[Federal Register Volume 61, Number 114 (Wednesday, June 12, 1996)]
[Rules and Regulations]
[Pages 29638-29641]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14688]
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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: Final rule.
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SUMMARY: The Board of Governors of the Federal Reserve System (Board)
has approved 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
amendments update the fees to be charged and streamline the subpart
generally.
EFFECTIVE DATE: July 12, 1996.
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). In January 1995, the Board adopted a new Subpart B
of Regulation S 1 and designated this part of Regulation S as
Subpart A (60 FR 231, January 3, 1995). No substantive changes were
made in that rulemaking to the newly designated Subpart A.
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\1\ In a rulemaking issued on April 1, 1996 (61 FR 14382), the
effective date of Subpart B was delayed until May 28, 1996.
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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 reviewed Subpart A of Regulation S and issued for comment
proposed amendments to update it (60 FR 65599, December 20, 1995). The
proposed amendments eliminated unnecessary provisions and updated the
rates to be paid and the exceptions to the provisions of this Subpart.
Summary of comments: The Board received 21 comments on the proposed
revisions--19 from banks or bank holding companies, one from a trade
association, and one from a Federal Reserve Bank. All comments
supported updating and streamlining the provisions of the regulation.
Several comments, however, requested further changes in the proposed
regulation. These requests for additional changes covered two
categories--the proposed fee structure, and the exemptions from the
fees.
Fees. Ten of the 21 comments requested further changes in the fee
schedule. The current fees are $10.00 per hour for search and
processing time, and $.15 per page for reproduction. The proposed fees
provided for two levels of reimbursement for search and processing
time: clerical time at $11.00 per hour, and managerial time at $17.00
per hour. Proposed fees for reproduction were left at $.15 per page. Of
the nine comments that specifically discussed the reimbursement rate
for search and processing, six supported the proposed fees and three
requested increased fees. Of the ten comments that focused on the
proposed reproduction fees, two supported the proposed fees and eight
requested that they be raised. The suggested reproduction fees ranged
from $.25 to $3.00 per page for paper copies, and $.25 to $3.00 for
microfiche copies.
Other miscellaneous comments on the fee schedule included two
comments requesting that fees be periodically adjusted to account for
inflation, a request for a definition of the terms ``clerical/
technical'' and ``manager/supervisory'', a request that a new category
be added for reimbursement for legal advice, and a request that the
regulation specify that search/processing time should be billed in 15-
minute increments.
Exceptions. The proposed regulation updated the list of statutory
exceptions wherein a financial institution is not entitled to
reimbursement under the RFPA. Eight of the 21 commenters objected to
these exceptions, stating that they cover the vast majority of the
searches required. These objections focused primarily on the exception
for requests from the IRS, and requests for a corporation's banking
records. The American Bankers Association, while acknowledging that the
exceptions are set by statute, not the Board, stated that these
exceptions ``effectively exclude
[[Page 29639]]
98% of all situations in which banks gather such records.''
Based upon the comments received, the Board has made some
adjustments to the reimbursement schedule.
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 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 has established uniform rates for all depository
institutions, regardless of size or location, in the belief that
administration of a complex fee schedule would be difficult.
A. Reproduction
The rates for reproduction set forth in Appendix A to Sec. 219.3
have been increased based upon the comments received. Eight out of ten
comments on the duplication rates stated that they were too low. There
was not a consensus, however, among the commenters on the appropriate
amount of the increase: two suggested $.25 per page, two suggested $.50
per page, two suggested $1.00 or more per page, and two just requested
a minimal increase in the rate. The comments recommending significantly
higher fees did not provide supporting information on the direct costs
of duplication, and the statute provides for reimbursement of ``costs *
* * directly incurred in * * * reproducing * * *.'' A plurality of the
comments, however, recommended a minimal increase in the fees, and some
provided supporting information on costs. Therefore, the Board has
raised the reimbursement rate for photocopying to $.25 per page. Other
commenters suggested that the reimbursement rate for duplication of
microfiche also was inadequate, based upon the costs to the bank.
Accordingly, the Board modified the reimbursement schedule to increase
the rate for reproduction of paper copies of microfiche from $.15 to
$.25 to match the photocopying rate, and increase the rate for
duplication of microfiche from $.30 to $.50 per microfiche.
B. Search and Processing
The fees for search and processing have not been changed from those
issued for comment. These rates 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 (BAI).
Based upon the job descriptions in the Cash Compensation Survey, the
position of Supervisor, Bookkeeping 2 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 3 (Bookkeeping and Operations @ $18,100) and
Clerk I 4 (Bookkeeping and Operations @ $15,100).
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\2\ BAI describes this position as follows: ``Direct supervision
of assigned nonexempt staff in the bookkeeping area with particular
emphasis on work flow to meet time deadlines. Includes training
staff, planning work schedules, recommending and implementing staff
needs, pay raises, etc. Coordinates the section's activities with
other areas of the bank. Handles the more involved problems and
calls from dissatisfied customers.''
\3\ BAI describes this position as follows: ``Performs a variety
of clerical duties in the bookkeeping department. Duties may include
filing checks, overdrafts and stop payments, reconciling,
computerized operations, preparing statements and reports, etc. May
do exclusively DDA, adjustments, reconciling, etc. or a combination
of activities. Handles more complex and difficult customer problems;
requires minimal supervision.''
\4\ BAI describes this position as follows: ``Performs the same
duties of a Bookkeeping and Operations Clerk II only may have less
experience. Requires direct supervision.''
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IV. Exceptions
This section has been updated to reflect changes in the exceptions
listed by the RFPA. Although many comments were critical of the listed
exceptions, the Board cannot change or eliminate them, because they are
set by statute. They are merely set forth in the regulation to assist
depository institutions in correctly applying the reimbursement
schedule.
V. Conditions for Payment and Payment Procedures
One commenter suggested that the rule require time to be billed in
15-minute increments, as the existing regulation does. Accordingly, the
Board has amended the section on itemized billing to state that the
time should be billed in 15-minute increments. No other changes have
been made to these two sections.
Regulatory Flexibility Act
Pursuant to 5 U.S.C. 605, the Board certifies that this rule will
not have a significant economic impact on a substantial number of small
entities. The final 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 rule under the authority delegated to the Board by the Office of
Management and Budget.
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 final regulation, 12 CFR part 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 1,042 state
member banks is estimated to be 11,462 hours. Based on an hourly cost
of $20, the annual cost to the public is estimated to be $229,240.
[[Page 29640]]
Send comments regarding the burden estimate, or any other aspect of
this collection, including suggestions for reducing the burden, 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 and to the Office of
Management and Budget, Paperwork Project (7100-0203), Washington, DC
20503.
List of Subjects in 12 CFR Part 219
Banks, banking, Currency, Federal Reserve System, Reporting and
recordkeeping requirements.
For the reasons set out in the preamble, 12 CFR Part 219, as
amended at 60 FR 231 and 44144, and 61 FR 14382, effective May 28,
1996, is amended as set forth below.
PART 219--REIMBURSEMENT FOR PROVIDING FINANCIAL RECORDS;
RECORDKEEPING REQUIREMENTS FOR CERTAIN FINANCIAL RECORDS
(REGULATION S)
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 requested information,
and to convey such material to the place of examination.
Appendix A to Sec. 219.3--Reimbursement Schedule
Reproduction:
Photocopy, per page--$.25
Paper copies of microfiche, per frame--$.25
Duplicate microfiche, per microfiche--$.50
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
[[Page 29641]]
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 of this part.
(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. Search and processing time should be billed in 15-minute
increments.
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.
Sec. 219.7 [Removed]
3. Section 219.7 is removed.
By order of the Board of Governors of the Federal Reserve
System, June 5, 1996.
William W. Wiles,
Secretary of the Board.
[FR Doc. 96-14688 Filed 6-11-96; 8:45 am]
BILLING CODE 6210-01-P