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F E D E R A L RESERVE B A N K OF D A LLA S DALLAS, TEXAS 75222 Circular No. 79-194 December 4, 1979 NEW REGULATION S Reimbursement Proce dures for Financial Institutions Providing Customer Records to the Federal Government TO ALL BANKS, OTHER CREDITORS, AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE DISTRICT: Effective October 1, 1979, the Board of Governors of the Federal Reserve System adopted Regulation S to set reimbursement rates for costs in cur re d by financial institutions in assembling and pr oviding customer financial record s to an authority of the federal government. Under Regu lation S, a financial institution's s ea rc h and proce ss ing costs will be reim b u r s e d at the rate of $10.00 p e r hour pe r p e r so n , computed on the basis of $ 2 .5 0 p e r q u a r t e r hour or fraction thereof. Reproduction costs will be set at $ .15 p e r page, and reimbursement for transpo rtatio n costs will be limited to actual costs. Enclosed is the printe d pamphlet for Regulation S. Member banks and oth er s that maintain Regulations Binders should file this pam phlet in their b i n d e r s . Any questions concerning Regulation S should be dire cted to the Consumer Affairs Section of our Bank Supervision and Regulations Department, Ext. 6171. Sincerely y o u r s , Robert H. Boykin F irs t Vice President Enclosure B a n k s and o th e rs are e n c o u ra g e d to use th e fo llo w in g in c o m in g W A TS n u m b e rs in c o n ta c tin g th is Bank: 1-800-442-7140 (in tra s ta te ) and 1-800-527-9200 (in te rs ta te ). F or c a lls p la c e d lo c a lly , p le a se use 651 p lu s th e e x te n s io n re fe rre d to above. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) BOARD OF GOVERNORS o f the FED ER A L RESER V E SYSTEM REIMBURSEMENT TO FINANCIAL INSTITUTIONS FOR ASSEMBLING OR PROVIDING FINANCIAL RECORDS R E G U L A T IO N S (12 CFR 219) As adopted effective October 1, 1979 Any inquiry relating to this regulation should be addressed to the Federal Reserve Bank o f the Federal Reserve district in which the inquiry arises. C ONTENTS S ec. Sec. S ec. S ec. Sec. S ec. S ec. 2 1 9 .1 — A u th o r ity , P urpo se and S cope 2 1 9 .2 — D efinitions 2 1 9 .3 — C o st R eim bu rsem en t 2 1 9 .4 — E xceptions 2 1 9 .5 — C onditions for Pa ym en t 2 1 9 .6 — P a ym en t P rocedures 2 1 9 .7 — E ffe c t iv e D ate ST A T U TO R Y AU TH O RITY This regulation is issued under the authority o f section 1115 of the Right to Financial Privacy Act o f 1978 (12 U .S .C . §3415), which reads as follows: S e c 1115. (a) Except for records obtained pursuant to section 1103(d) or 1113 (a) through (h), or as otherwise provided by law, a Government authority shall pay to the financial institution assembling or providing financial records pertaining to a customer and in accordance with procedures established by this title a fee for reimbursement for such costs as are reasonably necessary and which have been directly incurred in searching for, reproducing, or transporting books, papers, records, or other data required or requested to be produced. The Board o f Governors o f the Federal Reserve System shall, by regulation, establish the rates and conditions under which such payment may be made. (b) This section shall take effect on October 1, 1979. REGULATION S (12 CFR 219) As adopted effective October 1, 1979 REIM BURSEM ENT TO FINANCIAL INSTITUTIONS FOR ASSEM BLING OR PROVIDING FINANCIAL RECORDS* SECTION 2 1 9 .1— AU TH O RITY, PURPOSE AND SCOPE This Part is issued by the Board o f Governors of the Federal Reserve System under section 1115 of the Right to Financial Privacy Act o f 1978 (the “ A ct” ) (12 U .S .C . § 3415). It establishes the rates and conditions for reimbursement of reasonably necessary costs directly incurred by financial insti tutions in assembling or providing customer finan cial records to a government authority. SECTION 2 1 9 .2 — DEFINITIONS For the purposes of this Part, the following def initions shall apply: (a) “ Financial institution” means any office of a bank, savings bank, card issuer as defined in section 103 o f the Consumers Credit Protection Act (15 U .S .C . 1602(n)), industrial loan company, trust company, savings and loan, building and loan, or hom estead a sso c ia tio n (in clu d in g coo p erativ e banks), credit union, or consumer finance institu tion, located in any state or territory o f the United States, the D istrict o f Colum bia, Puerto R ico , Guam, American Samoa, or the Virgin Islands. (b) “ Financial record” means an original of, a copy of, or information known to have been de rived from, any record held by a financial institu tion pertaining to a customer’s relationship with the financial institution. (c) “ Government authority” means any agency or department of the United States, or any officer, em ployee or agent thereof. (d) “ Person” means an individual or a part nership of five or fewer individuals. * This text corresponds to the Code of Federal Regula tions, Title 12, Chapter II, Part 219, cited as 12 CFR 219. The words “ this Part” , as used herein, mean Reg ulation S. (e) “ Customer” means any person or author ized representative o f that person who utilized or is utilizing any service o f a financial institution, or for whom a financial institution is acting or has acted as a fiduciary, in relation to an account maintained in the person’s name. “ Customer” does not include corporations or partnerships comprised o f more than five persons. (f) “ Directly incurred costs” means costs in curred solely and necessarily as a consequence of searching for, reproducing or transporting books, papers, records, or other data, in order to comply with legal process or a formal written request or a customer’s authorization to produce a customer’s financial records. The term does not include any allocation o f fixed costs (overhead, equipment, de preciation, etc.). If a financial institution has finan cial records that are stored at an independent stor age facility that charges a fee to search for, repro duce, or transport particular records requested, these costs are considered to be directly incurred by the financial institution. SECTION 2 1 9 .3 — C O ST R E IM BU R SEM EN T Except as hereinafter provided, a government au thority requiring or requesting access to financial records pertaining to a customer shall pay to the financial institution that assembles or provides the financial records a fee for reimbursement o f reason ably necessary costs which have been directly in curred according to the following schedule: (a) Search and processing costs. (1) Reim bursement o f search and processing costs shall be the total amount o f personnel direct time incurred in locating and retrieving, reproducing, packaging and preparing financial records for shipment. (2) The rate for search and processing costs is $10 per hour per person, computed on the basis o f $ 2 .5 0 per quarter hour or fraction thereof, and is limited to the total amount o f personnel time spent in locat ing and retrieving documents or information or re producing or packaging and preparing documents for shipment where required or requested by a gov ernment authority. Specific salaries of such persons shall not be included in search costs. In addition, search and processing costs do not include salaries, fees, or similar costs for analysis o f material or for managerial or legal advice, expertise, research, or time spent for any o f these activities. If itemized separately, search and processing costs may include the actual cost o f extracting information stored by computer in the format in which it is normally pro duced, based on computer time and necessary sup plies; however, personnel time for computer search may be paid for only at the rate specified in this paragraph. (b) Reproduction costs. (1) Reimbursement for reproduction costs shall be for costs incurred in making copies of documents required or requested. (2) The rate for reproduction costs for making copies of required or requested documents is 15 cents for each page, including copies produced by reader/printer reproduction processes. Photographs, films, and other materials are reimbursed at actual cost. (c) Transportation costs. Reimbursement for transportation costs shall be for (1) necessary costs, directly incurred, to transport personnel to locate and retrieve the information required or requested; and (2) necessary costs, directly incurred solely by the need to convey the required or requested mate rial to the place o f examination. SECTION 2 1 9 .4 — EXCEPTIO N S A financial institution is not entitled to reim bursement under the Act for costs incurred in assembling or providing the following financial rec ords or information: (a) Security interests, bankruptcy claim s, debt collection. Any financial records provided as an incident to perfecting a security interest, proving a claim in bankruptcy, or otherwise collecting on a debt owing either to the financial institution itself or in its role as a fiduciary. (b) G overnm ent loan program s. Financial records provided in connection with a government authority’s consideration or administration of assist ance to a customer in the form of a government loan, loan guaranty, or loan insurance program; or as an incident to processing an application for assistance to a customer in the form o f a govern ment loan, loan guaranty, or loan insurance agree ment; or as an incident to processing a default on, or administering, a government-guaranteed or in sured loan, as necessary to permit a responsible government authority to carry out its responsibilities under the loan, loan guaranty, or loan insurance agreement. (c) Nonidentifiable information. Financial re cords that are not identified with or identifiable as being derived from the financial records of a partic ular customer. (d) Financial supervisory agencies. Financial records disclosed to a financial supervisory agency in the exercise o f its supervisory, regulatory, or monetary functions with respect to a financial insti tution. (e) Internal R evenue sum m ons. Financial records disclosed in accordance with procedures au thorized by the Internal Revenue Code. (f) Federally required reports. Financial re cords required to be reported in accordance with any federal statute or rule promulgated thereunder (such as the Bank Secrecy Act). (g) Government civil or criminal litigation. Financial records sought by a government authority under the Federal Rules of Civil or Criminal Proce dure or comparable rules of other courts in connec tion with litigation to which the government author ity and the customer are parties. (h) A d m in istr a tiv e a g en cy s u b p o e n a s. Financial records sought by a government authority pursuant to an administrative subpoena issued by an administrative law judge in an adjudicatory pro ceeding subject to section 554 o f Title 5 , United States Code, and to which the government authority and the customer are parties. (i) Identity of accounts in limited circum stances. Financial information sought by a govern ment authority, in accordance with the Right to Financial Privacy Act procedures and for a legiti mate law enforcement inquiry, and limited only to the name, address, account number, and type of account o f any customer or ascertainable group of customers associated (1) with a financial transaction or class of financial transactions, or (2) with a for eign country or subdivision thereof in the case of a government authority exercising financial controls over foreign accounts in the United States under section 5(b) of the Trading With the Enemy Act (50 U .S.C . App. 5(b)); the International Emergency Economic Powers Act (Title II, Public Law 95- 223); or section 5 of the United Nations Participa tion Act (22 U .S .C . 287(c)). (j) Investigation o f a financial institution or its noncustomers. Financial records sought by a government authority in connection with a lawful proceeding, investigation, examination, or inspec tion directed at the financial institution in posses sion o f such records or at a legal entity which is not a customer. (k) G eneral A ccou n tin g O ffice requ ests. Financial records sought by the General Accounting Office pursuant to an authorized proceeding, inves tigation, examination or audit directed at a govern ment authority. where the customer successfully challenges access by or disclosure to a government authority, the financial institution shall be reimbursed for reason ably necessary costs directly incurred in assembling financial records required or requested to be pro duced prior to the time that the government author ity notifies the institution that the legal process or request is withdrawn or defeated, or that the cus tomer has revoked his or her authorization. (d) Item ized bill or in voice. No payment shall be made unless the financial institution sub mits an itemized bill or invoice showing specific details concerning the search and processing, repro duction, and transportation costs. (1) Securities and Exchange Commission requests. Until November 10, 1980, financial rec SECTION 2 1 9 .6 — PAYM EN T PROCED U RES ords sought by the Securities and Exchange Com mission. SECTION 2 1 9 .5 — CONDITIONS FOR PAYM EN T (a) L im ita tio n s. Paym ent fo r reasonably necessary, directly incurred costs to financial insti tutions shall be limited to material required or re quested. (b) Sep arate con sid eration o f com ponent costs. Payment shall be made only for costs that are both directly incurred and reasonably necessary. In determining whether costs are reasonably neces sary, search and processing, reproduction, and transportation costs shall be considered separately. (c) Compliance with legal process, request, or authorization. No payment shall be made until the financial institution satisfactorily complies with the legal process or formal written request, or cus tomer authorization, except that in the case where the legal process or formal written request is with drawn, or the customer authorization is revoked, or (a) Notice to subm it invoice. Promptly fol lowing a government authority’s service o f legal process or request, the government authority shall notify the financial institution that an itemized bill or invoice must be submitted for payment and shall furnish an office address for this purpose. (b) Special Notice. If a government authority withdraws the legal process or formal written re quest, or if the customer revokes his or her author ization, or if the legal process or request has been successfully challenged by the customer, the gov ernment authority shall promptly notify the finan cial institution o f these facts, and shall also notify the financial institution that the itemized bill or in voice must be submitted for payment o f costs incur red prior to the time that the financial institution receives this notice. SECTION 2 1 9 .7 — E FFE C T IV E DATE This regulation shall become effective October 1, 1979.