[Federal Register Volume 61, Number 137 (Tuesday, July 16, 1996)]
[Rules and Regulations]
[Pages 37196-37197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-17988]



[[Page 37195]]


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Part VI





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); Final Rule

  Federal Register / Vol. 61, No. 137 / Tuesday, July 16, 1996 / Rules 
and Regulations  

[[Page 37196]]



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: Final rule.

SUMMARY: The Department of the Treasury hereby publishes this final 
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 corrects 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.

EFFECTIVE DATE: July 16, 1996.

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

SUPPLEMENTARY INFORMATION:

I. Background

    The final 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.
    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.
    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 thereto, as revised and 
amended, including any instructions promulgated by Treasury and its 
fiscal agents.
    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).
    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.

II. Summary of Amendments

    Section 321.21 refers to collection procedures outlined in 
Paragraph 21 of the appendix to this part.
    Paragraph 21 of the appendix to this part provides 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 final rule is not a ``significant 
regulatory action'' pursuant to Executive Order 12866.
    Although this rule was published in the Federal Register as a 
proposed rule on April 1, 1996, 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 of the Regulatory 
Flexibility Act (5 U.S.C. 601, et seq.) do not apply.
    There are no collections of information required by this final 
rule, therefore, the Paperwork Reduction Act does not apply.

Comments

    No comments were received on the proposed rule published April 1, 
1996, with a 30 day comment period.

List of Subjects in 31 CFR Part 321

    Banks, Banking, Bonds, Government securities.


[[Page 37197]]


    Dated: July 3, 1996.
John Kilcoyne,
Deputy Fiscal Assistant Secretary.

    For the reasons set forth in the preamble, part 321 of title 31 of 
the Code of Federal Regulations is amended to read 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 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 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 revised 
as follows:

    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 that may have 
resulted. 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. 96-17988 Filed 7-15-96; 8:45 am]
BILLING CODE 4810-39-M