (Sec. 317.3)
        All organizations currently must apply to a designated Federal 
    Reserve Bank to receive issuing agent qualification. The section would 
    be amended to state that an organization that 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) would 
    be approved by the Commissioner of the Bureau of the Public Debt or the 
    Commissioner's designee, though application still would be made through 
    a designated Federal Reserve Bank.
    (4) Issuance of Bonds (Sec. 317.6)
        The issuing agent fee provision would be simplified and continue to 
    emphasize that fee schedules are set out not in the regulations, but 
    through a separate publication in the Federal Register. The proposed 
    changes would have no effect on the current fee structure, though the 
    Bureau of the Public Debt would reserve the right to create new 
    categories of fees as new ways of selling 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 would be revised, primarily for changes in 
    terminology. For instance, the definition of ``issuing agent'' would be 
    redefined to reflect the changes to that term in Sec. 317.2. The term 
    ``over-the-counter'' would be 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 would be 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 would state that the regulations governing the 
    transfer of funds by electronic means on account of United States 
    securities in part 370 of this chapter would apply only to transactions 
    for the purchase of bonds issued through the Bureau of the Public Debt. 
    The regulations in part 370 would have no application 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 or the Commissioner's 
    designee.
    (2) Purchase of Bonds (Sec. 351.5)
        Currently, this section provides for four categories of savings 
    bond 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 inhibit sales rather than facilitate them.
        Furthermore, a comparison with the appendix to Sec. 317.8 of this 
    chapter (which discusses the remittance of sales proceeds and 
    registration records by issuing agents) shows a lack of consistency in 
    the categories and terminology used to define bond sales. In discussing 
    bond sales, the appendix does not mirror Sec. 351.5 but rather combines 
    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'' is not used in Sec. 351.5, which means that 
    different terminology is used in the two provisions despite the fact 
    that both provisions address bond sales. Also, the term ``over-the-
    counter'' has 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 proposed rule would revise Sec. 351.5 (as well as the appendix 
    to Sec. 317.8), using the two categories in the appendix to Sec. 317.8: 
    (1) ``payroll sales''; and (2) ``over-the-counter sales.'' The proposed 
    payroll sales category would include sales through ``payroll savings 
    plans'' and ``employee thrift, savings, vacation, and similar plans,'' 
    the provisions of which are already described in the substance of the 
    current Sec. 351.5. The proposed rule also states that employers and 
    the organizations operating payroll savings plans on behalf of 
    employers would be able to sell bonds only pursuant to payroll savings 
    plans. These types of issuing agents would not be allowed to sell bonds 
    over-the-counter.
        Over-the-counter sales would be all sales that are not payroll 
    sales. For over-the-counter sales, the proposed rule would provide that 
    ``the purchase application and remittance may be submitted to an 
    issuing agent by any means acceptable to the issuing agent.'' This 
    broad provision would ensure that issuing agents have the flexibility 
    to sell bonds through channels in addition to those currently set out 
    in Sec. 351.5. For instance, the proposed rule would authorize issuing 
    agents to sell savings bonds through electronic means such as the World 
    Wide Web. Both the application and remittance could be submitted and 
    signed through electronic methods agreed upon by the parties.
        The regulation would not impose limitations on the types of 
    remittances which an issuing agent may accept. As always, however, the 
    issuing agent would bear 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 bond if the issuing agent cannot 
    collect or must return the remittance.
        Finally, although the proposed changes would have no effect on the 
    current issuing agent fee structure, the Bureau of the Public Debt 
    would reserve the right to make changes to the fee structure as new 
    ways of selling bonds develop.
    
    C. Regulations Governing United States Savings Bonds, Series EE and HH 
    (31 CFR Part 353)
    
    (1) Application for Relief--Non-Receipt of Bond (Sec. 353.27)
        The regulations currently provide little guidance as to the status 
    of 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 bond, the Secretary will honor 
    the 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 bond is generally 
    conclusive of ownership. If a bond has not been inscribed, the proposed 
    rule states that the Secretary is authorized to issue 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 the Transfer of Funds by Electronic Means on 
    Account of United States Securities (31 CFR Part 370)
    
    (1) Scope (Sec. 370.0)
        This section would be amended to clarify that to the extent that 
    the rules
    
    [[Page 23697]]
    
    in part 210 of this title apply to the purchase or payment of interest 
    and principal on United States securities, the rules in this part 370 
    would apply in the event of any inconsistencies.
    (2) Definitions (Sec. 370.1)
        Several definitions would be added to or changed in this section. 
    The definition of ``Automated Clearing House (ACH) entry'' would refer 
    to transactions accomplished in accordance with the applicable 
    Operating Rules and Operating Guidelines of the National Automated 
    Clearing House Association, as modified by these and other regulations 
    and law.
        Other terms would be drawn from several authorities. The definition 
    of ``deposit account'' would be taken principally from Regulation E of 
    the Board of Governors of the Federal Reserve (12 CFR part 205). The 
    definition of ``financial institution'' would be the same as included 
    in a proposed rule to amend part 208 of this title, ``Management of 
    Federal Agency Disbursement,'' published in the Federal Register on 
    September 16, 1997, beginning at page 48714. The definition of 
    ``originator'' would be derived from the Operating Rules and Operating 
    Guidelines of the National Automated Clearing House Association.
    (3) Definition (Sec. 370.4)
        The definition of ``payment'' would be removed from the general 
    definitional section in subpart A and placed into a specific 
    definitional section applying only to subpart B. The limited definition 
    of a payment as a deposit from the Department to the account of the 
    owner only has application in subpart B and may cause confusion by its 
    application throughout part 370.
    (4) Governing Law (Sec. 370.30)
        Subpart D would establish rules and the exclusive liability of the 
    Bureau of the Public Debt for debit entries to a purchaser's account to 
    buy bonds from the Bureau of the Public Debt. As set out in Sec. 351.1, 
    part 370 would apply only to transactions for the purchase of bonds 
    issued through the Bureau of the Public Debt. These rules would not 
    apply to transactions for the purchase of bonds accomplished through 
    issuing agents generally, unless and to the extent the Commissioner of 
    the Bureau of the Public Debt or the Commissioner's designee deems 
    otherwise.
        It is anticipated that a purchaser would authorize an entity named 
    on an approved authorization form to be the originator for the debit 
    entries. This entity would forward collected funds to Treasury in 
    exchange for a fee (unless the Bureau of the Public Debt chooses to 
    name itself as the originator). The Bureau of the Public Debt would 
    then issue the bonds through a Federal Reserve Bank acting as a fiscal 
    agent for the United States.
    (5) Authorization of Purchaser (Sec. 370.31)
        This section would state that all debit authorizations must be 
    accomplished through a procedure approved by the Bureau of the Public 
    Debt. An authorization would have to be signed. The authorization would 
    allow for recurring debit entries. The section would also provide that 
    except to the extent required by the Bureau of the Public Debt, the 
    originator will not be required to take additional steps to verify the 
    identity of the purchaser or the authenticity of the signature.
        The Bureau of the Public Debt would retain 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 
    to Sec. 205.10(b) of Regulation E of the Board of Governors of the 
    Federal Reserve (12 CFR part 205), which allows ``successor 
    institutions'' to assume a originator's role without notice or a new 
    authorization.
        Finally, a purchaser's subsequent authorization would cancel a 
    previous authorization only if so noted by the purchaser on the 
    subsequent authorization form. This provision would allow a purchaser 
    to make additional recurring purchases of savings bonds through debit 
    entries without having to list anew all the recurring purchases on a 
    single form.
    (6) Cancellation or Suspension by the Bureau of the Public Debt 
    (Sec. 370.32)
        This section would state that the Bureau of the Public Debt could 
    terminate or suspend the availability of debit entries at any time, and 
    its decision to do so would be final.
    (7) Cancellation or Suspension by Purchaser (Sec. 370.33)
        Under this section, a purchaser would be able to cancel or suspend 
    debit ACH entries for the purchase of bonds by providing written notice 
    to the originator.
    (8) Changes and Error Resolution (Sec. 370.34)
        This section would provide that if a person gives an oral notice 
    relating to the correctness of bond purchase information or a debit 
    entry to the person's account, the originator could require a written 
    notice from the person, which must be received within thirty days. In 
    addition, the originator would be allowed to ignore the oral notice if 
    written notice is not received within thirty days. Finally, the 
    originator would be able to suspend further debit entries during a 
    resolution to any notice, written or oral.
    (9) Prenotification (Sec. 370.35)
        The section would leave the requirement of a prenotification, as 
    well as the length of the period during which the originator must wait 
    after sending a prenotification before sending a live debit entry, up 
    to the discretion of the Bureau of the Public Debt.
    (10) Liability (Sec. 370.36)
        This section would state that the Bureau of the Public Debt would 
    not be liable in disputes arising out of debit entries, unless the 
    Bureau of the Public Debt names itself as an originator. Disputes 
    arising out of debit entries would be 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 
    would serve as the agent of the purchaser in handling the remittance.
        In any case, the Bureau of the Public Debt's liability would be 
    limited to the amount of the improper debit, less any losses caused due 
    to the failure of a claimant to exercise due diligence. The Bureau of 
    the Public Debt's responsibility would be to replace lost, stolen, 
    destroyed, mutilated, and defaced bonds, as well as to issue or replace 
    bonds not received, under the rules set out in subpart F of part 353 of 
    this chapter, as proposed to be amended.
    (11) Governing Law (Sec. 370.50)
        Subpart E would establish rules for the electronic submission of 
    purchase applications and remittances for the purchase of savings bonds 
    issued through the Bureau of the Public Debt. The subpart explicitly 
    would enable the Bureau of the Public Debt's acceptance of electronic 
    signatures, establish the rules of contract formation accomplished by 
    electronic means, address the admissibility of digital signatures, and 
    set out the exclusive liability of the Bureau of the Public Debt for 
    these transactions.
        The first use of these provisions would be to facilitate the sale 
    of savings bonds over the World Wide Web through remittances paid for 
    by credit cards. On April 30, 1997, the Secretary of the Treasury 
    announced his support of this goal, stating:
    
    
    [[Page 23698]]
    
    
        I am pleased to announce a number of steps we are taking to make 
    savings bonds more attractive investments for American savers. * * *
        [W]e are using technology in an effort to make information about 
    the savings bond program more available to all Americans * * *. [W]e 
    will take another step to make savings bonds more available by 
    introducing credit card purchasing on-line.
    
        The bonds will be available at World Wide Web site of the Bureau of 
    the Public Debt, at http://www.savingsbonds.gov>. These sales will 
    utilize the latest in technology (including the issuance of digital 
    certificates to credit card holders and the use of the Secure 
    Electronic Transactions protocol), which may hamper the initial 
    availability of bonds sold in this fashion but which will help insure 
    the security of these sales for the Government and purchasers.
        It is important to note the limited scope and extent of these 
    proposed regulations. As would be stated in Sec. 351.1 of this chapter, 
    these rules would apply only to savings bond transactions accomplished 
    through the Bureau of the Public Debt. These regulations would not 
    apply to savings bond sales accomplished through issuing agents such as 
    banks and employers offering payroll savings plans. 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, and 
    the United Nations Commission on International Trade Law, among others. 
    Also, many states have passed or are contemplating comprehensive 
    legislation in this area.
        Given the rapidly changing nature of the technology, its narrow 
    initial use by the Bureau of the Public Debt, and a desire to avoid 
    even the appearance of encroaching upon the right of states to pursue 
    their own legislative approaches, these electronic and digital 
    signature regulations must be drawn in a limited fashion. The 
    regulations would leave unchanged the right of states to determine 
    their own rules for electronic and digital signatures and would not 
    address any issues related to certification authorities. Some brief 
    federal contract law provisions addressing electronic and digital 
    signatures are necessary to facilitate the sale of savings bonds over 
    the Internet by the Bureau of the Public Debt, and that is what these 
    regulations seek to implement.
    (12) Definitions (Sec. 370.51)
        The section would list five definitions. The most fundamental would 
    be a definition of ``signature.'' A signature would be ``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 would encompass electronic signatures. 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. To retain some control over a 
    new and uncertain process, an electronic signature submitted to the 
    Bureau of the Public Debt would have to be of a type approved by the 
    Bureau of the Public Debt.
        In addition, the section would include a definition of ``digital 
    signature,'' which is a special type of electronic signature. Treasury 
    will use digital signatures in the sale 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 may 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 
    digital signatures. 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 from the time the signer created the digital signature.
    (13) Contract Formation (Sec. 370.52)
        The ``mailbox rule'' would be adopted for the acceptance of 
    purchase applications submitted electronically to the Bureau of the 
    Public Debt. An application for a purchase of a bond submitted by 
    electronic means would be an offer to create a bond contract. 
    Acceptance of the offer by the Bureau of the Public Debt would be 
    effective and a contract formed upon the transmittal of the message of 
    acceptance by the Bureau of the Public Debt, not upon receipt of that 
    message by the purchaser.
    (14) Point of Sale (Sec. 370.53)
        The point of sale for a bond issued as a result of a purchase 
    application submitted electronically under this subpart would be 
    Parkersburg, West Virginia.
    (15) Effect of Electronic Signature (Sec. 370.54)
        This section would overcome challenges to the legal effect of an 
    electronically signed record that are based upon the electronic form of 
    the record or signature. Some provisions of law, such as the Statute of 
    Frauds, require evidence of an agreement to be in writing. Other 
    provisions of law can require that an original record be produced in 
    court, rather than a copy, or may 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. Accordingly, this section would prevent such challenges from 
    stopping the introduction of electronically signed records into 
    evidence.
    
    [[Page 23699]]
    
    (16) Admissibility of Digital Signature (Sec. 370.55)
        This section would address 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 
    would unnecessarily 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 inclusion of a limited self-authentication provision for 
    digital signatures in these proposed regulations is appropriate. Under 
    this section, extrinsic evidence of authenticity would be unnecessary 
    to establish the existence of a digital signature that 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. Importantly, the self-authentication provision would 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 would have to be provided before a digital 
    signature and a record to which it has been affixed could be 
    admissible.
        There are several reasons that support the insertion of a limited 
    self-authentication clause into this proposed 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 would 
    avoid 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 it 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 would do nothing to prevent such 
    challenges. This section also would have no application in criminal 
    cases. Furthermore, even to the extent that a self-authenticated 
    digital signature and accompanying record could be introduced into 
    evidence under this section, this section would in no way prevent 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.
    (17) Negligence Contributing to Unauthorized Signature (Sec. 370.56)
        This section would hold a person responsible for an unauthorized 
    signature if the person's failure to use ordinary care substantially 
    contributed to the creation or submission of the unauthorized 
    signature. Furthermore, the burdens will be on the person challenging a 
    signature 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.
        This section is drawn from section 3-406 of the Uniform Commercial 
    Code (UCC). The responsibilities imposed upon persons in regard to the 
    technology used to create and submit electronic signatures 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 a unlocked drawer, are stolen and used by an 
    unauthorized party to forge a check, a bank may be able to successfully 
    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 proposed 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 an unauthorized signature, the person would be precluded 
    from disavowing the signature.
    (18) Liability (Sec. 370.57)
        This section would limit the Bureau of the Public Debt's liability 
    for claims involving this subpart to the amount of the transaction, 
    less any losses caused by the failure of a claimant to exercise due 
    diligence. For instance, this section would have application to claims 
    involving errors in the handling of otherwise properly authorized 
    transactions.
    
    III. Procedural Requirements
    
        This proposed rule does not meet the criteria for a ``significant 
    regulatory action,'' as defined in Executive Order 12866. Therefore, 
    the regulatory review procedures contained therein do not apply.
        This proposed rule relates to matters of public contract and 
    procedures for United States securities. Accordingly, although this 
    proposed rule is being issued to secure the benefit of public comment, 
    the notice and public comment provisions of the Administrative 
    Procedure Act do not apply, 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 
    proposed rule. Therefore, the Paperwork Reduction Act (44 U.S.C. 3507) 
    does not apply.
    
    [[Page 23700]]
    
    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 proposed to be 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; 31 U.S.C. 
    3105.
    
        2. Revise Sec. 317.1 to read as follows:
    
    
    Sec. 317.1  Definitions.
    
        (a) Bond(s) means those series of United States Savings Bonds 
    currently being offered for sale by the Secretary of the Treasury.
        (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, the Commissioner of the Bureau of 
    the Public Debt, or the Commissioner's designee to sell savings bonds. 
    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. An issuing agent 
    acts as an agent of the purchaser in handling the remittance.
        (d) Offering circular refers to Department of the Treasury 
    Circular, Public Debt Series No. 1-80, current revision.
        (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 to be specifically and individually 
    qualified by the Commissioner of the Bureau of the Public Debt or the 
    Commissioner's designee, whenever the Commissioner or the 
    Commissioner's designee deems such a qualification to be in the public 
    interest. In selecting an issuing agent, the Commissioner or the 
    Commissioner's designee may use such process that the Commissioner or 
    the Commissioner's designee deems to be appropriate. The selected 
    issuing agent will be subject to such conditions that the Commissioner 
    or the Commissioner's designee deems to be appropriate.
        4. Amend Sec. 317.3 as follows:
        A. Revise paragraph (a) introductory text 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 shall obtain from and file with a 
    designated Federal Reserve Bank an application-agreement form. 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), the completed application-agreement 
    form shall be forwarded by the designated Federal Reserve Bank to the 
    Bureau of the Public Debt for approval by the Commissioner of the 
    Bureau of the Public Debt or the Commissioner's designee.
    * * * * *
        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, the Commissioner of the Bureau of the Public 
    Debt, or the Commissioner's designee to sell savings bonds.
    * * * * *
    
    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
    
    [[Page 23701]]
    
    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). 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 or the 
    Commissioner's designee.
        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 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 which the Secretary has not received payment, in order to 
    preserve public confidence in dealing with issuing agents.
    
    PART 370--REGULATIONS GOVERNING 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. Revise Sec. 370.0 to read as follows:
    
    
    Sec. 370.0  Scope.
    
        The regulations in this part apply to the transfer of funds by 
    electronic means as employed by the Bureau of the Public Debt in 
    connection with United States securities, except as otherwise provided. 
    To the extent that the rules in part 210 of this title apply to the 
    purchase or payment of interest and principal on United States 
    securities, the rules 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 entries accomplished 
    pursuant to this part.
        3. Revise Sec. 370.1 to read as follows:
    
    
    Sec. 370.1  Definitions.
    
        In this part, unless the context indicates otherwise:
        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 rules 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.
        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. 
    Sec. 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. Sec. 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. Sec. 1815);
        (ii) Any mutual savings bank as defined in section 3 of the Federal 
    Deposit Insurance Act (12 U.S.C. Sec. 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. Sec. 1815);
    
    [[Page 23702]]
    
        (iii) Any savings bank as defined in section 3 of the Federal 
    Deposit Insurance Act (12 U.S.C. Sec. 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. Sec. 1815);
        (iv) Any insured credit union as defined in section 101 of the 
    Federal Credit Union Act (12 U.S.C. Sec. 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. Sec. 1781);
        (v) Any savings association (as defined in section 3 of the Federal 
    Deposit Insurance Act) (12 U.S.C. Sec. 1813) that is an insured 
    depository institution (as defined in such Act) (12 U.S.C. Sec. 1811 et 
    seq.) or is eligible to apply to become an insured depository 
    institution under the Federal Deposit Insurance Act (12 U.S.C. 
    Sec. 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. 
    Sec. 3101).
        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.
        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.
        4. Add Sec. 370.4 to subpart B to read as follows:
    
    
    Sec. 370.4  Definition.
    
        Payment means, for the purpose of this subpart, the deposit of 
    money from the Department to the deposit account of the owner.
        5. Revise the heading of subpart C to read as follows:
    
    Subpart C--Debit ACH Entries for the Sale of Securities in TREASURY 
    DIRECT
    
        6. Redesignate subpart D as subpart F and Secs. 370.30 and 370.31 
    as Secs. 370.60 and 370.61.
        7. 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  Governing law.
    370.31  Authorization by purchaser.
    370.32  Termination or suspension by the Bureau of the Public Debt.
    370.33  Termination or suspension by purchaser.
    370.34  Changes and error resolution.
    370.35  Prenotification.
    370.36  Liability.
    
    
    Sec. 370.30  Governing law.
    
        This subpart provides rules 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 purchase of bonds 
    accomplished through issuing agents generally, unless and to the extent 
    the Commissioner of the Public Debt or the Commissioner's designee 
    requires otherwise.
    
    
    Sec. 370.31  Authorization by purchaser.
    
        (a) General. The purchaser of a bond shall authorize an originator 
    to initiate Automated Clearing House debit entries and a financial 
    institution and deposit account to receive such entries. An 
    authorization shall be accomplished only through a form approved by the 
    Bureau of the Public Debt. The purchaser's signature is 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 take 
    additional steps to verify the identity of the purchaser or the 
    authenticity of the signature.
        (b) Recurring debit entries. A single authorization may allow debit 
    entries to be made to a deposit account on a recurring basis.
        (c) 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.
        (d) Subsequent authorizations. A purchaser's subsequent 
    authorization cancels a previous authorization only if so noted by the 
    purchaser on the subsequent authorization form.
    
    
    Sec. 370.32  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 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. 370.33  Termination or suspension by purchaser.
    
        The purchaser may terminate all future debits or suspend one or 
    more future debits by providing written notice to the originator. A 
    written notice is also necessary to lift a suspension of indefinite 
    length. All notices must be received by the originator at least three 
    business days before the debit is to be initiated.
    
    
    Sec. 370.34  Changes and error resolution.
    
        In response to an oral notice from a person relating to the 
    propriety of bond issuance information or a debit entry involving the 
    person's deposit account, the originator may request the person to 
    submit the notice in writing. If so asked, the person shall respond in 
    writing within thirty calendar days. The originator may ignore the oral 
    notice if written notice is not received within thirty days. The 
    originator may suspend debit entries while reaching a resolution in 
    response to any notice, written or oral.
    
    
    Sec. 370.35  Prenotification.
    
        The requirement of a prenotification prior to the initiation of any 
    debit entry, as well as the length of the period during which the 
    originator must wait after initiating a prenotification before 
    initiating a subsequent debit entry, is left to the discretion of the 
    Bureau of the Public Debt.
    
    
    Sec. 370.36  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 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 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,
    
    [[Page 23703]]
    
    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 Submissions of Purchase Applications and 
    Remittances for the Purchase of United States Savings Bonds Issued 
    Through the Bureau of the Public Debt
    
    Sec.
    370.50  Governing law.
    370.51  Definitions.
    370.52  Contract formation.
    370.53  Point of sale.
    370.54  Effect of electronic signature.
    370.55  Admissibility of digital signature.
    370.56  Negligence contributing to unauthorized electronic 
    signature.
    370.57  Liability.
    
    
    Sec. 370.50  Governing law.
    
        This subpart provides rules for the electronic submission of 
    purchase applications and remittances 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 transactions submitted through electronic means. This 
    subpart does not apply to transactions for the sale of bonds 
    accomplished through issuing agents generally, unless and to the extent 
    the Commissioner of the Bureau of the Public Debt or the Commissioner's 
    designee requires otherwise.
    
    
    Sec. 370.51  Definitions.
    
        (a) Digital signature is 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.
        (b) 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.
        (c) 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.
        (d) 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.
        (e) Signature means any symbol or method executed or adopted by a 
    party with present intention to be bound, and includes electronic 
    methods (such as those accomplished by digital and biometric means) 
    approved by the Bureau of the Public Debt.
    
    
    Sec. 370.52  Contract formation.
    
        An application for a purchase of a bond submitted by electronic 
    means is an offer to create a bond contract. An offer is accepted at 
    the moment the message of acceptance is sent to the purchaser, not when 
    the message is received by the purchaser, regardless of the method used 
    to transmit the acceptance.
    
    
    Sec. 370.53  Point of sale.
    
        For jurisdiction and venue purposes, the point of sale for a bond 
    purchased pursuant to this subpart is Parkersburg, West Virginia, 
    regardless of from where the application is transmitted or where the 
    application is actually processed.
    
    
    Sec. 370.54  Effect of electronic signature.
    
        In any dispute involving this subpart, an electronic signature and 
    any electronic record to which it is affixed shall not be denied legal 
    effect because the signature or record is in electronic form. To the 
    extent that the law requires a signature, a writing, or an original, an 
    electronic signature and any electronic record to which it is affixed 
    shall satisfy that rule of law.
    
    
    Sec. 370.55  Admissibility of digital signature.
    
        In any civil litigation or dispute involving this subpart, 
    extrinsic evidence of authenticity as a condition precedent of 
    admissibility shall not be necessary to establish:
        (1) The existence of a digital signature that corresponds to a 
    specific public key pair and is affixed to an electronic record, and
        (2) The electronic record to which the digital signature is affixed 
    has not been altered from its original form.
    
    
    Sec. 370.56  Negligence contributing to unauthorized electronic 
    signature.
    
        A person whose failure to exercise ordinary care substantially 
    contributes to the creation or submission of an unauthorized electronic 
    signature is precluded from disavowing the unauthorized signature and 
    the validity of any electronic record to which the signature is 
    affixed. In any dispute involving this subpart, 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.
    
    
    Sec. 370.57  Liability.
    
        For any claim arising out of an electronic transaction 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: April 6, 1998.
    Donald V. Hammond,
    Acting Fiscal Assistant Secretary.
    [FR Doc. 98-11153 Filed 4-29-98; 8:45 am]
    BILLING CODE 4810-39-P
    
    
    

Document Information

Published:
04/30/1998
Department:
Fiscal Service
Entry Type:
Proposed Rule
Action:
Proposed rule.
Document Number:
98-11153
Dates:
Submit comments on or before June 1, 1998.
Pages:
23695-23703 (9 pages)
PDF File:
98-11153.pdf
CFR: (35)
31 CFR 3101)
31 CFR 317.9(a)
31 CFR 317.2(c)
31 CFR 353.13(c)(3)
31 CFR 317.2(d)
More ...