[Federal Register Volume 66, Number 174 (Friday, September 7, 2001)]
[Rules and Regulations]
[Pages 46707-46727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22173]


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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: Final rule.

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SUMMARY: This final 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: This rule is effective June 1, 2001.

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

SUPPLEMENTARY INFORMATION:

Background

    Stateside military banking began in 1941 when the Department 
realized that financial services were urgently needed by military and 
civilian personnel on domestic installations. To address this need, the 
Department permitted installation commanders to negotiate with nearby 
local banks to establish branches on their installation. Today, there 
are over 230 domestic installations that have either a bank or credit 
union or both. To ensure consistency between installations in the 
level, cost and types of financial services offered the Department 
established regulations in parts 230 and 231 to govern the operation 
and oversight of these institutions. These regulations limit the number 
of financial institutions that may operate on an installation to one 
bank and one credit union (with a grandfather provision). The 
regulations require full and open competition for a full spectrum of 
banking services (to include electronic banking services). Policy 
guidance relating to the military banking program, by regulation, is 
the responsibility of the Under Secretary of Defense (Comptroller) 
while operational guidance rests with the Defense Finance and 
Accounting Service (DFAS). To ensure financial services are available 
on our overseas installations, the Department operates the overseas 
military banking program. The DFAS has been assigned the program office 
responsibilities for this effort, which is provided under contract by a 
domestic financial institution. In FY 2000, the overseas military 
banking program contractor operated 110 banking offices and over 250 
automated teller machines in 10 foreign countries. Overseas military 
banks support DoD personnel and their families, disbursing officers, 
appropriated fund activities (such as the Defense Commissary Agency) 
and nonappropriated fund activities (such as the Army and Air Force 
Exchange Service).

Comments, and Changes to, the Proposed Rule

    The Department of Defense published a proposed rule on August 11, 
1999 (64 FR 43858). Over 240 comments from 55 entities were received in 
response to the publication of the proposed rule. The majority of these 
comments focused on three areas in the proposed rule: (1) Prohibiting 
the assessment of automated teller machine (ATM) surcharging; (2) the 
establishment of a ceiling for other fees and charges; and (3) monthly 
financial reporting. The first two were addressed in 32 CFR part 230. 
The comments and the disposition of those comments on monthly financial 
reporting are specifically addressed below. The remainder of the 
comments were either administrative in nature or suggested that 
additional clarification was needed in certain areas. None of these 
resulted in any significant changes to the proposed rule.
    The previously published proposed rule (Sec. 231.4(g)(5)) would 
have required that the on-base financial institution include in its 
operating agreement with the installation commander a provision that it 
will furnish copies of its monthly financial reports and other local 
publications to the installation commander (or designee). Prior to the 
consolidation of the guidance for banks and credit unions, the 
provision for monthly reporting was only included in the credit union 
guidance with periodic financial reporting required for banks only in 
certain situations. Therefore, most of the comments received were 
objections from on-base banks. The comments reflected that the banking 
industry is highly regulated and quarterly reports are generated as 
required by Federal and State regulators. Thus, they did not see a need 
to require the monthly production of information that is neither 
requested nor needed. It was suggested that when additional information 
is needed, it would be more appropriate for it to be provided on an 
``as requested'' basis. There may be occasions where the installation 
commander will need financial information that is unobtainable from 
sources other than the on-base financial institution. For example, 
there may be a need for financial information by the installation 
commander to accommodate an evaluation of a potential expansion of 
existing on-base financial services or information may be required to 
assist in the development of a solicitation when the on-base financial 
institution has given notice of its intent to terminate operations on 
the installation. Based on the comments received, the section has been 
revised to require an on-base financial institution furnish copies of 
its financial reports and other local publications only on an ``as 
needed'' basis in response to a formal request from the installation 
commander (or designee).

[[Page 46708]]

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.

Section 202, Public Law 104-4, ``Unfunded Mandates Reform Act''

    It has been certified that the rule does not involve a Federal 
mandate that may result in the expenditure by State, local and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more and that such rulemaking will not significantly or 
uniquely affect small governments.

Executive Order 13132, ``Federalism''

    It has been certified that the rule does not have federalism 
implications. The rules do not have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government.

List of Subjects in 32 CFR Part 231

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

    Accordingly, 32 CFR part 231 is 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 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 Applications of the Privacy Act to Financial 
Institution Operations
231.11   Guidelines.
Appendix A to part 231--Sample Operating Agreement Between Military 
Installations and Financial Institutions
Appendix B to part 231--In-store Banking.
Appendix C to part 231--Sample certificate of compliance for credit 
unions.

    Authority: 10 U.S.C. 136.

Subpart A--Guidelines


Sec. 231.1  Overview.

    (a) Purpose. This part implements DoD Directive 1000.11 (32 CFR 
part 230) \1\ 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 
herein.
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    \1\ Copies may be obtained via Internet at http://www.dtic.whs/directives.
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    (b) Applicability. This part applies to the Office of the Secretary 
of Defense (OSD), the Military Departments, the Joint Chiefs of Staff 
(JCS), the Joint Staff and the supporting Joint Agencies, the Combatant 
Commands, the Inspector General of the Department of Defense (IG, DoD), 
the Defense Agencies, the DoD Field Activities, the Uniformed Services 
University of the Health Sciences (USUHS), all DoD nonappropriated fund 
instrumentalities including the Military Exchange Services and morale, 
welfare and recreation (MWR) activities, and all other organizational 
entities within the Department of Defense.


Sec. 231.2  Policy.

    The policy pertaining to financial institutions operating on DoD 
installations is contained in DoD Directive 1000.11 (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 this part.
    (b) The Under Secretary of Defense (Acquisition, Technology and 
Logistics) (USD(AT&L)) shall monitor policies and procedures governing 
logistical support furnished to financial institutions on DoD 
installations, including the use of DoD real property and equipment.
    (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

[[Page 46709]]

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(AT&L), 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.
    (14) Maintain a listing of all geographic franchises assigned to 
credit unions serving DoD overseas installations.
    (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 banking institution, 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 (32 CFR part 230).
    (4) Evaluate the services provided and related charges and fees 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 1000.11 (32 CFR part 230) to the USD(C) 
through the Director, DFAS.
    (10) Monitor and encourage the use of financial institutions on DoD 
installations to accomplish the following ends.
    (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, including U.S. savings bonds. 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, without charge, basic financial education and counseling 
services. Financial education and counseling services refer to basic 
personal and family finances such as budgeting, checkbook balancing and 
account reconciliation, benefits of savings, prudent use of credit, how 
to start a savings program, how to shop and apply for credit, and the 
consequences of excessive credit.
    (12) Establish liaison, as appropriate, with federal and state 
regulatory agencies and financial institution trade associations, 
leagues, and councils.
    (13) Make military locator services available to on-base financial 
institutions in accordance with the Privacy Act guidelines in subpart B 
of this part.
    (14) Permit DoD personnel to serve on volunteer boards or 
committees of on-base financial institutions, without compensation, 
when neither a conflict of duty nor a conflict of interest is involved, 
in accordance with DoD Directive 5500.7.\3\
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    \3\ See footnote 1 to Sec. 231.1(a).
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    (15) Allow DoD personnel to attend conferences and meetings that 
bring together representatives of on-base financial institutions, when 
neither a conflict of duty nor a conflict of interest is involved, 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 the following types of 
requests affecting financial institutions overseas.
    (i) Establish financial institutions in countries not presently 
served. Such requests will include a statement 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.
    (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 that 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

[[Page 46710]]

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 as specified in this part 
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 volunteer boards or committees 
of on-base financial institutions, without compensation, when neither a 
conflict of duty nor a conflict of interest is involved, in accordance 
with DoD Directive 5500.7.
    (7) Allow DoD personnel to attend conferences and meetings that 
bring together representatives of on-base financial institutions, when 
neither a conflict of duty nor a conflict of interest is involved, 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 a valid 
requirement.


Sec. 231.4  General provisions.

    (a) Security. The installation commander (or designee) and 
officials of the on-base financial institutions shall work with the 
installation security authorities to establish an understanding as to 
each entity's responsibilities. The on-base financial institutions are 
encouraged to establish an ongoing relationship with installation 
security authorities on all matters of asset protection.
    (1) A written agreement shall be established outlining the security 
procedures that the financial institution will follow and the role that 
installation security authorities will play with regard to alarms, 
movement of cash, and procedures to be followed in response to criminal 
activity (e.g., armed robbery).
    (2) Cash and other assets in on-base banking offices and credit 
unions are the property of those financial institutions. Maintenance of 
alarms and use of armored cars is the sole responsibility of the on-
base financial institution. The on-base financial institution is also 
solely responsible for the guarding or escorting of cash unless the 
installation commander determines that providing such services is 
desirable or necessary.
    (b) Central locator services. Military locator services shall be 
provided per the guidelines in subpart B of 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. The 
financial institution will pay the appropriate fee for each request to 
the respective Military Department.
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    \6\ See footnote 1 to Sec. 231.1(a).
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    (2) The DoD Components shall 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, and cite 
the cognizant Military Service regulation that authorizes the use of 
locator services. If a financial institution needs immediate service, 
the cognizant institution official 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 Worldwide Locator, 
U.S. Army Enlisted Record and Evaluation Center, 8899 E. 56th Street, 
Indianapolis, IN 46249-5301.
    (ii) For addresses of Navy active, retired, separated and civilian 
personnel, financial institutions may telephone (901) 874-3388 or write 
to: Navy Personnel Command, PERS-312F, 5720 Integrity Drive, 
Millington, TN 38055-3120.
    (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: Air Force Personnel Center, MSIMDL Suite 
50, 550 C Street West, Randolph AFB, TX 78150-4752.
    (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) An on-base financial institution 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) An on-base financial institution 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 does not impose an unreasonable 
workload.
    (3) An on-base financial institution may include an insert in the 
installation's newcomers package (or equivalent). This insert should 
benefit newcomers by identifying the financial services that 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 are not permitted to distribute 
competitive

[[Page 46711]]

literature or forms on the installation. These institutions, however, 
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 advertisers are 
not official publications and, thus, may include advertising paid for 
by any financial institution.
    (7) Installation activities, including Military Exchange Services 
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 the Military Exchange 
Services from distributing literature on affinity credit card services 
that those Military Exchange Services may acquire centrally through 
competitive solicitation.
    (d) Automated teller machine (ATM) service. 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 ATMs on DoD 
installations shall bear the cost of ATM installation, maintenance and 
operation. The installation commander may enter into an agreement with 
the on-base financial institution wherein the installation may acquire 
and provide ATMs to on-base financial institutions under certain 
circumstances, such as when it is advantageous to the government to 
have one or more ATMs available for use but the acquisition cost to the 
financial institution is prohibitive. No ATM shall be purchased by an 
installation unless approved by the Secretary of the Military 
Department concerned (or designee). In all such cases, installation 
costs and all logistic support shall be borne by the financial 
institution.
    (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(c) and 231.7(b).
    (3) The availability of ATM service shall not preclude the later 
establishment of a banking office should conditions change on an 
installation.
    (4) Proposals by an installation commander to install ATMs on 
domestic installations from other than on-base financial institutions, 
including the Military Exchange Services, morale, welfare and 
recreational activities and/or other nonappropriated fund 
instrumentalities, shall be considered only when:
    (i) ATM service is unavailable or existing service is inadequate, 
and
    (ii) 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. Any ATM service from other 
than on-base financial institutions is considered an exception to 
policy. The procedures to establish an on-base financial institution 
set forth in Secs. 231.5(c) and 231.7(b) shall be followed when 
soliciting for such ATM services. Proposals offering shared-access ATMs 
(e.g., ATMs operated by two or more financial institutions where their 
accountholders are not assessed any or all fees applicable to 
nonaccountholders) 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. On installations 
with MBFs operated under contract, the MBFs shall be the primary source 
of the ATM service except when a determination has been made by the 
cognizant contract program office that providing the service is either 
not cost effective or precluded by pertinent status of forces 
agreements, other intergovernmental agreements or host-country law. In 
those instances where ATM service from foreign banking institutions is 
authorized and provided by other than the on-base financial 
institution, 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 submitted for approval by the 
appropriate Combatant Commander (or designee) prior to its execution. A 
copy of the operating agreement will be forwarded through DoD Component 
channels to the DFAS.
    (e) Domestic and international treasury general accounts. In cases 
where authorization will be required for the on-base banking office or 
credit union to act as a Treasury General Account (TGA) domestic 
depositary (or, on overseas installations, an International Treasury 
General Account (ITGA) depository), the financial institution shall 
satisfy the risk management standard established by the Secretary 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.
    (f) Staffing. (1) On-base financial institutions shall be staffed 
adequately (i.e., commensurate with industry standards for similar 
numbers of accountholders and financial services rendered). Staffing at 
overseas MBFs operated under DoD contract shall be maintained within 
negotiated ceilings.
    (2) All staffing shall comply fully with applicable equal 
employment opportunity laws and with the spirit of DoD equal employment 
opportunity policies as set forth in DoD Directive 1440.1.\8\
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    \8\ See footnote 1 to Sec. 231.1(a).
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    (3) DoD personnel, excluding military retirees and their 
dependents, may not serve as directors of domestic or foreign banking 
institutions operating banking offices on those DoD installations where 
they currently are assigned. This does not preclude 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, from retaining his or her directorship if called to 
active duty.
    (4) DoD personnel may not be detailed to duty with an on-base 
financial institution located on a DoD installation. Off-duty 
personnel, however, may be employed by an on-base financial institution 
subject to approval by the installation commander (or designee). Such 
employment must not interfere with the performance of the individual's 
official duties and responsibilities.
    (g) 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.
    (h) Financial education. (1) Officials of on-base financial 
institutions shall be

[[Page 46712]]

invited to take part in seminars to educate personnel on personal 
financial management and financial services. Financial institutions 
shall be encouraged to provide financial education and counseling 
services as an integral part of their financial service offerings. 
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 recommend 
workable repayment plans that avoid further endangering credit ratings 
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 difficulties in obtaining future 
credit at reasonable rates and terms and shall recommend its use only 
when no other alternative will alleviate the situation.
    (i) Operating agreements. (1) Before operations of an on-base 
banking office or credit union begin, a written operating agreement 
(Appendix C of this part) and the appropriate real estate outgrant 
(i.e., a lease, permit or license issued as identified in 
Secs. 231.5(e), 231.5(f), 231.5(g), 231.7(d), 231.7(e) and 231.7(f) 
shall be negotiated directly between the installation commander and 
officials of the designated financial institution. Thereafter, the 
operating agreement shall be jointly reviewed by the installation 
commander and the financial institution at least once every 5 years. 
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. 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:
    (i) 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.
    (ii) Agreement by both parties that they will comply with this part 
and DoD Directive 1000.11 (32 CFR part 230).
    (iii) Agreement by the on-base financial institution that it will 
furnish copies of its financial reports and other local publications on 
an ``as needed'' basis in response to a formal request from the 
installation commander (or designee).
    (iv) 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.
    (v) 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.
    (vi) Agreement by the on-base financial institution (or any 
successor) that it will provide no less than 180 days advance written 
notice to the installation commander before ceasing operations.
    (vii) Specification of the security services to be provided for 
guarding cash shipments, at times of unusual risk to the financial 
institution and to avoid excessive insurance costs charged to that 
institution.
    (viii) 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.
    (ix) 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.
    (x) Agreement that the financial institution will reimburse the 
installation for the provision of logistical support (such as 
custodial, janitorial, and other services provided by the government) 
at rates set forth in the lease or agreement between the installation 
and the financial institution.
    (xi) Statement that on-base financial institution operations shall 
be terminated, when required, under provisions specified in this part.
    (2) 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.
    (j) Installation financial services. (1) Retail banking operations 
shall not be performed by any DoD Component or nonappropriated fund 
instrumentality including the Military Exchange Services and morale, 
welfare and recreation (MWR) activities or any other organizational 
entity within the Department of Defense.
    (2) Financial services provided on DoD installations will be as 
uniform as possible for all personnel. 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 in the surrounding geographic area.
    (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 or 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) The on-base financial institution shall credit customer 
accounts not later than the deposit date of the allotment check or 
electronic funds transfer.
    (ii) The initiation of an allotment is voluntary (See Volume 7a, 
Chapter 42, Section 4202 of The DoD Financial Management Regulation 
(7200.14-R)). Thus, DoD personnel generally cannot be required to 
initiate an allotment for the repayment of a loan. Allotments 
voluntarily established by DoD personnel for the purpose of repaying a

[[Page 46713]]

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 basic financial 
education and counseling services available without charge to 
individuals seeking these services. Financial education and counseling 
services refer to basic personal and family finances such as budgeting, 
checkbook balancing and account reconciliation, benefits of savings, 
prudent use of credit, how to start a savings program, how to shop and 
apply for credit, and the consequences of excessive credit. DoD 
personnel in junior enlisted or civilian grades, or newly married 
couples who apply for loans, shall be given special attention and 
counseling.
    (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(h)(8).
    (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) General policy. Given their role in promoting morale and 
welfare, on-base banks shall be recognized and assisted by DoD 
Components at all levels.
    (b) 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 of those institutions.
    (iii) Available transportation between the installation and the 
financial institutions listed in paragraph (b)(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 name and location of the depositary used to make official 
deposits for credit to the TGA.
    (vi) 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.
    (vii) A written description and photographs of the space proposed 
for banking office use.
    (viii) A statement listing the requirements of the proposed banking 
office for safes and a vault, alarm systems, and surveillance 
equipment, when necessary.
    (ix) 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 the 
standard level user charge. As such, space occupied by a banking office 
to serve military needs will be assigned and charged by the GSA.
    (x) 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 Volume 5, Chapter 5, paragraph 050102 of The DoD 
Financial Management Regulation (7000.14-R).
    (c) 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 
(c)(4) of this section the preferred sources of on-base financial 
services at domestic installations are federally-insured, state-
chartered or federally-insured, federally-chartered banking 
institutions operating in the local area. The guidance at paragraph 
(c)(1) of this section addresses distribution of the solicitation only 
and does not preclude any federally-insured, state-chartered or 
federally-insured, federally-chartered banking institution from 
responding at any stage (from local distribution in paragraph (c)(1)(i) 
of this section to publication in the Commerce Business Daily and 
financial institution trade journals as outlined in paragraph 
(c)(1)(iii) of this section of the solicitation process. 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 shall 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.

[[Page 46714]]

    (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 banking institution 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, shall be predicated on the services to be 
provided as outlined in appendix A, paragraph 3, of this part, the 
financial institution's schedule of service fees and charges, and the 
extent of logistical support required. Prior to issuance of the 
solicitation, the preparing office shall identify (for internal use 
during the subsequent evaluation period) the weights to be applied to 
the factors reflected in the solicitation. Proposals shall 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.
    (d) 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 termination of banking office 
operations shall be initiated by the installation commander only under 
one of the following conditions:
    (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 herein.
    (iv) When merger, acquisition, change of control or other action 
results in violation of the terms and conditions of the existing 
operating agreement, the Secretary of the Military Department (or 
designee) shall terminate the operating agreement with the existing 
banking institution. When the merger, acquisition, change of control or 
other action does not result in violation of the terms and conditions 
of the existing operating agreement, the Secretary of the Military 
Department (or designee) shall initiate a novation action of the 
operating agreement identifying the change in control.
    (2) The installation commander shall forward requests for 
termination to the Secretary of the Military Department concerned (or 
designee). The Secretary of the Military Department (or designee) shall 
coordinate all termination actions 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 herein.
    (e) Use of space, logistical support, and military real property 
for domestic banks.--(1) Lease Terms. (i) The consideration for a lease 
shall be determined by appraisal of fair market rental value in 
accordance with 10 U.S.C. 2667. Periodic reappraisals shall be based 
upon the fair market rental value exclusive of the improvements made by 
the banks.
    (ii) The term of the lease shall not exceed 5 years except where 
the banking institution uses its own funds to improve existing 
government space as outlined in paragraph (e)(5) of this section. If 
space occupied is assigned by the GSA, charges to financial 
institutions for space and services shall be at the GSA standard level 
user rate.
    (iii) Leases shall include the following provisions:
    (A) 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.
    (B) The lessee shall provide written notice 180 days prior to 
voluntarily terminating the lease.
    (C) 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.
    (2) Logistical support. (i) The banking office shall be housed in a 
building accessible to DoD personnel on the installation and in a 
location permitting reasonable security.
    (ii) Banking institutions shall perform all maintenance, repair, 
improvements, alterations, and construction on the banking premises.
    (iii) Banking institutions shall pay for all utilities (i.e., 
electricity, natural gas or fuel oil, water and sewage), heating and 
air conditioning, intrastation telephone service, and custodial and 
janitorial services to include garbage disposal and outdoor maintenance 
(such as grass cutting and snow removal) at rates set forth in the 
lease, operating agreement or other written agreement between the 
installation and the banking institution.
    (3) Leases executed before the issuance of this part may not be 
altered solely as a result of the provisions of this part unless a 
lessee specifically requests a renegotiation under these provisions. No 
lease may be negotiated or renegotiated, nor may any rights be waived 
or surrendered without compensation to the government.
    (4) When a banking institution participates in the construction of 
a shopping mall complex the lease shall cover only land where the 
banking office physically is located.
    (5) When a banking institution uses its own funds to improve 
existing government space, leases, for a period not to exceed 25 years 
subject to periodic review every 5 years to assess changes in fair 
market value, may be negotiated for a period commensurate with the 
appraised value of the leasehold improvements divided by the annual 
lease fee.
    (f) Land leases. (1) A lease for construction of a building to 
house a banking office shall be at the appraised fair market rental 
value. Charges shall apply for the term of the lease not to exceed 25 
years, subject to periodic

[[Page 46715]]

review every 5 years to assess changes in fair market value.
    (2) 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.
    (3) 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.
    (g) Construction. Banks 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 with an 
information copy sent to the Secretary of the Military Department 
concerned (or designee). The Secretary of the Military Department (or 
designee) shall have 30 days to provide comments to the Major Command 
before final approval can be granted.
    (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) The Congress shall be notified of all construction projects, 
using other than appropriated funds and costing over $500,000, in 
accordance with DoD Instruction 7700.18 \10\.
---------------------------------------------------------------------------

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

    (5) Proposals for construction of structures on installations at a 
banking institution's expense shall be reviewed and reported in 
accordance with regulations of the Military Department concerned. 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) Statement that the banking institution will be responsible 
for utility connections and other utility and maintenance costs
    (viii) Statement that the building will be used only for financial 
services
    (ix) A statement that financial institution officials understand 
the 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) Banks shall pay for interior alterations and maintenance as 
well as utilities, custodial, and other furnished services.
    (7) Banks shall pay all construction costs.
    (h) Bank liaison officer (BLO). Each installation commander having 
an on-base banking office shall appoint a BLO. The BLO's 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 BLO shall:
    (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. Postal units and credit unions, however, are exempt from this 
restriction. Also, ensure that other financial services, to include 
vehicle financing on domestic installations, are offered only by the 
banking office.
    (3) Attend financial workshops, conferences, and seminars as 
appropriate. These 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 financial services made available to DoD personnel and 
organizations.
    (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 C) 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 financial 
institution.
    (6) Review the schedule of service charges and fees annually, and 
ensure that the operating agreement is updated at least every 5 years. 
Renegotiate the financial services offered and related service charges 
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 the DFAS.
    (9) Assist the installation commander to report to the appropriate 
regulatory agency any evidence suggesting malpractice by banking office 
personnel.
    (i) 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 a commissary operated by the 
Defense Commissary Agency, a Military Exchange, or any other on-base 
retail facility.
    (1) Provision of the requested services, and any associated 
stipulations, 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.

[[Page 46716]]

    (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, the 
bank liaison officer, and the installation commander (or designee). The 
final amendment shall be signed by the installation commander and the 
on-base financial institution with the acknowledgement of the DoD 
Component that will host the in-store banking operation.
    (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 by the installation commander through a 
lease to the banking institution that will provide in-store service.
    (j) Domestic military banking facilities (MBFs).--(1) Domestic MBF 
establishment. (i) Requests to establish MBFs shall 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.
    (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.
    (2) 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 the banking service previously rendered has been satisfactory and 
that the institution's proposal is adequate.
    (3) 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 from the following sources:
    (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.
    (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 shall 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 name and location of the depository used to make official 
deposits for credit to the TGA.
    (E) 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.
    (F) 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.
    (G) 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.
    (H) In countries where no MBFs currently are operated under 
contract, a statement from the cognizant 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 paragraph (c)(1)(i) of this section.
    (I) Any other pertinent information to justify the establishment of 
an MBF.
    (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 are 
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 are 
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-time 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

[[Page 46717]]

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 and 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, 
then the following applies:
    (i) Installation or community commanders shall send requests for 
banking services or unsolicited proposals from foreign banking 
institutions to their Major Commands with supporting data as required 
in Sec. 231.5(b)(1).
    (ii) Major Commands shall 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) shall coordinate with the DFAS to 
seek the designation of the parent foreign banking institution as a 
depositary and financial agent of the U.S. Government by the Department 
of the Treasury.
    (iii) Banking offices in this category cannot become operational 
until the foreign parent banking institution has been designated a 
depositary and financial agent of the U.S. Government. The institution 
also shall indicate a willingness and ability to provide collateral 
backing for any official and nonappropriated fund U.S. dollar deposits. 
Any collateral pledged shall be in a form acceptable to the DFAS and 
the Department of the Treasury.
    (c) Logistical support.--(1) Overseas MBFs operated under contract. 
(i) Given that appropriated funds support those MBFs that are operated 
under contract, installation or community commanders shall provide the 
MBFs logistical support to the maximum possible extent. 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 MBF 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 most users and 
permits the maximum security. In addition, office space for MBF area 
and district administrations and storage space for retention of 
records, files, and storage of supplies.
    (C) DoD housing on a rental basis to assigned MBF staff that are 
designated as key and essential MBF managerial 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.\11\
---------------------------------------------------------------------------

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

    (D) Education, on a space-available, tuition-paying basis, provided 
by the Department of Defense Education Activity to minor dependents of 
assigned staff in accordance with DoD Directive 1342.13.\12\
---------------------------------------------------------------------------

    \12\ 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, natural gas or fuel oil, 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 Switched Network (DSN) voice and data communication to 
include, where feasible, 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 replenishment 
of ATM currency and receipts, alarm system failures, and to avoid undue 
risks or insurance costs on the part of the MBF.
    (I) U.S. Military Postal Service access in accordance with DoD 
Directive 4525.6.\13\ 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.
---------------------------------------------------------------------------

    \13\ 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 shall 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 shall be subject to normal 
fees.
    (L) Issuance by local commanders of invitational travel orders, at 
no expense to the U.S. Government when required for official onsite 
visits by U.S. based banking institution officials.
    (ii) Suggestions for changes to the logistical support provisions 
of the MBF contract may be forwarded for consideration through command 
channels to the Director, DFAS.
    (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 shall not exceed that provided to contract 
MBFs, as specified in paragraph (c)(1) of this section.
    (d) Operations.--(1) General conditions of MBF operation. (i) 
Before initiating MBF operations, a written agreement shall be 
negotiated directly and signed by the installation or community 
commander and a senior official 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 shall 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

[[Page 46718]]

additional cost to the government. When added cost is involved, the 
commander shall 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, shall be forwarded to the 
Director, DFAS (or designee).
    (2) Overseas MBFs operated under contract.--(i) General. Overseas 
MBFs shall operate under terms and conditions established at the time 
of 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 precluded by status of forces agreements, other intergovernmental 
agreements, or host-country law.
    (iii) Services rendered. DoD banking contracts specify the services 
to be rendered and related charges. Suggestions for expansion or 
modification of authorized services, fees or charges may be forwarded 
through DoD Component channels to the Director, 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 Director, DFAS (or designee) 
shall advise each U.S. banking contractor operating an overseas MBF of 
this Regulation and furnish a copy to the contractor.
    (v) Conditions of operation. (A) Part-time and payday service MBFs 
shall 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 the Director, DFAS (or designee).
    (C) The MBF contractor and military disbursing officers shall 
establish cash management practices that minimize the cash required 
conducting 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 The DoD Financial Management Regulation (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 foreign banking 
institution and shall be reflected in the operating agreement. The list 
of authorized customers included in the operating agreement shall be 
consistent with the applicable status of forces agreement, 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 Director, DFAS (or 
designee).
    (iii) Operating agreements. Before agreements are executed, they 
will be coordinated with and approved by the cognizant Combatant 
Command (or designee).
    (iv) Conditions of operation. A foreign banking institution shall 
provide equipment (except that furnished by the installation or 
community), supplies, and trained 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 Director, DFAS 
(or designee).
    (ii) For all other relocations, prior approval from the Director, 
DFAS (or designee) shall be obtained through DoD Component channels.
    (5) Comments. Installation or community commanders shall send their 
banking comments through DoD Component channels to the Director, DFAS 
(or designee) 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 including 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(h).
    (e) Termination. Requests to eliminate any or all MBFs in a foreign 
country shall include documentation that the U.S. Chief of Diplomatic 
Mission has been informed and that arrangement 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 Director, DFAS (or 
designee).
    (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 Director, 
DFAS (or designee), who shall notify the Department of the Treasury so 
that the foreign banking institution's authority as a Depositary and 
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 financial institutions 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.

[[Page 46719]]

    (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(b)(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 could establish eligibility 
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 applicable 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(c)(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 applicable state regulatory agency shall be 
notified and asked to establish or amend the selected credit union's 
charter to include the new location.
    (4) No commitment may be made to a credit union regarding its 
proposal until the appropriate regulatory agency has approved the 
requested charter change.
    (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 Regulation, 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 the USD(C) 
through the Director, 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.
    (4) Termination resulting from merger, acquisition, or change of 
control. When merger, acquisition, change of control or other action 
results in violation of the terms and conditions of the existing 
operating agreement, the Secretary of the Military Department (or 
designee) shall, subsequent to coordination with the USD(C), through 
the Director, DFAS, terminate the operating agreement with the existing 
credit union. When the merger, acquisition, change of control or other 
action does not result in violation of the terms and conditions of the 
existing operating agreement, the Secretary of the Military Department 
(or designee) shall initiate a novation action of the operating 
agreement identifying the change in control.
    (5) Termination of lease. The lessee shall provide written notice 
180 days prior to a voluntary termination of the lease. Upon 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.
    (d) Use of space, logistical support, and military real property 
for domestic credit unions.--(1) Criteria for use of space in 
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 exceeding 5 years except where 
the credit union uses its own funds to improve existing government 
space as outlined in paragraphs (d)(1)(ii)(C) and (d)(1)(ii)(D) of this 
section. 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 section 170 of the Federal Credit 
Union Act (12 U.S.C. 1770). The provision of no-cost office space for a 
period not to exceed 5 years is limited to credit unions if at least 95 
percent of the membership to be served by the allotment of space 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. A written statement 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. This 
statement shall be prepared on the credit union's letterhead and signed 
either by the chairman of the board of directors or the president. A 
certification also shall be required whenever there is a merger, 
takeover, or significant change in a field of membership. This 
certification shall 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 every 5 years 
and on renewal of each no-cost permit or license. (See appendix C of 
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 June 9, 2000, 
credit unions giving less than full service or not serving all assigned 
DoD personnel are not authorized no-cost office 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 commensurate 
with the extent of the improvements not to exceed 25 years as 
determined by the DoD Component concerned. 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)(1)(ii)(B) of this section. If the credit union desires, this permit 
or license may extend through the period identified in the

[[Page 46720]]

original permit or license not to exceed 25 years.
    (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 25 years subject to periodic review every 5 years to assess 
changes in fair market value. Duration of this lease shall be 
commensurate with the extent of the improvements as determined by the 
DoD Component concerned.
    (iii) All space assigned by the GSA, whether leased or in a federal 
office building, is reimbursable to the GSA at the standard level user 
charge. Consequently, the GSA shall charge the benefiting DoD Component 
for any space assigned for credit union operations. Such space is 
subject to the provisions of paragraph (d)(1)(i) and (ii) of this 
section.
    (2) Logistical support. When available, custodial and janitorial 
services to include garbage disposal and outdoor maintenance (such as 
grass cutting and snow removal), heating and air conditioning, 
utilities (i.e., electricity, natural gas or fuel oil, water, and 
sewage), fixtures, and maintenance shall be furnished without cost to 
credit unions occupying no-cost office space in government buildings. 
With the exception of intrastation telephone service, 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.
    (3) Leases executed before the issuance of this part may not be 
altered solely as a result of the provisions of this part unless a 
lessee specifically requests a renegotiation under these provisions. No 
lease may be negotiated or renegotiated, nor may any rights be waived 
or surrendered without compensation to the government.
    (4) When a credit union participates in the construction of a 
shopping mall complex the lease shall cover only land where the branch 
or facility physically is located.
    (5) Administrative fees. All administrative fees associated with 
the initiation, modification, or renewal of an outgrant shall be borne 
by the installation, provided that the credit union satisfies the 95 
percent membership criterion requirement for no-cost office space as 
outlined paragraph (d)(1)(ii)(A) of this section, and that the fees are 
associated with the no-cost space.
    (e) Land leases. Credit unions entering into a land lease to 
construct a building on a DoD installation shall do so in accordance 
with Sec. 231.5(f).
    (f) Construction. Credit unions constructing a building on a DoD 
installation shall do so in accordance with Sec. 231.5(g).
    (g) Credit unions offering ATM service shall do so in accordance 
with Sec. 231.4(d).
    (h) Staffing. (1) On-base credit unions shall provide full service. 
To do so, credit union offices shall be staffed by:
    (i) An official authorized to act on loan applications.
    (ii) An individual authorized to sign checks; and
    (iii) A qualified financial counselor available to serve members 
during operating hours.
    (2) Exceptions to paragraph (h)(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.
    (3) When an on-base credit union can support only minimum staffing, 
one of the positions required in paragraph (h)(1)(i) of this section or 
paragraph (h)(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.
    (i) 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 name and duty telephone 
number shall be displayed prominently 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(h)).
    (j) In-store banking. In-store banking services may be provided in 
accordance with Sec. 231.5(i) except that:
    (1) Credit unions interested in submitting proposals to provide 
requested in-store banking services shall provide a statement from the 
NCUA or applicable state regulatory agency certifying the credit 
union's authority to offer the requested financial services to the 
commissary, Military Exchange, 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 section 170 of the Federal Credit Union Act (12 U.S.C. 
1770).


Sec. 231.8  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 franchise.
    (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.
    (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. The ultimate decision to provide 
services overseas rests with the credit union itself.
    (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 cognizant 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 credit 
union operations and will indicate any conditions imposed by the host 
country with respect to those operations.
    (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

[[Page 46721]]

union services under the following provisions.
    (i) Where there is a DoD designated geographic 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 supporting 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. The Director, DFAS 
(or designee) shall maintain a listing of all geographic franchises 
assigned to credit unions serving DoD overseas installations.
    (ii) Where there is no DoD designated geographic franchise, the 
Secretary of the Military Department (or designee) shall:
    (A) Coordinate requests, through the Director, DFAS (or designee), 
to obtain a geographic franchise. A geographic franchise is the 
authorization granted to a credit union by the Office of the Under 
Secretary of Defense (Comptroller) (OUSD(C)) to provide financial 
services in a specific geographic region located outside the United 
States, its territories and possessions.
    (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 the NCUA or applicable 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 franchise within that 
country an opportunity to assume the franchise being vacated. If all 
such institutions decline, the geographic franchise shall be offered to 
the federally insured 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:
    (A) Offers to provide service.
    (B) Meets host country requirements (if any) and
    (C) Is assigned the former geographic 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 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 shall 
provide logistical credit union support. Such support normally shall 
include:
    (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 credit union's insurance carrier; 
construction of counters, teller cages, and customer and work areas; 
necessary modifications and alterations to existing buildings. 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) Education, on a space-available, tuition-paying basis, provided 
by the Department of Defense Education Activity to minor dependents of 
assigned staff in accordance with DoD Directive 1342.13.
    (4) Utilities (i.e., electricity, natural gas or fuel oil, water 
and sewage), heating, intrastation telephone service, and custodial and 
janitorial services.
    (5) DSN voice and data communication to include, where feasible, 
internet access.
    (6) U.S. Military Postal Service support under DoD Directive 
4525.6. The 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.
    (7) Military guards, civilian guards (for use within the 
installation), military police, or other protective services to 
accompany shipments of money from the MBF to the credit union and 
return where it is impractical or not authorized to have a local 
armored car service or civilian police authorities entering a military 
installation to provide cash escort service or when the cost of 
obtaining such service is prohibitive. This level of protective service 
also shall be provided at other times as required to include 
replenishment of ATM currency and receipts, alarm system failures, and 
to avoid undue risks or insurance costs.
    (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 the applicable status of forces agreement, other 
intergovernmental agreements, or host-country law.
    (2) The Department assigns overseas credit unions a prescribed 
geographic franchise. Any credit union, however, may continue to serve 
its members stationed overseas by mail or telecommunications, to 
include access to the Internet.
    (3) A credit union proposing a new service to be offered by a 
branch office that is not authorized by the operating agreement shall 
coordinate the establishment of the new service through the cognizant 
Component command to the Combatant Command. The new service shall 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 applicable status of forces 
agreement, 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

[[Page 46722]]

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 wholesale rate and sell it 
at a rate of exchange no more favorable than that available to 
customers of the MBF.
    (6) Credit unions operating under a geographic franchise on an 
overseas DoD installation shall not publicize, display or sell vehicles 
on the installation.
    (7) The NCUA or applicable state regulatory agency 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.
    (f) Glossary of terms.--
    (1) 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 (e.g., Armed Forces Financial Network (AFFN), Cirrus, or 
PLUS) that processes the transaction.
    (2) Banking institution. An entity chartered by a state or the 
federal government to provide financial services.
    (3) 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.
    (4) Branch bank. A separate unit chartered to operate at an on-base 
location geographically remote from its parent banking institution.
    (5) 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.
    (6) 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.
    (7) 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.
    (8) 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 Defense Agencies, the DoD 
Field Activities, the Uniformed Services University of the Health 
Sciences, all nonappropriated fund instrumentalities including the 
Military Exchange Services, and morale, welfare and recreation 
activities, and all other organizational entities within the Department 
of Defense.
    (9) 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 fund 
instrumentalities); and their dependents. On domestic DoD 
installations, retired U.S. military personnel and their dependents are 
included.
    (10) Domestic DoD installation. For the purposes of this 
Regulation, a military installation located within a state of the 
United States, the District of Columbia, Guam or the Commonwealth of 
Puerto Rico.
    (11) 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. 
The appraiser, however, shall 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.
    (12) 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, 
rural district, and other persons sharing a common bond as described by 
credit union board of directors policy or by Interpretation Ruling and 
Policy Statement (IRPS) 99-1. A field of membership is defined in the 
credit union's charter by the appropriate regulatory agency.
    (13) Financial institution. This term encompasses any banking 
institution, credit union, thrift institution and subordinate office 
branch or facility, each as separately defined herein.
    (14) 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.
    (15) Foreign banking institution. A bank located outside the United 
States chartered by the country in which it is domiciled.
    (16) 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:
    (i) Status of forces agreements, other intergovernmental 
agreements, or host-country law.
    (ii) Physical security requirements that cannot be resolved by the 
credit union or local command.
    (17) Geographic 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, its territories and possessions.
    (18) Independent bank. A bank specifically chartered to operate on 
one or more 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.

[[Page 46723]]

    (19) In-store banking. An expansion of financial services provided 
by an on-base financial institution within the premises of a commissary 
store operated by the Defense Commissary Agency, a Military Exchange 
outlet, and other on-base retail facilities.
    (20) 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.
    (21) Military banking facility (MBF). A banking office located on a 
DoD installation and operated by a financial institution that the 
Department of the Treasury specifically has authorized, under its 
designation as a ``Depository and Financial Agent of the U.S. 
Government,'' to provide certain banking services at the installation.
    (22) National bank. An association approved and chartered by the 
Comptroller of the Currency to operate a banking business.
    (23) On-base. Refers to physical presence on a domestic or overseas 
DoD installation.
    (24) Operating agreement. A mutual agreement between the 
installation commander and the on-base financial institution to 
document their relationships.
    (25) 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.
    (26) 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.''
    (27) 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 Banks; the National Credit Union 
Administration; Office of Thrift Supervision; 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).
    (28) 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.
    (29) Thrift institution. An institution organized and chartered 
under federal or state law as a Savings Bank, Savings Association, or 
Savings and Loan Association.

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 subpart 
A of this part.
    (2) Prescribes consistent arrangements for the provision of 
services by financial institutions among the DoD Components, and 
requires that financial institutions operating on DoD installations 
provide, and are provided, support consistent with the policies stated 
herein.
    (b) Applicability. This subpart applies to the Office of the 
Secretary of Defense, the Military Departments, the Chairman of the 
Joint Chiefs of Staff, the Combatant Commands, the Inspector General of 
the Department of Defense, the Defense Agencies, the DoD Field 
Activities, and all other organizational entities within the Department 
of Defense (hereafter collectively referred to as ``the DoD 
Components''), 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 
subpart A of this part.
    (d) Policy. (1) The following pertains to financial institutions on 
DoD installations:
    (i) Except where they already may exist as of May 1, 2000, 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 the applicable 
provisions of subpart A of this part.
    (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) Except in limited situations overseas (see paragraph 
(d)(2)(ii)(C) of this section), only banking institutions insured by 
the Federal Deposit Insurance Corporation and credit unions insured by 
the National Credit Union Share Insurance Fund or by another insurance 
organization specifically qualified by the Secretary of the Treasury, 
shall operate on DoD installations. These financial institutions may 
either be State or federally chartered; however, U.S. credit unions 
operated overseas shall be federally insured.
    (B) Military banking facilities (MBFs) shall be established on DoD 
installations only when a demonstrated and justified need cannot be met 
through other means. An MBF is a financial institution that is 
established by the Department of the Treasury under statutory authority 
that is separate from State or Federal laws that govern commercial 
banking. Section 265 of title 12, United States Code contains the 
provisions for the Department of the Treasury to establish MBFs. 
Normally, MBFs shall be authorized only at overseas locations. This 
form of financial institution may be considered for use at domestic DoD 
installations only when the cognizant DoD Component has been unable to 
obtain, through normal means, financial services from a State or 
federally chartered financial institution authorized to operate in the 
State in which the installation is located. 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 MBFs to the Department of the 
Treasury.
    (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. The DoD Components shall rely on commercially available 
sources in accordance with DoD Directive 4100.15.\14\
---------------------------------------------------------------------------

    \14\ See footnote 1 to Sec. 231.1(a).
---------------------------------------------------------------------------

    (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.
    (v) Financial institutions authorized to locate on DoD 
installations shall be provided logistic support as set forth in 
subpart A of this part.

[[Page 46724]]

    (vi) Military disbursing offices, nonappropriated fund 
instrumentalities (including MWR activities and the Military Exchange 
Services) and other DoD Component activities requiring financial 
services shall use on-base financial institutions to the maximum extent 
feasible.
    (vii) The Department encourages the delivery of retail financial 
services on DoD installations via nationally networked automated teller 
machines (ATMs).
    (A) ATMs are considered electronic banking services and, as such, 
shall be provided only by financial institutions that are chartered and 
insured in accordance with the provisions of paragraph (d)(1)(iii) of 
this section.
    (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.
    (viii) Expansion of financial services (to include in-store 
banking) requiring the outgrant of additional space or logistical 
support shall be approved by the installation commander. Any DoD 
activity or financial institution seeking to expand financial services 
shall coordinate such requests with the installation bank/credit union 
liaison officer prior to the commander's consideration.
    (ix) The installation commander shall ensure, to the maximum extent 
feasible, that all financial institutions operating on that 
installation are given the opportunity to participate in pilot programs 
to demonstrate new financial-related technology or establish new 
business lines (e.g., in-store banking) where a determination has been 
made by the respective DoD Component that the offering of such services 
is warranted.
    (x) The installation commander shall approve requests for 
termination of financial services that are 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 USD(C), through the 
Director, DFAS, before notification to the appropriate regulatory 
agency.
    (xi) Additional guidance pertaining to financial services is set 
forth in subpart A of this part.
    (2) The following additional provisions pertain to only 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 herein and with the 
applicable status of forces agreements, other intergovernmental 
agreements, or host-country law.
    (ii) 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 agreements, other intergovernmental 
agreements, or host-country law.
    (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.
    (iii) 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 the customer rate available 
at the MBF.
    (e) Responsibilities. (1) The Under Secretary of Defense 
(Comptroller) (USD(C)) shall develop 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, Technology and 
Logistics) (USD(AT&L)) shall 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 subpart are 
set forth in subpart A of this part.

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 \15\ to those financial institutions that operate 
under this part:
---------------------------------------------------------------------------

    \15\ See footnote 1 to Sec. 231.1(a).
---------------------------------------------------------------------------

    (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

[[Page 46725]]

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) 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.\16\ 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.
---------------------------------------------------------------------------

    \16\ See footnote 1 to 231.1(a).
---------------------------------------------------------------------------

    (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. Once an 
individual's affiliation with the Department of Defense is terminated 
through separation or retirement, however, the Department's ability to 
render locator assistance (i.e., disclose a home address) is severely 
curtailed unless the public 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

Sample Operating Agreement Between Military Installations and Financial 
Institutions

    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 Financial Institution).

    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 financial institution), having 
its principal office at (location of home office) hereinafter 
referred to as the ``financial institution,'' together hereinafter 
referred to as ``the parties.'' Whereas the commander and the 
financial institution 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 banking 
institution operating a military banking facility (MBF) overseas, 
this agreement will not change the conditions of the contract 
between the banking institution and the Department of Defense.
    2. The financial institution agrees to operate a (federally or 
state) chartered office on-base in accordance with the policies and 
procedures set forth in DoD Directive 1000.11, and Volume 5, Chapter 
34, of the DoD 7000.14-R (as codified in the Code of Federal 
Regulations (CFR) at 32 CFR parts 230 and 231, respectively); and, 
in addition for the Overseas Military Banking Program (OMBP), the 
policies and procedures set forth in the applicable DoD contract. 
The hours of operations shall be between (hour office opens) and 
(hour office closes), and on the following days (weekdays office 
open), except on government holidays when the financial institution 
may be closed. The Program Office for the OMBP shall notify the 
commander of any changes to the DoD contract.
    3. The financial institution 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 interestbearing 
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) Loan services.
    (8) Electronic banking (i.e., automated teller machines, 
internet banking).
    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 interestbearing accounts offered by the banking 
institution.
    (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 subparagraphs 3.a.(2), and 3.a.(5), above, except for 
subparagraph 3.a.(2), wherein 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. Fees assessed to 
accountholders and nonaccountholders for use of automated teller 
machines shall be the customary service charges of the financial 
institution or those negotiated for base personnel per the attached 
schedule.
    (2) Checking and savings accounts. Fees for individual checking 
and savings accounts shall be the customary service charges of the 
financial institution 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 office.

[[Page 46726]]

    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 financial institution shall:
    a. Notify the commander or designated representative 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 DoD 
7000.14-R, as codified in the Code of Federal Regulations (CFR), and 
any changes thereto.
    c. Comply with Department of the Treasury requirements for 
establishment and operation of a Treasury General Account where the 
financial institution 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 
financial institution; and for any loss (including losses due to 
criminal activity), expenses, or claims for damages arising from 
financial institution 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 financial institution operating an office of the 
financial institution.
    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 financial institution 
the name, duty telephone number of the (Bank or Credit Union) 
Liaison Officer.
    h. Accept the government travel card in all on-base ATMs 
operated by the financial institution.
    i. 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 financial institution operations shall 
be administered in accordance with the existing outgrant (i.e., 
lease, permit or license). (Show Number of Outgrant).
    b. Utilities (i.e., electricity, natural gas or fuel oil, water 
and sewage), heating and air conditioning, 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. DoD housing and minor dependent education in overseas 
locations for military banking facility (MBF) and credit union 
personnel in accordance with Secs. 231.6(c)(1)(i)(C), 
231.6(c)(1)(D), 231.8(c)(2) and 231.8(c)(3).
    7. Termination of this Agreement shall be consistent with the 
termination provision of the real property lease and subpart A. The 
Secretary of the (Military Department) shall have the right to 
terminate this Agreement at any time. Any termination of the right 
of the financial institution 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 in which the financial institution 
is 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 financial institution 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 financial 
institution, by their duly authorized office, have hereunto set 
their hands this day of (month, day, year).
----------------------------------------------------------------------
Financial Institution 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., in 
buildings operated by the Defense Commissary Agency, Military 
Exchange Services and MWR activities) shall draft the solicitation 
letter.
    3. Close coordination among all cognizant DoD organizations is 
essential throughout the selection process.
    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 (or designee) 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 are 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, use the solicitation 
process outlined in Sec. 231.5(c) of this chapter, as supplemented 
by the provisions outlined in paragraph A, above.
    4. 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. The installation commander (or designee) formally shall 
notify 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 should 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 should 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 (or designee) and the appropriate financial institution 
official with a copy furnished to the Secretary of the Military 
Department concerned (or designee) and the Director, DFAS (or 
designee).

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

    I, (name), Chairman of the Board of Directors or President of 
the (credit union), located at (place), certify that this credit 
union complies with the requirements of section 170 of the Federal 
Credit Union Act (12 U.S.C 1770), for the allotment of space in 
federal buildings without charge for rent or

[[Page 46727]]

services. The provision of no-cost office space is limited to credit 
unions if at least 95 percent of the membership to be served by the 
allotment of space 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.

----------------------------------------------------------------------
(Date)
----------------------------------------------------------------------
(Name)
(Chairman of the Board of Directors or the President)


    Note: The Certificate of Compliance shall be written on credit 
union letterhead.


    Dated: August 29, 2001.
L.M. Bynum,
Alternate OSD Federal Register Liaison Officer, DoD.
[FR Doc. 01-22173 Filed 9-6-01; 8:45 am]
BILLING CODe 5001-08-P