[Federal Register Volume 61, Number 63 (Monday, April 1, 1996)]
[Proposed Rules]
[Pages 14444-14445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7880]




[[Page 14443]]

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Part X





Department of the Treasury





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Fiscal Service



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31 CFR Part 321



Regulations Governing Payments by Banks and Other Financial 
Institutions of United States Savings Bonds and United States Savings 
Notes (Freedom Shares); Proposed Rule

  Federal Register / Vol. 61, No. 63 / Monday, April 1, 1996 / Proposed 
Rules  

[[Page 14444]]


DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 321

[Department of the Treasury Circular, Public Debt Series No. 750]


Regulations Governing Payments by Banks and Other Financial 
Institutions of United States Savings Bonds and United States Savings 
Notes (Freedom Shares)

AGENCY: Bureau of the Public Debt, Fiscal Service, Department of the 
Treasury.

ACTION: Proposed Rule.

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SUMMARY: The Department of the Treasury hereby publishes, for comment, 
a proposed rule amending the regulations to update procedures used by 
the Bureau of the Public Debt for collecting debts owed by paying 
agents of United States Savings Bonds and Savings Notes (collectively 
referred to herein as savings bonds or bonds). These collection 
procedures are used when a paying agent cannot be relieved of liability 
for a savings bond transaction and the paying agent fails to reimburse 
Public Debt in a timely manner. Accounts designated or utilized by 
paying agents at Federal Reserve Banks for receiving settlements for 
savings bond redemptions are immediately credited upon the receipt of 
paid bonds with cash letters by Federal Reserve Banks or Branches 
through the EZ CLEAR system. These immediate settlements occur with the 
understanding that adjustments to correct errors may later be 
necessary.
    This system has expedited the process of crediting the accounts 
paying agents have designated or utilized for receiving savings bond 
transaction settlements. However, the system has also made it more 
cumbersome for Public Debt to collect monies from paying agents, not 
relieved of liability, that fail to reimburse Public Debt in a timely 
manner. This amendment will correct this problem by providing that 
paying agents are deemed to have authorized the debit of any overdue 
amount, interest, administrative cost, and penalty assessed, directly 
from the agents' Reserve, correspondent, or clearing accounts 
designated or utilized at Federal Reserve Banks or Branches for 
settlement of redeemed savings bonds.

DATES: Comments must be received on or before May 1, 1996.

ADDRESSES: Comments should be sent to: Department of the Treasury, 
Bureau of the Public Debt, P. O. Box 1328, Parkersburg, West Virginia 
26106-1328, Attention Debit Reg. Group, Room 507, Division of Staff 
Services. Comments received will be available for public inspection and 
copying at the Treasury Department Library, FOIA Collection, Room 5030, 
Main Treasury Building, 1500 Pennsylvania Avenue, NW., Washington, DC 
20220. Persons wishing to visit the library should call (202) 622-0990 
for an appointment.

FOR FURTHER INFORMATION CONTACT: Wallace L. Earnest, Division Director, 
Division of Staff Services, Bureau of the Public Debt, (304) 480-6319, 
or Edward Gronseth, Deputy Chief Counsel, Office of the Chief Counsel, 
Bureau of the Public Debt, (304) 480-5192.

SUPPLEMENTARY INFORMATION:

I. Background

    The Proposed Rule will update the debt collection process used by 
the Bureau of the Public Debt. This update is necessitated by the 
automated processing of redeemed savings bonds through EZ CLEAR.
    The collection procedures will apply when a paying agent cannot be 
relieved of liability under 31 U.S.C. 3126(a) for a loss resulting from 
a payment of a savings bond pursuant to 31 CFR Part 321. No change is 
being made in the procedure for assessing liability under 31 U.S.C. 
3126(a), or in the regulations with respect to such liability 
determinations.
    Relief of a paying agent from liability for a loss related to the 
redemption of a savings bond is a determination made under authority of 
31 U.S.C. 3126(a).
    When a depository financial institution qualifies as a savings bond 
paying agent, it agrees in writing to be bound by all of the provisions 
set out in 31 CFR Part 321 and the Appendix, as revised and amended, 
including any instructions promulgated by Treasury and its fiscal 
agents.
    Paying agents receive settlements for the value of savings bonds 
redeemed via credits to Reserve, correspondent, and clearing accounts 
with Federal Reserve Banks, or their Branches.

II. Summary of Amendments

    Section 321.21 will refer to collection procedures outlined in 
Paragraph 21 of the Appendix to this Part.
    Paragraph 21 of the Appendix to this Part, will provide a detailed 
explanation of the consequences of a paying agent's failure to make 
reimbursement within 30 days of Public Debt's mailing the first demand 
letter, provided the paying agent cannot be relieved of liability under 
31 U.S.C. 3126(a) for an erroneous payment.
    A paying agent receiving settlement for the redemption value of 
redeemed savings bonds via credits to a Reserve, correspondent, or 
clearing account is deemed to have authorized the Federal Reserve Bank 
or Branch to debit the amount due from that account. Such debits shall 
be made if the paying agent fails to make timely reimbursement or 
submit new evidence sufficient for Public Debt to change a 
determination of liability within 120 days of the mailing of the first 
demand letter. The amount due from the redemption of a security for 
which the paying agent is not relieved of liability, under 31 U.S.C. 
3126(a), shall include the amount of the final loss resulting from the 
erroneous payment, interest, administrative costs, and penalty charges.
    A financial institution designated by a paying agent to receive 
settlement for redeemed savings bonds on behalf of that paying agent 
via a credit to a Reserve, correspondent, or clearing account with a 
Federal Reserve Bank or Branch is deemed to have authorized a debit 
from such account to collect an amount due from the paying agent. The 
consequences of a paying agent's failure to make timely reimbursement 
include the paying agent's being required to pay:
    (a) Interest charges accruing from the date the first demand letter 
is mailed to the date of reimbursement, at the current value of funds 
rate published by the Secretary of the Treasury annually or quarterly 
in the Federal Register;
    (b) Administrative costs (currently processing costs of $6.00) will 
be assessed, if reimbursement is not made within 30 days of the date 
the first demand letter is mailed;
    (c) Penalty charges in accordance with 31 U.S.C. 3717(e), if 
reimbursement is not made within 120 days of the date the first demand 
letter is mailed. When assessed, the penalty charge will accrue and be 
calculated from 30 days after the date the first demand letter is 
mailed to the date of reimbursement.

Procedural Requirements

    It has been determined that this Proposed Rule is not a 
``significant regulatory action,'' pursuant to Executive Order 12866.
    Although this rule is being issued in proposed form to secure the 
benefit of public comment, the rule relates to matters of public 
contract, as well as the borrowing power and fiscal authority of the 
United States. The notice and public procedures requirements of the 
Administrative Procedure Act are inapplicable, pursuant to 5 U.S.C. 
553(a)(2). As no notice of proposed rulemaking is required, the 
provisions

[[Page 14445]]
of the Regulatory Flexibility Act (5 U.S.C. 601, et seq.) do not apply.
    There are no collections of information required by this Proposed 
Rule, therefore, the Paperwork Reduction Act does not apply.
    Comments: Consideration will be given to any written comments that 
are submitted to the Bureau of the Public Debt. All comments will be 
available for public inspection and copying.

List of Subjects in 31 CFR Part 321

    Banks, Banking, Bonds, Government securities.

    Dated: March 26, 1996.
Gerald Murphy,
Fiscal Assistant Secretary.

    For the reasons set forth in the preamble, Part 321 of Title 31 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 321--PAYMENTS BY BANKS AND OTHER FINANCIAL INSTITUTIONS OF 
UNITED STATES SAVINGS BONDS AND UNITED STATES SAVINGS NOTES 
(FREEDOM SHARES)

    1. The authority citation for Part 321 is proposed to be revised as 
follows:

    Authority: 2 U.S.C. 901, 5 U.S.C. 301, 12 U.S.C. 391, 31 U.S.C. 
3105, 31 U.S.C. 3126.

    2. Section 321.21 is proposed to be revised to read as follows:


Sec. 321.21  Replacement and recovery of losses.

    (a) If a final loss results from the redemption of a security, and 
the paying agent redeeming the security is not relieved of liability 
for such loss under 31 U.S.C. 3126(a), the Bureau of the Public Debt 
will demand that the paying agent promptly reimburse the United States 
in the amount of the final loss and will take such other action as may 
be necessary to collect such amount as set out in the procedure 
described in Paragraph 21 of the Appendix to this Part.
    (b) If a final loss has resulted from the redemption of a security, 
and no reimbursement has been or will be made, the loss shall be 
subject to replacement out of the fund established by the Government 
Losses in Shipment Act, as amended.
    3. Subpart E, Paragraph 21 of the Appendix to this Part is proposed 
to be revised to read as follows:

Appendix to Department of the Treasury Circular No. 750, Fourth 
Addition

* * * * *
    21. Determination of liability. [Sec. 321.18 and Sec. 321.21]
    (a) Upon completing the investigation, the Bureau of the Public 
Debt will examine the available information and determine whether a 
paying agent may be relieved of liability for any loss resulting 
from a payment. If the paying agent cannot be relieved of liability, 
demand will be made upon the paying agent to reimburse the Treasury 
promptly. Any amount not paid within 30 days following the mailing 
of the first demand letter is subject to the following charges.
    (1) Interest shall accrue from the date the first demand letter 
is mailed to the date reimbursement is made. The rate of interest to 
be used will be the current value of funds rate published annually 
or quarterly in the Federal Register and in effect during the entire 
period in which the remittance is late.
    (2) Administrative costs shall be assessed as set out in the 
first demand letter, if reimbursement is not made within 30 days of 
the date the first demand letter is mailed.
    (3) Penalty charges shall be assessed, in accordance with 31 
U.S.C. 3717(e), if reimbursement is not made within 120 days of the 
date the first demand letter is mailed. The penalty charge will 
accrue and be calculated from 30 days after the date the first 
demand letter is mailed to the date of reimbursement.
    (b) When a paying agent fails, within 120 days of the date the 
first demand letter is mailed, to make such reimbursement or to 
submit new evidence sufficient for Public Debt to change the 
determination of liability; by virtue of the paying agent's 
acceptance of settlement via credits to a Reserve, correspondent, or 
clearing account with a Federal Reserve Bank or Branch, the agent is 
deemed to have authorized the Federal Reserve Bank to debit the 
amount due from that account designated or utilized by the agent at 
the Federal Reserve Bank or Branch. An institution, designated by a 
paying agent to receive settlement on its behalf, in authorizing 
such paying agent to utilize its Reserve, correspondent, or clearing 
account on the books at the Federal Reserve Bank shall similarly be 
deemed to authorize such debits from that account.
    (c) Reconsideration of a determination of liability will be made 
in any case when a paying agent so requests and presents additional 
evidence and information regarding the transaction.

[FR Doc. 96-7880 Filed 3-29-96; 8:45 am]
BILLING CODE 4810-39-P