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Federal Reserve Bank
OF DALLAS
W IL L IA M
H. W A L L A C E
DALLAS, TEXAS 75222
FIRST VICE PRESIDENT
AND CHIEF OPERATING OFFICER
March 21, 1988
C ir cu lar 88-23
TO:
The Chief Operations Offi cer s of
all fi n an ci al i n s t i t u t i o n s in the
Eleventh Federal Reserve D i s t r i c t
SUBJECT
Revised Fiscal Agency Operating Circular No. 3 "Federal
Payments by the Automated Clearinghouse Method."
DETAILS
The Federal Reserve Bank of Dallas has prepared re vi sio ns to
i t s Fiscal Agency Operating Circu lar No. 3. The re vis io ns were required
by amendments to the Department of the Tre asury's A r e g u l a t i o n , 31 FR
CH
210, formerly ca ll e d Federal Recurring Payments, and by adoption of a
Treasury reg u la ti o n governing A payments under the Treasury Direct
CH
Book-Entry S e c u r i t i e s System, 31 CFR 357.26. Both of these re gulations
are included with the revised operating c i r c u l a r .
The operating c i r c u l a r t r e a t s payments made under these two
r eg ul at ion s in the same manner to the ex ten t possible and points out the
most important d i f fe r en ce s between se c u r i t y payments and othe r federal
A payments. For example, p r e n o t i f i c a t i o n s are used f or Treasury
CH
Direct s e c u r i t y payments, j u s t as f o r many commercial A payments.
CH
Previously, a fi n an ci al i n s t i t u t i o n signed a standard au th or iz at io n form
j u s t as i t did f or other federal A payments. In ad d i t i o n , a fina ncia l
CH
i n s t i t u t i o n is considered the agent of a s e c u r i t y owner and a s e c u ri ty
payment is considered completed upon r e c e i p t by the f in anc ial
i n s t i t u t i o n . Previously, other payments were considered completed upon
payment to the appropriate account a t the f in anc ial i n s t i t u t i o n .
D if fe re n t c o l l e c t i o n procedures also apply to recover overpayments under
the two r e g u l a t i o n s . Please f a m i l i a r i z e y o u r s e l f with the procedures
s e t f o r t h in t h i s operating c i r c u l a r in order to recognize how various
types of payments are to be handled.
For additional copies of any circular please contact the Public Affairs Department at (214) 651-6289. Banks and others are
encouraged to use the following incoming WATS numbers in contacting this Bank (800) 442-7140 (intrastate) and (800)
527-9200 (interstate).
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
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ATTACHMENTS
The revised Fiscal Agency Operating C ir cu lar No. 3 is enclosed.
Please i n s e r t t h i s in the appr opriate section of your Regulations
Binders.
MORE INFORMATION
For more information on t h i s operating c i r c u l a r , please contact
the Dallas Fed's Legal Department a t (214) 651-6228.
Sincerely yours,
FISCAL AGENCY
OPERATING CIRCULAR NO. 3
Federal Payments by the
Automated
Clearinghouse Method
FEDERAL RESERVE BANK OF DALLAS
SCOPE
This operating circular provides the terms and conditions upon which this
Bank, as fiscal agent of the United States, handles and distributes federal recurring
credit payments on media designed to facilitate electronic processing, and upon
which banks and other financial organizations receive such payments for credit to
their depositors' accounts.
FISCAL AGENCY OPERATING CIRCULAR NO. 3
FEDERAL RESERVE BANK OF DALLAS
have the meanings stated in those parts. The
term "payment instruction" as used herein in
cludes both a payment instruction under Part
210, and an instruction for payment by the ACH
method (including a prenotification message un
less the context otherwise requires) issued by the
Treasury Department under Part 357. The rules
applicable to financial institutions may differ as
between ACH payments issued under Part 210
and those issued under Part 357, as well as be
tween benefit payments and other payments is
sued under Part 210. This operating circular
points out certain differences between types of
payments, and financial institutions should be
aware of the type of payment being handled and
of the rules applicable to that type of payment.
GENERAL
1. This operating circular, issued pursuant to
Sections 4, 13, 14(e), and 15 of the Federal Re
serve Act and Section 210.6(a) and 357.26(d) of
Title 31 of the Code of Federal Regulations gov
erns the handling and distribution by this Bank
of Federal payments by the automated clearing
house (ACH) method. Section 210.6(a) of Part 210
of Title 31 of the Code of Federal Regulations
(Part 210) provides that each Reserve Bank, as
fiscal agent of the United States, may issue op
erating circulars not inconsistent with that part
governing the details of its handling of Federal
payments by the ACH method and containing
such provisions as are required or permitted by
that part. Section 210.1 refers to regulations
governing payments with respect to securities in
Section 357.26 of Subpart C of Part 357 of Title
31 of the Code of Federal Regulations (Part 357).
Section 357.26(d) provides that each Reserve
Bank, as fiscal agent of the United States, shall
handle payments with respect to securities made
by the ACH method under Part 357 in accord
ance with its operating circular governing such
payments. This circular applies both to pay
ments under Part 210 and to payments under
Subpart C of Part 357 (Treasury Direct BookEntry Securities System or Treasury Direct). It
does not apply to payment under Subpart B of
Part 357 (Treasury/Reserve Automated Debt
Entry System or TRADES). The provisions of
Part 210 and of Section 357.26 of Part 357 are set
forth in Appendix A to this circular. Reference
should also be made to Part 344 of Title 31 of the
Code of Federal Regulations for provisions gov
erning payments with respect to United States
Treasury Certificates of Indebtedness, Notes and
Bonds — State and Local Government Series.
Each Reserve Bank, as fiscal agent of the United
States, has issued an operating circular substan
tially similar to this one governing its handling
of Federal payments by the ACH method.
3. Unless otherwise stated, all references to this
Bank include our Head Office, and our branches
at El Paso, Houston and San Antonio.
4. By its action in maintaining or using an ac
count on the books of this Bank and in accepting
payment instructions from this Bank, each fi
nancial institution is deemed to agree to the
terms of Parts 210 and 357 and of this operating
circular. Section 357.26(b)(2) of Part 357 provides
that a financial institution that accepts payment
instructions under Part 210 is deemed to agree
to accept payment instructions under Subpart C
(Treasury Direct) of Part 357. A designated cor
respondent that authorizes a financial institution
to utilize the correspondent's account on our
books for the purpose of receiving the amount
of a payment instruction is deemed to agree to
the terms of Parts 210 and 357 and of this oper
ating circular.
HANDLING OF PAYMENT INSTRUCTIONS
BY THIS BANK
5. We send payment instructions to a financial
institution, or to a location in the same Federal
Reserve territory as that where the financial in
2. Except as otherwise defined herein, all terms
defined in Part 210 and Part 357 and used herein
03-88
1
FISCAL AGENCY OPERATING CIRCULAR NO. 3
FEDERAL RESERVE BANK OF DALLAS
available for withdrawal or other use by the fi
nancial institution or its designated correspond
ent on the payment date. We may cease acting
on a payment instruction at any time upon di
rection of the Department of the Treasury, and
will notify the financial institution of such fact
if the financial institution has received a pay
ment instruction. We will send an advice of
credit to a financial institution or designated
correspondent. Advices may be aggregated each
day for each financial institution.
stitution is located at the financial institution's
request, in the following manner:
(a) By the same means and to the same lo
cation used for sending cash items to the
financial institution, or to another person,
under Subpart A of Regulation J of the
Board of Governors of the Federal Re
serve System (12 CFR 210);
(b) By courier to a location not receiving
cash items, if the delivery point is on a
Federal Reserve courier route and, in our
opinion, results in savings through con
solidation of payment files;
9. While we handle payment instructions
promptly and expect that payment instructions
will be made available to a financial institution
or its designated agent during the business day
of the financial institution prior to the payment
date, no representation of such availability is
made by this Bank. In certain cases, a financial
institution choosing physical delivery of pay
ment instructions may not receive certain pay
ment instructions by the business day prior to
the payment date, In other cases, we notify a fi
nancial institution of a significant delay in the
handling of a payment instruction within a rea
sonable time after we obtain knowledge of such
a delay. If a financial institution does not re
ceive payment instructions within the usual time
for receipt or has reason to believe that in
structions may be lost or delayed in transit, the
financial institution should notify this Bank by
telephone.
(c) By electronic means under arrangements
with US;
(d) By the financial institution's picking up
the items; or
(e) By mail.
The person to which delivery is made as re
quested or who picks up the items is considered
to be the financial institution's agent.
6. We send items to a location in a different
Federal Reserve territory from that where the fi
nancial institution is located at the financial in
stitution's request and at the processor's expense
where, in our judgment, it is appropriate to do
so.
7. We furnish payment instructions in the format
we designate and on the medium designated by
a financial institution to us, and set forth in
technical specifications made available by this
Bank.
HANDLING OF PAYMENT INSTRUCTIONS
BY FINANCIAL INSTITUTIONS
10. A financial institution receiving a payment
file should act promptly to ensure that the total
dollar amount of the payment instructions re
ceived agrees with the dollar file total on the
payment file.
In addition, if payment in
structions are received in automated format
(magnetic tape, diskette or data transmission) the
financial institution should act promptly to en
8. We make the amount of all payment in
structions issued under Part 210 and delivered to
a financial institution available for withdrawal
or other use by the financial institution or its
designated correspondent at our opening of
business on the payment date. We make the
amount of all payment instructions issued under
Part 357 and delivered to a financial institution
03-88
2
FISCAL A G ENCY OPERATING CIRCULAR NO. 3
FEDERAL RESERVE BANK OF DALLAS
institution is unable to credit the designated ac
count, it shall return the payment instruction to
this Bank by the next business day after receipt
with a statement identifying the reason why. A
financial institution shall also promptly return to
this Bank a payment instruction to be returned
as provided in Section 357.26(b)(5)(ii).
sure that the file is readable and does not con
tain format errors.
11. If payment instructions or any related doc
umentation received by a financial institution
do not balance, are clearly erroneous on their
face, or are incapable of being processed, the fi
nancial institution, after assuring itself that nei
ther it nor its agent is responsible for the
problem and that it is unable to correct the
problem promptly, shall give us immediate no
tice by telephone of the problem so that we may
deliver or make available corrected material.
Payments in Error/Duplicate Payments
14. As prescribed by Section 357.26(b)(6), we may
charge the account of a financial institution or
its designated correspondent with the amount
of a payment in error or duplicate payment,
where the financial institution has failed to re
spond to a notice of such a payment.
PAYMENTS WITH RESPECT TO A SECURITY
Prenotification
PAYMENTS OTHER THAN SECURITY
PAYMENTS
12. A financial institution that receives a preno
tification message ( a payment instruction in zero
dollar amount) under Part 357 is deemed to have
warranted to the Treasury Department that the
information as to deposit account number and/or
type of account contained in the message is ac
curate as of the time of prenotification unless the
financial institution responds within eight (8)
calendar days after the date of receipt, as pro
vided in Section 357.26(b)(3). The financial in
stitution should state what information does not
agree with its account records, and set forth the
correct information, if available, or should state
any questions it has about the forthcoming pay
ment.
Crediting Recipient's Account
15. As provided in Section 210.7(d), a financial
institution that receives a payment instruction
shall credit the amount of the payment instruc
tion to the designated account of the recipient
on its books and shall make the amount avail
able for withdrawal or other use by the recipient
not later than the opening of business on the
payment date. If the scheduled payment date is
not a business day for the financial institution
or this Bank, the financial institution receiving
credit from us shall make the amount available
by the next business day for both the financial
institution and this Bank. If, as provided in Sec
tion 210.7(e), a financial institution is unable to
credit the amount of a payment instruction to the
appropriate account, the financial institution
shall immediately (by the end of the next busi
ness day after receipt) either (a) return the pay
ment instruction to this Bank with a statement
identifying the reason therefor, or (b) credit the
amount of the payment to the account desig
nated by the recipient if it has reason to believe
the account indicated in the payment instruction
is not the account designated by the recipient.
Crediting Owner's Account
13. As provided in Section 357.26(b)(5), a finan
cial institution that receives a payment instruc
tion shall credit the amount of the payment
instruction to the designated account on its
books and shall make the amount available for
withdrawal or other use on the payment date.
If the scheduled payment date is not a business
day for this Bank, the financial institution re
ceiving credit from us shall make the amount
available by our next business day. If a financial
03-88
3
FISCAL A G ENCY OPERATING CIRCULAR NO. 3
FEDERAL RESERVE BANK OF DALLAS
A financial institution also shall immediately re
turn to this Bank a payment instruction to be
returned as provided in Section 210.7(f).
nated correspondent on our books in the amount
of the payment instruction.
C ollection Procedures
LIABILITY OF THIS BANK
16. Upon completion of other collection activity
as prescribed by Section 210.12 and instruction
from the Department of the Treasury, we charge
the account of a financial institution or its des
ignated correspondent bank with the amount
claimed by the Department of the Treasury,
where the financial institution has failed to re
turn benefit payments to the government after
the death or legal incapacity of a recipient or the
death of a beneficiary.
18. In connection with the matters specified in
Part 210 of this circular, this Bank shall not have
or assume any responsibility to any person other
than to the Department of the Treasury. Simi
larly, in connection with matters specified in
Part 357 or this operating circular, this Bank acts
only as fiscal agent of the United States. This
Bank, as fiscal agent under Part 210 or Part 357,
shall not be responsible for the insolvency, neg
lect, mistake, misconduct or default of another
person or for the loss or destruction of a payment
instruction in transit or in the possession of oth
ers.
RETURN OF PAYMENTS
19. An owner or recipient or beneficiary of a
payment instruction, or a financial institution
with respect to its designated correspondent, has
no right of recourse upon, interest in, or right of
payment from, any reserve balance, clearing ac
count, deposit account or other funds of the
government, of a designated correspondent, or,
in the case of an owner, recipient, or beneficiary,
of a financial institution, in the possession of this
Bank.
17. Payment instructions shall be returned to
this Bank in the format we specify and on the
medium agreed to by the financial institution
and us. Returned payment instructions must be
accompanied by a transmittal form, in the format
we specify, setting forth the number of payment
instructions returned, the aggregate amount of
the payments and the name and routing number
of the financial institution. Each financial insti
tution returning a payment instruction for any
reason should maintain adequate records to per
mit the reproduction or tracing of any lost or
destroyed payment instruction. Upon receipt of
a returned payment instruction, we debit the
account of the financial institution or its desig
03-88
RIGHT TO AMEND
20. We reserve the right to amend this operating
circular at any time.
4
Federal Register / Vol. 52, No. 14 / Thursday. January 22, 1987 / Rules and Regulations
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 210
Federal Payments Made Through
Financial Institutions by the
Automated Clearing House Method
AGENCY: Financial Management Service,
Fiscal Service, Treasury.
action : Final rule.
SUMMARY: There are three reasons for
this revision of 31 CFR Part 210, which
defines the responsibilities and
liabilities of the Federal Government.
Federal Reserve Banks, financial
institutions, and recipients participating
in the Automated Clearing House (ACH)
payment system. First, changes
regarding the enrollment procedure are
made to allow the United States
Department of the Treasury (hereafter
referred to as Treasury) to devise, test,
and implement creative and innovative
means of enrollment while improving
the Direct Deposit/Electronic Funds
Transfer (DD/EFT) system's flexibility.
Second, the problem of fraud in the
Direct Deposit Program is addressed.
Finally, the overall clarity and
arrangement of the regulation are
improved.
EFFECTIVE DATE: February 23,1987.
FOR FURTHER INFORMATION CONTACT:
Christine Ricci. Policy Research Branch.
Financial M anagement Service, U.S.
Department of the Treasury, Room 226,
Treasury Annex, Washington. DC 20226,
(202) 535-6328.
SUPPLEMENTARY INFORMATION: On
January 22,1986 (51 FR 2899), Treasury
published a Notice of Proposed
Rulemaking (that w as republished in its
entirety on February 5,1986, (51 FR
4508) because of typesetting errors)
proposing a number of revisions to the
regulation in Part 210 of Title 31 of the
Code of Federal Regulations which
governs the Direct Deposit of Federal
recurring payments by means other than
by check (EFT). These changes are being
adopted with some revisions suggested
by the organizations that commented on
the Notice of Proposed Rulemaking. The
regulation in this part w as promulgated
in 1975, with amendments in 1976,1984,
and 1985. With this revision, the
coverage of the regulation is expanded
to include changes designed to meet
increased utilization of the ACH method
for Federal payments.
This regulation is am ended to make it
clearer an d more understandable, a s
well as to m ake it more flexible so as to
allow for future innovations in
technology an d payment methods. Thus,
the phrase in the title of P art 21Q
referring to paym ent "by means other
than by check" is changed to paym ents
“by the Automated Clearing House
method.” While the ACH method is
presently used only for recurring
payments, the word “recurring" is
eliminated to allow for the use of this
method in the future for non-recurring
payments, as welL The authority
citation is also updated. Sections 210.1
through 210.8 plus § 210.13, which are
applicable to both benefit and non
benefit payments, are grouped together
a s Subpart A . They also are rearranged
and renumbered. Minor changes are
m ade to § § 210.9 through 210.12, w hich
relate only to benefit payments, and
they are renumbered and labeled
Subpart B.
A number of new definitions are now
in this revised regulation. “Automated
Clearing House" refers to a payment
mechanism through* which participating
institutions exchange funds
electronically. “Benefit payment" is a
payment of money for any Federal
Government entitlement program or
annuity, either one-time or recurring.
New definitions are provided also for
“Federal Reserve Bank," and “financial
institution." Definitions of
“Government,” “recurring payment,"
and “Standard Authorization Form" are
eliminated.
The revised regulation replaces the
term “credit paym ent" with two terms:
“payment" a n d “payment instruction.”
The phrase “credit paym ent” w as not
only unclear, but w as used in two
different senses in the previous
regulation. The Financial Management
Service believes that this created
needless confusion in interpreting the
regulation. Accordingly, the term “credit
payment” is replaced throughout these
rules by either “paym ent” or “payment
instruction.” as the context dictates.
“Payment” is used in its most commonly
accepted sense to mean the transfer of a
sum of money, while "payment
instruction" means an order for the
payment of money, including the
information necessary to make the
indicated payment.
Changes in § 210.4 on recipients are
designed to improve the system's
flexibility as well as simplify the
enrollment process for recipients of
Federal payments. These revisions are
adopted with the understanding that
2405
enrollment products will be developed
in consultation with affected parties
which include, but are n ot limited to, the
Financial Management Service an d
program agencies.
The revised regulation deletes § 210.5
on program agencies, as it is
unneccessary, while a new § 210.3 is
added to state the policy for making
payments by the ACH method.
A new } 210.10 on fraud is added.
Paragraph (a) references the liabilities
which are imposed by the False Claims
Act. 31 U.S.C. 3729 et seq.. for the
submission of false claims or falsified
documents in support of such claims,
and also references applicable criminal
statutes and common law remedies.
This section is intended to apply to
falsified enrollments, as well as to such
activities as the initiation of an improper
ACH payment by an employee of the
Federal Government, or the diversion of
a properly authorized paym ent hy
employees of the Federal Government,
Federal Reserve Banks, or financial
institutions to their own bank account or
the account of another. The revised
regulation adds and expands former
§ 210.9(g) to this section and designates
it paragraph (b).
Numerous non-substantive changes in
wording are made throughout this
revised regulation to achieve greater
clarity and precision.
The changes and new procedures will
be published as amendments to the
Financial Management Service’s Green
Book on Direct Deposit.
Eighteen comments were received
pertaining to the Notice of Proposed
Rulemaking on 31 CFR Part 210
published on February 5,1986. Eight
comments were from financial
institutions or financial institution
associations, four were from automated
clearing house associations, five were
from Federal Government agencies, one
w as from a state government agency,
and one was from the Federal Reserve.
A number ol comments were received
which pertained to the specific
regulatory changes proposed in the draft
regulation, however, many of the
comments addressed the general
provisions, policies, and operations of
the Government’s ACH system. These
general provisions, policies, and
operations are the object of ongoing
evaluation within Treasury. Some of
them, such as the direct utilization by
Federal agencies of private sector ACHs
and prenotification, may be considered
in future revisions of 32 CFR Part 210. In
regard to enrollment procedures, the aim
of this rule is to encourage alternative,
simpler, more flexible enrollment. This
does not mean, as some commenters
2406
Federal Register / Vol. 52, No. 14 / Thursday, January 22, 1987 / Rules and Regulations
assumed, that current enrollment
procedures are being abandoned.
In response to the comments directly
pertaining to the rule and to clarify
certain provisions, the following
amendments to the proposal are being
incorporated into the final regulation:
(1) One commenter stated that the
definition of ACH in § 210.2(b) should
not include entities other than the
Federal Reserve Bank to preclude the
possiblity that the Federal Reserve
Bank's limited liability would extend to
private sector processors. Treasury does
not concur with this interpretation, since
§ 210.6(f) makes it very clear that the
limited liability applies only to the
Federal Reserve Bank. However, since
the term ACH is used to describe a
payment mechanism, and not identify
processors. Treasury believes it is
unnecessary to have references to
processing entities in the definition.
Accordingly, the definition of ACH is
revised to read as follows: ‘"A utom ated
Clearing House’ means a payment
mechanism through which participating
institutions exchange funds
electronically."
(2) The definition of “paym ent” at
§ 210.2(h) is clarified and expanded by
adding: “A payment includes any
Federal Government benefit, annuity, or
other payment (or allotment therefrom),
including any payment of salary, wages,
or pay and allowances.”
(3) Section 210.3 w as misinterpreted
by some commenters to suggest that it
w as mandatory for all Federal
Government payments to be made by
the ACH method unless Treasury
determines that conditions exist that
make payment by check or other means
more appropriate. The section is
clarified by stating that, “Once an ACH
enrollment has been completed, all
payments covered by that enrollment
shall be m ade by the ACH method
unless [Treasury] determines that
conditions exists that make payment by
check or other means more
appropriate.”
(4) Because changes in enrollment are
covered elsewhere in the regulation, and
to clarify to whom requests for
termination should be directed,
§ 210.4(c)(1) now reads as follows: “A
request from the recipient to the
program agency to terminate the
enrollment."
(5) Commenters said the last sentence
of § 210.4(c) appears to be addressed to
financial institutions as well as
recipients. We are clarifying this section
by changing the last sentence to read as
follows: "Upon the occurrence of any of
the foregoing events, except the death of
the recipients or beneficiary, the
recipient or representative payee shall
execute a new enrollment before further
payments may be credited to that
account.”
(6) In the interest of precision, “part”
is changed to "section" in § 210.6(f).
(7) To allow for a notice period
shorter than the 30-day requirement for
termination of enrollement by financial
institutions due to fraud, the following
sentence is added to § 210.7(c):
“However, terminations for reasons of
fraud shall be effective immediately.”
(8) Because financial institutions
normally do not monitor names on
recipients' accounts, the following is
deleted from § 210.7(d): “(e.g., the
account number and recipient's name do
not agree with the financial institution’s
records).”
(9) In the interest of precision and to
eliminate the inconsistency among
§§ 210.7(f), 210.12(b)(1), and 210.12(e),
"promptly” is changed to "immediately"
in § 210.7(f).
(10) Because it is agreed that financial
institutions should not be liable under
§ 210.7(f) for returning payments until
they have received notice of termination
from a program agency, the reference to
§ 210.4(c)(1) is deleted from § 210.7(f)(2).
(11) To make § 210.7(i) consistent with
§ 210.10(b), the last sentence of § 210.7(i)
is changed to read as follows: “Except
as provided in this section, §§ 210.10(b)
and 210.11. a financial institution shall
not be liable under this part to any party
for its handling of a payment.”
(12) To clarify that § 210.10 covers any
payment m ade under this part, the term
"benefit” is deleted from § 210.10(b).
(13) To make new § 210.10(b)
consistent with current § 210.11(f),
§ 210.10(b) is clarified and expended by
adding at the end of the third sentence,
“except for the case where the
beneficiary w as deceased at the time
the recipient executed the enrollment
and if the financial institution had no
knowledge of the beneficiary’s death.”
(14) To make the first sentence of
§ 210.11(a) consistent with § 210.11(f),
the following phrase is added to the end
of the first sentence, “except as
provided in paragraph (f) of this
section.”
In addition to the above changes.
Treasury decided to delete the term
“form" from references to the Notice of
Reclamation form (which includes the
Notice to Account Owners) and to
substitute “Notice of Reclamation”
where the term "form” is used to refer to
the Notice of Reclamation throughout
the regulation. While reclamations may
still b e handled by paper means, this
change allows for future processing of
reclamations by electronic means. We
do not consider this a substantive
change.
Treasury has determined that this is
not a major rule as defined by Executive
Order 12291. Accordingly, a regulatory
impact analysis is not required. It is
hereby certified pursuant to the
Regulatory Flexibility Act that this
revision will not have a significant
economic impact on a substantial
number of small entities. Accordingly, a
Regulatory Flexibility Act analysis is
not required.
List of Subjects in 31 CFR Part 210
A.utomated clearing house. Banks,
Banking, Electronic funds transfer,
Federal Reserve System.
For the reasons set out in the
preamble, Part 210 of Chapter II of Title
31 of the Code of Federal Regulations is
revised to read as follows:
PART 210—FEDERAL PAYMENTS
THROUGH FINANCIAL INSTITUTIONS
BY THE AUTOMATED CLEARING
HOUSE METHOD
Subpart A—General
Sec.
210.1 S cope of regulations.
210.2 D efinitions.
210.3 Policy for p ay m en ts b y th e A uto m ated
Clearing H o u se m ethod.
210.4 R ecipients.
210.5 T h e F ed eral G overnm ent.
210.6 F ed eral R eserv e Banks.
210.7 F inancial institutions.
210.8 T im elin ess of action.
210.9 L iability of, a n d ac q u itta n c e to, the
U nited S tates.
210.10 Fraud.
Subpart B—Repayment of Benefit
Payments
Sec.
210.11 D eath or legal in cap ac ity of recipients
or d e a th o f beneficiaries.
210.12 Collection procedures.
210.13 N otice to A cco u n t O w n e rs of
collection action.
210.14 E rro neou s d e a th inform ation.
Authority: 12 U.S.C. 391: 31 U.S.C. 321 a n d
o th er prov ision s o f law .
Subpart A—General
§ 210.1
Scope of regulations.
This part governs Federal Government
payments made by the automated
clearing house (ACH) method through
Federal Reserve Banks and financial
institutions, to recipients maintaining
accounts at these financial institutions.
It describes the procedures to be used,
defines the obligations and
responsibilities of the participants in
ACH payments, and states terms of a
contract between the Federal
Government and those participants. It
also prescribes the liabilities of financial
institutions to the Federal Government
arising from payments to deceased or
Federal Register / Vol. 52, No. 14 / Thursday, January 22, 1987 / Rules and Regulations
incompetent recipients, and deceased
beneficiaries, of Federal benefit
payments. Regulations promulgated by
the Bureau of the Public Debt governing
TREASURY DIRECT paym ents made by
the ACH method for principal and
interest on Government securities can
b e found at Part 357 of this title.
§ 210.2 Definitions.
A s used in this part, unless the
context otherwise requires:
(a) “Account,” “recipient's account."
“designated account" and "appropriate
account” m ean the account specified by
a recipient or beneficiary into which
payments under this part shall be
deposited. These terms also include an
account on which the financial
institutions has, after execution of an
enrollment, made changes to the
account number of the type of account
as authorized by § 210.4(f).
(b) “Automated Clearing House"
(ACH) means a payment mechanism
through which participating institutions
exchange funds electronically.
(c) “Beneficiary” means a person
other than a recipient who is entitled to
receive the benefit of all or part of a
benefit payment from the Federal
Government.
(d) “Benefit Payment” is a payment of
money for any Federal Government
entitlement program or annuity. It can
be either a one-time or recurring
payment. These payments include, but
are not limited to, the following nine:
(1) Social Security.
(2) Supplemental Security Income.
(3) Black Lung.
(4) Civil Service Retirement.
(5) Railroad Retirement Board
Retirement/Annuity.
(6) Veterans Administration
Compensation/Pension.
(7) Central Intelligence Agency
Annuity.
(6) Military Retirement Annuity.
(9) Cost Guard Retirement.
(e) "Federal Reserve Bank” means
any Federal Reserve District Head
Office, branch, pr regional check
processing center that processes ACH
payments for the Federal Government.
(f) “Financial Institution” means any
bank, savings bank, savings and loan
association, credit union, or similar
institution.
(g) "Outstanding Total” means the
sum of all benefit payments received
pursuant to an enrollment, after death or
legal incapacity, minus any amount
returned to or recovered by the Federal
Government.
(h) “Payment" means a sum of money
which is transferred to a recipient in
satisfaction of an obligation. A payment
includes any Federal Government
benefit, annuity, or other payment (or
allotment therefrom), including any
payment of salary, wages, or pay and
allowances.
(i) “Payment Date" means the date
specified in the payment instruction for
a payment. It is the date on which the
funds specified in the paym ent
instruction are to be available for
w ithdraw al from the recipient’s account
w ith the financial institution specified
by the recipient, and on which the funds
are to be m ade available to the financial
institution by the Federal Reserve Bank
with which the financial institution
maintains or utilizes a n account. If the
payment date is not a business day for
the financial institution receiving a
payment, or for the Federal Reserve
Bank from which it received such
payment, then the next succeeding
business day for both shall be deemed
to be the payment date.
(j) “Payment Instruction” means an
order issued by the Federal Government
for the payment of money under this
part. A payment instruction may be
contained on:
(1) A letter, memorandum, telegram,
computer printout or similar writing, or
(2) Any form of nonverbal
communication, reguistered upon
magnetic tape, disc or any other medium
designed to capture and contain in
durable form conventional signals used
to electronically communicate messages.
(k) "Program Agency” means an
agency of the Federal Government
responsible for determining and
initiating a payment to be made, and
includes any department, agency,
independent establishment, board,
office, commission, or other
establishment in the executive,
legislative, or judicial branches of the
Federal Government and any whollyowned or -controlled Federal
Government corporation.
(1) “Recipient” means a person
authorized by a program agency to
receive payments from the Federal
Government. Recipient includes a
person named by a program agency to
receive benefit payments for a
beneficiary.
§ 210.3 Policy for paym ents by the
Automated Clearing House method.
Once an ACH enrollment has been
completed, all payments covered by that
enrollment shall be made by the ACH
method unless the United States
Department of the Treasury (hereafter
referred to as Treasury) determines that
conditions exist that make payment by
check or other means more appropriate.
§210.4
2407
Recipients.
(a) In order for a recipient to receive a
payment by the ACH method, the
recipient shall designate the desired
financial institution and account
identification at that financial institution
using an enrollment procedure
prescribed by the Financial
Management Service for such payments.
The title of the account so designated
shall include the name of the recipient.
(b) In executing an enrollment, a
recipient:
(1) Agrees to the provisions of this
part: and
(2) Authorizes the termination of any
inconsistent previously executed
enrollment or inconsistent payment
instructions.
(c) Once an ACH enrollment has been
effected, it shall remain in effect until it
is terminated by one of the following
events:
(1) A request from the recipient to the
program agency to terminate the
enrollment;
(2) A change in the title of an account
which removes the name of the
recipient, removes or adds the name of a
beneficiary, or alters the interest of the
beneficiary;
(3) The death or legal incapacity of a
recipient, or the death of the beneficiary
of a benefit payment; or
(4) The closing of the account.
Upon the occurrence of any of the
foregoing events, except the death of the
recipient or beneficiary, the recipient or
representative payee shall execute a
new enrollment before further payments
may be credited to that account.
(d) A recipient who wishes to change
the account or financial institution to
which payment is directed shall execute
a new enrollment.
(e) A recipient of a benefit payment
made under this part may request only
that the full amount of the payment be
credited to one account on the books of
a financial institution. Except as
authorized by law or other regulations,
the procedures set forth in this part shall
not be used to effect an assignment of a
payment.
(f) A financial institution may change
the account numbers or, at the request
of the recipient, the type of the
recipient’s account without executing a
new enrollment provided no change is
made to the title of the account or the
interest of the recipient or beneficiary in
the account. These changes must be
communicated to the appropriate
program agency or agencies in
accordance with implementing
instructions issued by the Federal
Government.
2408
§210.5
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The Federal G overnm ent
(a) The Federal agencies that perform
disbursing functions will, in accordance
with the provisions of this part, issue
and direct paym ent instructions to the
Federal Reserve Bank on whose books
the financial institution nam ed therein
maintains or utilizes an account in
sufficient time for the Federal Reserve
Bank to carry out its responsibilities
under this part.
(b) Procedural instructions will be
issued by the Financial Management
Service for the guidance of program
agencies, Federal agencies that perform
disbursing functions, Federal Reserve
Banks, and financial institutions in the
implementation of these regulations.
§ 210.6
Federal R eserve Banks.
(a) Each Federal Reserve Bank as
Fiscal Agent of the United States shall
receive paym ent instructions from the
Federal Government and shall make
available and pay to financial
institutions am ounts specified in these
paym ent instructions, and shall
otherwise carry out the procedures and
conduct the operations contemplated
under this part. Each Federal Reserve
Bank may issue operating circulars
(sometimes referred to as operating
letters or bulletins) not inconsistent with
this part, governing the details of its
handling of paym ents under this part
and containing such provisions as are
required and permitted by this part.
(b) The Federal Government by its
action of issuing an d sending any
payment instruction contained in the
media specified in § 210.2(k) shall be
deemed to authorize the Federal
Reserve Banks to:
(1) Pay the amount specified in the
paym ent instruction to the debit of the
general account of the Treasury on the
paym ent date; and
(2) Handle and act upon the payment
instruction.
(c) Upon receipt of a paym ent
instruction, a Federal Reserve Bank
shall, if the paym ent is directed to a
financial institution which m aintains or
utilizes an account on the books of
another Federal Reserve Bank, forward
the paym ent instruction to the other
Federal Reserve Bank. The Federal
Reserve Bank on whose books the
financial institution or its designated
correspondent maintains an account
shall deliver or make available to the
financial institution the information
contained in the paym ent instruction not
later than the close of business for the
financial institution on the business day
prior to the paym ent date on the medium
as agreed to by the Federal Reserve
Bank and financial institution.
(d) A financial institution by its action
in maintaining or utilizing an account at
a Federal Reserve Bank shall be deemed
to authorize that Federal Reserve Bank
to credit the amount of the paym ent to
the account of the financial institution
on its books, or the account of its
designated correspondent maintaining
an account with the Federal Reserve
Bank.
(e) A Federal Reserve Bank receiving
a paym ent instruction from the Federal
G overnment shall make the amount
specified in the paym ent instruction
available for w ithdraw al from the
financial institution’s account on its
books, referred to in paragraph (d) of
this section, at the opening of business
on the paym ent date.
(f) Each Federal Reserve Bank shall
be responsible only to the Treasury and
shall not be liable to any other party for
any loss resulting from the Federal
Reserve Bank’s action under this
section.
§ 210.7
Financial institutions.
(a) A financial institution's execution
of actions required of it in connection
with an enrollment shall constitute its
agreement to the terms of this p art with
respect to each paym ent received by it
pursuant to the enrollment. Regardless
of w hether it has executed an
enrollment, a financial institution's
acceptance an d handling of a paym ent
issued pursuant to this part shall
constitute its agreement to the
provisions of this part.
(b) A financial institution in executing
an enrollment shall be responsible for:
(1) The completeness and accuracy of
the d ata provided by it with respect to
the enrollment, and
(2) Verifying that the account number
entered by the recipient during
enrollment corresponds to an account
bearing the nam e of the recipient.
(c) A financial institution wishing to
terminate an enrollment shall do so by
giving written notice to the recipient.
The termination shall become effective
30 days after the financial institution
has sent the notice to the recipient.
However, terminations for reasons of
fraud shall be effective immediately.
(d) A financial institution receiving a
paym ent under this part shall credit the
amount of the paym ent to the
designated account of the recipient on
its books, and it shall make the amount
available for w ithdraw al or other use by
the recipient not later than the opening
of business on the paym ent date.
"Available" in this paragraph means
accessible through any means of access
provided by a financial institution to its
customers for the recipient’s type of
account, for example, checks, automated
teller machines, or automatic transfers
from the recipient's account. If the
paym ents or any related information
received by the financial institution from
a Federal Reserve Bank do not balance,
are incomplete, are clearly erroneous on
their face, or are incapable of being
processed, the financial institution, after
assuring itself that neither it nor any.of
its agents is responsible, shall
immediately notify the Federal Reserve
Bank in order that it may deliver
corrected information to the financial
institution.
(e) A financial institution receiving a
paym ent under this part shall credit the
amount of the paym ent to the account
specified in the paym ent instruction. If
the financial institution is unable to
credit the amount of the paym ent to the
account indicated in the paym ent
instruction because, for example, such
an account does not exist on its books,
or because in processing the paym ent it
has reason to believe the account
indicated in the paym ent instruction is
not the account designated by the
recipient, it shall either:
(1) Return the paym ent to the Federal
Reserve Bank with a statem ent
identifying the reason therefor; or
(2) Credit the amount of the payment
to the account designated by the
recipient.
A credit to any other account by a
financial institution shall constitute a
breach of its w aranty made by reason of
paragraph (i) of this section.
(f) A financial institution shall
immediately return to the Federal
Government through the Federal
Reserve Bank any paym ent received by
the financial institution:
(1) After termination of the enrollment
pursuant to § 210.4(c)(2) and before the
execution of a new enrollment;
(2) After termination of the enrollment
pursuant to § 210.7(c) has become
effective;
(3) After the financial institution
learns of the death or legal incapacity of
the recipient, or the death of the
beneficiary, of a benefit payment,
regardless of w hether or not notice has
been received from the Federal
Government; or
(4) After the closing of the recipient's
account.
(g) A financial institution to which a
payment is sent under this part does not
thereby become a Federal Government
depositary and shall not advertise itself
as one because of that fact.
(h) If any change in account numbers
permitted by § 210.4(f) is m ade by a
financial institution, the financial
institution shall be liable to the recipient
for any lost or late payment caused by
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the financial institution's actions in
processing the change.
(i) Each financial institution by its
action of handling a paym ent under this
part shall be deem ed to w arran t to the
Federal Government that it has handled
the paym ent in accordance with the
requirements of this part. In addition to
the liability which may be imposed
pursuant to § 210.11, if the foregoing
w arranty is breached, the financial
institution shall be liable to the Federal
Government for any loss sustained by
the Federal Government, but only to the
extent that the loss w as the result of the
breach. Except as provided in this
section § § 210.10(b) and 210.11, a
financial institution shall not be liable
under this part to any party for its
handling of a payment.
§ 210.8 Timeliness of action.
If, because of circumstances beyond
its control, action by the Federal
Government, a Federal Reserve Bank, or
a financial institution is delayed beyond
the time prescribed for the action
(including the paym ent date) by this
part, by the operating circulars of the
Federal Reserve Banks, or by applicable
law, the time within which the action
shall be completed shall be extended for
such time after the cause of the delay
ceases to operate as shall be necessary
to take or complete the action, provided
the Federal Government, the Federal
Reserve Bank, or the financial
institution exercises such dilegence as
the circumstances require.
§ 210.9 Liability of, and acquittance to, the
United States.
(a) The United States shall be liable to
a recipient for the failure to credit the
proper amount of a paym ent to the
appropriate account of the recipient as
required by this part. This liability shall
be limited to the amount of the payment.
(b) The United States shall be liable to
the financial institution, up to the
amount of the payment, for a loss
sustained by the financial institution as
a result of its crediting the amount of the
payment to the account specified in the
payment instruction, if the financial
institution has handled the payment in
accordance with this part. The foregoing
does not extend to benefit paym ents
received by the financial institution
after the death or legal incapacity of the
recipient or death of the beneficiary, in
which event § 210.11 shall govern.
(c) The crediting of the amount of a
payment to the appropriate account of a
recipient on the books of the appropriate
financial institution shall constitute a
full acquittance to the United States for
the amount of the payment.
§ 210.10
Fraud.
(a) The False Claims Act, 31 U.S.C.
3729, et seq., provides for the recovery of
dam ages and a civil penalty from any
person who knowingly presents to the
Federal Government, or causes to be
presented, a false or fraudulent claim for
payment, or uses a false record or
statem ent in connection with such a
claim. In addition, criminal penalties are
provided in 18 U.S.C. 1001 for knowingly
making false or fraudulent statem ents or
representations to agencies of the
Federal Government, and in 18 U.S.C.
1002 for knowingly possessing false
documents for the purpose of enabling
another to receive a paym ent from the
Federal Government. These provisions
are in addition to the Federal
Government’s remedies under common
law.
(b) A financial institution shall verify
the identity of any person who initiates
and executes an enrollment through
such financial institution. The Federal
Government shall verify the identity of
any person who presents an enrollment
to the Federal Government without prior
review or execution by a financial
institution. A financial institution that
executes an enrollment in which the
recipient’s or beneficiary’s signature is
forged or other information is falsified
shall be liable to the Federal
Government for all paym ents m ade in
reliance thereon, except for the case
w here the beneficiary w as deceased at
the time the recipient executed the
enrollment and if the financial
institution had no knowledge of the
beneficiary's death. However, once the
financial institution has provided notice
to the program agency that a paym ent
certified by the program agency h as not
been received by the correct recipient or
beneficiary, it shall not be liable for any
paym ents based on the forged, false, or
fraudulent information which are
certified for paym ent after the date of
the notice.
Subpart B—Repayment of Benefit
Payments
§210.11 Death or legal Incapacity of
recipients o r death of beneficiaries.
(a) A financial institution shall be
liable to the Federal Government for the
total amount of all benefit payments
received after the death or legal
incapacity of the recipient or the death
of the beneficiary, except as provided in
paragraph (f) of this section. However, a
financial institution may limit its
liability if the financial institution did
not have knowledge of the death or legal
incapacity at the time of the deposit or
w ithdraw al of any of the benefit
paym ents made after the death or legal
2409
incapacity, and if it fulfills the
requirements of this section and those of
§§ 210.12 and 210.13.
(b) Except as provided in paragraph
(f) of this section, if limitation of liability
is available to a financial institution
under this part, the amount of its
liability shall be:
(1) An amount equal to the amount in
the recipient's or beneficiary’s account
as defined in § 210.12(b)(2)(i), plus.
(2) An amount equal to the benefit
paym ents received by the financial
institution within 45 days after the death
or legal incapacity of the recipient or the
death of the beneficiary; Provided, that
the financial institution will be liable
only for the 45-day amount to the extent
described in § 210.12(d).
(c) Although a financial institution
shall be liable for an amount equal to
the amount in the recipient's or
beneficiary's account, plus the amount
of benefit paym ents received within 45
days after the death or legal incapacity
of the recipient or the beneficiary, this
part does not authorize or direct a
financial institution to debit the account
of any customer, living or deceased,
including that of the recipient or
beneficiary, for the financial institution's
liability to the Federal Government
under this part. The amount in the
recipient’s or beneficiary's account is
only a measure of the financial
institution’s liability. Nothing in this part
shall be construed to affect any right a
financial institution may have under
State law or the financial institution’s
contract with a customer to recover
from the customer’s account an amount
returned to the Federal Government in
compliance with this part.
(d) A financial institution shall be
deemed to have knowledge of the death
or legal incapacity of the recipient or
beneficiary when it is brought to the
attention of a financial institution
employee who handles benefits
payments, or w hen it would have been
brought to that person's attention if the
financial institution h ad exercised due
diligence. The financial institution will
be considered to have exercised due
diligence only if it maintains procedures
under which, once it learns of the death
of a depositor, it determines w hether its
deceased depositor is a recipient or
beneficiary’ of benefit paym ents under
this part, and immediately
communicates such information to the
appropriate employees, and it complies
with such procedures. This obligation
does not impose a duty on a financial
institution to learn of the deaths of its
customers by searching obituaries or
any other means, unless it does so for
purposes other than its participation in
2410
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the paym ent system governed by this
part.
(e) A financial institution that fails to
comply timely with the collection
procedures set forth in § 210.12 or the
Notice to Account O wners requirement
of § 210.13 may not limit its liability in
accordance with paragraph (a) of this
section.
(f) A financial institution will not be
liable under this part for benefit
paym ents m ade after the death of a
beneficiary if the beneficiary w as
deceased at the time the recipient
executed an enrollment and if the
financial institution had no knowledge
of the beneficiary’s death.
§ 210.12 Collection procedures.
The amount for which the financial
institution is liable under § 210.11 shall
be collected as follows:
(a) For each type of benefit payment,
the Federal Government will send a
Notice of Reclamation to the financial
institution. The Notice of Reclamation
will identify benefit paym ents sent to
the financial institution for credit to the
account of a recipient or beneficiary
which should have been returned by the
financial institution because of the
death or legal incapacity of a recipient,
or the death of a beneficiary.
(b) Upon receipt of the Notice of
Reclamation, the financial institution
must do one of the following:
(1) If the financial institution had
knowledge of the death or legal
incapacity and did not immediately
return to the Federal Government all
benefit paym ents received after it
acquired that knowledge, the financial
institution shall immediatelly return to
the Federal Government an amount
equal to the outstanding total of benefit
paym ents listed on the notice that it
received after it learned of the death.
With respect to any benefit paym ents
received prior to learning of the death
that have not been returned, the
financial institution shall certify on the
Notice of Reclamation the date it
learned of the death and follow the
procedure in paragraph (b)(2) of this
section.
(2) If the financial institution had no
knowledge of the death or legal
incapacity at the time any benefit
paym ents m ade after the death or legal
incapacity w ere credited to the
recipient's or beneficiary’s account, an
appropriate official of the financial
institution shall certify on the Notice of
Reclamation that it had no knowledge of
the death or legal incapacity and fully
complete the Notree of Reclamation in
accordance with its instructions and do
the following:
(i) The financial institution shall
fully completed and properly executed
return to the Federal Government both
Notice of Reclamation along with the
the executed Notice of Reclamation and
amount due under § 210.11(b)(1) within
an amount equal to the amount in the
60 days of the issue date of the original
account or the outstanding total,
Notice of Reclamation, the financial
whichever is less. The amount in the
institution shall be liable for the
account is the balance w hen the
outstanding total listed on the Notice of
financial institution has received the
Reclamation. Following the sixtieth day
Notice of Reclamation and has h ad a
after the date of the original Notice of
reasonable time to take action based on
Reclamation, the Federal Government
its receipts, plus any additions to the
will instruct the appropriate Federal
account balance m ade before the
Reserve Bank to debit the account
financial institution returns the
utilized by the financial institution for
completed Notice of Reclamation to the
receipt of benefit paym ents in the
Federal Government. For the purposes
amount of the outstanding total. By
of this paragraph, action is taken within
receiving benefit paym ents under this
a reasonable time if it is taken not later
part, the financial institution is deemed
than the close of business day following
to authorize this debit. The Federal
the receipt of the Notice of Reclamation.
Reserve Bank will provide advice of the
(ii) If the amount returned is less than
debit to the financial institution.
the am ount requested in the notice, the
(d) After the financial institution has
financial institution shall include with
paid to the Federal Government an
the Notice of Reclamation the nam e and
amount equal to the amount in the
the most current address on its records
recipient’s account as provided in
of any person(s) who withdrew funds
§ 210.11(b)(1), if the program agency is
from the account after the death or legal
unable to collect the entire outstanding
incapacity. If the financial institution is
total from the withdrawer(s), the
unable to supply the name(s) of the
financial institution shall be liable for an
withdrawer(s), it shall provide the
additional am ount equal to the benefit
nam es and most current ad dresses on its
paym ent received by it w ithin 45 days
records of any co-owners of the account
after the death or legal incapacity, or the
or other persons authorized to
balance of the outstanding total,
w ithdraw . If it is unable to supply the
whichever is less. The Federal
nam es or addresses of the w ithdraw ers
Government will instruct the
or co-owners, it shall state the reason
appropriate Federal Reserve Bank to
for its inability on the Notice of
debit the account utilized by the
Reclamation.
(3) If the Federal Government issues a financial institution for receipt of benefit
paym ents in the amount of the
second or subsequent Notice of
outstanding total. By receiving benefit
Reclamation for the same type of
paym ents under this part, the financial
paym ent for the same recipient or
institution is deemed to authorize this
beneficiary, the financial institution
debit. The Federal Reserve Bank will
shall be liable w ith respect to such
provide advice of the debit to the
second or subsequent Notice only for an
financial institution.
amount equal to the amount in the
(e) Immediately upon learning of the
account at the time it receives a second
death or legal incapacity regardless of
or subsequent Notice of Reclamation,
w hether there has been notification from
plus any further additions to the account
the Federal Government, the financial
balance up to the date it returns these
institution shall return to the Federal
subsequent Notices of Reclamation. For
Government any further benefit
a second or subsequent Notice of
paym ents it receives and notify the
Reclamation for the same type of
Federal Government that it has learned
paym ent for the same recipient or
of the death or legal incapacity in order
beneficiary, the financial institution
that the above collection procedures can
shall not be liable for an amount in
be commenced. See 8 210.7(f)(3).
excess of the amount determined under
the first sentence of this paragraph,
§ 210.13 Notice to Account O wners of
attributable to benefit paym ents
collection action.
received within 45 days after the death
(a) Upon receipt by a financial
or legal incapacity if it complied
institution of the Notice of Reclamation
properly and timely to the first Notice of
as described in § 210.12(a), the financial
Reclamation.
institution shall immediately mail to the
(c) If the Federal Government does
current address(es) of the account
not receive a response to the Notice of
owner(s) of record a copy of the Notice
Reclamation within 30 days, it will issue
to Account O wners included with the
a follow-up to ensure that the original
Notice of Reclamation.
Notice of Reclamation w as received. If
(b) The financial institution shall
the Federal Government does not
indicate with the Notice to Account
receive from the financial institution the
Federal Register / Vol. 52, No. 14 / Thursday, January 22, 1987 / Rules and Regulations
Owners any action it has taken or
intends to take with repsect to the
recipient's or beneficiary’s account in
connection with the Federal
Government’s collection action against
the financial institution.
(c) The financial institution is not
authorized by this part to debit the
account of any party or to deposit any
funds from any account in a suspense
account or escrow account or the
equivalent. If such action is taken, it
must be under authority of State law or
the financial institution’s contract with
its depositor(s).
(d) The financial institution’s liability
under this part is not affected by any
action taken by it to recover from any
party the amount of the financial
institution's liability to the Federal
Government.
(e) Failure to mail the Notice to
Account Owners, or failure to certify on
the Notice of Reclamation that it has
done so, shall result in the forfeiture by
the financial institution of its ability
under this part to limit its liability. See
§ 210.11(e).
9210.14 Erroneous death information.
(a) In the event that the financial
institution is advised that the Federal
Government's information that the
recipient or beneficiary is deceased is
correct, or that the date of death is
incorrect, the financial institution shall
certify the correct information to the
Federal Government by one of the
following means:
(1) Certify on the “Notice of
Reclamation" that the person whose
name is reflected on the notice is alive,
or that the date of death is incorrect,
and that the financial institution took
prudent measures to assure that the
person w as alive or that the date of
death w as erroneous. Prudent measures
to assure that the person w as alive
include, but are not limited to, the
named person providing the financial
institution adequate identification, or
obtaining through a third person a
signed, dated and notarized statement
from the named person. Prudent
measures to assure the correct date of
death include obtaining a death
certificate.
(2) If there is any question regarding
the sufficiency of the evidence
presented to demonstrate that the date
or fact of death is incorrect, the
individual presenting the evidence
should be referred by the financial
institution to the agency making the
payment, e.g., the Social Security
Administration or the Veterans
1 Administration. The agency will certify
in writing to the financial institution the
corrected information. The financial
institution shall then return the agency's
certification with the Notice of
Reclamation.
(b) If the Federal Government's
informaion that the recipient or
beneficiary is deceased is in error, the
financial institution shall be relieved of
its liability, and shall no longer be
subject to collection procedures under
this part, if an accurate certification in
accordance with paragraph (a) of this
section is received by the Federal
Government, on or with a properly
completed Notice of Reclamation, within
60 days of the date of the original Notice
of Reclamation to the financial
institution.
(c) If the date of the death on the
Notice of Reclamation is in error, the
financial institution shall be relieved of
an appropriate part of its liability if an
accurate certification in accordance
with paragraph (a) of this section is
received by the Federal Government, on
or with properly completed Notice of
Reclamation, within 60 days of the date
of the original Notice of Reclamation to
the financial institution. In that event, the
financial institution shall adjust the
outstanding total on the Notice of
Reclamation to exclude benefit
payments made before the corrected
date of death. The financial institution
shall include an explanation of the
adjustment with the Notice of
Reclamation. If correction of an error
relating to the date of death shown on
the Notice of Reclamation would result
in additional payments being due to the
Federal Government, the financial
institution shall so notify the Federal
Government when it returns the Notice
of Reclamation.
(d) If after the financial institution has
returned to the Federal Government a
completed Notice of Reclamation and
had made payment of its liability, the
financial institution learns that the fact
of death or date of death w as in error, it
should bring the information to the
attention of the agency which made the
benefit payments, e.g., the Social
Security Administration or the Railraod
Retirement Board. The agency will
refund to the financial institution,
without interest, the appropriate amount
of funds paid by the financial institution
pursuant to § 210.12, including funds
debited from its Federal Reserve
account under § 210.12 (c) or (d).
Dated: Ja nuary 16. 1987.
W.E. Douglas,
Commissioner.
[FR Doc. 87-1286 Filed 1-21-87: 8:45 am]
BILLING C O D E 4 t1 0 - 3 S - M
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Federal Register / Vol. 51, No. 95 / Friday. May 16, 1986 / Rules and Regulations
Supplementary Information section of
this document is designated as
Appendix A to Part 357 and is added to
Part 357.
PART 357— REGULATIONS
GOVERNING BOOK-ENTRY
TREASURY BONDS, NOTES AND
BILLS (DEPARTMENT OF THE
TREASURY CIRCULAR, PUBLIC DEBT
SERIES NO. 2-66)
Subpart A—General Information
Sec.
357.0-357.2 [Reserved]
357.3
Definitions.
Subpart B—Treasury/R eserve Automated
Debt Entry System (TRADES)—[Reserved]
Subpart C—TREASURY DIRECT BOOKENTRY Securities System (TREASURY
DIRECT)
357.20 S ecurities acco u n t in TREASURY
D.'RECT.
357.21 Registration.
357.22 T ransfers.
357.23 Judicial p ro ceed in g s—sovereign
immunity.
357.24 A vailability a n d d isclo sure of
TREASURY DIRECT records.
357.25 S ecurity interests.
357.26 P aym ents.
357.27 R einvestm ent.
357.28 T ra n s a c tio n requests.
357.29 T im e required for processing
tran sactio n request.
357.30 C ase of d elay or su sp en sio n of
paym ent.
357.31 Certifying individuals.
357.32 S ubm ission of tran sactio n requests;
further inform ation.
Subpart D—Additional Provisions
357.40 A d d itional requirem ents.
357.41 W aiv er of regulations
357.42 Liability of D epartm ent a n d Federal
R eserve Banks. [Reserved)
357.43 Liability for tran sfers to a n d from
TREASURY DIRECT.
357.44 N otice of a ttach m en t for se curities in
TRADES.— [R eserved ]
357.45 S upplem ents, am en d m en ts, or
revisions.
A p pendix A— D iscussion of Final Rule.
A uthority: 31 U.S.C. C h a p te r 31:12 U.S.C
391.
S u b p a rt A—G e n e ra l In fo rm atio n
§§357.0-357.2
§ 357.3
[Reserved]
Definitions.
In this Part, unless the context
indicates otherwise:
“Bill” means an obligation of the
United States, with a term of not more
than one year, issued at a discount,
under Chapter 31 of Title 31 of the
United States Code, in book-entry form.
"Bond” means an obligation of the
United States, with a term of more than
ten years, issued under Chapter 31 of
Title 31 of the United States Code, in
book-entry form.
"Department" means the United
States Department of the Treasury, and,
where appropriate, the Federal Reserve
Banks acting as fiscal agents of the
United States.
“Depository institution” means an
entity described in section 19(b) of the
Federal Reserve Act (12 U.S.C. 461(b)).
Under section 19(b) of the Federal
Reserve Act, the term “depository
institution" includes:
(a) Any insured bank as defined in 12
U.S.C. 1813 or any bank which is eligible
to make application to become an
insured bank under 12 U.S.C. 1815:
(b) Any mutual savings bank as
defined in 12 U.S.C. 1813 or any bank
which is eligible to make application to
become an insured bank under 12 U.S.C.
1815;
(c) Any savings bank as defined in 12
U.S.C. 1813 or any bank which is eligible
to make application to become an
insured bank under 12 U.S.C. 1815;
(d) Any insured credit union as
defined in 12 U.S.C. 1752 or any credit
union which is eligible to make
application to become an insured
institution under 12 U.S.C. 1781;
(e) Any member as defined in 12
U.S.C. 1422;
(f) Any insured institution as defined
in 12 U.S.C. 1724 or any credit union
which is eligible to make application to
become an insured credit union under 12
U.S.C. 1726; and
(g) For the purpose of 12 U.S.C. 248(o),
342 to 347, 347c, and 372, any
association or entity which is wholly
owned by or which consists only of
institutions referred to in paragraphs (a)
through (d) of this definition.
“Federal Reserve Bank” or “Reserve
Bank" means a Federal Reserve Bank or
Branch.
"Financial institution” means, for
purposes of direct deposit, an institution
which has agreed to receive credit
payments under 31 CFR Part 210, as
amended from time to time, and has not
withdrawn its participation in a direct
deposit program under Part 210, or an
institution which is willing to agree to
receive credit payments under 31 CFR
Part 210 and has enrolled with its
Federal Reserve Bank.
“Incompetent" means an individual
who is legally, medically or mentally
incapable of handling his or her
business affairs, except that a minor is
not an incompetent solely because of
age.
'
"Maturity value” is the amount that
the Department is obligated to pay when
a security matures.
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"Minor” means an individual who is
under the age of majority, as determined
by applicable state Law.
"Note” means an obligation of the
United States, with a term of at least
one year, but of not more than ten years,
issued under Chapter 31 of Title 31 of
the United States Code, in book-entry
form.
“Original issue” means the offering by
the Department of the Treasury of a
marketable Treasury security to the
public and its issuance in book-entry
accounts maintained either directly by
the Treasury or held through a Federal
Reserve Bank.
“Owner,” as used in Subpart C, means
the individual(s) or entity in whose
name a security is registered. If a
security is registered in more than one
name, the term “ow ner” incudes all
those whose names appear on the
registration and are authorized by this
Part to make a transaction request on a
security held in TREASURY DIRECT.
“Redemption” means payment of a
security at maturity, or pursuant to a
call for redumption in accordance with
the terms of a security.
"Representative” includes an
executor, administrator, legal guardian,
committee, conservator, and any similar
person or entity appointed by a court to
represent the estate of a decedent,
minor, or incompetent, as well as a
trustee, whether appointed by a court or
otherwise.
“Security" means a bond, note, or bill,
each as defined in this section, and any
other obligation issued by the
Department that, by the terms of the
applicable offering circular, are made
subject to this Part. Solely for purposes
of this Part, it also means the interest
and principal components of a security
eligible for Separate Trading of
Registered Interest and Principal of
Securities (“STRIPS"), if such security
has been divided into such components
by the express terms of the offering
circular under which the security was
issued and the components are
maintained separately on the books of a
Federal Reserve Bank.
"Security interest” and "pledge" mean
an interest in a security, which interest
is acquired by a secured party to secure
payment or performance of an
obligation and is created by a security
agreement between the person having
such obligation and the secured party.
"Taxpayer identifying number” or
“TIN” means a social security account
number or an employer identification
number, as appropriate.
“TRADES" is the Treasury/Reserve
Automated Debt Entry System.
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Federal Register / Vol. 51, No. 95 / Friday, May 16, 198a / Rules and Regulations
"Transaction request” means a
request to effect a change in an account
m aster record or securities portfolio
maintained in TREASURY DIRECT.
“Transaction request form” means a
form or series of forms prescribed for
use by the Department to request a
transaction in TREASURY DIRECT.
(This term includes a document that the
Department has determined contains all
of the elements required by the
transaction request form.)
"TREASURY DIRECT" is the
TREASURY DIRECT Book-Entry
Securities System.
Subpart B—Treasury/Reserve
Automated Debt Entry System
(TRADES)—[Reserved]
Subpart C—TREASURY DIRECT BookEntry Securities System (TREASURY
DIRECT)
Federal Register / Vol. 51, No. 95 / Friday, May 16, 1986 / Rules and Regulations
§ 357.26
Payment*.
(a) General. A payment by the
Department with respect to a security
shall be by direct deposit (electronic
funds transfer), except w hen the
Department determines that
extraordinary circumstances exist that
require payment by check.
(b) Direct deposit.
(1) Information on deposit account at
financial institution.
(i)
To establish an account in
TREASURY DIRECT, the ow ner must
furnish the name and ABA routing/
transit number of the financial
institution (“institution”) to which
payments with respect to a security are
to be made, as well as a depositor name
18269
reference, deposit account number, and
type or classification of account at the
institution to which such paym ents are
to be credited. The information should
be furnished on the tender form if the
account is being established on original
issue, or in other cases on an
appropriate form provided by the
Department. To assure the accuracy of
the account number and account type,
as well as the name and ABA routing/
transit number of the institution to
which payments are to be made, the
owner should consult with the
institution in advance of the submission
of the tender or transaction form. If the
investor finds that the institution to be
designated to receive TREASURY
DIRECT paym ents has not agreed to
receive direct deposit payments under
31 CFR Part 210, but is willing to do so,
the investor should ask the institution to
contact the Federal Reserve Bank of its
district for enrollment advice.
(ii) Where the TREASURY DIRECT
securities account is in the name of
individual(s) in their own right, and the
deposit account at the financial
institution is in the name of individual(s)
in their own right, the two accounts
must contain at least one nam e that is
common to both.
(iii) Where the deposit account to
which payments are to be directed is
held in the name of the financial
institution itself acting as sole trustee, or
as co-trustee, or is in the name of a
commercially-managed investment fund,
particular inquiry should first be made
of the financial institution to make
certain that the direct deposit payments
can be received, and alternate
arrangements m ade if it cannot do so.
(iv) In any case where, after the
establishment of the securities account,
-it is determined that direct deposit
payments cannot be accepted by the
financial institution designated, under
these circumstances, and pending new
direct deposit instructions, payments
will be made by check draw n in the
nam e of the ow ner and sent to the
correspondence address of record.
(v) All payments relating to a single
account m aster record-must be made to
the same designated account at a
financial institution.
(vi) The deposit account to which
paym ents are directed should preferably
be established in a form identical to the
registration of the securities account,
particularly w here the securities are
registered jointly or with right of
survivorship, to assure that the rights of
ownership and of survivorship can be
more easily identified and preserved.
Neither the United States nor any
Federal Reserve Bank shall be liable for
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Federal Register / Vol. 51, No. 95 / Friday, May 16, 1986 / Rules and Regulations
any loss sustained because the interests
of the holder(s) of a deposit account to
which payments are made are not the
same as the interests of the owner(s) of
the security.
(vii) The designation of a financial
institution by an owner to receive
payments with respect to a security
constitutes the appointment of that
institution as the owner's agent for
receipt of such payments. The crediting
of a payment to the institution for
deposit to an account in accordance
with the instructions of the owner
discharges the United States of any
further responsibility for such payment.
Where the institution has arranged with
a Federal Reserve Bank to have
payments credited through a designee
institution, the crediting of a payment to
that designee institution discharges the
United States of any further
responsibility for the amount of such
payment.
(viii) Upon the request of a financial
institution receiving direct deposit
payments with respect to a security, the
Department will change a deposit
account number an d /o r type or
classification of such account without
requiring the submission of a
transaction request from the owner of
Ithe security. The request must be made
in accordance with implementing
instructions issued by the Department.
Such a request by a financial institution,
however, will be deemed an agreement
by the institution to indemnify the
Department and the owner for any loss
resulting from the requested change.
(2) Agreement o f financial institution.
Any financial institution which has
agreed to accept credit payments under
31 CFR Part 210, or hereafter agrees to
do so. shall be deemed to agree to
accept payments under this Subpart. In
any case, a financial institution’s
acceptance and handling of a payment
made with respect to a security covered
by this Subpart shall constitute its
agreement to the provisions of this
Subpart. An institution may not be
designated to receive payments, as
provided in this Subpart, unless it has
agreed, or hereafter agrees, to receive
direct deposit payments under 31 CFR
Part 210.
(3) Pre-notification —(i) General. The
institution designated for payment will
receive shortly after a securities account
has been established, but not less than
fifteen (15) days prior to the first
payment, a pre-notification message
advising that an account maintained by
such institution has been designated for
direct deposit payment(s). A pre
notification message will also be sent
whenever there is a change in the
payment instructions. The pre
notification message shall contain the
information prescribed in paragraph
(b)(l)(i) of this section.
(ii) Response to pre-notification. The
institution must respond to the pre
notification message within eight (8)
calendar days after the date of receipt if
the information as to the deposit
account number an d /o r the type of
account contained in the message does
not agree with the records of the
institution, or if the institution for any
other reason has questions about the
forthcoming payment, including its
ability to credit the payment in
accordance with this Subpart. Upon
receipt of a response to the pre
notification message, the Department, as
appropriate, will correct the payment
instructions and send another pre
notification message, or contact the
owner for further instructions. Where
the circumstances indicate that there is
insufficient time to effect the change,
payment will be made by check. See
paragraph (c) of this section.
(iii) Effect o f failure to reject If an
institution does not reject or otherwise
respond to a pre-notification message
within the specified time period, the
institution shall be deemed to have
accepted the pre-notification and to
have w arranted to the Department that
the information as to the deposit
account number an d /o r the type of
account contained in the message is
accurate as of the time of such pre
notification.
(4) Continuation o f paym ent
instructions. Payment instructions for an
account m aster record will apply to any
and all securities held in that account
until the Department:
(i) Receives a request from the owner
to change such instructions: or
(ii) Receive a request from a financial
institution to change such instructions in
accordance with paragraph (b)(l)(vii) of
this section; or
(iii) Receive advice from the financial
institution holding the deposit account
to which payment is being made that it
has been closed; or
(iv) Receives notice of a change in
status of a designated account or of the
owner, as provided in paragraph (f) of
this section.
(5) Responsibility o f financial
institution. An institution which
receives a payment on behalf of its
customer must:
(i)
Upon receipt, credit the designated
account and make the payment
available for withdrawal or other use 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 credit the
designated account, it shall return the
payment by no later than the next
business day after the date of receipt,
with an electronic message or other
response, explaining the reason for the
return.
(ii) Promptly notify the Department
when the designated account has been
closed, or when it is on notice of the
death or legal incapacity (as determined
under applicable state law) of any
individual named on such account, or
when it is on notice of the dissolution of
a corporation in whose name the deposit
account is held. In all such cases, the
institution, following receipt of notice by
its organizational component
responsible for direct deposit
transactions, shall return to TREASURY
DIRECT all payments received for the
designated account.
(6) Payments in error/duplicate
payments. If the Department or a
Federal Reserve Bank has made a
payment in error, the Department or
Federal Reserve Bank will make a
corrected payment, as appropriate, to
the person(s) or entity entitled thereto
under this Subpart, It will then promptly
initiate action to recover the payment in
error, and do so likewise on any
duplicate payment that occurs, as
follows:
(i) Send a written or electronic notice
to the financial institution to which the
payment w as directed, which notice
shall include the deposit account name
reference, number, and the date and
amount of the error in payment or
duplicate payment that was not
returned. See paragraphs (b)(3)(ii) and
(b)(5)(ii) of this section. Upon receipt of
this notice, the financial institution shall
immediately return to the appropriate
Federal Reserve Bank an amount equal
to the payment in error or duplicate
payment, where available. If the
institution is unable to return payment
for whatever reason, the institution shall
immediately notify the Department or
the Federal Reserve Bank, and provide
such information as it has about the
matter. The Department reserves the
right to request the return of a partial
amount of a payment in error or a
duplicate payment.
(ii) Where the payment in error or a
duplicate payment has not been
returned, the Department or Federal
Reserve Bank shall undertake such other
actions as may be appropriate under the
circumstances. To the extent permitted
by law. the collection action may
include deducting the amount owing
from future payments made to the
Federal Register / Vol. 51, No. 95 / Fjiday, May 16, 1986 / Rules and Regulations
deposit account to which the payment in
error or duplicate payment w as made.
(iii) If a financial institution has failed
to respond in any way to the notice
made pursuant to paragraph (b)(6)(i) of
this section within sixty (60) calendar
days of that notice, it will be deemed, by
virtue of its acceptance of the direct
deposit payment hereunder, to have
authorized the Federal Reserve Bank to
debit the am ount of the payment in error
or duplicate paym ent from the account
maintained or utilized by the financial
institution at the Federal Reserve Bank
to which the payment in error or
duplicate payment w as credited. An
institution designated by a financial
institution to receive payment on its
behalf, in authorizing such financial
institution to utilize its account on the
books of the Federal Reserve Bank, shall
similarly be deemed to authorize such
debit from that account. The institution
to which payment has been directed and
the owner of the TREASURY DIRECT
account who designated the deposit
account to which the payment has been
deposited, shall be deemed to have
agreed to provide information and
assistance to effect recovery of a
payment in error or duplicate payment
under this subsection. The owner is
further deemed to agree to any action
permitted by law to effect collection of a
payment in error or a duplicate
payment.
(c) Checks. If a payment is not made
by direct deposit, it shall be m ade by a
check, drawn by a Federal Reserve Bank
as fiscal agent of the United States, on
the Federal Reserve Bank in its banking
capacity ("fiscal agency check"), or
drawn by the Department on itself
(“Treasury check”). A fiscal agency
check is governed by the regulations in
31 CFR Part 355. A Treasury check is
governed by the regulations and statutes
applicable to checks draw n on the
United States or designated depositories
of the United States [i.e., 31 CFR Parts
235, 240, and 245). A check issued with
respect to a security shall be made
payable in the names of the owner(s) of
the TREASURY DIRECT account and
will be mailed to the correspondence
address shown in the TREASURY
DIRECT account.
(d) Handling o f paym ents by Federal
R eserve Banks. Each Federal Reserve
Bank, as fiscal agent of the United
States, shall receive payment in
accordance with the information
described in paragraph (b)(l)(i) of this
section, and make payment to the
designated institution by crediting it to
the account of the designated institution,
or of its designee, in accordance with
the Federal Reserve Bank's operating
circular governing such payments.
(e) Timeliness o f action. If. because of
circumstances beyond its control, the
Department, a Federal Reserve Bank, or
a financial institution is delayed beyond
applicable time limits in taking any
action with respect to a payment, the
time for taking such action shall be
extended as necessary until the cause of
the delay ceases to operate.
(f) Suspension o f payments. Upon
receipt of notice that a designated
deposit account h a s been closed, that an
individual named on such account is
dead or has been declared legally
incompetent, or where a corporation is
the owner, and it has been dissolved,
the Department reserves the right to
suspend paym ents and any transactions
with respect to a security pending
receipt of satisfactory evidence of
entitlement. Payments will also be
suspended in any case where the
Department receives notice that an
individual ow ner nam ed on a securities
account in TREASURY DIRECT is dead
or has been declared legally
incompetent, or in any case where the
Department receives notice of a change
in the name or status of an organization
or representative named on a securities
account in TREASURY DIRECT.
(A pp rov ed b y the Office of M a n a g e m e n t a n d
B u ^ e t u n d e r control n u m b e r 1535-0068.)
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@FedFRASER