[Federal Register Volume 64, Number 154 (Wednesday, August 11, 1999)]
[Proposed Rules]
[Pages 43858-43877]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20509]


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DEPARTMENT OF DEFENSE

Office of the Secretary

32 CFR Part 231

RIN 0790-AG74


Procedures Governing Banks, Credit Unions and Other Financial 
Institutions on DoD Installations

AGENCY: Department of Defense.

ACTION: Proposed rule.

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SUMMARY: This proposed rule reflects the transition of operational 
responsibilities for banks and credit unions from the Office of the 
Under Secretary of Defense (Comptroller) to the Defense Finance and 
Accounting Service; to address changes in financial-related technology 
and the vehicles through which financial services are delivered (i.e., 
in-store banking, electronic banking (ATMs)); and incorporates the 
procedural guidance contained in other DoD documents.

DATES: Comments must be received by October 12, 1999.

ADDRESSES: Forward comments to: OUSD(C), 1745 Jefferson Davis Highway, 
Suite 201, Arlington, VA 22202.

FOR FURTHER INFORMATION CONTACT: T. Summers, 703-602-0299.

SUPPLEMENTARY INFORMATION:

Executive Order 12866, Regulatory Planning and Review

    It has been determined that 32 CFR part 231 is not a significant 
regulatory action. The rule does not:
    (1) Have an annual effect to the economy of $100 million or more or 
adversely affect in a material way the economy; a section of the 
economy; productivity; competition; jobs; the environment; public 
health or safety; or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another Agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs, or the rights and obligations of 
recipients thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive Order.

Public Law 96-354, Regulatory Flexibility Act (5 U.S.C. 601)

    It has been certified that this rule is not subject to the 
Regulatory Flexibility Act (5 U.S.C. 601) because it would not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities. This rule is being promulgated to provide 
administrative guidelines for the operation of banks and credit unions 
on domestic and overseas installations of the Department of Defense and 
address areas such as the solicitation for such services, the types of 
services and the logistics support provided.

Public Law 96-511, Paperwork Reduction Act (44 U.S.C. Chapter 35)

    It has been certified that this part does not impose any reporting 
or recordkeeping requirements under the Paperwork Reduction Act of 
1995.

List of Subjects in 32 CFR Part 231

    Armed forces, Banks, banking, Credit unions, Federal buildings and 
facilities.

    Accordingly, 32 CFR part 231 is proposed to be revised to read as 
follows:

PART 231--PROCEDURES GOVERNING BANKS, CREDIT UNIONS AND OTHER 
FINANCIAL INSTITUTIONS ON DOD INSTALLATIONS

Subpart A--Guidelines

231.1  Overview.
231.2  Policy.
231.3  Responsibilities.
231.4  General policy provisions.
231.5  Procedures-domestic banks.
231.6  Procedures-overseas banks.
231.7  Procedures-domestic credit unions.
231.8  Procedures-overseas credit unions.
231.9  Definitions.

Subpart B-DoD Directive 1000.11

231.10 Financial institutions on DoD installations.

Subpart C--Guidelines for Application of the Privacy Act to Financial 
Institution Operations

231.11  Guidelines
    Appendix A to Part 231--Sample Operating Agreement
    Appendix B to Part 231--In-Store Banking
    Appendix C to Part 231--Sample Certificate of Compliance for 
Credit Unions
    Appendix D to Part 231--Foreign Geographic Field of Membership 
(Franchise) Assignment Listing

    Authority: 10 U.S.C. 136.

Subpart A--Guidelines


Sec. 231.1  Overview.

    (a) Purpose. This part implements DoD Directive 1000.1,\1\ 
``Financial Institutions on DoD Installations,'' and prescribes 
guidance and procedures governing the establishment, support, 
operation, and termination of banks and credit unions operating on DoD 
installations worldwide, to include military banking facilities (MBFs). 
In addition, this part provides guidance intended to ensure that 
arrangements for the provision of services by financial institutions 
are consistent among DoD Components, and that financial institutions 
operating on DoD installations provide, and are provided support 
consistent with the guidance and procedures stated in this part.
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    \1\ Copies may be obtained at http://web7.whs.osd.mil/
corres.htm.
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    (b) Applicability. This part applies to the Office of the Secretary 
of Defense (OSD), the Military Departments, the Chairman of the Joint 
Chiefs of Staff (JCS), the Combatant Commands, the Inspector General of 
the Department of Defense (IG, DoD), the Defense Agencies, the DoD 
Field Activities, and all nonappropriated fund instrumentalities 
including the Military Exchange Services and morale, welfare and 
recreation (MWR) activities.


Sec. 231.2  Policy.

    The policy pertaining to financial institutions operating on DoD 
installations is contained in DoD Directive 1000.11, ``Financial 
Institutions on DoD Installations'' (32 CFR part 230) and in 
Sec. 231.4.


Sec. 231.3  Responsibilities.

    (a) The Under Secretary of Defense (Comptroller) (USD(C)) shall 
develop and monitor policies governing establishment, operation, and 
termination of financial institutions on DoD installations and take 
final action on requests for exceptions to DoD Directive 1000.11.
    (b) The Under Secretary of Defense (Acquisition and Technology) 
(USD(A&T)) shall develop and monitor policies and procedures governing 
logistical support furnished to financial institutions on DoD 
installations, including the use of DoD real property and equipment.

[[Page 43859]]

    (c) The Under Secretary of Defense (Personnel and Readiness) 
(USD(P&R)) shall advise the USD(C) on all aspects of on-base financial 
institution services that affect the morale and welfare of DoD 
personnel.
    (d) The Director, Defense Finance and Accounting Service (DFAS) 
shall:
    (1) Develop procedures governing banks and credit unions on DoD 
installations for promulgation in this part.
    (2) For domestic DoD installations, coordinate with the Secretaries 
of the Military Departments (or designees) on requests from subordinate 
installation commanders to establish or terminate banking offices or 
on-base credit unions. For overseas DoD installations, coordinate with 
the Secretary of the Military Department concerned (or designee) on 
requests from subordinate installation commanders to establish or 
discontinue the provision of financial services from the on-base 
financial institution under contract with the Department of Defense or 
to establish or terminate banking offices or credit unions located on 
DoD installations.
    (3) In coordination with affected DoD Components, authorize the 
specific types of banking services that will be provided by overseas 
military banking facilities (MBFs) and specify the charges or fees, or 
the basis for these, to be levied on users of these services.
    (4) Coordinate with the Fiscal Assistant Secretary of the Treasury 
on the designation of domestic and overseas MBFs as depositaries and 
financial agents of the U.S. Government.
    (5) Designate a technical representative to provide policy 
direction for the procuring and administrative contracting officer(s) 
responsible under the Federal Acquisition Regulation (FAR) for 
acquiring banking services required at overseas DoD installations.
    (6) Serve as principal liaison with banking institutions having 
offices on overseas DoD installations. In this capacity, monitor MBF 
managerial and operational policies, procedures, and operating results 
and take action as appropriate.
    (7) As necessary, assist in the formation of government-to-
government agreements for the provision of banking services on overseas 
DoD installations, in accordance with DoD Directive 5530.3. \2\
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    \2\ See footnote 1 to Sec. 231.1(a).
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    (8) Provide procedural guidance to DoD Components, as required.
    (9) Maintain liaison with financial institution trade associations, 
leagues, and councils in order to interpret DoD policies toward 
respective memberships and aid in resolving mutual concerns affecting 
the provision of financial services.
    (10) Coordinate with the USD(P&R), through the USD(C), on all 
aspects of morale and welfare and with the USD(A&T), through the 
USD(C), on all aspects of logistic support for on-base financial 
institutions.
    (11) Monitor industry trends, conduct studies and surveys, and 
facilitate appropriate dialogues on banking and credit union 
arrangements and cost-benefit relationships, coordinate as necessary 
with DoD Components, financial institutions, and trade associations as 
appropriate.
    (12) Maintain liaison, as appropriate, with financial institution 
regulatory agencies at federal and state levels.
    (13) Ensure that recommendations of the Combatant Commands are 
considered before processing requests for overseas banking and credit 
union service or related actions.
    (e) Secretaries of the Military Departments (or designees) shall:
    (1) For domestic DoD installations, take action on requests from 
subordinate installation commanders to establish or terminate financial 
institution operations. For overseas DoD installations, take action in 
accordance with guidance contained herein on requests from subordinate 
installation commanders to establish or discontinue the provision of 
financial services from the DoD contracted bank, or to establish or 
terminate other financial institutions located on DoD installations.
    (2) Provide for liaison to those financial institutions that 
operate banking offices on respective domestic DoD installations.
    (3) Oversee the use of banking offices and credit unions on 
respective DoD installations within the guidance contained herein and 
in DoD Directive 1000.11.
    (4) Evaluate the services provided by respective on-base banking 
offices and credit unions to ensure that they fulfill the requirements 
upon which the establishment and retention of those services were 
justified.
    (5) Monitor practices and procedures of respective banking offices 
and credit unions to ensure that the welfare and interests of DoD 
personnel as consumers are protected.
    (6) Assist on-base banking offices and credit unions to develop and 
expand necessary services for DoD personnel consistent with this part.
    (7) Encourage the conversion of existing domestic MBFs on 
respective installations to independent or branch bank status where 
feasible.
    (8) Provide logistical support to overseas MBFs under terms and 
conditions identified in this part as well as with the applicable terms 
of DoD contracts with financial institutions responsible for the 
operations of overseas MBFs.
    (9). Refer matters requiring policy decisions or proposed changes 
to this part or DoD Directive 100011 to the USD(C) through the 
Director, DFAS.
    (10) Supervise and encourage the use of financial institutions on 
DoD installations to:
    (i) Facilitate convenient, effective management of the 
appropriated, nonappropriated, and private funds of on-base activities.
    (ii) Assist DoD personnel in managing their personal finances 
through participation in programs such as direct deposit and regular 
savings plans. The use of on-base financial institutions shall be on a 
voluntary basis and should not be urged in preference to, or to the 
exclusion of, other financial institutions.
    (11) Encourage and assist duly chartered financial institutions on 
domestic DoD installations to provide complete financial services to 
include financial counseling at no charge.
    (12) Establish liaison, as appropriate, with federal and state 
regulatory agencies and financial institution trade associations, 
leagues, and councils.
    (13) Provide debt processing assistance to on-base financial 
institutions in accordance with the Privacy Act guidelines in subpart B 
of this part.
    (14) Recognize the right of DoD personnel to organize and join duly 
chartered credit unions.
    (15) Permit DoD personnel to serve on credit union boards and 
committees on a voluntary basis, without compensation, when neither a 
conflict of duty nor a conflict of interest is involved, as stated in 
DoD Directive 5500.7.\3\
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    \3\ See Footnote 1 to Sec. 231.1(a).
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    (16) Allow personnel to attend credit union conferences and 
meetings in accordance with DoD Directive 1327.5 \4\, Subchapter 630 of 
the ``DoD Civilian Personnel Manual,'' DoD 1400.25-M \5\, and 
Comptroller General Decision B-212457.
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    \4\ See Footnote 1 to Sec. 231.1(a).
    \5\ See Footnote 1 to Sec. 231.1(a).
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    (f) The Commanders of the Combatant Commands (or designees) shall:
    (1) Ensure the appropriate coordination of requests to:
    (i) Establish financial institutions in countries not presently 
served. Such requests will include a statement that

[[Page 43860]]

the requirement has been coordinated with the U.S. Chief of Diplomatic 
Mission or U.S. Embassy and that the host country will permit the 
operation.
    (ii) Eliminate any or all financial institutions on DoD 
installations within a foreign country. Such requests will include a 
statement that the U.S. Chief of Diplomatic Mission has been informed 
and appropriate arrangements to coordinate local termination 
announcements and procedures have been made with the U.S. Embassy.
    (2) Monitor and coordinate military banking operations within the 
command area. Personnel assigned to security assistance positions will 
not perform this function without the prior approval of the Director, 
Defense Security Cooperation Agency (DSCA).
    (g) The Commanders of Major Commands and subordinate installation 
commanders shall:
    (1) Monitor the banking and credit union program within their 
commands.
    (2) Coordinate requests to establish or construct bank and credit 
union offices or terminate logistical support to banks and credit 
unions within their commands. Personnel assigned to overseas security 
assistance positions will not monitor, coordinate, or assist in 
military banking operations without the prior approval of the DSCA.
    (3) Assign, as appropriate, responsibility for paragraphs (g)(1) 
and (g)(2) of this section, to Comptroller or resource management 
personnel.
    (4) Cooperate with financial institution associations, leagues, and 
councils.
    (5) Recognize the right of all DoD personnel to organize and join 
credit unions and promote the credit union movement in DoD worldwide.
    (6) Permit DoD personnel to serve on credit union boards and 
committees on a voluntary basis, without compensation, when neither 
conflict of duty nor conflict of interest is involved, as stated in DoD 
Directive 5500.7.
    (7) Allow personnel to attend credit union conferences and meetings 
in accordance with DoD Directive 1327.5, Subchapter 630 of the DoD 
Civilian Personnel Manual (DoD 1400.25-M), and Comptroller General 
Decision B-212457.
    (8) Seek the provision of financial services only from existing on-
base financial institutions, proposing alternatives only where on-base 
financial institutions fail to respond favorably to legitimate 
requirements.
    (9) Coordinate appropriate actions with the cognizant Combatant 
Command.


Sec. 231.4  General policy provisions.

    (a) Security. The installation commander (or designee) and the on 
base financial institutions shall work with the installation security 
police to establish an understanding as to each entity's 
responsibilities. A written agreement shall be established outlining 
the security procedures that the financial institution will follow and 
the role that the security police will play with regard to alarms, 
movement of cash, and procedures to be followed should a robbery occur. 
The on-base financial institutions are encouraged to establish an 
ongoing relationship with the security police on all matters of asset 
protection.
    (1) Cash and other assets in on-base banking offices and credit 
unions are the property of the financial institutions. Maintenance of 
alarms, escorting of cash or use of armored cars, and the guarding of 
cash is the sole responsibility of the on-base financial institution.
    (2) Military guards, civilian guards (for use within the 
installation), military police or other protective service will be 
provided without charge in the following cases:
    (i) For needed periods for paydays to guard shipments of money that 
primarily are for disbursing officer use.
    (ii) At times of unusual risk to the financial institution, such as 
cash needed to stock remote automated teller machines.
    (iii) To avoid undue insurance costs.
    (b) Central locator services. Military locator services shall be 
provided per the guidelines in subpart B to this part.
    (1) When appropriate, installations will process financial 
institution requests for central locator service to obtain military 
addresses of active duty personnel. This service will be used to locate 
persons for settling accounts, and recovering funds on checks that did 
not clear or loans that are delinquent or in default (see DoD Directive 
1344.9 \6\). If delinquent loans or dishonored checks are not recouped 
within 48 hours, financial institutions operating on DoD installations 
may bring this information to the attention of the local commander, 
bank liaison officer, or other designee for assistance in effecting 
restitution of the amount due, if not otherwise prohibited by law.
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    \6\ See footnote 1 to Sec. 231.1(a).
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    (2) The Department will assist financial institutions to locate DoD 
personnel whose whereabouts cannot be locally determined. The request 
should be on the financial institution's letterhead, include the 
Service member's name and social security number (SSN), and cite the 
cognizant Military Department regulation that authorizes the use of 
locator services. If a financial institution needs immediate service, 
the institution should contact the bank or credit union liaison 
officer.
    (i) For addresses of Department of the Army active, retired, 
separated and civilian personnel, financial institutions may telephone 
(703) 325-3732 or write to: Department of the Army WW Locator, U.S. 
Army Enlisted Record and Evaluation Center, 8899 E. 56th Street, 
Indianapolis, IN 46249-5301.
    (ii) For addresses of Department of the Navy active, retired, 
separated and civilian personnel, financial institutions may telephone 
(901) 874-3388 or write to: Department of the Navy, Navy Personnel 
Command, PERS-312F, 5720 Integrity Drive, Millington, TN 38055.
    (iii) For addresses of Department of the Air Force active, retired, 
separated and civilian personnel, financial institutions may telephone 
(210) 565-2660 or write to: Department of the Air Force Personnel 
Command, MSIMDL Suite 50, 550 C Street West, Randolph AFB, TX 78150.
    (iv) For addresses of United States Marine Corps active, retired, 
separated and civilian personnel, financial institutions may telephone 
(703) 784-3942 or write to:

Active:
    U.S. Marine Corps-CMC, HQ MC MMS B 10, 2008 Elliot Road, Room 201, 
Quantico, VA 22134-5030

Retired-Separated:
    Q U.S. MMRS-6, 280 Russell Road, Quantico, VA 22134-5105

Civilian:
    Commanding General, 15303 Andrew Road, Kansas City, MO, 64147-1207

    (c) Advertising. (1) On-base financial institutions may use the 
unofficial section of that installation's daily bulletin, provided 
space is available, to inform DoD personnel of financial services and 
announce seminars, consumer information programs, and other matters of 
broad general interest. Announcements of free financial counseling 
services are encouraged. Such media may not be used for competitive or 
comparative advertising of, for example, specific interest rates on 
savings or loans.
    (2) On-base financial institutions may use installation bulletin 
boards, newsletters or web pages to post general information that 
complements the installation's financial counseling programs and 
promotes financial responsibility and thrift. Message center services 
may distribute a reasonable number of announcements to units for use on 
bulletin boards so long as this

[[Page 43861]]

does not impose an unreasonable workload.
    (3) On-base financial institutions may include a one page insert 
into the newcomer's package. This insert would benefit the 
installation's newcomers by letting them know what financial services 
are available on the installation.
    (4) DoD Directive 5120.20 \7\ prevents use of the Armed Forces 
Radio and Television Service to promote a specific financial 
institution.
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    \7\ See footnote 1 to Sec. 231.1(a).
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    (5) Off-base financial institutions will not be permitted to 
distribute competitive literature or forms on the installation. 
However, they may use commercial advertising, mailings or 
telecommunications to reach their customers.
    (6) Advertising in government-funded (official) installation papers 
is not permitted with the exception of insert advertising in the Stars 
and Stripes overseas. Installation newspapers funded by local 
advertisers are not official publications and, thus, may include paid 
bank advertising.
    (7) Installation activities, including Military Exchange and 
concessionaire outlets, shall not permit the distribution of literature 
from off-base financial institutions if there is an on-base financial 
institution. This does not prevent Military Exchange Services from 
distributing literature on affinity credit cards centrally acquired 
through competitive solicitation.
    (d) On-base financial institutions are encouraged to install ATMs 
at those installation(s) on which they are located.
    (1) Financial institutions that propose to install an ATM on DoD 
installations shall bear the cost of ATM installation, maintenance, and 
operation.
    (2) ATM approval authority is as shown.
    (i) The installation commander has approval authority when an on-
base financial institution wishes to place an ATM on the installation. 
This approval should be reflected as an amendment to the operating 
agreement.
    (ii) Where there is no on-base financial institution, follow the 
solicitation procedures to obtain financial services set forth in 
Secs. 231.5(b) and 231.7(b).
    (3) The availability of ATM service will not preclude the later 
establishment of a banking office should conditions change on an 
installation.
    (4) Proposals by the installation commander to install ATMs from 
other than on-base financial institutions on domestic installations 
shall be considered only when ATM service is unavailable or existing 
service is inadequate and the on-base financial institution(s) either 
declines to provide the service, fails to improve existing service so 
that it is adequate, or does not formally respond to the request for 
such service within 30 days of the date of the request. Additional ATM 
service from other than on-base financial institutions is considered an 
exception to policy and, therefore, must be submitted by the 
installation commander for approval to the USD(C) through the Secretary 
of the Military Department concerned (or designee) and the DFAS. The 
procedures to establish an on-base financial institution set forth in 
Secs. 231.5(b) and 231.7(b) shall be followed when soliciting for the 
additional services. Proposals offering shared-access ATMs shall 
receive preference.
    (5) ATM service from foreign banking institutions may be authorized 
on overseas installations with or without MBFs operated under contract 
where the installation or community commander determines that a 
bonafide need exists to support local national hires. In such 
instances, ATM connectivity shall be limited to host country networks 
and the ATMs shall dispense only local currency (no U.S. dollars). The 
operating agreement covering ATM service shall be negotiated by the 
installation or community commander and coordinated with the Secretary 
of the Military Department concerned (or designee) and the appropriate 
Combatant Command (or designee) prior to its execution. A copy of the 
operating agreement will be forwarded through DoD Component channels to 
the DFAS.
    (6) Domestic and International Treasury General Accounts. In cases 
where authorization will be required for the banking office or on-base 
credit union to act as a Treasury General Account (TGA) domestic 
depositary (on overseas installations--International Treasury General 
Account (ITGA) overseas depository), the financial institution must 
satisfy the risk management standard established by the Department of 
the Treasury. Local operating funds may be used if the on-base 
financial institution requests reimbursement for costs incurred. On-
base financial institutions shall accept deposits for credit to the TGA 
(or ITGA) when so authorized.
    (7) Staffing. (i) On-base financial institutions are expected to be 
staffed adequately commensurate with industry standards for similar 
numbers of accountholders and financial services rendered. Staffing at 
overseas MBFs operated under contract shall be maintained within 
negotiated ceilings.
    (ii) All staffing will comply fully with the spirit and intent of 
the DoD equal employment opportunity policies and programs in 
accordance with DoD Directive 1440.1. \8\
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    \8\ See footnote 1 to Sec. 231.1(a).
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    (iii) DoD personnel may not serve as directors of domestic or 
foreign banking institutions operating banking offices on those DoD 
installations where they are currently assigned. However, a member of a 
Reserve Component who has been serving as a director of a domestic or 
foreign banking institution operating a banking office on a DoD 
installation need not resign his or her directorship when called to 
active duty.
    (iv) DoD personnel may not be detailed to duty with an on-base 
financial institution located on a DoD installation. However, off-duty 
personnel may be employed by an on-base financial institution subject 
to installation commander approval. Such employment must not interfere 
with the performance of the individual's official duties and 
responsibilities.
    (e) Departure clearance. The installation commander establishes the 
clearance policy for all DoD personnel leaving the installation. The 
on-base financial institutions shall be included as places requiring 
clearance. The purpose of a clearance is to report change of address, 
reaffirm allotments or outstanding debts, and receive financial 
counseling, if desired or appropriate. Clearance may not be denied in 
order to collect debts or resolve disputes with financial institution 
management.
    (f) Financial education. (1) Officials of on-base financial 
institutions shall be invited to take part in seminars to educate 
personnel on personal financial management and services of financial 
institutions. Financial institutions will be encouraged to provide 
financial education and counseling services as an integral part of 
their financial program. Officials of on-base financial institutions 
shall submit advance-briefing texts for approval by the installation 
commander to ensure that the program is not used to promote services of 
a specific financial institution.
    (2) DoD personnel who tender uncollectable checks, overdraw their 
accounts or fail to meet their financial obligations in a proper and 
timely manner damage their credit reputation and adversely affect the 
public image of all government personnel. For uniformed personnel, 
military financial counselors and legal advisors shall

[[Page 43862]]

recommend workable repayment plans that avoid further endangering 
credit rating and counsel affected personnel to protect their credit 
standing and career. Counselors shall ensure that such personnel are 
aware of the stigma associated with bankruptcy and shall recommend its 
use only when no other alternative will alleviate the situation.
    (g) Operating agreements. Before operations of an on base banking 
office or credit union begin, a written operating agreement (Appendix A 
to this part) shall be negotiated directly between the installation 
commander and officials of the designated financial institution. The 
operating agreement shall define the basic relationship between the on-
base financial institution and the installation commander and identify 
mutual support activities such as hours of operation, service fees and 
security provided. The agreement shall not prescribe internal 
operations of the financial institution. One copy of the agreement 
shall be sent through command channels to the Secretary of the Military 
Department concerned (or designee). A copy of the agreement shall be 
maintained by the installation commander and the banking office or on-
base credit union. At a minimum, the agreement shall include the 
following provisions:
    (1) Identification of services to be rendered and the conditions 
for service. Full financial services shall be provided where feasible. 
Agreements, however, may not restrict either entity's right to 
renegotiate services and fees.
    (2) Agreement that retail fees and services for products (to 
include related minimum balance requirements for noninterest checking, 
NOW and savings accounts) offered by financial institutions operating 
on domestic installations and domestic credit unions operating on DoD 
installations overseas shall not exceed 110 percent of the industry-
wide averages for banks as identified in the ``Annual Report to 
Congress on Retail Fees and Services of Depository Institutions,'' 
published by the Board of Governors of the Federal Reserve System. This 
report is submitted to the Congress pursuant to section 1002 of the 
Financial Institutions Reform, Recovery, and Enforcement Act of 1989 as 
amended by section 108 of the Riegle-Neal Interstate Banking and 
Branching Efficiency Act of 1994 and is accessible through the Internet 
at http://www.bog.frb.fed.us/boarddocs/RptCongress.
    (3) Agreement that, notwithstanding the provisions contained in 
paragraph (g)(2) of this section, on-base ATM service offered by 
financial institutions operating on domestic installations and domestic 
credit unions operating on DoD installations overseas shall be provided 
without surcharge.
    (4) Agreement by both parties that they will comply with this part.
    (5) Agreement by the on base financial institution that it will 
furnish copies of its monthly financial reports and other local 
publications to the installation commander (or designee).
    (6) Agreement that the on-base financial institution will indemnify 
and hold harmless the U.S. Government from (and against) any loss, 
expense, claim, or demand to which the U.S. Government may be subjected 
as a result of death, loss, destruction, or damage in conjunction with 
the use and occupancy of the premises caused in whole or in part by 
agents or employees of the on-base financial institution.
    (7) Agreement that neither the Department of Defense nor its 
representatives shall be responsible or liable for the financial 
operation of the on-base financial institution or for any loss 
(including criminal losses), expense, or claim for damages arising from 
operations.
    (8) Agreement by the on-base financial institution (or any 
successor) that it will provide no less than 180 days advance written 
notice before ceasing operations.
    (9) Specification of the security services to be provided for 
guarding cash shipments for paydays, at times of unusual risk to the 
financial institution, and to avoid excessive insurance costs charged 
to that institution.
    (10) Statement that the physical security for cash and negotiable 
items will be in a manner consistent with the requirements of the on-
base financial institution's insurer. A copy of those requirements will 
be provided to the installation commander on request.
    (11) Statement that the financial institution, whenever possible, 
will accommodate local command requests for lectures and printed 
materials for consumer credit education programs. Officials invited to 
participate in such programs shall not use the occasion to promote the 
exclusive services of a particular financial institution.
    (12) Agreement of the installation commander to provide support as 
identified in this part.
    (13) Statement that on-base financial institution operations shall 
be terminated in accordance with the provisions outlined in this part.
    (h) Installation financial services. (1) Financial services 
provided on DoD installations will be as uniform as possible for all 
personnel.
    (2) As separately negotiated, or based on a fee schedule, 
custodians of nonappropriated funds shall compensate on-base financial 
institutions for services received. Compensation may be made with 
compensating balances or paying fees based on the services provided or 
a combination of these payment mechanisms. Fees shall not exceed the 
charge customary for the financial institution less an offsetting 
credit on balances maintained. Banking offices shall classify 
nonappropriated fund accounts as commercial accounts.
    (3) At a minimum, banking offices shall provide the same services 
to individuals and nonappropriated fund instrumentalities as are 
available locally.
    (4) On-base financial institutions may conduct operations during 
normal duty hours provided they do not disrupt the performance of 
official duties. Operating hours shall be set, in consultation with the 
bank/credit union liaison officer, to meet the needs of all concerned. 
ATMs may be used to expand financial services and operating hours.
    (5) DoD personnel may use their allotment of pay privileges to 
establish sound credit and savings practices through on-base financial 
institutions.
    (i) On-base financial institution shall credit customer accounts 
not later than the value date of the allotment check or electronic 
funds transfer.
    (ii) The initiation of an allotment is voluntary (see Volume 7A, 
section 4202, of DoD 7000.14-R). Thus, generally, a Service member 
cannot be required to initiate an allotment for the repayment of a 
loan. Allotments voluntarily established by a Service member for the 
purpose of repaying a loan or otherwise providing funds to an on-base 
financial institution shall continue in effect at the option of the 
allotter.
    (6) In accordance with sound lending practice, policies on loans to 
individuals are expected to be as liberal as feasible while remaining 
consistent with the overall interests of the on-base financial 
institution. On-base financial institutions shall conform to the 
Standards of Fairness principles before executing loan or credit 
agreements. (See DoD Directive 1344.9).
    (7) On-base financial institutions shall make financial education 
and counseling services available without charge to individuals seeking 
financial counseling. Such services shall include helping customers to 
budget and solve financial problems. Personnel in junior enlisted 
grades, or newly married couples who apply for loans, shall be given 
special attention and counseling.

[[Page 43863]]

    (8) On-base financial institutions must strive to provide the best 
service to all customers. On-base financial institutions that evidence 
a policy of discrimination in their services are in violation of this 
part. In resolving complaints of discrimination, use the procedures 
specified in Sec. 231.5(g)(7).
    (9) All correspondence regarding on-base financial institutions, 
and questions concerning their operation that cannot be resolved 
locally shall be referred through command channels to the Secretary of 
the Military Department concerned (or designee) for consideration.


Sec. 231.5  Procedures--domestic banks.

    (a) Establishment. (1) The following information shall be included 
in the installation commander's request to the Secretary of the 
Military Department concerned (or designee) for establishment of 
banking offices:
    (i) The approximate number of DoD personnel at the installation, 
and other persons who may be authorized to use the banking office.
    (ii) The distance between the installation and the financial 
institutions in the vicinity, and the names and addresses of those 
institutions.
    (iii) Available transportation between the installation and the 
financial institutions listed in paragraph (a)(1)(ii) of this section.
    (iv) The number of DoD personnel in duty assignments that confine 
them to the installation or who cannot obtain transportation (such as 
hospital patients).
    (v) The approximate loss of duty time due to DoD personnel leaving 
the installation for banking services.
    (vi) Sources from which the disbursing officer obtains operating 
and payroll cash, the frequency of these acquisitions, and the amount 
obtained monthly.
    (vii) The name and location of the depositary used to make official 
deposits for credit to the Treasury General Account (TGA).
    (viii) The estimated savings to the disbursing officer if a banking 
office is established on the installation.
    (ix) A list of organizational and nonappropriated fund accounts, 
the name and location of the financial institutions where deposited, 
and the average daily activity and balance of each account.
    (x) A written description and photographs of the space proposed for 
banking office use.
    (xi) A statement listing the requirements of the proposed banking 
office for safes and a vault; alarm systems; and surveillance 
equipment, when necessary.
    (xii) Reasons for use of space controlled by the General Services 
Administration (GSA). All the GSA-assigned space, whether leased space 
or federal office building space, is reimbursable to the GSA at a 
standard level user charge. As such, space occupied by a banking office 
to serve military needs will be assigned and charged by the GSA.
    (xiii) Any other information pertinent to the establishment of a 
banking office.
    (2) The Secretary of the Military Departments (or designee) shall:
    (i) Review each request for the establishment of banking offices.
    (ii) Conduct a solicitation for the services when warranted.
    (iii) Approve proposals for banking offices.
    (iv) Notify the selected financial institution either directly or 
through the installation commander. The selected banking institution 
will, in turn, obtain operating authority from their regulating 
agencies.
    (v) Forward proposals to establish TGAs to the DFAS for subsequent 
forwarding to the Fiscal Assistant Secretary of the Treasury in 
accordance with this part.
    (b) Solicitations. The Secretary of the Military Department 
concerned (or designee), or the installation commander with advice from 
the cognizant Secretary of the Military Department (or designee), shall 
conduct solicitations to include pre-proposal conferences for on-base 
banking. Subject to the criteria for selection outlined in paragraph 
(d) of this section, the preferred sources of on-base financial 
services at domestic installations are federally-insured state or 
federally-chartered banking institutions operating in the local area. 
No commitment may be made to any banking institution regarding its 
proposal until a designation is made by the appropriate regulatory 
agency.
    (1) Solicitations for banking services shall be accomplished in the 
following order:
    (i) Solicitation letters will be sent to local banking institutions 
and a solicitation announcement will be published in the local 
newspaper(s) and forwarded to financial institution associations.
    (ii) If the Secretary of the Military Department concerned (or 
designee) or, where delegated, the installation commander, determines 
that the geographic scope of the solicitation needs to be expanded, a 
prospectus will be forwarded to financial institutions in a larger 
geographic area, as well as financial institution associations and 
regulatory authorities in the state where the installation is located.
    (iii) If the Secretary of the Military Department concerned (or 
designee) or, where delegated, the installation commander, determines 
that the geographic scope of the solicitation needs to be expanded 
further, the prospectus will be published in the Commerce Business 
Daily and financial institution trade journals.
    (2) For solicitations conducted at the installation level, the 
installation commander shall review proposals to establish banking 
offices, select the banking institution making the best offer and 
forward a recommendation to the Secretary of the Military Department 
concerned (or designee) for final approval.
    (3) Banking institutions will not be coerced when banking 
arrangements are under consideration or after banking offices are 
established. If otherwise proper, this prohibition does not preclude:
    (i) Discussions with banking institutions prior to submitting a 
proposal for a new banking office.
    (ii) Helping banking offices extend their operations in support of 
an installation requirement.
    (iii) Discussions with banking institutions to improve services or 
to create savings for the bank or DoD personnel.
    (iv) Seeking proposals for banking service as directed by the 
Secretary of the Military Department concerned (or designee).
    (v) Negotiations preparatory to signing a banking agreement.
    (4) When soliciting for banking services, proposals shall be 
evaluated on specific factors identified in the solicitation. These 
factors, at a minimum, will be predicated on the services to be 
provided as outlined in paragraph 3 of Appendix A to this part, service 
fees and charges, and the extent of logistical support required. Prior 
to issuance of the solicitation, the preparing office will identify 
(for internal use during the subsequent evaluation period) the weights 
to be applied to the factors reflected in the solicitation. Proposals 
will be evaluated and ultimate selection made based upon the factors 
and weights developed for the solicitation.
    (5) The Secretary of the Military Department concerned (or 
designee), or the installation commander with advice from the cognizant 
Secretary of the Military Department (or designee), shall make the 
selection of the banking institution based on the provisions outlined 
in this section.

[[Page 43864]]

    (c) Terminations. (1) Requests for termination of financial 
services shall be approved by the installation commander, substantiated 
by sufficient evidence and forwarded to the Secretary of the Military 
Department concerned (or designee). The installation commander only 
under one of the following conditions shall initiate the termination of 
banking office operations:
    (i) The mission of the installation has changed, or is scheduled to 
be changed, thereby eliminating or substantially reducing the 
requirement for financial services.
    (ii) Active military operations prevent continuation of on-base 
financial services.
    (iii) Performance of the banking office in providing services is 
not satisfactory according to standards ordinarily associated with the 
financial services industry or is inconsistent with the operating 
agreements or the procedures prescribed in this section.
    (iv) Merger, acquisition, change of control or other action results 
in violation of the terms and conditions of the existing operating 
agreement.
    (2) The installation commander shall forward requests for 
terminations to the Secretary of the Military Department concerned (or 
designee). The Secretary of the Military Department (or designee) shall 
coordinate such requests with the USD(C), through the Director, DFAS, 
before notification to the appropriate regulatory agency. Subsequent to 
this coordination process:
    (i) The Secretary of the Military Department (or designee) shall 
inform the regulatory agency of the action.
    (ii) The installation commander shall revoke the authority of the 
financial institution to operate. The lease will be terminated.
    (3) Any banking office that intends to terminate its operations 
should notify the installation commander at least 180 days before the 
closing date. This notification should precede any public announcement 
of the planned closure. When appropriate, the commander shall attempt 
to negotiate an agreement permitting the banking office to continue 
operations until the installation has made other arrangements. 
Immediately upon notification of a closing, the commander shall advise 
the DoD Component headquarters concerned. If it is determined that 
continuation of banking services is justified, action to establish 
another banking office shall be taken in accordance with the guidance 
prescribed in this section.
    (d) Leases or permits for existing government structures. (1) Lease 
terms.
    (i) The charge for lease of an existing structure shall be 
determined by appraisal of fair market rental value.
    (ii) The term shall be for 5 years subject to renewal by mutual 
agreement and with the understanding that the cognizant Assistant 
Secretary of the Military Department (Installations and Logistics) has 
the authority to terminate the lease per the cancellation provisions 
addressed in paragraphs (e)(3)(i) and (e)(3)(iii) of this section. 
Terms in excess of 5 years must be approved by the Secretary of the 
Military Department (or designee) following a determination that the 
longer term will aid the national defense or be in the public interest. 
If space occupied is assigned by GSA, charges to financial institutions 
for space and services shall be at the standard level user rate of GSA.
    (iii) When banking institutions use their own funds to improve 
existing government space, leases, for a period not to exceed 5 years, 
may be negotiated for a period commensurate with the appraised value of 
the leasehold improvements divided by the annual lease fee. Terms in 
excess of 5 years must be approved by the Secretary of the Military 
Department (or designee) following a determination that the longer term 
will aid the national defense or be in the public interest.
    (iv) Banking institutions shall perform all maintenance, repair, 
improvements, alterations, and construction on the banking premises.
    (v) Banking institutions shall pay for all utilities and custodial, 
janitorial, and other services furnished by the government at rates set 
forth in the lease or by written agreement between the installation and 
the banking institution.
    (vi) The banking office shall be housed in a building accessible to 
most DoD personnel on the installation and in a location permitting 
reasonable security.
    (2) Leases executed before [effective date of the final rule] may 
not be altered solely as a result of the provisions of this part unless 
a lessee specifically requests a renegotiation under these provisions. 
Leases may not be negotiated or renegotiated, nor may any rights be 
waived or surrendered without compensation to the government. 
Compensation to the government may consist of added property value, 
added banking services, or both.
    (e) Land leases. (1) A lease for construction of a building to 
house a bank shall be at the appraised fair market rental value. 
Charges shall apply for the term of the lease not to exceed 5 years. 
Terms in excess of 5 years shall be approved by the Secretary of the 
Military Department (or designee) following a determination that the 
longer term will aid the national defense or be in the public interest.
    (2) Banking institutions that participate in the construction of a 
shopping mall complex will be given a lease at fair market rental value 
for a term not to exceed 5 years. Terms in excess of 5 years shall be 
approved by the Secretary of the Military Department (or designee) 
following a determination that the longer term will aid the national 
defense or be in the public interest. The lease shall cover only land 
where the banking office physically is located.
    (3) Leases shall include the following provisions:
    (i) The government has the right to terminate the lease due to 
national emergency; installation inactivation, closing, or other 
disposal action; or default by the lessee.
    (ii) The lessee shall provide written notice 180 days prior to 
voluntarily terminating the lease.
    (iii) Upon a lease termination, the government has the option to 
cause the title of all structures and other improvements to be conveyed 
to the United States without reimbursement, or require the lessee to 
remove the improvements and restore the land to its original condition.
    (4) If determined to be in the government's interest, an existing 
lease of land may be extended prior to expiration of its term. Passage 
of title to facilities shall be deferred until all extensions have 
expired. Such extensions shall be for periods not to exceed 5 years 
with lease payments set at the appraised fair market rental of the land 
only as determined on the date of each such extension. Banking 
institution lessees shall continue to maintain the premises and pay for 
utilities and services furnished.
    (5) When under the terms of a lease, title to improvements passes 
to the government, arrangements normally will be made as follows:
    (i) When the square footage involved exceeds that authorized in DoD 
4270.1-M,\9\ the banking institution shall be given first choice to 
continue occupying the excess space under a lease that provides for 
fair market rental for the land underlying that excess space.
---------------------------------------------------------------------------

    \9\ See footnote 1 to Sec. 231.1(a).
---------------------------------------------------------------------------

    (ii) The charge for continued occupancy of improved space by a 
banking office shall be at fair market rental value only for the 
associated land. The lessee shall continue to maintain the premises and 
pay the cost of utilities and services furnished.
    (6) Without exception, those leases executed before [effective date 
of the

[[Page 43865]]

final rule] shall not be altered solely as a result of the provisions 
of this part unless a lessee specifically requests a renegotiation 
under these provisions. Lease contracts may not be negotiated or 
renegotiated, nor may any rights thereunder be waived or surrendered, 
without compensation to the government.
    (f) Construction. Banking institutions may construct buildings 
subject to the following provisions:
    (1) The building shall be solely for the use of the banking 
institution and may not provide for other commercial enterprises or 
government instrumentalities.
    (2) Construction projects must meet the criteria in DoD 4270.1-M.
    (3) Construction projects approval authority.
    (i) Projects costing $25,000 or more shall be approved by the Major 
Command (or Claimant) with an information copy sent to the Secretary of 
the Military Department concerned (or designee). The Secretary of the 
Military Department (or designee) will have 30 days to provide comments 
to the Major Command (or Claimant) before final approval can be 
granted. Major Commands (or Claimants) may accept telephonic 
concurrence from the Secretary of the Military Department (or 
designee).
    (ii) Projects costing less than $25,000, to include interior 
alterations and room or office additions to existing banking offices, 
shall be approved by installation commanders. Copies of approvals, 
including the identification of project cost, shall be furnished to the 
Secretary of the Military Department concerned (or designee).
    (4) In accordance with applicable Military Department regulations, 
the Congress must be notified of all construction projects using other 
than appropriated funds and costing over $500,000.
    (5) Proposals for construction of structures on installations at 
banking institution expense shall be reviewed and reported in 
accordance with cognizant Military Department regulations. The 
following information shall be listed to support each proposal:
    (i) Number of DoD personnel at the installation plus others who may 
use the banking office.
    (ii) Square footage of the proposed building.
    (iii) Land area to be leased to the banking institution.
    (iv) Term of the lease.
    (v) Estimated cost of construction.
    (vi) Estimated fair market value of the land to be leased.
    (vii) A statement that the banking institution will be responsible 
for utility connections and other utility and maintenance costs.
    (viii) A statement that the building will be used only for 
financial services.
    (ix) A statement that management understands its potential loss of 
the building in the event of installation closure or other delimiting 
condition.
    (x) Justification for a waiver of space criteria if the building 
exceeds that specified in DoD 4270.1-M.
    (6) Banking institutions shall pay for interior alterations and 
maintenance as well as utilities, custodial, and other furnished 
services.
    (7) Banking institutions shall pay all construction costs.
    (g) Bank liaison officer (BLO). Each installation commander having 
a banking office shall appoint a BLO. The BLO's photograph, name and 
duty telephone number shall be displayed prominently at each banking 
office on the installation. As appropriate, the BLO's responsibility 
shall be assigned to comptroller or resource management personnel. 
Employees, officials or directors of a financial institution may not 
serve as BLOs. The duties of a BLO are to:
    (1) Ensure that the banking institution operating the banking 
office has the latest version of this part.
    (2) Ensure that traveler's checks and money orders are not being 
sold by other on-base organizations when banking offices are open for 
business. However, postal units and credit unions are exempt from this 
restriction.
    (3) Attend financial workshops, conferences, and seminars as 
appropriate. Such gatherings offer excellent opportunities for 
personnel of financial institutions and the Department to improve the 
military banking program. Free discussion among the attendees gives an 
excellent forum for planning, developing, and reviewing programs that 
improve Military banking and financial services.
    (4) Assist, when requested by the banking office manager or the 
installation commander, in locating and collecting from individuals 
tendering uncollectable checks, overdrawing accounts, or defaulting on 
loans (within the guidelines of subpart B of this part) if not 
otherwise prohibited by law.
    (5) Maintain regular contact with the banking office manager to 
confer and discuss quantitative and qualitative improvements in the 
services provided. In executing this authority, the BLO shall not 
become involved in the internal operations of the banking institution.
    (6) Review the schedule of fees annually, and ensure that the 
operating agreement is updated at least every 5 years. Renegotiate 
services and fees as necessary.
    (7) Assist in resolving customer complaints about banking services.
    (8) Assist in resolving complaints of discrimination with financial 
services by the banking institution. If a complaint cannot be resolved, 
a written request for investigation shall be forwarded to the 
appropriate regulatory agency. Any such request must document the 
problem and command efforts taken toward its resolution. Information 
copies of all related correspondence shall be sent through channels to 
the Secretary of the Military Department concerned (or designee) for 
transmittal to DFAS.
    (9) Assist the installation commander to report to the appropriate 
regulatory agency any evidence suggesting malpractice by banking office 
personnel.
    (h) In-store banking. Under the direction and approval of the 
installation commander, an on-base financial institution may provide 
in-store banking within the premises of the commissary, the Military 
Exchange Service or other on-base retail facility.
    (1) Provision of the requested services and the associated 
stipulations arising from the provision of the requested services shall 
be documented as an amendment to the existing operating agreement 
between the installation commander and the on-base financial 
institution that will provide in-store services.
    (2) The amendment to the operating agreement shall be drafted 
through close coordination between the requesting DoD Component 
representative, the on-base financial institution representative, and 
the installation commander. All three parties shall sign the amendment: 
the installation commander, the DoD Component that hosts the in-store 
banking operations, and the on-base financial institution.
    (3) The installation commander shall extend the opportunity to 
provide the requested in-store banking services to all financial 
institutions located on the installation. The selection process is 
outlined in Appendix B of this part.
    (4) Space shall be granted through a lease to the banking 
institution that will provide in-store service.
    (i) Domestic military banking facilities (MBFs) (1) Domestic MBF 
establishment. Requests to establish MBFs should be made only when a 
need for services cannot be met by other means. During mobilization, 
however, MBFs may be designated as an emergency measure.

[[Page 43866]]

    (ii) Installation commanders shall send requests for an MBF with 
justification for its establishment through the Secretary of the 
Military Department concerned (or designee) to the Director, DFAS, for 
coordination with the Department of the Treasury. The Department of the 
Treasury may approve the designation of an MBF under provisions of 12 
U.S.C. 265.
    (iii) MBF operations may begin only after approval for MBF status 
is granted by the Department of the Treasury.
    (5) MBF conversion. (i) Where MBFs exist, installation commanders 
shall encourage their conversion to independent or branch banks.
    (ii) Proposals from the on-base banking institution to convert an 
existing MBF to an independent or branch bank shall be sent through 
command channels to the Secretary of the Military Department concerned 
(or designee) for approval. The Secretary of the Military Department 
(or designee), shall forward the request to the Director, DFAS, for 
coordination with the Department of the Treasury.
    (iii) Unsolicited proposals from banking institutions to establish 
independent or branch banks where an MBF exists shall be forwarded 
through command channels to the Secretary of the Military Department 
concerned (or designee). Each proposal shall be evaluated on its own 
merits.
    (A) The installation commander shall inform the banking institution 
operating the MBF that an unsolicited proposal for a banking office has 
been received and shall offer that incumbent institution the 
opportunity to submit its own proposal.
    (B) Preference to operate an independent or branch bank shall be 
given to the banking institution that has operated the MBF provided 
that prior banking service has been satisfactory and that the 
institution's proposal is adequate.
    (6) MBF termination. The Director, DFAS, shall coordinate the 
termination of a financial institution's authority to operate an MBF 
with the Department of the Treasury.


Sec. 231.6  Procedures--overseas banks.

    (a) General provisions of banking services overseas. The Department 
acquires banking services overseas for use by authorized persons and 
organizations by:
    (1) MBFs operated under contract and authorized by the pertinent 
status of forces agreement, other intergovernmental agreements, or 
host-country law.
    (2) Domestic and foreign banking institutions located on overseas 
DoD installations. Each such institution shall be:
    (i) Chartered to provide financial services in that country,
    (ii) A party to a formal operating agreement with the installation 
commander to provide such services, and
    (iii) Identified, where applicable, in the status of forces 
agreements, other intergovernmental agreements, or host-country law.
    (b) Establishment. (1) Overseas MBFs operated under contract. 
Installation or community commanders requiring banking services will 
send a request through command channels to the Secretary of the 
Military Department concerned (or designee) for concurrence and 
subsequent transmittal to the Director, DFAS, for approval.
    (i) Requests to establish MBFs will include, but are not limited 
to, the following information:
    (A) The approximate number of DoD personnel at the installation and 
in the community and any other persons who may be authorized to use the 
MBF.
    (B) The distance between the installation and the nearest MBF and 
credit union office, the names; addresses, and telephone numbers of the 
operators of those institutions; and the installations and communities 
where they are located.
    (C) The availability of official and public transportation between 
the installation or community and the nearest MBF and credit union 
office.
    (D) The approximate loss of duty time due to DoD personnel leaving 
the installation or community to obtain banking services.
    (E) Sources from which the disbursing officer obtains operating and 
payroll cash, the frequency of these acquisitions, and the amount 
obtained monthly.
    (F) The name and location of the depository used to make official 
deposits for credit to the TGA.
    (G) The estimated savings to the disbursing officer if the MBF is 
established on the installation.
    (H) A list of organizational and nonappropriated fund accounts, the 
name and location of the financial institutions where deposited, and 
the average daily activity and balance of each account.
    (I) A written description and photographs or drawings of the space 
proposed for MBF use. The extent and approximate cost of required 
alterations, including the construction of counters and teller cages.
    (J) A statement that recognizes the logistical support, including 
equipment, to be provided by the local command as detailed in paragraph 
(c) of this section. The statement will include the costs of such 
equipment and the manner in which it will be acquired.
    (K) In countries where no MBFs currently are operated under 
contract, a statement from the appropriate Combatant Command that the 
requirement has been coordinated with the U.S. Chief of Diplomatic 
Mission or U.S. Embassy and that the host country will permit the 
operation in accordance with Sec. 231.3(f)(1)(i).
    (L) Any other pertinent information to justify MBF establishment.
    (ii) As a general rule, MBFs may be established only when the 
installation or community population meets the following criteria:
    (A) Full-time MBF. Except in unusual circumstances, a total of at 
least 1,000 permanent military personnel and DoD civilian employees is 
necessary to qualify for a full-time MBF.
    (B) Part-time MBF. Except in unusual circumstances, a total of at 
least 250 permanent military personnel and DoD civilian employees is 
necessary to qualify for a part time MBF.
    (iii) If the population at a certain remote area is not sufficient 
to qualify under the criteria for full-or part-time MBFs, the 
installation or community commander will explore all other alternatives 
for acquiring limited banking services before requesting establishment 
of an MBF as an exception to these provisions. Alternatives to limited 
banking services include installation of ATMs and check cashing and 
accommodation exchange service by disbursing officers and their agents.
    (iv) Establishment of an overseas MBF is predicated on and 
requires:
    (A) Designation of the MBF contractor as a depositary and financial 
agent of the U.S. Government by the Department of the Treasury.
    (B) The availability of banking contractors interested in bidding 
for the operation of the facility and the viability of such proposals.
    (C) The availability of appropriated funds to underwrite such 
banking services.
    (D) Establishment of a U.S. Dollar Currency Custody Account to 
support banking operations.
    (2) Other overseas banking offices. Where a need for financial 
services has been identified; either the banking and currency control 
laws of certain host countries do not permit MBFs to operate on DoD 
installations or MBFs, where permitted, have not been established; and 
there is a desire to establish banking services the following applies:

[[Page 43867]]

    (i) Installation or community commanders will send requests for 
banking services or unsolicited proposals from foreign banking 
institutions to their Major Commands (or Claimants) with supporting 
data as required in Sec. 231.5 (a).
    (ii) Major Commands (or Claimants) will forward installation or 
community commander requests to the Secretary of the Military 
Department concerned (or designee) for approval. The Secretary of the 
Military Department concerned (or designee) will coordinate with DFAS 
to seek the designation of the parent foreign banking institution 
designated as a depositary and financial agent of the U.S. Government 
by the Department of the Treasury.
    (iii) Banking offices in this category will become operational only 
after the foreign parent banking institution has been designated a 
depositary and financial agent of the U.S. Government. The institution 
also must indicate a willingness and ability to provide collateral 
backing for any official and nonappropriated fund U.S. dollar deposits. 
Any collateral pledged must be in a form acceptable to DFAS and the 
Department of the Treasury.
    (c) Logistical support. (1) Overseas MBFs operated under contract. 
(i) Installation or community commanders will provide logistical 
support to MBFs. Such support normally includes:
    (A) Adequate office space, including steel bars; grillwork; 
security doors; a vault, safes, or both; security alarm systems and 
camera surveillance equipment (where deemed necessary) that meet 
documented requirements of the contractor's insurance carrier; 
construction of counters, teller cages, and customer and work areas; 
necessary modifications and alterations to existing buildings; and 
construction of new MBF premises, if necessary.
    (1) The size and arrangement of space should permit efficient 
operations. Space assigned may not exceed that prescribed in DoD 
4270.1-M.
    (2) All maintenance, repair, rehabilitation, alterations, or 
construction for banking offices shall comply with guidelines 
established by the installation commander.
    (B) Office space in a building that is accessible to the most users 
and permits the maximum security.
    (C) Office space for MBF area and district administrations and 
storage space for retention of records, files, and storage of supplies.
    (D) DoD housing on a rental basis to key MBF personnel who are 
unable to find suitable, reasonably priced housing in the vicinity of 
the DoD installation, subject to the assignment procedures and other 
requirements of DoD 4165.63-M \10\
---------------------------------------------------------------------------

    \10\ See footnote 1 to Sec. 231.1(a).
---------------------------------------------------------------------------

    (E) Air-conditioning, which is considered a normal utility for 
banking offices located at installations that qualify for air-
conditioning under applicable regulations. Banking space is classified 
as administrative space at Military installations.
    (F) Utilities (i.e., electricity, gas, water and sewage), heating, 
intrastation telephone service, and custodial and janitorial services 
to include garbage disposal and outdoor maintenance (such as grass 
cutting and snow removal).
    (G) Defense Switching Network (DSN) voice and data communication to 
include Internet access.
    (H) Military guards, civilian guards (for use within the 
installation), military police, or other protective services to 
accompany shipments of money. This level of protective service also 
shall be provided at other times as required to include alarm system 
failures and to avoid undue risks or insurance costs on the part of the 
MBF.
    (I) U.S. Military Postal Service access under DoD Directive 4525.6 
\11\. Use of free intra-theater delivery system (IDS) is authorized for 
all routine mail sent and received between Army Post Offices (APOs) and 
Fleet Post Offices (FPOs) within a theater.
---------------------------------------------------------------------------

    \11\ See footnote 1 to Sec. 231.1(a).
---------------------------------------------------------------------------

    (J) Office equipment and furniture on memorandum receipt if 
available from local stock. If office equipment or furniture is 
unavailable, statements of nonavailability will be issued.
    (K) Vehicle registration and fuel sales from government-owned 
facilities for bank-operated vehicles if not in conflict with host 
government agreements. Vehicle registration will be subject to normal 
fees.
    (L) The local commander for official may issue issuance of 
invitational travel orders that authorize travel at no expense to the 
U.S. Government on site visits by U.S. based banking institution 
officials.
    (ii) Suggestions for changes to the contract under which logistical 
support is granted may be forwarded through command channels to the 
Director, DFAS, for consideration.
    (2) Other overseas banking offices. (i) Logistical support provided 
to such offices will be negotiated with the parent foreign banking 
institution and incorporated into the written operating agreement.
    (ii) Logistical support will not exceed that provided to contract 
MBFs as specified paragraph (c)(1) of this section.
    (d) Operations. (1) General conditions of MBF operation. (i) Before 
initiating MBF operations, a written agreement shall be directly 
negotiated and signed by the installation or community commander and 
management of the banking contractor or other financial institution 
concerned. One copy of the agreement with U.S. banking contractors and 
two copies of the agreement with institutions other than U.S. banking 
contractors will be forwarded through command channels to the Secretary 
of the Military Department concerned (or designee). The Secretary of 
the Military Department (or designee) shall forward one copy of the 
agreement with institutions other than U.S. banking contractors through 
command channels to the Director, DFAS. A copy of the agreement also 
shall be maintained at all times by the installation or community 
commander and the banking institution manager.
    (ii) For MBFs operated by U.S. banking contractors, the agreement 
shall state operating details not set forth in the contract. Though the 
contract limits the number of operating hours per week, local 
commanders and MBF managers should set days and hours of operation to 
best meet local needs. Operating times may include Saturdays and 
evening hours when necessary to complement other retail services for 
DoD personnel, provided the contractor can implement that service at no 
additional cost to the government. When added cost is involved, the 
commander will send a request including reasons for expanded or 
modified times of operation, through command channels, to the Secretary 
of the Military Department concerned (or designee) for action. If 
approved, the request, with recommendations, will be forwarded to the 
Director, DFAS.
    (2) Overseas MBFs operated under contract. (i) General. Overseas 
MBFs shall operate under terms and conditions established at the time 
of annual contract negotiations and confirmed in respective contracts 
or contracting officer determinations.
    (ii) Authorized customers. DoD banking contracts specify the 
personnel authorized to receive service. Additionally, overseas major 
commanders may approve banking services for other individuals that 
qualify for individual logistic support under the regulations of the 
DoD Component concerned, provided that the use of banking services is 
not prevented by status of forces agreements, other intergovernmental 
agreements, or host-country law.
    (iii) Services rendered. DoD banking contracts specify the services 
to be

[[Page 43868]]

rendered and related charges. Suggestions for expansion or modification 
of authorized services, fees or charges may be forwarded through DoD 
Component channels to DFAS. Proposals for any new service must be 
coordinated with the appropriate Combatant Command and U.S. Chief of 
Diplomatic Mission or U.S. Embassy to make certain that the proposal 
does not conflict with the status of forces agreements, other 
intergovernmental agreements, or host-country law.
    (iv) Regulation to be provided. The DFAS shall advise each U.S. 
banking contractor operating an overseas MBF of this part and furnish a 
copy to the contractor.
    (v) Conditions of operation. (A) Part-time and payday service MBFs 
will provide limited services that mirror, to the extent feasible, 
those provided by full-time MBFs. Since part-time MBFs operate out of 
nearby MBFs, installation or community commanders shall provide and 
fund transportation and guards for their operation.
    (B) Any deficiency of banking services under DoD banking contracts 
shall be reported to the manager of the MBF within 7 calendar days of 
noting the deficiency. If the problem has not been corrected within 30 
calendar days after being noted, the commander shall report the problem 
through DoD Component channels to DFAS.
    (C) The MBF contractor and military disbursing officers shall 
establish cash management practices that minimize the cash required to 
conduct business.
    (D) Commanders shall assist MBF contractors to develop and update 
contingency plans for banking services in the event of hostilities or 
other emergencies.
    (E) MBF provision of foreign currency shall be in accordance with 
Volume 5, Chapter 13 of DoD 7000.14-R.
    (3) Other overseas banking offices. (i) Authorized customers. The 
list of authorized customers shall be negotiated between the 
installation commander and the bank and shall be reflected in the bank 
operating agreement. Those customers identified as authorized in the 
operating agreement shall be in accordance with applicable status of 
forces agreements, other intergovernmental agreements, or host-country 
law.
    (ii) Services rendered. Services and charges shall parallel, 
whenever practical, the services and charges of MBFs operated under 
contract. Specific services shall be negotiated and included in the 
agreement with the foreign banking institution. A copy of the agreement 
shall be sent through DoD Component channels to the DFAS.
    (iii) Operating agreements. Before agreements are executed, they 
will be coordinated with and approved by the appropriate Combatant 
Command (or designee).
    (iv) Conditions of operation. A banking institution shall provide 
equipment (except that furnished by the installation or community), 
supplies, and trained bank personnel.
    (4) Relocation of MBF. (i) When an MBF is moved from one location 
to another at the same installation or community, the commander shall 
notify the cognizant Military Department, through command channels. The 
Military Department shall forward the information to the DFAS.
    (ii) For all other relocations, prior approval from the DFAS must 
be obtained through DoD Component channels.
    (5) Comments. Installation or community commanders shall send their 
banking comments through DoD Component channels to the DFAS for any of 
the following:
    (i) Major changes in installation population that would affect use 
of the MBF.
    (ii) Opinion that the space assigned is not adequate for the 
efficient operation of the MBF. Include a statement concerning 
corrective action.
    (iii) Suggestions that might improve the MBF operation, increase 
efficiency, or decrease costs.
    (iv) Pending developments that may have a material impact on the 
MBF operation.
    (6) Bank liaison officer. The duties of the BLO are outlined in 
Sec. 231.5 (g).
    (e) Termination. Requests to eliminate any or all MBFs in a foreign 
country must include documentation that the U.S. Chief of Diplomatic 
Mission has been informed and arrangements for local termination 
announcements and procedures have been made with the U.S. Embassy.
    (1) Overseas MBFs operated under contract. In cases where an 
installation or community no longer can justify overseas MBF 
operations, the commander shall notify the Secretary of the Military 
Department concerned (or designee) through command channels.
    (i) The report shall state whether a part-time MBF should be 
established and specify the days each week that the MBF would be 
needed.
    (ii) The Secretary of the Military Department (or designee) shall 
send this report with recommendations to the DFAS.
    (2) Other overseas banking offices. Termination actions, when 
required, shall be taken in accordance with the applicable clauses in 
the operating agreement. Notice of intent to terminate, including the 
closing date, shall be sent through DoD Component channels to DFAS, 
which shall notify the Department of the Treasury so that the foreign 
banking institution's authority as a depositary and as a financial 
agent of the U.S. Government at that location may be revoked.


Sec. 231.7  Procedures-domestic credit unions.

    (a) General policy. Given their role in promoting morale and 
welfare, on base credit unions shall be recognized and assisted by DoD 
Components at all levels. These credit unions shall provide services to 
DoD personnel of all ranks and grades within their respective fields of 
membership.
    (b) Establishment. A demonstrated need for credit union services 
may be addressed by establishing a new full-service credit union or by 
opening a branch office or facility of an existing credit union under 
the common bond principle.
    (1) DoD personnel seeking to establish a new full-service credit 
union shall submit a proposal to the installation commander for review. 
In addition to the information identified in Sec. 231.5(a)(1), the 
proposal shall include a request for the establishment of a field of 
membership that includes all personnel at the installation. Upon 
installation commander concurrence, the proposal shall be forwarded 
through DoD Component channels to the Secretary of the Military 
Department (or designee).
    (2) The Secretary of the Military Department concerned (or 
designee) shall:
    (i) Obtain a list of credit unions that are eligible to serve the 
installation's military members and civilian employees from the 
National Credit Union Administration (NCUA) Regional Office that has 
geographic jurisdiction and the appropriate state regulatory agency.
    (ii) Prepare and send formal solicitation letters to eligible 
credit unions informing them of an opportunity to establish a branch 
office at the installation.
    (iii) In coordination with the installation commander, establish 
the criteria for selection of a specific credit union in accordance 
with Sec. 231.5(b)(4). Proposals shall be evaluated, and a selection 
made, based upon the factors and weights developed for the 
solicitation.
    (3) Upon approval by the Secretary of the Military Department (or 
designee), the NCUA or appropriate state regulatory agency shall be 
notified and

[[Page 43869]]

asked to establish or amend the selected credit union's charter to 
include the new location. For Federal credit unions, no specific NCUA 
approval is required to open a branch.
    (4) No commitment may be made to a credit union regarding its 
proposal until the appropriate regulatory agency has announced a 
selection.
    (c) Terminations. (1) Voluntary credit union terminations. (i) When 
a credit union plans to end operations on a DoD installation, it shall 
be required to notify the installation commander 180 days before the 
closing date. Such notification shall be required to precede public 
announcement of the planned closure. When appropriate, the commander 
shall attempt to negotiate an agreement permitting the credit union to 
continue operations until the installation has made other arrangements.
    (ii) The installation commander shall inform the Secretary of the 
Military Department concerned (or designee) immediately upon receiving 
notification of a closing. The report shall include a recommendation 
about continued credit union service on the installation. Paragraph (b) 
of this section applies if continued service is needed.
    (2) Termination for cause. If, after discussion with credit union 
officials, an installation commander determines that the operating 
policies of a credit union are inconsistent with this part, a 
recommendation for termination of logistical support and space 
arrangements may be made through the Secretary of the Military 
Department concerned (or designee). A credit union shall be removed 
from the installation only with approval of the Secretary of the 
Military Department (or designee) after coordination with DFAS and the 
appropriate regulatory agency.
    (3) Termination in the interest of national defense. At the option 
of the government, leases may be terminated in the event of national 
emergency or as a result of installation deactivation, closing, or 
other disposal action.
    (d) Use of space, logistical support, and military real property 
for domestic credit unions. (1) Criteria for use of space on 
Government-owned real property. (i) Criteria governing the assignment 
of space and construction of new space for credit unions are in DoD 
4270.1-M.
    (ii) A credit union may be furnished space on a DoD installation at 
one or more locations for periods not to exceed 5 years. Terms in 
excess of 5 years must be approved by the Secretary of the Military 
Department concerned (or designee) following a determination that the 
longer term will aid the national defense or be in the public interest. 
The cumulative total of space furnished shall be subject to the 
limitations of DoD 4270.1-M.
    (A) The furnishing of office space (including ATM placement) to on-
base credit unions is governed by the Federal Credit Union Act (12 
U.S.C. 1751). The provision of no-cost office space is limited to 
credit unions having a membership at least 95 percent of which is 
composed of individuals who are, or who were at the time of admission 
into the credit union, military personnel or federal employees, or 
members of their families. This percentage criterion applies only to 
members who use the on-base office, not to the total credit union 
membership. A written statement, prepared on the credit union's 
letterhead and signed by either the president of its board of directors 
or its general manager to the effect that the credit union meets the 95 
percent criterion, shall be required to justify and document the 
allotment of free government space. A certification also shall be 
required whenever there is a merger, takeover, or significant change in 
a field of membership. This certification shall be required to serve as 
justification and documentation for the continued allocation of free 
government space including space renovated with credit union funds. The 
statement shall be updated on renewal of lease. (See Appendix A to this 
part for a sample format of the statement.)
    (B) Credit unions that fail to meet the 95 percent criterion shall 
be charged fair market rental for space provided. Except where more 
than one credit union exists on an installation prior to July 1, 1999, 
credit unions giving less than full service or not serving all assigned 
DoD personnel are not authorized free space.
    (C) When a credit union that meets the 95 percent criterion uses 
its own funds to expand, modify, or renovate government-owned space, it 
may be provided a no-cost permit or license for a period not to exceed 
5 years. Duration of the permit or license shall be commensurate with 
the extent of the improvements as determined by the DoD Component 
concerned. Terms in excess of 5 years must be approved by the Secretary 
of the Military Department concerned (or designee) following a 
determination that the longer term will aid the national defense or be 
in the public interest. The permit or license shall be effective until 
the agreed date of expiration or until the credit union ceases to 
satisfy the 95 percent criterion. In this latter case, the no-cost 
permit shall be cancelled in favor of a lease immediately negotiated at 
fair market value under the provisions of paragraph (d) of this 
section. If the credit union desires, this lease at fair market value 
may extend through the period identified in the original license not to 
exceed 5 years. When the term proposed exceeds 5 years, the Secretary 
of the Military Department concerned (or designee) must approve the 
longer term following a determination that the longer term will aid the 
national defense or be in the public interest.
    (D) Similarly, a credit union not meeting the 95 percent criterion 
that uses its own funds to expand, modify, or renovate government-owned 
space, may be provided a lease at fair market value for a period not to 
exceed 5 years. Duration of this lease shall be commensurate with the 
extent of the improvements as determined by the DoD Component 
concerned.
    (2) Logistical support. When available, custodial and janitorial 
services, heating and air conditioning, utilities (i.e., electricity, 
gas, water, and sewage), fixtures, and maintenance shall be furnished 
at no cost to credit unions occupying free space in government 
buildings. However, credit unions shall be required to pay for all 
communication services to include telephone lines, long distance data 
services and Internet connections. Credit unions also shall pay for 
space alterations. Should a credit union fail to meet the 95 percent 
membership criterion, any logistical support furnished shall be on a 
reimbursable basis.
    (e) Credit unions offering ATM service shall do so in accordance 
with Sec. 231.4(d) except that the installation commander may provide 
ATMs to on-base credit unions under certain circumstances such as when 
it is advantageous to the government to have one or more ATMs but the 
acquisition cost to the credit union is prohibitive. In all such cases, 
installation costs and all logistics support must be borne by the 
credit union.
    (f) Staffing. (1) On-base credit unions shall provide full service. 
To do so, credit union offices shall be staffed by:
    (i) A loan officer authorized to act for the credit committee.
    (ii) An individual authorized to sign checks.
    (iii) A qualified financial counselor available to serve members 
during operating hours.
    (2) Exceptions to paragraph (f)(1)(i) of this section may be 
approved by the installation commander with advice from the Secretary 
of the Military Department concerned (or designee) in the case of newly 
organized credit unions.

[[Page 43870]]

    (3) When an on-base credit union can support only minimum staffing, 
one of the positions required in paragraph (f)(1)(i) or (f)(1)(ii) of 
this section also may be subsumed under the counselor duties.
    (4) Credit union remote service locations at the same installation 
may be staffed with one person alone, provided that a direct courier or 
an electronic or automated message service links each remote location 
to the credit union's main office.
    (5) All credit union staffing shall comply fully with the spirit 
and intent of the DoD equal employment opportunity policies and 
programs, in accordance with DoD Directive 1440.1.
    (g) Credit union liaison officer (CULO) When a credit union office 
is located on an installation, the commander shall appoint a CULO. As 
appropriate, the CULO responsibility should be assigned to comptroller 
or resource management personnel. The CULO's photograph, name and duty 
telephone number shall be displayed conspicuously at each credit union 
office on the installation. Anyone who serves as a credit union board 
member or in any other official credit union capacity may not serve as 
a CULO. The duties of a CULO are the same as the duties listed for a 
BLO (see Sec. 231.5(g)).
    (h) In-store banking. In-store banking services may be provided in 
accordance with Sec. 231.5(h) except that:
    (1) Credit unions interested in submitting proposals to provide 
requested in-store banking services shall provide a statement from the 
National Credit Union Administration (NCUA) certifying the credit 
union's authority to offer the requested financial services to the 
commissary, the Military Exchange Services, or other on-base 
facilities.
    (2) Space granted to a credit union selected to provide in-store 
banking services should be issued through a no cost license in 
accordance with the Federal Credit Union Act (12 U.S.C. 1751).


Sec. 231.8  Procedures--overseas credit unions.

    (a) General policy. (1) Credit union services to authorized persons 
and organizations may be provided by domestic on-base credit unions 
operating under a geographic field of membership (franchise). The 
Foreign Geographic Field of Membership (Franchise) Assignment listing 
is included at Appendix D to this part.
    (2) The extension of credit union service overseas is encouraged 
consistent with the principles prescribed for domestic credit unions 
and with applicable status of forces agreements or other 
intergovernmental agreements, or host-country law. Where permitted by 
the applicable status of forces agreement or other intergovernmental 
agreements, or host-country law, the ultimate decision to provide 
services overseas rests with the credit union itself.
    (3) Where permitted by the status of forces agreements or other 
intergovernmental agreements, or host-country law, only Federal credit 
unions or federally insured state chartered credit unions may operate 
on overseas DoD installations.
    (b) Establishment. (1) Commanders shall notify the Secretary of the 
Military Department concerned (or designee), through command channels, 
when overseas credit union services are needed. Such requests shall 
include:
    (i) Full information about available space and logistical support.
    (ii) The name and location of the nearest credit union facility or 
branch.
    (iii) The distance between the installation and the nearest credit 
union facility or branch.
    (iv) The availability of any official or public transportation.
    (v) The number of DoD personnel in duty assignments that confine 
them to the installation or who cannot obtain transportation (such as 
hospital patients).
    (vi) In countries not presently served, a statement concurred in by 
the Combatant Command that the requirement has been coordinated with 
the U.S. Chief of Diplomatic Mission or U.S. Embassy. The statement 
shall include that the host country will permit the operations, with 
any conditions imposed by the host country identified.
    (2) Subsequent to approval of the request from the installation or 
community commander to establish an overseas credit union facility, the 
Secretary of the Military Department concerned (or designee) shall 
solicit proposals for the provision of full credit union services as 
follows:
    (i) Where there is a DoD designated geographic field of membership 
(franchise) with a specific field of membership, the Secretary of the 
Military Department (or designee) shall direct the installation or 
community commander to contact the servicing defense credit union and 
request that a branch or facility be established. The basic decision 
concerning such extensions of service rests with the servicing credit 
union.
    (ii) Where there is no DoD designated geographic field of 
membership (franchise), the Secretary of the Military Department (or 
designee) shall:
    (A) Coordinate requests, through the DFAS, to obtain a geographic 
field of membership (franchise). A geographic field of membership 
(franchise) is the authorization granted to a credit union by the 
Office of the Under Secretary of Defense (Comptroller) to provide 
financial services in a specific geographic region located outside the 
United States and its territories.
    (B) Solicit proposals from credit unions currently operating on DoD 
installations.
    (C) Review proposals of interested credit unions.
    (D) Coordinate with field commands, as needed.
    (E) Recommend selection to National Credit Union Administration 
(NCUA) or appropriate state regulatory agency with a copy to the DFAS 
and the OUSD(C), requesting that the appropriate field of membership 
adjustment be made. Such a recommendation shall identify the primary 
installations on which the credit union would operate and, if 
applicable, the contiguous geographic boundaries for future facilities 
and branches.
    (3) Where there is an existing field of membership, the Secretary 
of the Military Department concerned (or designee) shall take the 
following actions:
    (i) If a credit union on an installation terminates operation, 
afford any other credit union having a geographic field of membership 
(franchise) within that country an opportunity to assume the franchise 
being vacated. If all such institutions decline, the geographic field 
of membership (franchise) shall be offered to the federally insured 
defense credit union community. If, as a result of a credit union 
decision to decline service to an installation or a termination action, 
another credit union is assigned the former geographic field of 
membership (franchise) or portion thereof, the NCUA or the applicable 
state regulatory agency shall be notified and requested to make 
appropriate field of membership adjustments.
    (ii) When other credit union(s) having a geographic field of 
membership (franchise) within a country decline the opportunity, or 
there is no other credit union having a franchise within that country, 
the provisions of paragraph (b)(2)(ii) of this section apply.
    (4) No commitment may be made to a credit union regarding its 
proposal until the appropriate regulatory agency has announced a 
selection.
    (c) Logistical support. Installation or community commanders will 
provide logistical credit union support. Such support normally shall 
include:

[[Page 43871]]

    (1) Adequate office space, including steel bars; grillwork; 
security doors; a vault, safes or both; security alarm systems and 
camera surveillance equipment (where deemed necessary) that meet 
documented requirements of the contractor's insurance carrier; 
construction of counters, teller cages, and customer and work areas; 
necessary modifications and alterations to existing buildings; and 
construction of a new premises, if necessary. The size and arrangement 
of space should permit efficient operations. The credit union shall pay 
for all improvements to the space given. Space assigned may not exceed 
that prescribed in DoD 4270.1-M.
    (2) DoD housing on a rental basis to key credit union personnel 
unable to find suitable, reasonably priced housing in the vicinity of 
the DoD installation, if available.
    (3) Utilities (i.e., electricity, gas, water and sewage), heating, 
intrastation telephone service, and custodial and janitorial services 
to include garbage disposal and outdoor maintenance (such as grass 
cutting and snow removal).
    (4) Defense Switched Network (DSN) voice and data communication to 
include internet access.
    (5) U.S. Military Postal Service support under DoD Directive 4525.6 
(reference (q)). Use of free intra-theater delivery system (IDS) is 
authorized for all routine mail sent and received between Army Post 
Offices (APOs) and Fleet Post Offices (FPOs) within a theater.
    (d) Travel. Travel by credit union officials must be at no expense 
to the U.S. Government. Overseas commanders may issue invitational 
travel orders for official on-base visits by credit union officials at 
no cost to the U.S. Government.
    (e) Operations. (1) An overseas credit union shall confine its 
field of membership to individuals or organizations eligible by law or 
regulation to receive services and benefits from the installation. 
Services shall not be provided to those personnel precluded such 
services by applicable status of forces agreements, other 
intergovernmental agreements, or host-country law.
    (2) The Department assigns overseas credit unions a prescribed 
geographic field of membership (franchise). However, any credit union 
may continue to serve its members stationed overseas by mail or 
telecommunications.
    (3) A credit union proposing any new service not authorized by the 
operating agreement must coordinate the establishment of the new 
service through the cognizant Component command to the Combatant 
Command. The new service can be offered only after the appropriate 
command's approval and coordination with the U.S. Chief of Diplomatic 
Mission or U.S. Embassy to ensure that the service does not conflict 
with the status of forces agreements, other intergovernmental 
agreements, or host-country law.
    (4) Credit unions that operate full service branches shall have 
U.S. currency and coin available for member transactions. In areas 
served by currency custody accounts, transactional U. S. currency and 
coins shall be made available from the servicing MBF with no direct or 
analysis charge to the credit union, provided settlement is made via 
the local MBF account or equivalent arrangements are made with the MBF.
    (5) In countries served by MBFs operated under contract, credit 
unions shall purchase foreign currency only from the servicing MBF.
    (i) The bulk rate purchase price shall apply to currency used by 
the credit union to make payments to vendors or to make payroll 
payments.
    (ii) Credit unions that desire and are authorized to provide 
accommodation exchange services to its members shall acquire foreign 
currency from the servicing MBF at the MBF accommodation rate and sell 
it at a rate of exchange no more favorable than that available to 
customers of the MBF.
    (6) The NCUA may review operations of overseas credit union offices 
either when it examines the main credit union or at other times of its 
choosing. For federally insured, state chartered credit unions, the 
applicable state regulatory agency also may examine credit unions 
operations.


Sec. 231.9  Definitions.

    Automated teller machine (ATM). An electronic machine that 
dispenses cash, and may perform such other functions as funds transfers 
among a customer's various accounts and acceptance of deposits. 
Equipment generally is activated by a plastic card in combination with 
a personal identification number (PIN). Typically, when the 
cardholder's account is with a financial institution other than that 
operating the ATM, its use results in the assessment of a fee from the 
ATM network (Armed Forces Financial Network (AFFN), Cirrus, PLUS) 
handling the transaction. Shared access, which is predicated on a 
formal agreement between financial institutions, refers to ATMs that 
may be used by cardholders of more than one financial institution 
without being assessed a network fee.
    Banking institution. An entity chartered by a state or the federal 
government to provide financial services.
    Banking office. A branch bank, or independent bank operated by a 
banking institution on a domestic DoD installation or by a foreign 
banking institution on an overseas DoD installation.
    Branch bank. A separate unit chartered to operate at an on-base 
location geographically remote from its parent banking institution.
    Credit union. A cooperative nonprofit association, incorporated 
under the Federal Credit Union Act, 12 U.S.C. 1751 et seq., or similar 
state statute, for the purposes of encouraging thrift among its members 
and creating a source of credit at a fair and reasonable rate of 
interest.
    Credit union facility. A facility employing a communications system 
with the parent credit union to conduct business at remote locations 
where a full-service credit union or credit union branch is 
impractical. Credit union facilities need not provide cash transaction 
services but must disburse loans and shares by check or draft and 
provide competent financial counseling during normal working hours.
    Defense credit union. A state or federally insured credit union 
with a field of membership composed primarily of DoD personnel.
    Discrimination. Any differential treatment in provision of 
services, including loan services, by a financial institution to DoD 
personnel and their dependents on the basis of race, color, religion, 
national origin, sex, marital status, age, rank, or grade. However, if 
uniformly applied, the amount of credit extended may be directly based 
on an applicant's total income.
    DoD Component. For the purposes of this part, DoD Components 
include the Office of the Secretary of Defense, the Military 
Departments, the Joint Chiefs of Staff, the Joint Staff and the 
supporting Joint Agencies, the Combatant Commands, the Inspector 
General of the Department of Defense, the Uniformed Services University 
of the Health Sciences, the Defense Agencies, the DoD Field Activities, 
and all nonappropriated fund instrumentalities including the Military 
Exchange Services, and Morale, Welfare and Recreation activities.
    DoD Personnel. All military personnel; DoD civil service employees; 
other civilian employees, including special government employees of all 
offices, Agencies, and Departments performing functions on a DoD 
installation (including nonappropriated

[[Page 43872]]

fund instrumentalities); and their dependents. On domestic DoD 
installations, retired U.S. military personnel and their dependents are 
included.
    Domestic DoD installation. For the purposes of this part, a 
military installation located within a state of the United States, the 
District of Columbia, Guam or the Commonwealth of Puerto Rico.
    Fair Market Rental. A reasonable charge for on-base land, 
buildings, or building space. Rental is determined by a government 
appraisal based on comparable properties in the local civilian economy. 
However, the appraiser will consider that on-base property may not 
always be comparable to similar property in the local commercial 
geographic area. Examples of circumstances that may affect fair market 
rental include limitations of usage and access to the financial 
institution by persons other than those on the installation, proximity 
to the community center or installation business district, and the 
government's right to terminate the lease or take title to improvements 
constructed at the financial institution's expense.
    Field of membership. A group of people entitled to credit union 
membership because of a common bond of occupation, association, 
employment, or residence within a well-defined neighborhood, community 
or rural district. A field of membership is defined in the credit 
union's charter by the appropriate regulatory agency.
    Financial institution. This term encompasses any banking 
institution, credit union, and subordinate office or facility, each as 
separately defined in this section.
    Financial services. Those services commonly associated with 
financial institutions in the United States, such as electronic banking 
(e.g., ATMs and personal computing banking), in-store banking, 
checking, share and savings accounts, funds transfers, sales of 
official checks, money orders, and travelers checks, loan services, 
safe deposit boxes, trust services, sale and redemption of U.S. Savings 
Bonds, and acceptance of utility payments and any other services 
provided by financial institutions.
    Foreign banking institution. A bank located outside the United 
States chartered by the country in which it is domiciled.
    Full service credit union. A credit union that provides full-time 
counter transaction services, to include cash operations, and is 
staffed during normal working hours by a loan officer, a person 
authorized to sign checks, and a qualified financial counselor. In 
overseas areas, ``full service'' includes cash operations where not 
prevented by:
    (a) Status of forces agreements, other intergovernmental 
agreements, or host-country law.
    (b) Physical security requirements that cannot be resolved by the 
credit union or local command.
    Geographic field of membership (franchise). Authorization granted 
to a credit union by the Office of the Under Secretary of Defense 
(Comptroller) to provide financial services in a specific geographic 
region located outside the United States and its territories.
    Independent bank. A bank specifically chartered to operate on a DoD 
installation or DoD installations whose directors and officers usually 
come from the local business and professional community. Such 
operations are thus differentiated from county-wide or state-wide 
branch systems consisting of a head office and one or more 
geographically separate branch offices.
    In-store banking. An expansion of financial services provided by an 
on-base financial institution within the premises of the commissary, 
exchange, and/or other on base retail facility.
    Malpractice. Any unreasonable lack of skill or fidelity in 
fiduciary duties or the intentional violation of an applicable law or 
regulation or both that governs the operations of the financial 
institution. A violation shall be considered intentional if the 
responsible officials know that the applicable action or inaction 
violated a law or regulation.
    Military banking facility (MBF). A banking office located on a DoD 
installation and operated by a financial institution that the 
Department of the Treasury has specifically authorized, under its 
designation as a ``Depository and Financial Agent of the U.S. 
Government,'' to provide certain banking services at the installation.
    National bank. An association approved and chartered by the 
Comptroller of the Currency to operate a banking business.
    On-base. Refers to physical presence on a domestic or overseas DoD 
installation.
    Operating agreement. A mutual agreement between the installation 
commander and the on-base financial institution to document their 
relationships.
    Overseas DoD installation. A military installation (or community) 
located outside the states of the United States, the District of 
Columbia, Guam or the Commonwealth of Puerto Rico.
    Part-time MBF. A MBF that operates fewer than 5 days a week 
exclusive of additional payday service. When only payday service is 
provided, the MBF may be termed a ``payday service facility.''
    Regulatory agency. Includes the Office of the Comptroller of the 
Currency, Department of the Treasury; the Federal Deposit Insurance 
Corporation; the Board of Governors of the Federal Reserve System; the 
respective Federal Reserve District Banks; the National Credit Union 
Administration; the various state agencies and commissions that oversee 
financial institutions; and, for military banking facilities (MBFs), 
the Fiscal Assistant Secretary of the Treasury (or designee).
    State bank. An institution organized and chartered under the laws 
of one of the states of the United States to operate a banking business 
within that state.
    Surcharge. A fee typically assessed on nonaccountholders to access 
an ATM. In accordance with Federal Reserve Board Regulation E, such a 
fee must be disclosed at the ATM either through a sign or screen 
disclosure. For the purposes of this chapter, surcharges are limited to 
ATMs.

Subpart B--DoD Directive 1000.11


Sec. 231.10  Financial institutions on DoD installations.

    (a) Purpose. This subpart:
    (1) Updates policies and responsibilities for financial 
institutions that serve Department of Defense (DoD) personnel on DoD 
installations worldwide. Associated procedures are contained in DoD 
7000.14-R.
    (2) Ensures that arrangements for the provision of services by 
financial institutions are consistent among the DoD Components, and 
that financial institutions operating on DoD installations provide, and 
are provided, support consistent with the policies stated in this 
subpart.
    (b) Applicability. This subpart applies to the Office of the 
Secretary of Defense, the Military Departments, the Joint Chiefs of 
Staff, the Joint Staff and the supporting Joint Agencies, the Combatant 
Commands, the Inspector General of the Department of Defense, the 
Uniformed Services University of the Health Sciences, the Defense 
Agencies, the DoD Field Activities, and all nonappropriated fund 
instrumentalities including the Military Exchange Services and morale, 
welfare and recreation (MWR) activities.
    (c) Definitions. Terms used in this subpart are set forth in Volume 
5 of DoD 7000.14-R.
    (d) Policy. (1) The following pertains to financial institutions on 
domestic DoD installations:

[[Page 43873]]

    (i) Except where they already may exist as of July 1, 1999, no more 
than one banking institution and one credit union shall be permitted to 
operate on a DoD installation.
    (ii) Upon the request of an installation commander and with the 
approval of the Secretary of the Military Department concerned (or 
designee), duly chartered financial institutions may be authorized to 
provide financial services on DoD installations to enhance the morale 
and welfare of DoD personnel and facilitate the administration of 
public and quasi-public monies. Arrangement for the provision of such 
services shall be in accordance with this subpart and related 
issuances.
    (iii) Financial institutions, or branches thereof, shall be 
established on DoD installations only after approval by the Secretary 
of the Military Department concerned (or designee) and the appropriate 
regulatory agency.
    (A) Only banking institutions insured by the Federal Deposit 
Insurance Corporation (FDIC) and credit unions insured by the National 
Credit Union Share Insurance Fund (NCUSIF) shall operate on DoD 
installations. These financial institutions may be either state or 
federally chartered. Foreign banking institutions operating on overseas 
DoD installations and chartered to provide financial services in that 
country are excepted from this requirement.
    (B) Military banking facilities (MBFs) shall be established on DoD 
installations only when a demonstrated and justified need cannot be met 
through other means. Normally, MBFs shall be authorized only at 
overseas locations. They may be considered for use at domestic DoD 
installations only when DoD Components have been unable to obtain, 
through normal means, financial services from a state or federally 
chartered financial institution authorized to operate in that state. In 
times of mobilization, it may become necessary to designate additional 
MBFs as an emergency measure. The Director, Defense Finance and 
Accounting Service (DFAS) may recommend the designation of banking 
facilities to the Department of the Treasury under provisions of 12 
U.S.C. 265.
    (C) Retail banking operations shall not be performed by any DoD 
Component. Solicitations for such services shall be issued, or 
proposals accepted, only in accordance with the policies identified in 
this subpart. DoD Components shall rely on commercially available 
sources in accordance with DoD Directive 4100.15.\12\
---------------------------------------------------------------------------

    \12\ See footnote 1 to Sec. 231.1(a).
---------------------------------------------------------------------------

    (D) Retail fees and services for products (to include related 
minimum balance requirements for noninterest checking, Negotiable Order 
of Withdrawal (NOW) and savings accounts) offered by financial 
institutions operating on domestic installations and domestic credit 
unions operating on DoD installations overseas shall not exceed 110 
percent of the industry-wide averages for banks in the ``Annual Report 
to Congress on Retail Fees and Services of Depository Institutions,'' 
published by the Board of Governors of the Federal Reserve System.
    (iv) Installation commanders shall not seek the provision of 
financial services from any entity other than the on-base banking 
office or credit union. The Director, DFAS, with the concurrence of the 
Under Secretary of Defense Comptroller (USD(C)), may approve exceptions 
to this policy. Such requests for exception shall be proposed through 
the Secretary of the Military Department concerned (or designee).
    (v) Financial institutions authorized to locate on DoD 
installations shall be provided logistic support as set forth in Volume 
5 of DoD 7000.14-R.
    (vi) Military disbursing offices, nonappropriated fund 
instrumentalities including MWR activities, the Military Exchange 
Services and other DoD Component activities requiring financial 
services shall use on-base financial institutions to the maximum extent 
feasible and consistent with sound management practice.
    (vii) The Department encourages the delivery of retail financial 
services on DoD installations via nationally networked automated teller 
machines (ATMs). ATMs are considered electronic banking services and, 
as such, shall be provided only by duly chartered financial 
institutions.
    (A) Notwithstanding the provisions contained in paragraph 
(d)(1)(iii)(D) of this section, on-base ATM service offered by 
financial institutions operating on domestic installations and domestic 
credit unions operating on DoD installations overseas shall be provided 
without surcharge.
    (B) Proposals by the installation commander to install ATMs from 
other than on-base financial institutions shall comply with the 
provisions of paragraph (d)(1)(iv) of this section and will be 
considered only when ATM service is unavailable or existing service is 
inadequate and the on-base financial institution(s) either declines to 
provide the service, fails to improve the existing service so that it 
is adequate or does not formally respond to the request within 30 days 
of the date of the request.
    (viii) Expansion of financial services (to include in-store 
banking) provided by on-base financial institutions must be approved by 
the installation commander. Such requests for expansion of services 
should be coordinated with the installation bank/credit union liaison 
officer prior to the commander's consideration. Approved expansion of 
services will be documented as an amendment to the existing operating 
agreement between the installation commander and the on-base financial 
institution. The amendment to the operating agreement and any required 
lease (to include a change to an existing lease) shall be in place 
prior to the initiation of new financial services or offices.
    (ix) The installation commander shall ensure, to the maximum extent 
feasible, that all financial institutions operating on his or her 
installation are given the opportunity to participate in pilot programs 
to demonstrate new financial-related technology (e.g., smart cards) or 
establish new business lines (e.g., in-store banking) where a 
determination has been made by the installation commander that the 
offering of such services is warranted.
    (x) Requests for termination of financial services must be approved 
by the installation commander, substantiated by sufficient evidence and 
forwarded to the Secretary of the Military Department concerned (or 
designee). The Secretary of the Military Department (or designee) shall 
coordinate such requests with the Under Secretary of Defense 
(Comptroller), through the Director, DFAS, before notification to the 
appropriate regulatory agency.
    (2) The following pertains to financial institutions on overseas 
DoD installations:
    (i) The extension of services by MBFs and credit unions overseas 
shall be consistent with the policies stated in this subpart and with 
the pertinent status of forces agreement, other intergovernmental 
agreement, or host-country law.
    (ii) The policies governing the operation of financial institutions 
on domestic DoD installations identified in paragraph (d)(1) of this 
section shall apply to financial institutions operating overseas.
    (iii) Financial services at overseas DoD installations may be 
provided by:
    (A) Domestic on-base credit unions operating overseas under a 
geographic franchise and, where applicable, as authorized by the 
pertinent status of forces agreement, other intergovernmental 
agreement, or host-country law.

[[Page 43874]]

    (B) MBFs operated under and authorized by the pertinent status of 
forces agreement, other intergovernmental agreement, or host-country 
law.
    (C) Domestic and foreign banks located on overseas DoD 
installations that are:
    (1) Chartered to provide financial services in that country, and
    (2) A party to a formal operating agreement with the installation 
commander to provide such services, and
    (3) Identified, where applicable, in the status of forces 
agreements, other intergovernmental agreements, or host-country law.
    (iv) Financial institutions authorized to locate on DoD 
installations shall be provided logistical support as set forth in the 
Volume 5 of DoD 7000.14-R.
    (v) In countries served by MBFs operated under contract, 
nonappropriated fund instrumentalities and on-base credit unions that 
desire and are authorized to provide accommodation exchange services 
shall acquire foreign currency from the MBF at the MBF accommodation 
rate; and shall sell such foreign currency at a rate of exchange that 
is no more favorable to the customer than that available from the MBF.
    (vi) Additional guidance pertaining to financial services overseas 
is set forth in Volume 5 of DoD 7000.14-R.
    (e) Responsibilities. (1) The Under Secretary of Defense 
(Comptroller) (USD(C)) shall develop and monitor policies governing 
establishment, operation, and termination of financial institutions on 
DoD installations and take final action on requests for exceptions to 
this subpart.
    (2) The Under Secretary of Defense (Acquisition and Technology) 
(USD(A&T)) shall develop and monitor policies and procedures governing 
logistical support furnished to financial institutions on DoD 
installations, including the use of DoD real property and equipment.
    (3) The Under Secretary of Defense (Personnel and Readiness) 
(USD(P&R)) shall advise the USD(C) on all aspects of on-base financial 
institution services that affect the morale and welfare of DoD 
personnel.
    (4) DoD Component responsibilities pertaining to this Directive are 
set forth in Volume 5 of DoD 7000.14-R.

Subpart C--Guidelines for Application of the Privacy Act to 
Financial Institution Operations


Sec. 231.11  Guidelines.

    (a) The following guidelines govern the application of DoD 
Directive 5400.11 to those financial institutions that operate under 
this subpart:
    (1) Financial institutions and their branches and facilities 
operating on DoD military installations do not fall within the purview 
of 5 U.S.C. 552 et seq.
    (i) These financial institutions do not fit the definition of 
``agency'' to which the Privacy Act applies, that is, any executive 
department, Military Department, government corporation, government-
controlled corporation, or other establishment in the executive branch 
of the government (including the Executive Office of the President), or 
an independent regulatory agency (5 U.S.C. 552(e) and 552a(a)(1)).
    (ii) These financial institutions are not ``government 
contractors'' within the meaning of 5 U.S.C. 552a(o), as they do not 
operate a system of records on behalf of an agency to accomplish an 
agency function. According to the Office of Management and Budget 
Privacy Act Guidelines, the provision relating to government 
contractors applies only to systems of records actually taking the 
place of a Federal system which, but for the contract, would have been 
performed by an agency and covered by the Privacy Act. Clearly, the 
subject institutions do not meet these criteria.
    (iii) Since the Act does not apply to them, these financial 
institutions are not required to comply with 5 U.S.C. 552a(e)(3) in 
obtaining and making use of personal information in their relationships 
with personnel authorized to use such institutions. Thus, these 
institutions are not required to inform individuals from whom 
information is requested of the authority for its solicitation, the 
principal purpose for which it is intended to be used, the routine uses 
that may be made of it, or the effects of not providing the 
information. There also is no requirement to post information of this 
nature within on-base banking and credit union offices.
    (2) The financial institutions concerned hold the same position and 
relationship to their account holders, members, and to the government 
as they did before enactment of OMB Circular A-130. Within their usual 
business relationships, they still are responsible for safeguarding the 
information provided by their account holders or members and for 
obtaining only such information as is reasonable and necessary to 
conduct business. This includes credit information and proper 
identification, which may include social security number, as a 
precondition for the cashing of checks.
    (3)(i) Financial institutions may incorporate the following 
conditions of disclosure of personal identification in all contracts, 
including loan agreements, account signature cards, certificates of 
deposit agreements, and any other agreements signed by their account 
holders or members:

    I hereby authorize the Department of Defense and its various 
Components to verify my social security number or other identifier 
and disclose my home address to authorized (name of financial 
institution) officials so that they may contact me in connection 
with my business with (name of financial institution). All 
information furnished will be used solely in connection with my 
financial relationship with (name of financial institution).

    (ii) When the financial institution presents such signed 
authorizations, the receiving military command or installation shall 
provide the appropriate information.
    (4) Even though an agreement described in paragraph (a)(3) of this 
section has not been obtained, the Department of Defense may provide 
these financial institutions with salary information and, when 
pertinent, the length or type of civilian or military appointment, 
consistent with DoD Directives 5400.11 and 5400.7. Some examples of 
personal information pertaining to DoD personnel that normally can be 
released without creating an unwarranted invasion of personal privacy 
are name, rank, date of rank, salary, present and past duty 
assignments, future assignments that have been finalized, office phone 
number, source of commission, and promotion sequence number.
    (5) When DoD personnel with financial obligations are reassigned 
and fail to inform the financial institution of their whereabouts, they 
should be located by contacting the individual's last known commander 
or supervisor at the official position or duty station within that 
particular DoD Component. That commander or supervisor either shall 
furnish the individual's new official duty location address to the 
financial institution, or shall forward, through official channels, any 
correspondence received pertaining thereto to the individual's new 
commander or supervisor for appropriate assistance and response. 
Correspondence addressed to the individual concerned at his or her last 
official place of business or duty station shall be forwarded as 
provided by postal regulations to the new location. However, once an 
individual's affiliation with the Department of Defense is terminated 
through separation or retirement, the Department's ability to render 
locator assistance (i.e., disclose a home address) is severely 
curtailed unless the public

[[Page 43875]]

interest dictates disclosure of the last known home address. The 
Department may, at its discretion, forward correspondence to the 
individual's last known home address. The Department may not act as an 
intermediary for private matters concerning former DoD personnel who 
are no longer affiliated with the Department.
    (b) Questions concerning this guidance should be forwarded through 
channels to the Deputy Chief Financial Officer, Office of the Under 
Secretary of Defense (Comptroller), The Pentagon, Washington, DC 20301-
1100.

Appendix A to Part 231--Sample Operating Agreement

Operating Agreement Between Military Installations and Banks/Credit 
Unions

    Note: The following operating agreement template identifies 
general arrangement and content. Content of the actual operating 
agreement may vary according to the circumstances of each 
installation.

Operating Agreement Between (Name of Installation), (State or Country 
Installation Located) and (Name of Bank/Credit Union).

    This Agreement is made and entered into this day by and between 
the installation commander of (Name of Installation) in his or her 
official capacity as installation commander, hereinafter referred to 
as the ``Commander'' and the (Name of Bank/Credit Union), having its 
principal office at (Location of Home Office) hereinafter referred 
to as the ``Bank/Credit Union,'' together hereinafter referred to as 
``the parties.'' Whereas the Commander and the Bank/Credit Union 
enter into this Operating Agreement upon the mutual consideration of 
the promises, covenants, and agreements hereinafter contained:
    1. The parties understand and agree that this Agreement shall in 
no way modify, change, or alter the terms and conditions of Lease 
Number (number of lease) covering the use of real property described 
therein, and this Agreement shall continue, subject to the 
termination provisions herein-after set forth, during the terms of 
said lease and any extensions thereof. In the case of a bank 
operating a military banking facility (MBF) overseas, this agreement 
will not change the conditions of the contract between the bank and 
the Department of Defense.
    2. The Bank/Credit Union agrees to operate a (State Bank, 
National Bank, Independent Bank, Branch Bank, Military Banking 
Facility or Credit Union) on-base in accordance with the policies 
and procedures set forth in Volume 5, Chapter 34 of the DoD 
Financial Management Regulation or, for the Overseas Military 
Banking Program (OMBP), the policies and procedures set forth in 
Volume 5, Chapter 34 of the DoD Financial Management Regulation and 
the applicable DoD contract. The hours of operations shall be 
between (Hour Office Opens) and (Hour Office Closes), and on the 
following days (Week Days Office Open), except on government 
holidays when the Bank/Credit Union may be closed. The Program 
Office for the OMBP shall notify the commander of any changes to the 
DoD contract.
    3. The Bank/Credit Union shall provide the following services:
a. Services for Individuals 
    (1) Demand (checking) account services.
    (2) Cashing personal checks and government checks for 
accountholders.
    (3) Maintaining savings accounts and (any other interest-bearing 
accounts).
    (4) Selling official checks, money orders, and traveler's 
checks.
    (5) Selling and redeeming United States savings bonds.
    (6) Providing direct deposit service.
    (7) Electronic banking (Automated Teller Machines).
b. Services for Disbursing Officers
    (1) Furnishing cash (if the financial institution's terms for 
doing so is consistent with sound management practices).
    (2) Accepting deposits for credit to the Treasury General 
Account (where the financial institution has entered into an 
agreement with the Department of the Treasury).
c. Services for Nonappropriated Fund Instrumentalities and Private 
Organizations
    (1) Demand (checking) account services, including wire 
transfers.
    (2) Savings accounts and nonnegotiable certificates of deposit 
or other interest-bearing accounts offered by the bank.
    (3) Currency and coin for change.

    4. Service charges shall be as follows:
    a. Service for Individuals.
    (1) No fees shall be charged to individuals for the services 
listed in subpara graph 3.a.(2), 3.a.(5) and 3.a.(7), above, except 
that checks drawn on other financial institutions may be treated in 
accordance with the financial institution's established policy. Any 
charge to cash a government check shall not exceed that typically 
charged by financial institutions in the vicinity of the 
installation.
    (2) Checking and savings accounts. Fees for individual checking 
and savings accounts shall be the customary service charges of the 
bank/credit union or those negotiated for base personnel per the 
attached schedule.
    (3) Sale of official checks, money orders, traveler's checks and 
other types of financial paper. Charges for these services shall be 
the customary charges of the financial institution operating the on-
base banking/credit union office.
    b. Service for Disbursing Officers. No charge shall be made for 
the services listed in subparagraph 3.b.(2), above. Compensation to 
the financial institution shall be per its separate agreement with 
the Department of the Treasury. Charges, if any, for the services 
stated in subparagraph 3.b.(1) shall be as locally negotiated with 
the financial institution.
    c. Nonappropriated Fund Instrumentalities and Private 
Organizations. State the charges or refer to a schedule of charges 
for funds and organizations that do not participate in a central 
banking program. For those activities participating in a central 
banking program, determine the compensation to the financial 
institution by account analysis.
    5. It is agreed that the Bank/Credit Union shall:
    a. Notify the Commander of any proposed changes to the attached 
schedule of fees and services at least 30 days prior to 
implementation.
    b. Follow the requirements in Volume 5, Chapter 34 of the DoD 
Financial Management Regulation and any changes thereto.
    c. Comply with Department of the Treasury requirements for 
establishment and operation of a Treasury General Account where the 
bank/credit union agrees to act as a depository for government 
funds.
    d. Absolve the (Military Service) and its representatives of 
responsibility or liability for the financial operation of the bank/
credit union; and for any loss (including losses due to criminal 
activity), expenses, or claims for damages arising from bank/credit 
union operations.
    e. Indemnify, and hold harmless the United States from (and 
against) any loss, expense, claim, or demand, including attorney 
fees, court costs, and costs of litigation, to which the government 
may be subjected as a result of death, loss, destruction, or damage 
in connection with the use and occupancy of (Military Service) 
premises occasioned in whole or in part by officers, agents or 
employees of the institution operating a bank/credit union office.
    f. Favorably respond, whenever feasible, to reasonable local 
command requests for lectures and printed materials to support 
consumer credit education programs, financial management program and 
newcomer's briefings.
    g. Prominently post in the lobby of the bank/credit union the 
name, duty telephone number and photograph of the Bank/Credit Union 
Liaison Officer.
    h. Allow, with reasonable notification, authorized auditors or 
installation comptroller representatives to verify financial 
operational data provided by the institution at the request of the 
installation commander.
    i. Accept the government travel card in all on-base ATMs 
operated by the bank/credit union.
    j. Abide by the installation fire protection program, including 
immediate correction of fire hazards noted by the installation fire 
inspector during periodic fire prevention inspections.
    6. The Commander shall provide the following space and support:
    a. Space requirements for bank/credit union operations will be 
administered in accordance with the existing lease. (Show Number of 
Lease).
    b. Utilities (i.e., electricity, gas, water and sewage), 
heating, intrastation telephone service, and custodial and 
janitorial services to include garbage disposal and outdoor 
maintenance (such as grass cutting and snow removal) on a 
reimbursable basis.
    c. Assistance in locating military personnel and civilian 
employees who tender uncollectable checks, overdraw their accounts, 
default on loans, or otherwise owe money to (or are owed money by) 
the Bank/Credit Union.
    d. Making recovery of funds in such cases as allowed by 
regulation.
    7. Termination of this Agreement shall be consistent with the 
termination provision of

[[Page 43876]]

the real property lease and Volume 5, Chapter 34, of the DoD 
Financial Management Regulation. The Secretary of the (Military 
Department) shall have the right to terminate this Agreement at any 
time. Any termination of the right of the Bank/Credit Union to 
operate on the installation shall render this Agreement terminated 
without any applicable action by the Commander.
    8. Any provision of this Agreement that is contrary to or 
violates any laws, rules, or regulations of the United States, its 
agencies, or the state of (State Bank/Credit Union Located) that 
apply on federal installations shall be void and have no force or 
effect; however, both parties to this Agreement agree to notify the 
other party promptly of any known or suspected continuing violation 
of such laws, rules, or regulations.
    9. So long as this Agreement remains in effect, it shall be 
reviewed jointly by the Commander and the Bank/Credit Union at least 
once every 5 years to ensure compatibility with current DoD 
issuances and to determine if any changes are required to the 
Agreement.
    In witness whereof, the Commander, and the Bank/Credit Union, by 
their duly authorized office, have hereunto set their hands this day 
of (Day, Month, Year).

----------------------------------------------------------------------
Bank/Credit Union Official

----------------------------------------------------------------------
Installation Commander

Appendix B to Part 231--In-Store Banking

    A. Selection Process. The purpose of this guidance is to assure 
an impartial and thorough process to select the best on-base 
financial institution to provide in-store banking services when such 
services are desired and approved by the installation commander.
    1. Consistent with DoD Component delegation, the final decision 
to solicit for an in-store banking office rests with the 
installation commander.
    2. The DoD Component seeking in-store banking (e.g., Defense 
Commissary Agency, Military Exchange Services and MWR activities) 
shall draft the solicitation letter.
    3. The solicitation letter shall be reviewed by the installation 
legal counsel prior to its release.
    4. Close coordination among all cognizant DoD elements is 
essential throughout the selection process.
    5. The Bank/Credit Union Liaison Officer(s) shall be the focal 
point(s) of the selection process.
    6. During the selection process, all communication between 
requesting DoD Component and the financial institutions shall be 
channeled through the Bank/Credit Union Liaison Officer(s).
    B. Specific Procedures:
    1. The need for in-store banking service may be identified from 
either:
    a. An unsolicited proposal from an on-base financial 
institution,
    b. A DoD Component's request, or
    c. An installation commander's request.
    2. The cognizant installation commander is responsible for 
assessing the environment and authorizing the Bank/Credit Union 
Liaison Officer(s) to pursue the acquisition of in-store banking 
services. If no authorization is given, no further action is 
required.
    3. The cognizant installation commander shall determine whether 
a solicitation is required. (A solicitation shall be required 
whenever there is two or more financial institutions on a DoD 
installation). If no solicitation is required, then the Bank/Credit 
Union Liaison Officer shall work directly with the on base financial 
institution to obtain the requested services. Where there is neither 
a banking office nor an on-base credit union, the solicitation 
process outlined in paragraph 340502, as supplemented by the 
provisions outlined in paragraph A, above, apply.
    4. The requesting DoD Component shall prepare a solicitation 
letter and present the letter, through the Bank/Credit Union Liaison 
Officer, to the installation commander for signature. The 
solicitation letter shall identify the financial services being 
requested and classify these services as either mandatory or 
optional. In addition, the solicitation letter shall highlight any 
services that will be weighed as more important than others during 
the evaluation of the proposals. Any space consideration and terms 
of the proposed agreement also shall be identified in the letter.
    5. In order to maintain the integrity of the solicitation 
process, all communications among the requesting agency, the 
installation commander, and the interested financial institutions 
shall be directed through the Bank/Credit Union Liaison Officer(s). 
The Bank/Credit Union Liaison Officer(s) shall forward the 
solicitation letter to both on-base financial institutions. All 
proposals shall be referred to the requesting DoD Component for 
evaluation and subsequent selection. Credit union proposals must 
contain certification from the NCUA or appropriate state regulatory 
agency that the provision of the requested services complies fully 
with regulatory guidelines and statute. The requesting DoD Component 
shall submit a written recommendation, and supporting rationale, to 
the installation commander for final approval. The installation 
commander shall approve or disapprove the requesting DoD Component's 
recommendation and notify the requesting agency of that decision.
    6. The Bank/Credit Union Liaison Officer(s) shall notify in 
writing the selected financial institution and request that 
institution to coordinate with the proper activity to begin any 
construction, modifications or renovations necessary to open the in-
store banking office. The cognizant facility management personnel 
shall begin the process of obtaining the necessary outgrant 
instruments. Concurrently, the requesting DoD Component 
representative and the financial institution representative shall 
draft the appropriate amendment to the operating agreement. The 
amendment shall contain provisions regarding: (a) the roles and 
responsibilities of all parties involved, (b) the financial services 
to be provided, and (c) the logistical support arrangements to 
include custodial services and security provisions. The amendment 
shall be coordinated with the Bank/Credit Union Liaison Officer(s) 
prior to forwarding that document to the installation commander for 
signature. The amendment shall be signed by the installation 
commander and the appropriate representatives from the financial 
institution and the requesting DoD Component.

Appendix C to Part 231--Sample Certificate of Compliance for Credit 
Unions

Certificate of Compliance

    I, (name), general manager of the (credit union), located at 
(place), certify that this credit union complies with the 
requirements of the Federal Credit Union Act, section 124 (12 U.S.C. 
1770), for the allotment of space in Federal buildings without 
charge for rent or services. At least 95 percent of the (credit 
union and branch) current membership is composed of persons who are 
now, or were when they joined this credit union, military personnel 
or Federal employees, or members of their families.
Date-------------------------------------------------------------------

Name-------------------------------------------------------------------
(President of the board of directors or general manager)

(Note: The Certificate of Compliance is posted on credit union 
letterhead)

Appendix D to Part 231--Foreign Geographic Field of Membership 
(Franchise) Assignment Listing

    Credit Union services to authorized persons and organizations on 
DoD installations overseas are provided by domestic defense credit 
unions operating under a geographic field of membership (franchise). 
The DoD geographic fields of membership (franchises) are as follows:

Bahrain

Navy Federal Credit Union

Belgium

Andrews Federal Credit Union

Canada

Navy Federal Credit Union

Cuba

Navy Federal Credit Union

Diego Garcia

Navy Federal Credit Union

Federal Republic of Germany

Andrews Federal Credit Union:
    State of Hessen
    State of Nordrhein Westfalen
    Hamlen Pymont--Sub District of Hannover County/District State of 
Niedersachsen
    Mainz--Sub District of County/District Rheinhessen State of 
Rheinlandpfalz
    Bad Kreuznach--Sub District of Koblenz County/District State of 
Rheinlandpfalz
    County/District of Unterfranken--State of Bayern
Finance Center Federal Credit Union:
    State of Bayern excluding County/District of Unterfranken
Pentagon Federal Credit Union:
    State of Hamburg
    State of Schleswig Holstein

[[Page 43877]]

    State of Bremen
    State of Niedersachsen excluding Hamlen Pymont Sub District 
Hannover County/District
Service Federal Credit Union:
    State of Berlin
    State of Baden-Wurttemburg
    State of Saarland
    State of Rheinlandpfalz excluding:
    Bad Krueznach--Sub District of Koblenz
    Mainz--Sub District of Rheinhessen

Greece/Crete

Army and Air Force Mather Federal Credit Union
Navy and Marine Corps--Navy Federal Credit Union

Hong Kong

Navy Federal Credit Union

Iceland

Navy Federal Credit Union

Italy

Army and Air Force--Global Credit Union
Navy and Marine Corps Navy--Federal Credit Union

Japan

Army and Air Force--United Services of America Federal Credit Union
Navy and Marine Corps--Navy Federal Credit Union

Korea

United Services of America Federal Credit Union

The Netherlands

Andrews Federal Credit Union

Okinawa (Prefecture of Japan)

Army and Air Force--Pentagon Federal Credit Union
Navy and Marine Corps--Navy Federal Credit Union

The Philippines

Army and Air Force--Alaska USA Federal Credit Union
Navy/Marine Corps--Navy Federal Credit Union

Portugal

Pentagon Federal Credit Union

Spain

Army and Air Force--Pentagon Federal Credit Union
Navy and Marine Corps--Navy Federal Credit Union

Turkey

Pentagon Federal Credit Union

United Kingdom

Army and Air Force--Keesler Federal Credit Union
Navy/Marine Corps--Navy Federal Credit Union

World-Wide

Tower Federal Credit Union (representative offices only)
Security Service Federal Credit Union (representative offices only)

    Note: Questions concerning this guidance should be forwarded 
through channels to the Deputy Chief Financial Officer, Office of 
the Under Secretary of Defense (Comptroller), The Pentagon, 
Washington, DC 20301-1100.

    Dated: August 5, 1999.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 99-20509 Filed 8-10-99; 8:45 am]
BILLING CODE 5001-10-P