1 of 76 DOCUMENTS

> FEDERAL REGISTER
>
> Vol. 73, No. 176
>
> Rules and Regulations
>
> DEPARTMENT OF THE TREASURY
>
> Funds Management Division
>
> **Financial Management** Service
>
> **31 CFR Part 210**
>
> **RIN 1510-AB00**
>
> **Federal Government Participation in the Automated Clearing House**
>
> *73 FR 52578*

**DATE:** Wednesday, September 10, 2008

**ACTION:** **Final rule.**

**SUMMARY:** We are amending our regulation governing the use of the
Automated Clearing House (ACH) system by Federal agencies. The rule
adopts, with some exceptions, the ACH Rules developed by NACHA\--The
Electronic Payments Association (NACHA) as the rules governing the use
of the ACH Network by Federal \[\*52579\] agencies. We are issuing this
rule to address changes to the ACH Rules set forth in NACHA\'s 2006 ACH
Rules book and 2007 ACH Rules book. We are adopting all of the changes
that NACHA published in the 2006 ACH Rules book and 2007 ACH Rules book,
except certain changes to the self-audit provisions of the ACH Rules,
which we have previously determined are not appropriate for the Federal
government. This rule follows publication of a January 9, 2008 proposed
rule and adopts the provisions of the proposed rule without change.

In addition, the rule provides two exceptions to existing deposit
account requirements. Generally, an ACH credit entry representing a
Federal payment other than a vendor payment must be deposited into a
deposit account at a financial institution in the name of the recipient.
On April 25, 2005, Treasury waived this requirement in order to allow
some or all of the amount to be reimbursed to a Federal employee for
official travel credit card charges to be disbursed directly to the
credit card issuing bank. The rule codifies this waiver. The rule also
provides an exception from existing deposit account requirements in
cases where a Federal payment is to be disbursed through a debit card,
stored value card, prepaid card or similar payment card program
established by the **Financial Management** Service (Service).

**EFFECTIVE DATE:** This rule is effective October 10, 2008. The
incorporation by reference of the publication listed in the rule is
approved by the Director of the Federal Register as of October 10, 2008.

**ADDRESSES:** You can download this rule at the following Web site:
*http://www.fms.treas.gov/ach*.

**FOR FURTHER INFORMATION CONTACT:** Bill Brushwood, Financial Program
Specialist, at (202) 874-1251 or *bill.brushwood@fms.treas.gov*; or
Natalie H. Diana, Senior Counsel, at (202) 874-6680 or
*natalie.diana@fms.treas.gov*.

**SUPPLEMENTARY INFORMATION:** Title **31** CFR part **210** (Part 210)
governs the use of the ACH Network by Federal agencies. The ACH Network
is a nationwide electronic fund transfer (EFT) system that provides for
the inter-bank clearing of electronic credit and debit transactions and
for the exchange of payment related information among participating
financial institutions. Part 210 incorporates the ACH Rules adopted by
NACHA, with certain exceptions. From time to time we amend Part 210 in
order to address changes that NACHA periodically makes to the ACH Rules
or to revise the regulation as otherwise appropriate.

*Proposed Rulemaking*

On January 9, 2008, we published a notice of proposed rulemaking (NPRM)
requesting comment on a number of proposed amendments to Part 210. *73
FR 1560.* We proposed to amend Part 210 to address changes to the ACH
Rules set forth in the 2006 ACH Rules book and the 2007 ACH Rules book.
We also proposed to amend Part 210 to codify a waiver allowing for split
disbursements of Federal employee travel payments. In addition, we
proposed to amend Part 210 to provide that where a Federal payment is to
be disbursed through a debit card, stored value card, prepaid card or
similar payment card program established by the Service, the Federal
payment may be deposited to an account at a financial institution
designated by the Service to operate the program as Treasury\'s
financial or fiscal agent, and the Service may specify the title, access
terms and other provisions governing the account.

We received two comment letters on the NPRM. NACHA submitted a comment
letter generally supporting the amendments. NACHA requested
clarification that the proposed amendments relating to payment card
programs and split disbursement of Federal employee travel
reimbursements would not impose any express or implied requirement on
financial institutions to match the name on the entry to the name on the
account. As discussed in Section II below, neither of these amendments
in any way affects the right of financial institutions to rely on
account numbers alone in posting entries.

The Association for Financial Professionals (AFP) also commented on the
NPRM. AFP\'s comment letter primarily addressed the conversion of
business checks to ACH debits. AFP supported the proposed incorporation
of the ACH Rules regarding the conversion of checks at accounts
receivable and back office locations. However, AFP expressed concern
that the proposed rule would permit the conversion of business checks at
points-of-purchase without written authorization. AFP pointed out that
business staff persons paying for purchases at points-of-purchase may
not be authorized to make decisions about payment methods and may not be
educated about the need to read posted notices. Although the Service
recognizes that corporate staff may not be authorized to make decisions
about payment methods at a point-of-purchase, businesses that do not
want checks converted at points-of-purchase can prevent conversion by
utilizing an identifier within the Auxiliary On-Us Field within the MICR
line of the check. Accordingly, we do not believe that the unauthorized
conversion of corporate checks at points-of-purchase is likely to be a
significant problem.

***Final Rule***

We are adopting, without change, all of the changes to Part 210 that
were proposed in the NPRM. Those changes consist of the following:

. The codification of a waiver allowing for split disbursements of
Federal employee travel payments;

. The adoption of a provision stating that where a Federal payment is to
be disbursed through a debit card, stored value card, prepaid card or
similar payment card program established by the Service, the Federal
payment may be deposited to an account at a financial institution
designated as a financial or fiscal agent, and the Service may specify
the title, access terms and other provisions governing the account; and

. The adoption of all changes to the ACH Rules set forth in the 2006 ACH
Rules book and the 2007 ACH Rules book, except changes to the self-audit
rules.

**II. Discussion of Amendments to Part 210**

*Split Travel Reimbursements*

Section 210.5 generally requires that an ACH credit entry representing a
Federal payment to a payee (other than a vendor payment) be deposited
into a deposit account at a financial institution in the name of the
recipient. On August 5, 2005, the Office of Management and Budget (OMB)
revised Circular No. A-123 (Management\'s Responsibility for Internal
Control). This revision became effective in fiscal year 2006 (October 1,
2005). OMB Circular No. A-123, Appendix B (Improving the Management of
Government Charge Card Programs), sec. 4.4 requires, as a general
matter, that Federal executive branch agencies implement split
disbursement when reimbursing employees for official travel charges.
This requirement applies when the individual cardholder is responsible
for making payment to the charge card vendor, i.e., the travel card
issuing bank. Split disbursement \"is the process of dividing a travel
voucher reimbursement between the charge card vendor and traveler.\" OMB
Circular No. A-123, Appendix B, sec. 4.4.1. Under split disbursement,
the \"balance owed \[\*52580\] to each is sent directly to the
appropriate party.\" Id.

In April 2005, the Department of the Treasury, under the authority of 31
CFR 210.5(b)(3), waived the section 210.5 requirement that an ACH entry
be deposited into a deposit account at a financial institution in the
name of the recipient for purposes of permitting split disbursement.
This was necessary in order to implement OMB\'s split disbursement
policy since an account maintained by the travel card issuing bank in
the name of an employee is not a deposit account at a financial
institution within the meaning of section 210.5. We are amending section
210.5 to codify the terms of the split disbursement waiver into the
rule. n1

n1 The waiver issued by the Department of the Treasury in April 2005
also waived the sister deposit account regulation codified at 31 CFR
part 208 (Management of Federal Agency Disbursements). We plan to issue
a separate Notice of Proposed Rulemaking in the **Federal Register** for
the purpose of amending part 208 to codify the terms of the split
disbursement waiver into that rule as well.

From a general cash management perspective, the Service supports split
disbursement because it may benefit Federal agencies by reducing the
number of travel card delinquencies. Split disbursement may also benefit
Federal employee travelers by facilitating payment of their travel card
liabilities (although employees remain responsible for having their
accounts current).

The **final rule** does not establish or amend substantive Federal
regulations or policies pertaining to Federal employee travel or
reimbursement for official travel expenses. Such regulations and
policies are established by, among other authorities, the Federal Travel
Regulation (FTR), 41 CFR chapters 300-304. The FTR is within the purview
of the General Services Administration (GSA). GSA issued GSA Bulletin
FTR 05-08 on December 2, 2005, which advised Federal agencies of OMB
Circular No. A-123 requirements, including the requirement for split
disbursement.

In its comment letter on the proposed rule, NACHA requested
clarification that the use of split travel disbursements by agencies
does not affect the right of financial institutions to rely on account
numbers alone in crediting those entries. As is the case with any entry
representing a Federal payment, financial institutions may rely on
account numbers alone when posting entries.

*Card Programs Established by the Service*

In addition to amending section 210.5 to allow for split disbursement,
we are amending section 210.5 to provide that where a Federal payment is
to be disbursed through a debit card, stored value card, prepaid card or
similar payment card program established by the Service, the Federal
payment may be deposited to an account at a financial institution
designated by the Service to operate the program as Treasury\'s
financial or fiscal agent, and the Service may specify the title, access
terms and other provisions governing the account. This provision applies
only in those cases when the Service directs its financial or fiscal
agent bank to set up a card program.

The requirement that an account to which Federal payments are delivered
be a deposit account in the name of the recipient is designed to ensure
that a payment reaches the intended recipient. In some cases in which
the Service directs its financial or fiscal agent banks to set up a card
program to facilitate the delivery of Federal payments, the most
effective approach may be to utilize an account in which each
cardholder\'s interest is recorded, but each individual\'s name is not
included in the account title. In these programs, the Service can ensure
that the beneficial interests of Federal payment recipients are
protected because the Service controls the terms and conditions of the
programs. The section 210.5 requirements serve little purpose in this
context, and add to the complexity of operating these programs. We are
therefore adopting an exception to section 210.5 which will provide the
Service with greater flexibility in setting up payment card programs. We
are also confirming, as requested by NACHA in its comment letter, that
financial institutions may rely on account numbers alone when posting
entries representing Federal payments to a card account.

*ACH Rule Changes*

Since we last addressed changes to the ACH Rules in 2005, NACHA has made
a number of changes to the ACH Rules. The first set of changes was
published in NACHA\'s 2006 ACH Rules book and a subsequent set of
changes was published in NACHA\'s 2007 ACH Rules book. n2 We are
adopting all of the changes set forth in the 2006 and 2007 ACH Rules
books except those relating to the self-audit provisions of the ACH
Rules, which we have previously determined not to incorporate in part
210. The rule changes that we are adopting consist primarily of
modifications to the ACH Rules that have a minimal impact on
participants in the ACH Network and that we believe will not
significantly affect Federal agencies\' use of the ACH Network. However,
there are a few rule changes that could have a significant impact on the
Federal government\'s use of the ACH Network.

n2 NACHA has promulgated additional rule changes since the publication
of the 2007 ACH Rule book. We plan to address those changes in a future
rulemaking.

A. Changes to ACH Rules Published in 2006 ACH Rules Book

The changes published in the 2006 ACH Rules book include a number of
minor operational efficiency and return issues changes, and a more
significant rule change related to the identification of business checks
ineligible for conversion to ACH entries for Accounts Receivable (ARC)
entries and Point-of-Purchase (POP) entries. The more significant rule
change amended the ACH Rules to enable Receivers n3 to identify business
checks that are not to be converted to ARC or POP entries. For ARC
entries, the rule change allows a Receiver to notify the Originator n4
directly that the Receiver\'s checks are not to be converted, or to
utilize checks that include an identifier within the Auxiliary On-Us
Field within the MICR line. For POP entries, Receivers may opt out
either by utilizing checks that include an identifier within the
Auxiliary On-Us Field within the MICR line, or by refusing to sign the
required written authorization. n5

n3 In an ARC or POP transaction, the Receiver is the person or entity
making the payment (i.e., the remitter or payor) by presenting the check
that is converted to an ACH debit.

n4 In an ARC or POP transaction, the Originator is the person or entity
originating the debit entry to the account of the payor by accepting the
payor\'s check and converting it to an ACH debit.

n5 Part 210 does not require written authorization for POP entries
originated by Federal agencies. Consumers who wish to opt out of POP at
an agency location may do so utilizing checks that include an identifier
within the Auxiliary On-Us Field within the MICR line or by utilizing
another payment method.

Part 210 allows agencies to convert business checks at
points-of-purchase and lockboxes by using the Corporate Credit or Debit
(CCD) entry format. However, the great majority of checks converted by
agencies are consumer checks, and in 2004 we indicated that as we
continued to implement check conversion we would not convert business
checks at new over-the-counter or lockbox locations. NACHA\'s rule
change provides a way for agencies to clearly identify, in an automated
\[\*52581\] fashion, whether a business check is ineligible for
conversion to an ARC or POP entry. n6 We believe the rule change solves
a problem that the ACH rules previously presented for agencies: how to
identify business checks that are ineligible for conversion that are
received in collection streams. Because NACHA\'s rule change eliminates
the need to address the conversion of business checks in part 210, we
are deleting those provisions from the regulation. The rule change does
not mean that we intend to begin converting all eligible business checks
to ACH entries. Rather, the rule change allows for greater flexibility
in determining the most advantageous way for the government to handle
business checks. Thus, we may continue to process business checks by
using image presentment or presenting the original items, as
appropriate, but we will also have the option of converting eligible
business checks in situations where it is more efficient and
cost-effective to do so.

n6 In 2007, NACHA adopted a rule change to implement a new application
for converting checks received at points-of-purchase and manned bill
payment locations to ACH debit entries in a back-office environment (see
discussion in Section II(B)). As with POP and ARC, Receivers may opt out
of back-office conversion by utilizing checks that include an identifier
within the Auxiliary On-Us Field within the MICR line.

The minor rule changes published in the 2006 Rules book include:

. Changes related to the Company Name Field definition for ARC entries;

. A requirement for the Originating Depository Financial Institution
(ODFI) to enter into a contractual relationship with Third-Party
Senders;

. Removal of redundant language regarding use of encryption technology
for Internet-initiated (WEB) entries;

. Inclusion of language with respect to an ODFI\'s liability for breach
of specific Telephone-initiated (TEL) warranties;

. Addition of definitions for Automated Accounting Advice (ADV) and
Notification of Change (COR) entries;

. Minor modifications of definitions associated with various Return
Reason codes; and

. Consolidation of Dishonored Return Reason codes.

We are adopting all the foregoing rule changes, which we believe improve
the operation of the ACH Network and the clarity of the ACH Rules.

B. Changes to ACH Rules Published in 2007 ACH Rules Book

The rule changes published in NACHA\'s 2007 Rules book involve a number
of changes that have a minimal impact on ACH Network participants, as
well as three rule amendments with a significant impact either on the
private sector or on Federal agencies. Those three amendments are:
changes to NACHA\'s voting and funding requirements; changes to the
requirements for ARC entries and POP entries; and changes to implement a
new application, Back Office Conversion (BOC) entries, for converting
checks received at points-of-purchase and manned bill payment locations
to ACH debit entries in a back-office environment.

*Voting and Funding Requirements*

Effective January 1, 2007, NACHA amended the ACH Rules to provide for
the assessment of new Network administration fees to cover the costs
related to management of the ACH Network. These fees include a per-entry
fee for each commercial, inter-bank or Federal Government entry
transmitted or received by the participating Depository Financial
Institution (DFI). The amount of the transaction fee will be established
from time to time by the NACHA Board of Directors based on projected
costs and volumes. For calendar year 2008, the per-entry fee is \$
.0001. In addition to providing for fees, NACHA also modified the
procedures for the amendment of the ACH Rules to clarify the specific
allocation of votes required for approval of an amendment by the voting
membership.

We support this rule change because of its importance in providing for
the long term funding of NACHA\'s Network management activities,
including risk management. The Service will pay these fees on behalf of
agencies for which we disburse and collect payments.

*ARC and POP Entries*

NACHA has amended its check conversion rules to keep the rules
consistent with Regulation E (12 CFR part 205) and its associated
commentary, which the Federal Reserve revised by amendments effective
January 1, 2007. NACHA\'s rule changes ensure that the ACH Rules are
consistent with Regulation E by making corresponding changes to the
check conversion applications established by the ACH Rules.
Specifically, NACHA\'s amendment (1) modifies the ACH Rules with respect
to the notice requirement for ARC entries, and (2) incorporates a notice
obligation into the authorization requirements for POP Entries. This
amendment also includes other minor revisions to the ACH Rules to
clarify that (1) an ARC source document may not be presented for payment
unless the ARC entry is returned by the Receiving Depository Financial
Institution (RDFI); (2) ARC entries for which the Receiver opted out of
check conversion constitute a valid reason for recredit to the Receiver
and return by the RDFI; and (3) a POP entry is considered to be
unauthorized if the requirements for both written authorization and
notice are not met. In addition, effective March 16, 2007, the
requirement that ARC source documents be destroyed within 14 days of the
settlement of the entry has been deleted. A new rule has been added to
provide that Originators must use commercially reasonable methods to
securely store all source documents, as well as all banking information
relating to ARC entries, until destruction. Finally, NACHA: (1) Modified
the ARC and POP rules governing requirements for MICR capture of source
document information, and (2) made corresponding modifications/additions
to the audit requirements regarding MICR capture obligations for ARC and
POP entries to ensure consistency of rule wording among various check
conversion applications.

The ACH rule changes incorporate Regulation E safe harbor language for
the notice required to be provided to Receivers whose checks are
converted using ARC entries. Under the newly revised ACH Rules, agencies
would be required to use the following language, or language that is
substantially similar, for their notices:

\"When you provide a check as payment, you authorize us either to use
information from your check to make a one-time electronic fund transfer
from your account or to process the payment as a check transaction.\"

Until January 1, 2010, the following or substantially similar additional
language must be included: \"When we use information from your check to
make an electronic fund transfer, funds may be withdrawn from your
account as soon as the same day we receive your payment, and you will
not receive your check back from your financial institution.\"

The new ACH Rule changes provide that an Originator may convert a check
presented at a point-of-purchase, provided that a required notice is
posted in a prominent and conspicuous location, and that a copy of the
notice is provided to the Receiver at the time of the transaction. The
notice and copy of the notice must include the following or
substantially similar language:

\"When you provide a check as payment, you authorize us either to use
information from your check to make a one-time electronic fund transfer
from your account or \[\*52582\] to process the payment as a check
transaction.\"

Until January 1, 2010, the following or substantially similar additional
language must be included in the notice: \"When we use information from
your check to make an electronic fund transfer, funds may be withdrawn
from your account as soon as the same day you make your payment, and you
will not receive your check back from your financial institution.\"

Agencies are currently required by part 210 to use specifically worded
disclosures for POP and ARC check conversion. Those disclosures, which
are set out in Appendices A, B and C to part 210, are substantially
similar to (but much longer than) the foregoing POP and ARC required
notices. We are deleting Appendices A, B and C from part 210, which
means that agencies may either continue to use the same disclosures they
are currently using or, alternatively, begin using the shorter
disclosures published in the ACH Rules.

*Back Office Conversion Entries*

Effective March 16, 2007, NACHA established a new electronic check
conversion application, Back Office Conversion (BOC) entries, that will
allow retailers and billers to accept checks at the point-of-purchase or
at manned bill payment locations and convert the checks to ACH debits
during back office processing. In order to use a check to originate a
BOC entry, the Originator must post a notice in a prominent and
conspicuous location that states: \"When you provide a check as payment,
you authorize us either to use the information from your check to make a
one-time electronic fund transfer from your account or to process the
payment as a check transaction. For inquiries, please call \[retailer
phone number\].\" Until January 1, 2010, the posted notice must also
state: \"When we use information from your check to make an electronic
fund transfer, funds may be withdrawn from your account as soon as the
same day you make your payment, and you will not receive your check back
from your financial institution.\" A copy of the notice, or language
that is substantially similar, must be provided to the Receiver at the
time of the transaction. In addition, the Originator must provide the
Receiver the ability to opt out of the conversion of his check to an ACH
debit entry. To opt out, the Receiver must notify the Originator at the
time of purchase that the check being used to make payment does not
authorize an ACH debit entry.

We are adopting most of the ACH rule changes implementing the BOC
application. In 2003, we amended part 210 to allow agencies to convert
checks to ARC entries in certain circumstances that fall outside typical
accounts receivable and point-of-purchase settings. Our rule enabled
Federal agencies to convert checks in circumstances in which check
conversion would not have been possible under NACHA\'s then-existing ARC
and POP rules. For example, when Army pay officers travel to remote,
off-base locations in order to cash checks for soldiers, pay officers
cannot bring along the necessary equipment to scan and return voided
checks, as is required by the ACH rules governing POP entries. Nor could
these checks be converted to ARC entries under the ACH rules, because a
pay officer\'s acceptance of checks in these circumstances does not
constitute an accounts receivable (lockbox) setting. To provide for the
conversion of checks in a variety of circumstances falling outside
typical accounts receivable and point-of-purchase settings, we adopted
in part 210 a provision to allow agencies to convert checks delivered in
person in circumstances in which an agency cannot contemporaneously
image and return the check.

Because the BOC application addresses the Government\'s need for
flexibility in these situations, there is no longer a need to retain
this provision in part 210. Instead, agencies can now convert these
checks using the BOC application. We therefore adopt the rule changes
implementing the BOC application, with the exception of the audit
requirements associated with the BOC entry type as reflected within
Appendix Eight (Rule Compliance Audit Requirements), Sections 8.2 and
8.3 of the ACH Rules.

Treasury needs to make the programming and operational changes necessary
to implement the BOC application. Accordingly, we expect that for some
period of time after the adoption of a **final rule,** it will be
necessary to continue our existing process of converting items to ARC
entries in circumstances other than typical lockbox and
point-of-purchase settings.

*Rules With a Minor Impact on the ACH Network*

NACHA published in the 2007 Rules book the following amendments that
have a minor impact on the ACH Network:

. *Description of Corrected Data Within Contested Dishonored Return
Reason Code R74* \--Previously, the description of Return Reason Code
R74 (Corrected Return), related to the correction of the Individual
Identification Number/Identification Number Field within the Entry
Detail Record, did not reflect all applicable SEC Codes that contain
these fields. This amendment modified the description of Return Reason
Code R74 within Appendix Five, Section 5.4 (Table of Return Reason
Codes), as it relates to the Individual Identification
Number/Identification Number, to add the following additional SEC Codes
to be consistent with current industry practice: CBR, CTX, DNE, ENR,
PBR, TEL, TRX, and WEB.

. *Direct Financial Institution and Payment Association Definitions*
\--The terms \"Direct Financial Institution\" and \"Payment
Association\" were referenced within the procedures for amendment of the
ACH Rules in Article Thirteen but not defined within the ACH Rules. This
amendment added definitions for these terms to Article Fourteen
(Definition of Terms) of the ACH Rules.

. *Time Frame to Re-initiate Entries* \--Previously, the ACH Rules
defined under what conditions an ACH entry that is returned may be
re-initiated, but did not prescribe any limitations on the time period
within which such re-initiation must occur. To preclude attempts to
re-initiate extremely stale entries, NACHA amended the rules to
establish the period of time after which returned entries cannot be
re-initiated. Specifically, an entry may not be re-initiated more than
180 days after the settlement date of the original transaction.

. *Available ACH Characters* \--This amendment modified the definition
of \"alphameric\" within Article Fourteen and the data specification
requirements within Appendix One to clarify that lowercase alpha
characters are permitted within ACH entries, except where explicitly
noted otherwise.

. *Name and Definition of Cash Concentration or Disbursement (CCD)
Standard Entry Class Code* \--This amendment modified the name and
description of the CCD format to clarify that CCD entries can be used
more broadly than just for intra-corporate payments. The name of the CCD
format was changed from \"Cash Concentration or Disbursement\" to
\"Corporate Credit or Debit\" and the description was revised to
indicate that this code may also be used for a transfer of funds from
the account of one organization to the account of another organization.

. *Formatting Requirements for TEL (Telephone-Initiated) and WEB
(Internet-Initiated) Entries* \--This amendment redefined the Individual
Name Field within the Entry Detail Record of both TEL and WEB entries
(and related returns) from Required to \[\*52583\] Mandatory to
facilitate ACH Operators\' use of various risk filters to monitor the
field for possible fraudulent content. Operator edits within Appendix
Three, as they relate to Return Reason Code R26 (Mandatory Field Error),
were also modified to permit the return of any TEL or WEB entry within
which this field contains all spaces or all zeros.

. *Additional Addenda Code for Dishonored Return Reason Code R69*
\--This amendment added, under the description of Return Reason Code R69
(Field Errors), an additional criterion under which an entry containing
incorrect information may be dishonored. This change enables an ODFI to
dishonor a return if the original Effective Entry Date was incorrectly
copied from the forward entry.

We support the foregoing ACH Rules changes. The changes clarify certain
ACH Rules that were previously unclear or ambiguous, and provide greater
flexibility and operational efficiency for users of the ACH Network. We
believe these changes are beneficial and are incorporating them into
part 210.

**III. Section-by-Section Analysis**

In order to incorporate in part 210 the ACH rule changes that we are
accepting, we are replacing references to the 2005 Rules book with
references to the 2007 ACH Rules book.

*Sec. 210.2(d)*

We are amending the definition of applicable ACH Rules at § 210.2(d) to
reference the rules published in NACHA\'s 2007 Rules book rather than
the rules published in NACHA\'s 2005 Rules book.

*Sec. 210.3(b)*

We are amending § 210.3(b) by replacing the references to the ACH Rules
as published in the 2005 Rules book with references to the ACH Rules as
published in the 2007 Rules book.

*Sec. 210.5*

We are amending § 210.5(b) by adding a new paragraph (b)(3) to allow for
the issuance of part or all of a Federal employee\'s travel
reimbursement to the employee\'s travel card account at the card-issuing
bank. We are also adding a new paragraph (b)(4), which provides that
where a Federal payment is to be disbursed through a debit card, stored
value card, prepaid card or similar payment card program established by
the Service, the Federal payment may be deposited to an account at a
financial institution designated as a financial or fiscal agent. The
Service may specify the account title, access terms, and other account
provisions, and thereby protect the interest of payment recipients. This
paragraph would apply in those cases when the Service directs its
financial or fiscal agent bank to set up a card program.

*Sec. 210.6(g)*

We are revising current § 210.6(g) to reflect the revision of the ACH
Rules governing POP entries. We believe that, as revised, the ACH Rules
governing POP entries are appropriate in most respects for agencies.
Unlike the ACH Rules, however, part 210 will continue to allow agencies
to originate POP entries without a written authorization, as long as a
notice required by the ACH Rules is posted and the Receiver is provided
with a copy of the notice. This approach is consistent with the
authorization requirements of Regulation E.

*Sec. 210.6(h)*

We are deleting the text of current § 210.6(h). We believe that, as
revised, the ACH Rules governing accounts receivable check conversion
are appropriate for agencies, and therefore, a separate rule within part
210 is no longer necessary. We are revising the text of current §
210.6(i) and renumbering it as § 210.6(h). The revision clarifies that
in order to debit a Receiver\'s account for an insufficient funds
service fee, the agency must have independent authority to collect fees
for items returned due to insufficient funds. An agency that has such
authority may originate an ACH debit entry to collect a one-time service
fee in connection with an ARC, POP or BOC entry that is returned due to
insufficient funds, provided that the agency discloses the service fee
in the notices required for the ARC, POP or BOC entry. The required
disclosure that must be given in order to debit an account for an
insufficient funds service fee is unchanged, but has been relocated to §
210.6(h) from Appendices A, B, and C, which we are removing from the
regulation.

**IV. Procedural Requirements**

*Request for Comment on Plain Language*

Executive Order 12866 requires each agency in the Executive branch to
write regulations that are simple and easy to understand. We invite
comment on how to make the rule clearer. For example, you may wish to
discuss: (1) Whether we have organized the material to suite your needs;
(2) whether the requirements of the rules are clear; or (3) whether
there is something else we could do to make these rules easier to
understand.

*Regulatory Planning and Review*

The rule does not meet the criteria for a \"significant regulatory
action\" as defined in Executive Order 12866. Therefore, the regulatory
review procedures contained therein do not apply.

*Regulatory Flexibility Act Analysis*

It is hereby certified that the rule will not have a significant
economic impact on a substantial number of small entities. The changes
to the regulation related to ARC, POP, and BOC check conversion will not
result in significant costs for individuals or financial institutions
affected by the changes, including financial institutions that are small
entities. New ACH fees will be borne by the government, and will not
affect other parties sending or receiving Federal ACH transactions,
including small entities. Accordingly, a regulatory flexibility analysis
under the Regulatory Flexibility Act *(5 U.S.C. 601* *et seq.*) is not
required.

*Unfunded Mandates Act*

Section 202 of the Unfunded Mandates Reform Act of 1995, *2 U.S.C. 1532*
(Unfunded Mandates Act), requires that the agency prepare a budgetary
impact statement before promulgating any rule likely to result in 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 in any one year. If a budgetary impact statement is
required, section 205 of the Unfunded Mandates Act also requires the
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating the rule. We have determined that the
rule will not result in expenditures by State, local, and tribal
governments, in the aggregate, or by the private sector, of \$ 100
million or more in any one year. Accordingly, we have not prepared a
budgetary impact statement or specifically addressed any regulatory
alternatives.

**List of Subjects in 31 CFR Part 210**

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

**Words of Issuance**

For the reasons set out in the preamble, we are amending **31** CFR part
**210** as follows: \[\*52584\]

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

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

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

2\. In § 210.2, revise paragraph (d) to read as follows:

**§ 210.2 Definitions.**

\* \* \* \* \*

\(d\) *Applicable ACH Rules* means the ACH Rules with an effective date
on or before September 21, 2007, as published in Parts II, III and VI of
the \"2007 ACH Rules: A Complete Guide to Rules & Regulations Governing
the ACH Network\" except:

\(1\) ACH Rule 1.1 (limiting the applicability of the ACH Rules to
members of an ACH association);

\(2\) ACH Rule 1.2.2 (governing claims for compensation);

\(3\) ACH Rules 1.2.4 and 2.2.1.12; Appendix Eight; and Appendix Eleven
(governing the enforcement of the ACH Rules, including self-audit
requirements);

\(4\) ACH Rules 2.2.1.10; 2.6; and 4.8 (governing the reclamation of
benefit payments);

\(5\) ACH Rule 9.3 and Appendix Two (requiring that a credit entry be
originated no more than two banking days before the settlement date of
the entry\--see definition of \"Effective Entry Date\" in Appendix Two);

\(6\) ACH Rule 2.11.2.3 (requiring that originating depository financial
institutions (ODFIs) establish exposure limits for Originators of
Internet-initiated debit entries); and

\(7\) ACH Rule 2.13.3 (requiring reporting regarding unauthorized
Telephone-initiated entries).

\* \* \* \* \*

3\. In § 210.3, revise paragraph (b) to read as follows:

**§ 210.3 Governing law.**

\* \* \* \* \*

\(b\) *Incorporation by reference\--applicable ACH Rules.*

\(1\) This part incorporates by reference the applicable ACH Rules,
including rule changes with an effective date on or before September 21,
2007, as published in Parts II, III, and VI of the \"2007 ACH Rules: A
Complete Guide to Rules & Regulations Governing the ACH Network.\" The
Director of the Federal Register approves this incorporation by
reference in accordance with *5 U.S.C. 552*(a) and 1 CFR part 51. Copies
of the \"2007 ACH Rules\" are available from NACHA\--The Electronic
Payments Association, 13450 Sunrise Valley Drive, Suite 100, Herndon,
Virginia 20171, *http://www.nacha.org*. Copies also are available for
public inspection at the **Financial Management** Service, 401 14th
Street, SW., Room 400A, Washington, DC 20227, (202) 874-1251, or at the
National Archives and Records Administration (NARA). For information on
the availability of this material at NARA, call 202-741-6030, or go to:
*http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html.*

\(2\) Any amendment to the applicable ACH Rules that is approved by
NACHA\--The Electronic Payments Association after January 1, 2007 shall
not apply to Government entries unless the Service expressly accepts
such amendment by obtaining approval of the amended incorporation by
reference from the Director of the Federal Register and publishing an
amendment to this part in the **Federal Register** . An amendment to the
ACH Rules that is accepted by the Service and approved by the Director
of the Federal Register for incorporation by reference shall apply to
Government entries on the effective date specified by the Service in the
**Federal Register** rulemaking expressly accepting such amendment.

\* \* \* \* \*

4\. In § 210.5, redesignate paragraph (b)(3) as paragraph (b)(5), and
add new paragraphs (b)(3) and (b)(4) to read as follows:

**§ 210.5 Account requirements for Federal payments.**

\* \* \* \* \*

(b)(3) Where an agency is issuing part or all of an employee\'s travel
reimbursement payment to the official travel card issuing bank, as
authorized or required by Office of Management and Budget guidance or
the Federal Travel Regulation, the ACH credit entry representing the
payment may be deposited to the account of the travel card issuing bank
for credit to the employee\'s travel card account at the bank.

\(4\) Where a Federal payment is to be disbursed through a debit card,
stored value card, prepaid card or similar payment card program
established by the Service, the Federal payment may be deposited to an
account at a financial institution designated by the Service as a
financial or fiscal agent. The account title, access terms and other
account provisions may be specified by the Service.

\* \* \* \* \*

5\. In § 210.6, revise paragraphs (g) and (h) to read as follows, and
remove paragraph (i):

**§ 210.6 Agencies.**

\* \* \* \* \*

\(g\) *Point-of-purchase debit entries.* An agency may originate a
Point-of-Purchase (POP) entry using a check drawn on a consumer or
business account and presented at a point-of-purchase unless the
Receiver opts out in accordance with the ACH Rules. The requirements of
ACH Rules 2.1.2 and 3.12 shall be met for such an entry if the Receiver
presents the check at a location where the agency has posted the notice
required by the ACH Rules and has provided the Receiver with a copy of
the notice.

\(h\) *Returned item service fee.* An agency that has authority to
collect returned item service fees may do so by originating an ACH debit
entry to collect a one-time service fee in connection with an ARC, POP
or BOC entry that is returned due to insufficient funds. An entry
originated pursuant to this paragraph shall meet the requirements of ACH
Rules 2.1.2 and 3.5 if the agency includes the following statement in
the required notice(s) to the Receiver: \"If the electronic fund
transfer cannot be completed because there are insufficient funds in
your account, we may impose a one-time fee of \$ \[\_\_\_\_\] against
your account, which we will also collect by electronic fund transfer.\"

**Appendices A Through C to Part 210 \[Removed\]**

6\. Remove Appendices A, B and C.

Dated: August 27, 2008.

**Kenneth E. Carfine,**

*Fiscal Assistant Secretary, Department of the Treasury.*

\[FR Doc. E8-20575 Filed 9-9-08; 8:45 am\]

BILLING CODE 4810-35-P