[Federal Register Volume 66, Number 33 (Friday, February 16, 2001)]
[Rules and Regulations]
[Pages 10578-10580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-3667]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 210

RIN 1510-AA81


Federal Government Participation in the Automated Clearing House

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Interim rule with request for comment.

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SUMMARY: This rule amends our regulation governing the use of the 
Automated Clearing House (ACH) system by Federal agencies. The 
regulation adopts, with some exceptions, the ACH Rules developed by 
NACHA--The Electronic Payments Association (NACHA) as the rules 
governing the use of the ACH system by Federal agencies. We're issuing 
this interim rule to address changes that NACHA has made to the ACH 
Rules during the past year.

DATES: This interim rule is effective March 19, 2001. The incorporation 
by reference of the publication listed in the rule is approved by the 
Director of the Federal Register as of March 19, 2001.

ADDRESSES: You can download this interim rule at the following website: 
http://www.fms.treas.gov/ach/. You may also inspect and copy this rule 
at: Treasury Department Library, Freedom of Information Act (FOIA) 
Collection, Room 1428, Main Treasury Building, 1500 Pennsylvania 
Avenue, NW, Washington, DC 20220. Before visiting, you must call (202) 
622-0990 for an appointment.
    You can view Treasury's procedural guidelines for ACH payments in 
the Green Book at the following website: http://www.fms.treas.gov/greenbook. You may also register at this website for e-mail 
notification of updates to the Green Book.
    You may send comments electronically to the following address: 
[email protected]. You may also mail comments to Cynthia L. 
Johnson, Director, Cash Management Policy and Planning Division, 
Financial Management Service, 401 14th Street, SW, Room 420, 
Washington, DC 20227.

FOR FURTHER INFORMATION CONTACT: Walt Henderson, Senior Financial 
Program

[[Page 10579]]

Specialist, at (202) 874-6705 or [email protected]; Natalie 
H. Diana, Senior Attorney, at (202) 874-6680 or 
[email protected]; Adam Martin, Financial Program Specialist, 
at (202) 874-6881 or [email protected]; Michele Heine, 
Financial Program Specialist, at (202) 874-8645 or 
[email protected]; or Cynthia L. Johnson, Director, Cash 
Management Policy and Planning Division, at (202) 874-6590 or 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Part 210 incorporates, with certain exceptions, the ACH Rules. 
NACHA periodically updates the ACH Rules. Each year NACHA publishes a 
new rule book that reflects the changes to the ACH Rules that have been 
approved since the publication of the previous rule book. Part 210 
currently provides that any amendment to the ACH Rules, as published in 
NACHA's 2000 rule book, that takes effect after September 15, 2000, 
will not apply to Federal government ACH entries unless we publish 
notice of acceptance of the amendment in the Federal Register. 31 CFR 
Sec. 210.3(b)(2). NACHA recently published its 2001 rule book. We're 
publishing this interim rule in order to indicate which amendments to 
the ACH Rules we're accepting and which amendments we're rejecting.\1\
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    \1\ The 2000 ACH Rule changes were published in an interim rule 
with request for comment. 65 FR 18866 (April 7, 2000).
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II. Summary of Rule Changes

A. Changes to ACH Rules

    The ACH Rules published in NACHA's 2001 rule book reflect changes 
to the ACH Rules published in NACHA's 2000 rule book related to five 
topics \2\
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    \2\ NACHA also adopted in the 2001 rule book a rule that 
modifies the process by which amendments to the ACH Rules are 
approved. Under the new rule, approval of an amendment requires two 
thirds of the voting power cast on the amendment by members entitled 
to vote. The rule change became effective as of January 1, 2001. 
Since neither the Financial Management Service nor other Federal 
agencies vote on the amendment of the ACH Rules, this rule change 
does not affect the Federal government's participation in the ACH 
system and we do not believe it is necessary or appropriate to 
address this rule modification in Part 210.
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1. Telephone Initiated ACH Debit
    NACHA has adopted a rule enabling an Originator to initiate a 
single entry ACH debit to a consumer's account for transactions 
initiated over the telephone. The rule requires the Originator to 
receive oral authorization from the Receiver, and to retain that 
authorization for a period of two years from the termination or 
revocation of that authorization. The Originator must either tape 
record the authorization or provide the Receiver with written notice 
confirming the oral authorization prior to the settlement date of the 
entry. The rule permits the initiation of ACH debits by telephone in 
three sets of circumstances: When a consumer makes a telephone call to 
a company with which the consumer has an existing relationship, when a 
company makes a telephone call to a consumer with whom the company has 
an existing relationship, or when a consumer makes a telephone call to 
a company with which the consumer has no prior relationship. The rule 
change will become effective September 14, 2001.
2. Corrected Returns Time Frame
    NACHA has adopted a rule that amends the ACH Rules to shorten the 
time frame for the transmission of corrected returns to two banking 
days from the settlement date of the dishonored return. This change 
will make the time frame consistent with that of the contested 
dishonored return process. This rule change will reduce the risk to the 
Originator and originating depository financial institution (ODFI) 
because corrected returns will be received more quickly than is 
currently required. The rule change will become effective March 16, 
2001.
3. Internet-Initiated Entries
    NACHA has adopted a rule that is intended to establish a foundation 
for promoting secure Internet-initiated ACH payments. The rule 
establishes a new Standard Entry Class (SEC) Code, WEB, that will 
specifically identify consumer ACH debit transactions initiated over 
the Internet. Among other things, the rule requires that Originators 
utilize commercially reasonable fraudulent transaction detection 
systems to screen entries; verify that routing numbers are valid; and 
establish secure Internet sessions prior to and during the key entry by 
consumers of banking information. The rule will become effective March 
16, 2001.
4. Accounts Receivable Check Truncation
    In 1999 NACHA adopted a short-term rule expanding the definition of 
the Prearranged Payment and Deposit Entry (PPD) format in the ACH Rules 
to allow Originators to utilize the PPD format to truncate checks 
received through the U.S. mail for payment of goods or services and 
convert them to ACH debit entries. The implementation period for the 
rule ended on December 15, 2000. However, in order to allow for the 
continuation of pilot programs testing lockbox check truncation, NACHA 
has issued a revised short-term rule with an implementation period from 
December 15, 2000 through March 14, 2002. Unlike the original short-
term rule, the revised short-term rule permits truncation of items 
exceeding $2,500.
5. Cross-Border Payments
    NACHA has amended the ACH Rules governing the transmission and 
receipt of cross-border entries to (1) include necessary legal 
protections for ACH network participants in light of modifications to 
the Cross-Border Payment Operating Rules that were adopted by the 
Cross-Border Council and (2) allow for the transmission and receipt of 
cross-border debit transactions. The amendment became effective 
September 15, 2000.

B. ACH Rule Changes That We Are Accepting

    We are accepting the ACH Rules that address telephone-initiated ACH 
entries, corrected returns time frames, and cross-border payments. 
These rule changes are effective as of the effective date of this 
interim rule or NACHA's effective date for the rule change, whichever 
is later. In order to incorporate these rules in Part 210, the only 
change necessary to the current regulation is to replace references to 
the 2000 rule book with references to the 2001 rule book.

C. ACH Rule Changes That We Are Not Accepting

    We are not accepting, at this time, the ACH Rules that address 
accounts receivable check truncation or Internet-initiated entries. We 
are currently evaluating Treasury initiatives in both of these areas 
and will publish a notice of proposed rulemaking in the near future in 
order to provide the public with an opportunity to comment before we 
adopt rules related to these transactions.

D. Section-by-Section Analysis

Section 210.2(d)

    We are amending the definition of ``applicable ACH Rules'' at 
section 210.2(d) to reference the rules published in NACHA's 2001 rule 
book rather than the rules published in NACHA's 2000 rule book. We also 
are adding new subsection 210.2(d)(6) and (d)(7) to exclude the rules 
relating to accounts receivable check truncation and Internet-initiated 
entries from the definition of ``applicable ACH Rules.''

[[Page 10580]]

Section 210.3(b)

    We are amending subsection 210.3(b), ``Incorporation by reference--
applicable ACH Rules,'' by replacing the references to the ACH Rules as 
published in the 2000 rule book with references to the ACH Rules as 
published in the 2001 rule book.

III. Procedural Requirements

Request for Comment

    We invite comment on all aspects of the interim rule.

Request for Comment on Plain Language

    On June 1, 1998, the President issued a memorandum directing each 
agency in the Executive branch to write its rules in plain language. 
This directive is effective for all new proposed and final rulemaking 
documents issued on or after January 1, 1999. We invite comment on how 
to make this interim rule clearer. For example, you may wish to 
discuss: (1) Whether we have organized the material to suit your needs; 
(2) whether the requirements of this interim rule are clear; or (3) 
whether there is something else we could do to make this rule easier to 
understand.

Notice and Comment; Effective Date

    We find that good cause exists for issuing this interim rule 
without prior notice and comment. Under the Administrative Procedure 
Act, an agency is permitted to issue a rule without prior notice and 
comment when the agency for good cause finds that notice and public 
procedure thereon are impracticable, unnecessary, or contrary to the 
public interest. 5 U.S.C. 553(b)(B). We believe that it is important to 
address the publication of new ACH Rules as quickly as possible in 
order to mitigate the uncertainty and inconvenience to financial 
institutions and agencies that would result from a time lag in 
responding to NACHA's rule changes. When we proposed to address changes 
to the ACH Rules by reviewing and responding to rule changes on an 
annual basis, we received many comments expressing concern over the 
potential consequences of such a time lag.
    Those consequences include uncertainty as to the rules governing 
government ACH transactions, as well as the inability of financial 
institutions to segregate the processing of those transactions. For 
these reasons, we find that we have good cause for issuing this interim 
rule without prior notice and comment.
    Nevertheless, we are inviting comment and will consider the 
comments received.

Executive Order 12866, Regulatory Planning and Review

    This interim rule does not meet the criteria for a ``significant 
regulatory action'' as defined in Executive Order 12866.

Regulatory Flexibility Act

    Because notice and public comment are not required, the Regulatory 
Flexibility Act (5 U.S.C. 601) does not apply.

Paperwork Reduction Act

    This interim rule contains no new collections of information. 
Therefore, the Paperwork Reduction Act does not apply.

List of Subjects in 31 CFR Part 210

    Automated Clearing House, Electronic funds transfer, Financial 
institutions, Fraud, and Incorporation by reference.

Authority and Issuance

    For the reasons set out in the preamble, 31 CFR part 210 is amended 
as follows:

PART 210--FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED 
CLEARING HOUSE

    1. The authority citation for Part 210 continues to read as 
follows:

    Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 U.S.C. 321, 3301, 
3302, 3321, 3332, 3335, and 3720.


    2. Revise Sec. 210.2(d) to read as follows:


Sec. 210.2  Definitions.

* * * * *
    (d) Applicable ACH Rules means the ACH Rules with an effective date 
on or before September 14, 2001, as published in Parts II, III, and IV 
of the ``2001 ACH Rules: A Complete Guide to Rules & Regulations 
Governing the ACH Network,'' (see Sec. 210.3(b)), except:
    (1) ACH Rule 1.1 (limiting the applicability of the ACH Rules to 
members of an ACH association);
    (2) ACH Rule 1.2.2 (governing claims for compensation);
    (3) ACH Rule 1.2.4; 2.2.1.10; Appendix Eight and Appendix Eleven 
(governing the enforcement of the ACH Rules, including self-audit 
requirements);
    (4) ACH Rules 2.2.1.8; 2.6; and 4.7 (governing the reclamation of 
benefit payments);
    (5) ACH Rule 8.3 and Appendix Two (requiring that a credit entry be 
originated no more than two banking days before the settlement date of 
the entry--see definition of ``Effective Entry Date'' in Appendix Two);
    (6) 2.1.4; 2.9; 3.6; 7.6.3; and 7.7.3 (governing PPD accounts 
receivable truncated check debit entries); and
    (7) ACH Rule 2.10 and 3.8 (governing Internet-initiated entries) 
and Appendix Two (definition of WEB entry).
* * * * *

    3. Revise Sec. 210.3(b) to read as follows:


Sec. 210.3  Governing law.

* * * * *
    (b) Incorporation by reference--applicable ACH Rules. (1) This part 
incorporates by reference the applicable ACH Rules, including rule 
changes with an effective date on or before September 14, 2001, as 
published in Parts II, III, and IV of the ``2001 ACH Rules: A Complete 
Guide to Rules & Regulations Governing the ACH Network.'' The Director 
of the Federal Register approves this incorporation by reference in 
accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies of the ``2001 
ACH Rules'' are available from NACHA--The Electronic Payments 
Association, 13665 Dulles Technology Drive, Suite 300, Herndon, 
Virginia 20171. Copies also are available for public inspection at the 
Office of the Federal Register, 800 North Capitol Street, NW., Suite 
700, Washington, DC; and the Financial Management Service, 401 14th 
Street, SW., Room 420, Washington, DC 20227.
    (2) Any amendment to the applicable ACH Rules that takes effect 
after September 14, 2001, shall not apply to Government entries unless 
the Service expressly accepts such amendment by publishing notice of 
acceptance of the amendment to this part in the Federal Register. An 
amendment to the ACH Rules that is accepted by the Service shall apply 
to Government entries on the effective date of the rulemaking specified 
by the Service in the Federal Register notice expressly accepting such 
amendment.
* * * * *

    Dated: February 8, 2001.
Richard L. Gregg,
Commissioner.
[FR Doc. 01-3667 Filed 2-15-01; 8:45 am]
BILLING CODE 4810-35-P