[Federal Register Volume 60, Number 244 (Wednesday, December 20, 1995)]
[Proposed Rules]
[Pages 65599-65601]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30725]



 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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 

  Federal Register / Vol. 60, No. 244 / Wednesday, December 20, 1995 / 
Proposed Rules  

[[Page 65599]]


FEDERAL RESERVE SYSTEM

12 CFR Part 219

[Regulation S; Docket No. R-0906]


Reimbursement for Providing Financial Records; Recordkeeping 
Requirements for Certain Financial Records

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule.

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SUMMARY: The Board of Governors of the Federal Reserve System (Board) 
is proposing amendments to Subpart A of Regulation S, which implements 
the requirement under the Right to Financial Privacy Act (RFPA) that 
the Board establish the rates and conditions under which payment shall 
be made by a government authority to a financial institution for 
assembling or providing financial records pursuant to RFPA. These 
proposed amendments update the fees to be charged and streamlines the 
subpart generally.

DATES: Comments must be submitted on or before February 20, 1996.

ADDRESSES: Comments should refer to Docket No. R-0906, and may be 
mailed to William W. Wiles, Secretary, Board of Governors of the 
Federal Reserve System, 20th Street and Constitution Avenue, N.W., 
Washington, D.C. 20551. Comments also may be delivered to Room B-2222 
of the Eccles Building between 8:45 a.m. and 5:15 p.m. weekdays, or to 
the guard station in the Eccles Building courtyard on 20th Street, N.W. 
(between Constitution Avenue and C Street) at any time. Comments 
received will be available for inspection in Room MP-500 of the Martin 
Building between 9:00 a.m. and 5:00 p.m. weekdays, except as provided 
in 12 CFR 261.8 of the Board's rules regarding availability of 
information.

FOR FURTHER INFORMATION CONTACT: Elaine M. Boutilier, Senior Counsel 
(202/452-2418), Legal Division, Board of Governors of the Federal 
Reserve System, Washington, DC 20551. For users of the 
Telecommunication Device for the Deaf (TDD), please contact Dorothea 
Thompson (202/452-3544).

SUPPLEMENTARY INFORMATION:

Background

    Section 1115 of the RFPA (12 U.S.C. 3415) requires the Board to 
establish, by regulation, the rates and conditions under which payment 
is made by a Government authority to a financial institution for 
searching for, reproducing, or transporting data required or requested 
under the RFPA. Shortly after the RFPA was adopted, the Board issued 
Regulation S (12 CFR 219) to implement this provision (44 FR 55812, 
September 28, 1979). No changes to the rates have been made since that 
time. In January 1995, the Board adopted a new Subpart B of Regulation 
S (to become effective on January 1, 1996 1) and designated this 
part of Regulation S as Subpart A. 60 FR 231 (January 3, 1995) No 
substantive changes were made to the newly designated Subpart A. 
Pursuant to section 303 of the Riegle Community Development and 
Regulatory Improvement Act of 1994, Pub. L. 103-325 (12 U.S.C. 4803), 
the Board has reviewed Subpart A of Regulation S and proposes to update 
it through these amendments. These amendments streamline the regulation 
by eliminating unnecessary provisions, and they update the rates to be 
paid and the exceptions to the provisions of this Subpart.

    \1\  In a rulemaking issued on August 24, 1995 (60 FR 44144), 
the effective date of Subpart B has been delayed until April 1, 
1996.
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I. Definitions

    The definitions in Subpart A reiterate the statutory definitions 
from the RFPA for the applicable terms of this Subpart. The definition 
for ``directly incurred costs'' has been removed and incorporated into 
the section concerning cost reimbursement.

II. Cost Reimbursement

    This section has been streamlined and reorganized to place the 
rates in a separate Appendix A for clarity and ease of amendment when 
updating the rates. The proposed amendments also recognize that courts 
issuing orders or subpoenas in connection with grand jury proceedings 
must pay the rates set by Subpart A.

III. Rates

    The Board is particularly interested in receiving comments on the 
rates proposed in Appendix A. It is difficult to establish rates to be 
applied across all geographic regions and to all depository 
institutions, regardless of size. While recognizing this difficulty, 
the Board nevertheless proposes a uniform rate in the belief that 
administration of a complex fee schedule would be difficult.
A. Reproduction
    The rates proposed for reproduction are the same rates used by the 
Board to charge requesters seeking documents under the Freedom of 
Information Act (FOIA). The Board establishes its FOIA fees based upon 
the actual costs of making such reproductions and believes that these 
costs are similar to those incurred by other entities. The Board 
welcomes comments on the appropriateness of the proposed fees and any 
suggested alternative methods of determining the fees.
B. Search and Processing
    The proposed fees for search and processing are separated into two 
categories--clerical/technical and manager/supervisory. Any search for 
sensitive customer records is likely to involve both clerical staff and 
managerial staff, who are paid at different levels. The rates set for 
this reimbursement were calculated using the 1994 Bank Cash 
Compensation Survey done by the Bank Administration Institute. Based 
upon the job descriptions in the Cash Compensation Survey, the position 
of Supervisor, Bookkeeping was used to calculate the managerial rate. 
The calculation was made based upon the total compensation (with bonus) 
for all banks on a national average ($27,600) divided by 2080 hours, 
adjusted up by 25% to cover benefits, and further adjusted by 3% for 
inflation since 1994. The clerical rate was calculated in the same way, 
but using an average of the two job positions of Clerk II (Bookkeeping 
and Operations @ $18,100) and Clerk I (Bookkeeping and Operations @ 
$15,100). The Board is very interested in receiving comments on the 
rates and the method of calculation. 

[[Page 65600]]


IV. Exceptions

    This section has been updated to reflect changes in the exceptions 
listed by the RFPA.

V. Conditions for Payment and Payment Procedures

    No substantive changes have been made to these two sections.

Regulatory Flexibility Act

    Pursuant to 5 U.S.C. 605, the Board certifies that this proposed 
rule, if adopted, will not have a significant economic impact on a 
substantial number of small entities. The proposed rule confers a 
benefit on financial institutions, including small financial 
institutions, by providing for reimbursement of certain costs incurred 
in complying with a requirement to assemble and produce financial 
records.

Paperwork Reduction Act

    In accordance with section 3506 of the Paperwork Reduction Act of 
1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board reviewed 
the proposed rule under the authority delegated to the Board by the 
Office of Management and Budget. Comments on the collections of 
information should be sent to the Office of Management and Budget, 
Paperwork Reduction Project (7100-0203), Washington, DC 20503, with 
copies of such comments to be sent to Mary M. McLaughlin, Federal 
Reserve Board Clearance Officer, Division of Research and Statistics, 
Mail Stop 97, Board of Governors of the Federal Reserve System, 
Washington, DC 20551.
    The Right to Financial Privacy Act mandates that each financial 
institution maintain a record of instances in which it releases a 
consumer's financial information to a government agency. Generally, the 
institution may not release records until the government agency has 
notified the consumer of its intent to request the record, together 
with the reason for the request. Normally, the agency may not obtain 
records unless it has a subpoena, a search warrant, or an authorization 
from the consumer.
    The Federal Reserve may not conduct or sponsor, and an organization 
is not required to respond to, this information collection unless it 
displays a currently valid OMB control number. The OMB control number 
for the Recordkeeping and Disclosure Requirements in Connection with 
the Right to Financial Privacy Act is 7100-0203.
    Because the records would be maintained at banks, no issue of 
confidentiality under the Freedom of Information Act arises.
    This proposed regulation, 12 CFR 219, has no effect upon the 
paperwork burden associated with the Recordkeeping and Disclosure 
Requirements in Connection with the Right to Financial Privacy Act. 
That hour burden is estimated to be 22 minutes per response. It is 
estimated that the frequency of response at state member banks is 30 
responses per year. Thus the annual hour burden across the 975 state 
member banks is estimated to be 10,725 hours. Based on an hourly cost 
of $20, the annual cost to the public is estimated to be $214,500.

List of Subjects in 12 CFR Part 219

    Banks, banking, Currency, Federal Reserve System, Foreign banking, 
Reporting and recordkeeping requirements.

    For the reasons set out in the preamble, 12 CFR Part 219, as 
amended at 60 FR 231 and 44144 effective April 1, 1996, is proposed to 
be amended as set forth below.

PART 219--REIMBURSEMENT FOR PROVIDING FINANCIAL RECORDS; 
RECORDKEEPING REQUIREMENTS FOR CERTAIN FINANCIAL RECORDS 
(REGULATION)

Subpart A--Reimbursement to Financial Institutions for Providing 
Financial Records

    1. The authority citation for Subpart A continues to read as 
follows:

    Authority: 12 U.S.C. 3415

    2. Subpart A is amended by revising Secs. 219.2 through 219.6 to 
read as follows:


Sec. 219.2  Definitions.

    For the purposes of this subpart, the following definitions shall 
apply:
    Customer means any person or authorized representative of that 
person who uses any service of a financial institution, or for whom a 
financial institution acts 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 of more than five persons.
    Financial institution means any office of a bank, savings bank, 
card issuer as defined in section 103 of the Consumers Credit 
Protection Act (15 U.S.C. 1602(n)), industrial loan company, trust 
company, savings association, building and loan, or homestead 
association (including cooperative banks), credit union, or consumer 
finance institution, located in any State or territory of the United 
States, the District of Columbia, Puerto Rico, Guam, American Samoa, or 
the Virgin Islands.
    Financial record means an original or copy of, or information known 
to have been derived from, any record held by a financial institution 
pertaining to a customer's relationship with the financial institution.
    Government authority means any agency or department of the United 
States, or any officer, employee or agent thereof.
    Person means an individual or a partnership of five or fewer 
individuals.


Sec. 219.3  Cost reimbursement.

    (a) Fees payable. Except as provided in Sec. 219.4, a government 
authority, or a court issuing an order or subpoena in connection with 
grand jury proceedings, seeking access to financial records pertaining 
to a customer shall reimburse the financial institution for reasonably 
necessary costs directly incurred in searching for, reproducing or 
transporting books, papers, records, or other data as set forth in this 
section. The reimbursement schedule for a financial institution is set 
forth in Appendix A to this section. If a financial institution has 
financial records that are stored at an independent storage facility 
that charges a fee to search for, reproduce, or transport particular 
records requested, these costs are considered to be directly incurred 
by the financial institution and may be included in the reimbursement.
    (b) Search and processing costs. (1) Reimbursement of search and 
processing costs shall cover the total amount of personnel time spent 
in locating, retrieving, reproducing, and preparing financial records 
for shipment. Search and processing costs shall not cover analysis of 
material or legal advice.
    (2) If itemized separately, search and processing costs may include 
the actual cost of extracting information stored by computer in the 
format in which it is normally produced, based on computer time and 
necessary supplies; however, personnel time for computer search may be 
paid for only at the rates specified in Appendix A to this section.
    (c) Reproduction costs. The reimbursement rates for reproduction 
costs for requested documents are set forth in Appendix A to this 
section. Copies of photographs, films, computer tapes, and other 
materials not listed in Appendix A to this section are reimbursed at 
actual cost.
    (d) Transportation costs. Reimbursement for transportation costs 
shall be for the reasonably necessary costs directly incurred to 
transport personnel to locate and retrieve the 

[[Page 65601]]
requested information, and to convey such material to the place of 
examination.

Appendix A to Sec. 219.3--Reimbursement Schedule

Reproduction:                                                           
  Photocopy, per page..........................................      .15
  Paper copies of microfiche, per frame........................      .15
  Duplicate microfiche, per microfiche.........................      .30
  Computer diskette............................................     5.00
Search and Processing:                                                  
  Clerical/Technical, hourly rate..............................    11.00
  Manager/Supervisory, hourly rate.............................    17.00
                                                                        

Sec. 219.4  Exceptions.

    A financial institution is not entitled to reimbursement under this 
subpart for costs incurred in assembling or providing financial records 
or information related to:
    (a) Security interests, bankruptcy claims, 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) Government loan programs. Financial records that are necessary 
to permit the appropriate government authority to carry out its 
responsibilities under a government loan, loan guaranty or loan 
insurance program.
    (c) Nonidentifiable information. Financial records that are not 
identified with or identifiable as being derived from the financial 
records of a particular customer.
    (d) Financial supervisory agencies. Financial records disclosed to 
a financial supervisory agency in the exercise of its supervisory, 
regulatory, or monetary functions with respect to a financial 
institution.
    (e) Internal Revenue summons. Financial records disclosed in 
accordance with procedures authorized by the Internal Revenue Code.
    (f) Federally required reports. Financial records required to be 
reported in accordance with any federal statute or rule promulgated 
thereunder.
    (g) Government civil or criminal litigation. Financial records 
sought by a government authority under the Federal Rules of Civil or 
Criminal Procedure or comparable rules of other courts in connection 
with litigation to which the government authority and the customer are 
parties.
    (h) Administrative agency subpoenas. Financial records sought by a 
government authority pursuant to an administrative subpoena issued by 
an administrative law judge in an adjudicatory proceeding subject to 5 
U.S.C. 554, and to which the government authority and the customer are 
parties.
    (i) Investigation of financial institution or its noncustomer. 
Financial records sought by a government authority in connection with a 
lawful proceeding, investigation, examination, or inspection directed 
at the financial institution in possession of such records, or at an 
entity that is not a customer as defined in Sec. 219.2.
    (j) General Accounting Office requests. Financial records sought by 
the General Accounting Office pursuant to an authorized proceeding, 
investigation, examination, or audit directed at a government 
authority.
    (k) Federal Housing Finance Board requests. Financial records or 
information sought by the Federal Housing Finance Board (FHFB) or any 
of the Federal home loan banks in the exercise of the FHFB's authority 
to extend credit to financial institutions or others.
    (l) Department of Veterans Affairs. The disclosure of the name and 
address of any customer to the Department of Veterans Affairs where 
such disclosure is necessary to, and used solely for, the proper 
administration of benefits programs under laws administered by that 
Department.


Sec. 219.5  Conditions for payment.

    (a) Direct costs. Payment shall be made only for costs that are 
both directly incurred and reasonably necessary to provide requested 
material. Search and processing, reproduction, and transportation costs 
shall be considered separately when determining whether the costs are 
reasonably necessary.
    (b) Compliance with legal process, request, or authorization. No 
payment may be made to a financial institution until it satisfactorily 
complies with the legal process, the formal written request, or the 
customer authorization. When the legal process or formal written 
request is withdrawn, or the customer authorization is revoked, or 
where the customer successfully challenges disclosure to a grand jury 
or government authority, the financial institution shall be reimbursed 
for the reasonably necessary costs incurred in assembling the requested 
financial records prior to the time the financial institution is 
notified of such event.
    (c) Itemized bill or invoice. No reimbursement is required unless a 
financial institution submits an itemized bill or invoice specifically 
detailing its search and processing, reproduction, and transportation 
costs.


Sec. 219.6  Payment procedures.

    (a) Notice to submit invoice. Promptly following a service of legal 
process or request, the court or government authority shall notify the 
financial institution that it must submit an itemized bill or invoice 
in order to obtain payment and shall furnish an address for this 
purpose.
    (b) Special notice. If a grand jury or government authority 
withdraws the legal process or formal written request, or if the 
customer revokes the authorization, or if the legal process or request 
has been successfully challenged by the customer, the grand jury or 
government authority shall promptly notify the financial institution of 
these facts, and shall also notify the financial institution that it 
must submit an itemized bill or invoice in order to obtain payment of 
costs incurred prior to the time of the notice to the financial 
institution receives this notice.
    3. Section 219.7 is removed.

    By order of the Board of Governors of the Federal Reserve 
System, December 13, 1995.
William W. Wiles,
Secretary of the Board.
[FR Doc. 95-30725 Filed 12-19-95; 8:45 am]
BILLING CODE 6210-01-P