[Federal Register Volume 75, Number 93 (Friday, May 14, 2010)]
[Proposed Rules]
[Pages 27239-27248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11492]


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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 210

RIN 1510-AB24


Federal Government Participation in the Automated Clearing House

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Notice of proposed rulemaking with request for comment.

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SUMMARY: The Department of the Treasury, Financial Management Service 
(Service) is proposing to amend our regulation governing the use of the 
Automated Clearing House (ACH) system by Federal agencies. Our 
regulation adopts, with some exceptions, the ACH Rules developed by 
NACHA--The Electronic Payments

[[Page 27240]]

Association (NACHA) as the rules governing the use of the ACH Network 
by Federal agencies. We are issuing this proposed rule to address 
changes that NACHA has made to the ACH Rules since the publication of 
NACHA's 2007 ACH Rules book. These changes include new requirements to 
identify all international payment transactions using a new Standard 
Entry Class Code and to include certain information in the ACH record 
sufficient to allow the receiving financial institution to identify the 
parties to the transaction and to allow Office of Foreign Assets 
Control (OFAC) screening.
    In addition, we are proposing to streamline the process for 
reclaiming post-death benefit payments from financial institutions; to 
require financial institutions to provide limited account-related 
customer information related to the reclamation of post-death benefit 
payments as permitted under the Payment Transactions Integrity Act of 
2008; to allow Federal payments to be delivered to pooled or master 
accounts established by nursing facilities for residents or held by 
religious orders whose members have taken vows of poverty; and to allow 
Federal payments to be delivered to stored value card, prepaid card or 
similar card accounts meeting certain consumer protection requirements.

DATES: Comments on the proposed rule must be received by July 13, 2010.

ADDRESSES: You can download this proposed rule at the following Web 
site: http://www.fms.treas.gov/ach. You may also inspect and copy this 
proposed rule at: Treasury Department Library, Freedom of Information 
Act (FOIA) Collection, Room 1428, Main Treasury Building, 1500 
Pennsylvania Avenue, NW., Washington, DC 20220. Before visiting, you 
must call (202) 622-0990 for an appointment.
    In accordance with the U.S. government's eRulemaking Initiative, 
the Service publishes rulemaking information on http://www.regulations.gov. Regulations.gov offers the public the ability to 
comment on, search, and view publicly available rulemaking materials, 
including comments received on rules.
    Comments on this rule, identified by docket FISCAL-FMS-2009-0001, 
should only be submitted using the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions on the Web site for submitting comments.
    <bullet> Mail: Bill Brushwood, Financial Management Service, 401 
14th Street, SW., Room 400A, Washington, DC 20227.
    The fax and e-mail methods of submitting comments on rules to the 
Service have been decommissioned.
    Instructions: All submissions received must include the agency name 
(``Financial Management Service'') and docket number FISCAL-FMS-2009-
0001 for this rulemaking. In general, comments received will be 
published on Regulations.gov without change, including any business or 
personal information provided. Comments received, including attachments 
and other supporting materials, are part of the public record and 
subject to public disclosure. Do not disclose any information in your 
comment or supporting materials that you consider confidential or 
inappropriate for public disclosure.

FOR FURTHER INFORMATION CONTACT: Bill Brushwood, Director of the 
Settlement Services Division, at (202) 874-1251 or 
<a href="/cdn-cgi/l/email-protection#77151e1b1b59150502041f0018181337111a0459030512160459101801"><span class="__cf_email__" data-cfemail="7c1e151010521e0e090f140b1313183c1a110f52080e191d0f521b130a">[email protected]</span></a>; or Natalie H. Diana, Senior Counsel, at 
(202) 874-6680 or <a href="/cdn-cgi/l/email-protection#315f5045505d58541f5558505f5071575c421f45435450421f565e47"><span class="__cf_email__" data-cfemail="315f5045505d58541f5558505f5071575c421f45435450421f565e47">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

I. Background

    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.
    NACHA has adopted a number of changes to the ACH Rules since the 
publication of the 2007 ACH Rules book. We are proposing to incorporate 
in Part 210 some, but not all, of the changes to the ACH Rules. The 
changes to the ACH Rules include new requirements to identify all 
international payment transactions using a new Standard Entry Class 
Code and to include in the ACH record certain information sufficient to 
allow the receiving financial institution to identify the parties to 
the transaction and the path of the transaction. In addition, NACHA 
amended the ACH Rules to allow NACHA to request data from Originating 
Depository Financial Institutions (ODFIs) for an Originator or Third-
Party Sender that exceeds a rate of 1 percent for debit entries 
returned as unauthorized.
    In addition to addressing NACHA Rule changes, we are proposing to 
amend Part 210, effective January 1, 2012, to streamline the 
reclamation process for post-death benefit payments. Currently, the 
reclamation process is a manual, paper-based process in which Treasury 
sends out a Notice of Reclamation (FMS Form 133) that the financial 
institution must complete, certify and return. Under Part 210, a 
financial institution generally is liable for the total amount of 
payments sent within 45 days of the recipient's death even if the 
financial institution was not aware of the death. In light of the fact 
that the great majority of reclamations are limited to just this ``45-
day Amount,'' consisting of one or two post-death payments for which 
the financial institution will ultimately be liable, we are requesting 
comment on an approach in which Treasury would proceed with an 
automatic debit to the financial institution's reserve account, 
following advance notice to the financial institution of the debit with 
a right to challenge. This process would apply only to situations in 
which a notice of reclamation is limited to payments received within 45 
days after the recipient's death. As discussed in Section II below, we 
believe this change would result in operational efficiencies for both 
Treasury and financial institutions.
    For reclamations limited to the 45-day Amount, financial 
institutions would no longer be required to provide customer account-
related information related to the disposition of the post-death 
payments. For reclamations of payments received more than 45 days after 
the recipient's death, we are proposing to require financial 
institutions to provide the last-known telephone number of account 
holders and withdrawers, in addition to name and address. Also, as now 
permitted pursuant to the Payment Transactions Integrity Act of 2008, 
financial institutions would be required to provide withdrawer 
information for all types of benefit payments being reclaimed. Prior to 
the enactment of the Payment Transactions Integrity Act, account-
related information could be shared only for certain types of benefit 
payments.
    Finally, we are proposing to amend our long-standing requirement in 
Part 210 that non-vendor payments be delivered to a deposit account at 
a financial institution in the name of the recipient. The proposed 
amendment would allow the delivery of Federal payments to resident 
trust or patient fund accounts held by nursing homes,

[[Page 27241]]

to accounts held by religious orders for members who have taken a vow 
of poverty, and to prepaid and stored value card accounts provided that 
the cardholder's balance is FDIC insured and covered by the consumer 
protections of the Federal Reserve's Regulation E.
    We are requesting public comment on all the foregoing proposed 
amendments to Part 210.

II. Summary of Rule Changes

International ACH Transactions

    Effective September 18, 2009, the NACHA Rules require ODFIs and 
Gateway Operators to identify all international payment transactions 
transmitted via the ACH Network for any portion of the money trail as 
International ACH Transactions using a new Standard Entry Class Code 
(IAT). IAT transactions must include the specific data elements defined 
within the Bank Secrecy Act's (BSA) ``Travel Rule'' so that all parties 
to the transaction have the information necessary to comply with U.S. 
law, including the laws administered by OFAC.
    OFAC has stated that financial institutions need to safeguard the 
U.S. financial system from terrorist and other sanctions abuses 
involving international ACH payments processed through the domestic 
U.S. ACH Network. In the domestic payment environment, ODFIs and 
Receiving Depository Financial Institutions (RDFIs) can rely on each 
other to ensure compliance with OFAC obligations with regard to their 
own customers. For international payments, however, Depository 
Financial Institutions (DFIs) cannot rely on international counterparts 
for compliance with U.S. law.
    Previously, many payments that are international in nature were 
being introduced as domestic transactions into the U.S. ACH Network 
through correspondent banking relationships, making it difficult for 
processing DFIs to identify them for purposes of complying with U.S. 
law. NACHA's new IAT Standard Entry Class Code classifies international 
payments based on the geographical location of the financial 
institutions or money transmitting businesses involved in the 
transaction, instead of the location of the originator or receiver. 
Each IAT entry is accompanied by mandatory Addenda Records conveying 
the following information:
    <bullet> Name and physical address of the Originator.
    <bullet> Name and physical address of the Receiver.
    <bullet> Account number of the Receiver.
    <bullet> Identity of the Receiver's bank.
    <bullet> Foreign Correspondent Bank name, Foreign Correspondent 
Bank ID number, and Foreign Correspondent Bank Branch Country Code.

As defined in the 2009 ACH Rules, an International ACH Transaction 
(IAT) entry is:

    A debit or credit Entry that is part of a payment transaction 
involving a financial agency's office that is not located in the 
territorial jurisdiction of the United States. For purposes of this 
definition, a financial agency means an entity that is authorized by 
applicable law to accept deposits or is in the business of issuing 
money orders or transferring funds. An office of a financial agency 
is involved in the payment transaction if it (1) holds an account 
that is credited or debited as part of the payment transaction; (2) 
receives payment directly from a Person or makes payment directly to 
a Person as part of the payment transaction; or (3) serves as an 
intermediary in the settlement of any part of the payment 
transaction.

    See 2009 ACH Rules, Subsection 14.1.36. The term ``Person'' means a 
natural person or an organization. 2009 ACH Rules, Subsection 14.1.52. 
The term ``payment transaction'' is not defined within the ACH Rules, 
but the 2009 Operating Guidelines state that within the IAT definition, 
payment transaction refers to: ``An instruction of a sender to a bank 
to pay, or to obtain payment of, or to cause another bank to pay or 
obtain payment of, a fixed or determinate amount of money that is to be 
paid to, or obtained from, a receiver, and any and all settlements, 
accounting entries, or disbursements that are necessary or appropriate 
to carry out the instruction.'' 2009 Operating Guidelines, Section IV, 
Chapter XI, p. 202.
    The 2009 Operating Guidelines provide various examples of 
transactions that would be classified as IAT entries. One example deals 
with pension or Social Security benefit payments delivered to the U.S. 
bank accounts of retirees residing offshore. If the U.S. bank to which 
such a payment is delivered further credits the payment to an offshore 
bank with which it has a correspondent relationship, the entry is to be 
classified by the ODFI as IAT. In other words, despite being destined 
to U.S. bank accounts, the transactions would be IATs because the 
ultimate destinations of the payments are accounts held with offshore 
banks or financial agencies. The 2009 Operating Guidelines indicate 
that it is the Originator's obligation to understand the legal domicile 
of its retirees and inquire whether they hold accounts in U.S. banks or 
with offshore financial institutions. See 2009 Operating Guidelines, 
Section IV, Chapter XI, Scenario F, p. 209. As applied to Federal 
payments, this would mean that an agency certifying a payment to a 
recipient residing overseas must inquire whether the payment, although 
directed to a domestic bank, will be further credited to a foreign 
correspondent bank. If so, the agency must classify the payment as IAT.
    We are proposing to accept the IAT rule for Federal payments. For 
Federal benefit payments delivered to overseas recipients in Mexico, 
Canada and Panama through the FedGlobal\SM\ ACH Payment Services, we do 
not foresee any difficulty in implementing the IAT rule. For other 
payments, however, we anticipate that it may take until January 1, 2012 
to make the system and operational changes necessary to implement the 
IAT, due in part to the dedication of operational resources to the 
delivery of Economic Recovery Act payments in 2009. We plan to phase in 
IAT requirements in stages, based on the type of payment and the agency 
issuing the payment, as expediently as operationally possible, and we 
have already ceased originating Consumer Cross Border (PBR) and 
Corporate Cross Border (CBR) entries. Accordingly, we are proposing to 
adopt the IAT rule for Federal benefit payments delivered to Mexico, 
Canada and Panama through the FedGlobal\SM\ ACH Payment Service. For 
all other Federal payments, we are proposing an effective date of 
January 1, 2012.
    The proposed January 1, 2012 effective date does not affect 
agencies' existing and ongoing obligation to perform OFAC screening of 
all payments that they certify to Treasury for disbursement, and in 
fact presupposes that agencies are screening all payments prior to 
certification. As set forth in the Treasury Financial Manual, agencies 
must not make or certify payments, or draw checks or warrants, payable 
to an individual or organization listed on the Specially Designated 
National and Blocked Person list, and agencies must consult the list 
before making payments. See Treasury Financial Manual, Vol. I, Part 4, 
Chapter 1000, sec. 1020.
    Lastly, in implementing the IAT requirements, we anticipate that 
some agencies will format as an IAT transaction any payment to an 
individual or entity with an address outside the territorial 
jurisdiction of the U.S. This may result in the identification of some 
transactions as IAT even though funds do not ultimately leave the 
United States. However, taking an ``over-inclusive''

[[Page 27242]]

approach to implementing IAT greatly eases the administrative burden 
that Federal agencies would otherwise be faced with. We do not believe 
this over-inclusive approach would create any compliance issues, but we 
request comment from agencies and financial institutions on this 
approach.

B. NACHA Rules Enforcement

    Effective December 21, 2007, NACHA modified its rules to broaden 
the scope of Appendix Eleven (The National System of Fines). The 
Appendix was revised to (1) allow NACHA to request data from ODFIs for 
an Originator or Third-Party Sender that appears to exceed a rate of 
one percent for debit entries returned as unauthorized; and (2) define 
the circumstances under which NACHA may submit violations related to 
the ODFI reporting requirement to the National System of Fines. Several 
other provisions of the National System of Fines were also modified.
    Part 210 does not incorporate Appendix 11 of the NACHA Rules. See 
31 CFR 210.2(d)(3). The Federal government is constrained from entering 
into arrangements that may result in unfunded liabilities. Moreover, we 
do not believe that subjecting Federal agencies to the System of Fines 
is necessary or appropriate in light of its underlying purpose. 
Accordingly, we are proposing not to adopt the modifications to 
Appendix 11. In the event that a Federal agency were to experience a 
high rate of debit entries returned as unauthorized, we would work with 
the agency and coordinate with NACHA to address the situation.

C. ODFI Reporting Requirements

    Effective March 20, 2009, NACHA amended its rules to incorporate 
new reporting requirements for ODFIs within Article Two (Origination of 
Entries). These reporting requirements require ODFIs to provide, when 
requested by NACHA, certain information about specific Originators or 
Third-Party Senders believed to have a return rate for unauthorized 
debit entries in excess of 1 percent. The rule also requires ODFIs to 
reduce the return rate for any such Originator or Third-Party Sender to 
a rate below 1 percent within 60 days. The amendment replaced a 
reporting requirement for Telephone-Initiated (TEL) entries that was 
previously in the ACH Rules.
    We are proposing not to adopt the new reporting requirements. When 
NACHA adopted the TEL reporting requirement in 2003, we did not adopt 
it, in part because we did not believe that agencies were likely to 
experience excessive rates of returned entries, which has proved to be 
true. Similarly, we do not believe that it is necessary or appropriate 
to subject Federal agencies to a formal reporting process for 
unauthorized entries. However, in the event that NACHA were to bring to 
our attention an excessive return rate at any agency, we would work 
with the agency and coordinate with NACHA to address the situation.

D. Reclamations

    Currently, based on instructions from the Social Security 
Administration (SSA) and other Federal agencies that pay recurring 
benefit payments, Treasury sends paper Notices of Reclamation to RDFIs 
in order to reclaim post-death benefit payments. RDFIs must respond to 
these notices by providing information on the notices and returning 
them to Treasury within a specific time frame. Depending on the 
circumstances of a reclamation, the RDFI would be liable for either the 
full amount or a partial amount of the post-death payments that were 
issued. In general, an RDFI is liable to Treasury for the total amount 
of all benefit payments received after the death or legal incapacity of 
a recipient or death of a beneficiary unless the RDFI can limit its 
liability. An RDFI can limit its liability to the total amount of 
payments sent within 45 days after the recipient's death if it: (1) 
Certifies that it did not have actual or constructive knowledge of the 
recipient's death or incapacity at the time the RDFI received one or 
more benefit payments; (2) returns all post-death benefit payments it 
receives after it learns of the death; and (3) responds to the FMS-133, 
Notice of Reclamation, within 60 days from the date of the Notice. 
Since most benefit payments are issued on a monthly basis, the ``45-day 
Amount'' consists of either one or two payments.
    Currently, after receiving the completed Notice of Reclamation from 
the RDFI, Treasury debits the RDFI for the 45-day Amount less any 
amount the RDFI has returned with the completed Notice of Reclamation. 
In some cases, the Federal agency that issued the payment(s) (e.g., 
SSA) may be able to collect an amount from whoever withdrew the funds 
after they were deposited, thereby reducing the 45-day Amount. In such 
cases, the amount of the reclamation debit against the RDFI's reserve 
account is sometimes less than the 45-day Amount.
    Approximately 85 percent of all reclamation notices sent to RDFIs 
are for payments disbursed within 45 days after death or legal 
incapacity of the recipient. Of this 85 percent figure, RDFIs return 
the full 45-day Amount approximately 89 percent of the time. For the 
other 11 percent of reclamation notices, in many cases the RDFIs 
eventually remit any remaining portion of the 45-day Amount.

    Example: To illustrate, assume that for a given month the 
Service sends 100 reclamation notices to RDFIs. Of those 100 
notices, approximately 85 notices will request reclamation of only 
payments disbursed within 45 days after death or legal incapacity. 
Of those 85 notices, RDFIs will return the 45-day Amount in response 
to 76 notices. The RDFIs will eventually return the 45-day Amount 
for most of the other 9 notices.

As the example illustrates, in the vast majority of cases, the amount 
of the reclamation is the 45-day Amount, which represents one or two 
post-death payments, and the vast majority of RDFIs return that amount 
with their response to the Notice of Reclamation.
    To achieve cost savings and efficiencies for both the Federal 
government and RDFIs, we are proposing to automatically debit RDFIs for 
the 45-day Amount, following a 30-day advance notice of the debit. 
RDFIs could choose to return the 45-day Amount after receiving the 
notice, or could elect to let the debit proceed. By automatically 
originating a debit for the 45-day Amount (less any amount collected by 
the paying agency), rather than issuing forms that must be manually 
processed, the Service would create a more streamlined process with 
reduced processing, paperwork, and postage. The Service would not need 
to expend resources manually processing reclamation notices and RDFIs 
would not be required to expend resources processing notices and 
returning funds to Treasury. The proposed change, which would take 
effect on January 1, 2012, would affect only the procedure used to 
process a reclamation, and not the amount of an RDFI's liability. In 
order to provide RDFIs with a process for challenging any debit for a 
45-day Amount, we are proposing to adopt a formal procedure for 
protesting such debits. An RDFI that believes that a debit was or would 
be improper, either entirely or in part, would be able to submit a 
notice that it is disputing the reclamation either before the debit is 
carried out or within 90 days after the debit to its reserve account. 
The Service would be required to make a determination within 60 days of 
receipt of the dispute notice, subject to a 60- day extension if 
necessary. If the RDFI files a dispute notice before the debit is 
carried out, the Service would not proceed with the debit until a final

[[Page 27243]]

determination is made that the debit is proper.
    Only reclamations limited to the 45-day Amount would be subject to 
this process. As discussed above, 15 percent of all reclamation actions 
are for an amount that exceeds the 45-day Amount. For these 
reclamations, the current paper-based manual process would be 
continued, meaning that RDFIs would receive and need to respond to a 
Notice of Reclamation as they currently do.

E. Payment Transactions Integrity Act of 2008 Changes

    Last year Congress enacted the Payment Transactions Integrity Act 
of 2008. The Payment Transactions Integrity Act amended the Right to 
Financial Privacy Act of 1978, which had prohibited Treasury and other 
Federal agencies from obtaining from banks information contained within 
the financial records of any customer, with limited exceptions. Under 
the Payment Transactions Integrity Act, Treasury and other agencies are 
now permitted to obtain customer information in connection with the 
investigation or recovery of an improper Federal payment. We are 
proposing to amend Sec.  210.11(b)(3)(i) in order to require RDFIs to 
provide the name and last-known address and phone number for account 
owners and others who have withdrawn, or were authorized to withdraw, 
funds subject to a reclamation. Currently, Part 210 requires banks to 
provide only the name and address (not the phone number) of account 
owners and withdrawers, and only in connection with the reclamation of 
Social Security Federal Old-Age, survivors, and Disability Insurance 
benefit payments or benefit payments certified by the Railroad 
Retirement Board or the Department of Veterans' Affairs. The proposed 
change would require financial institutions to provide information for 
other types of benefit payments, such as Civil Service benefit payments 
and Supplemental Security Income payments, as now permitted under the 
Payment Transactions Integrity Act. As discussed above, the Service is 
proposing to discontinue the collection of such information for all 
reclamations that do not exceed the 45-day Amount. Accordingly, 
information would be collected in connection with reclamations only for 
the approximately 15 percent of total reclamations involving more than 
the 45-day Amount.

F. ``In The Name Of The Recipient'' Requirements

    Title 31 CFR Sec.  210.5(a) provides that, notwithstanding ACH 
rules 2.1.2, 4.1.3, and Appendix Two, section 2.2 (listing general 
ledger and loan accounts as permissible transaction codes), an ACH 
credit entry representing a Federal payment other than a vendor payment 
shall be deposited into a deposit account at a financial institution. 
For all payments other than vendor payments, the account at the 
financial institution must be in the name of the recipient, subject to 
certain exceptions.\1\ As we indicated in the preamble of the Federal 
Register notice promulgating Sec.  210.5, our long-standing 
interpretation of the words ``in the name of the recipient,'' has been 
that the payment recipient's name must appear in the account title. 
See, e.g., 64 FR 17480, referring to discussion at 63 FR 51490, 51499. 
From time to time financial institutions and other payment service 
providers have urged Treasury to opine that the ``in the name of the 
recipient'' requirement is met if the recipient has an ownership 
interest in a pooled account and that individual's interest is 
reflected in a subacccount record, even if the recipient's name is not 
included in the title of the account. To date we have declined to adopt 
this interpretation.
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    \1\ Identical requirements appear in 31 CFR 208.6. In the event 
that we finalize the proposed amendment to Sec.  210.5, we will 
amend 31 CFR 208.6 to create an identical exception.
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    The ``in the name of the recipient'' requirement is, in essence, a 
consumer protection policy. The requirement that an account be in the 
name of the recipient is designed to ensure that a payment reaches the 
intended recipient. See discussion at 63 FR 51490, 51499. We have had 
concerns in the past that Federal benefit payment recipients could 
enter into master/sub account relationships in which they have little 
control over the account to which their benefit payments are directed.
    The Service's ``in the name of the recipient'' requirement was last 
opened for public comment in the late 1990's during the rulemaking 
process for 31 CFR part 208. It was at this time that Treasury 
reaffirmed that the policy applies not only to benefit payments, but 
also to wage, salary and retirement payments, and that the account must 
be at a financial institution, with specific exceptions provided for 
authorized payment agents and investment accounts. The exclusion of 
vendor payments was a result of the comments received during the 
comment period and accepted in the final rule.
    Currently, there are four exceptions to the ``in the name of the 
recipient'' requirement of Sec.  210.5(a), which are set forth in 
paragraphs (b)(1), (b)(2), (b)(3), and (b)(4). Paragraph 210.5(b)(1) 
allows deposits into an account held by an ``authorized payment agent'' 
and titled in accordance with the regulations governing the authorized 
payment agent. An authorized payment agent is defined as a 
representative payee or fiduciary appointed to act on behalf of an 
individual under agency regulations. 31 CFR 210.2(e). Section 
210.5(b)(2) allows deposits into investment accounts established 
through a registered securities broker or dealer. Section 210.5(b)(3) 
allows Federal agency employee travel reimbursement payments to be 
credited to the account of the travel card issuing bank for credit to 
the employee's travel card account. Section 210.5(b)(4) allows deposits 
to an account held by a fiscal or financial agent designated by the 
Service for card programs established by the Service and provides that 
the account title, access terms and other account provisions may be 
specified by the Service. We are proposing to add three additional 
exceptions to the ``in the name of the recipient'' requirements: (1) An 
exception for payments to individuals residing in nursing facilities; 
(2) an exception for payments to members of religious orders who have 
taken a vow of poverty; and (3) an exception for payments to prepaid 
debit and stored value card accounts meeting certain consumer 
protection requirements.
1. Accounts Held by Nursing Facilities
    On April 21, 2008, SSA published a Federal Register notice 
requesting comments on arrangements in which Social Security benefit 
payments are deposited into a third-party's ``master'' account when the 
third party maintains separate ``sub'' accounts for individual 
beneficiaries. 73 FR 21403. The issue of master/sub accounts had come 
to SSA's attention in the context of concerns regarding the use of 
master/sub accounts by ``payday lenders'' who solicit Social Security 
beneficiaries to take out high-interest loans. SSA requested comments 
on the use of master/sub accounts not only by beneficiaries, lenders, 
advocates, and other members of the public, but also specifically asked 
if nursing homes would be able to receive and manage benefits for their 
residents without the use of master/sub accounts. The comments received 
by SSA indicated that the use of master/sub account arrangements by 
residents of nursing facilities is widespread, and that these 
arrangements are beneficial for residents

[[Page 27244]]

(particularly for the elderly population needing assistance with 
banking or for whom it can be difficult to make trips to the bank). 
None of the commenters noted any abuses associated with these 
arrangements. Based on the comments received, SSA's view is that 
master/sub accounts held by nursing facilities serve useful purposes 
and do not present the concerns raised by payday lender account 
arrangements.
    Nursing facilities are highly regulated entities, and resident 
trust or patient fund accounts held by nursing facilities are fiduciary 
accounts subject to specific requirements and protections under Federal 
statute and regulation. The Federal Nursing Home Reform Act, which was 
part of the Omnibus Budget Reconciliation Act of 1987 (OBRA '87), 
revised Federal standards for nursing home care established in the 1965 
creation of both Medicare and Medicaid. 42 U.S.C. 1395i-3, 42 U.S.C. 
1396r. OBRA '87 created a set of national minimum standards of care and 
rights for people living in nursing facilities. Detailed regulations at 
42 CFR part 483 implement the statute. The Centers for Medicare and 
Medicaid Services (CMS) provides additional detailed guidance as part 
of its oversight and compliance enforcement. See http://www.cms.hhs.gov/GuidanceforLawsand Regulations/12_NHs.asp.
    One element of the revised standards was to mandate that nursing 
facilities manage and account for the personal funds residents often 
deposit with the facility. Residents have the right to manage their 
financial affairs, and nursing facilities are prohibited from requiring 
residents to deposit their personal funds with the facility. 42 U.S.C. 
1396r(c)(6); 42 CFR 483.10(c)(1). At the same time, upon written 
authorization of a resident, facilities must ``hold, safeguard, manage 
and account for'' the personal funds of the resident deposited with the 
facility. 42 U.S.C. 1396r(c)(1)(B); 42 CFR 483.10(c)(2). The statute 
requires that residents be provided a written description of their 
legal rights that includes a description of the protection of personal 
funds and a statement that a resident may file a complaint with a state 
survey and certification agency respecting resident abuse and neglect 
and misappropriation of resident property in the facility. 42 U.S.C. 
1396r(c)(1)(B); 42 CFR 483.10(b)(7)(i). Other statutory provisions 
address the management of personal funds, as follows:
    <bullet> The facility must deposit any amount of personal funds in 
excess of $50 with respect to a resident in an interest bearing account 
that is separate from any of the facility's operating accounts and all 
interest earned on that separate account must be credited to resident's 
account balance. With respect to any other personal funds, the facility 
must maintain such funds in a non-interest bearing account or petty 
cash fund. 42 U.S.C. 1396r(c)(6)(B)(i).
    <bullet> The facility must assure a full and complete separate 
accounting of each resident's personal funds, maintain a written record 
of all financial transactions involving the personal funds of a 
resident deposited with the facility, and afford the resident (or a 
legal representative of the resident) reasonable access to such record. 
42 U.S.C. 1396r(c)(6)(B)(ii).
    <bullet> The facility must notify each resident receiving medical 
assistance under the state plan when the amount in the resident's 
account reaches $200 less than the dollar amount determined under 42 
U.S.C. 1382(a)(3)(B) and of the fact that, if the amount in the account 
(in addition to the value of the resident's other nonexempt resources) 
reaches the amount determined under such section, the resident may lose 
eligibility for such medical assistance or for certain other benefits. 
42 U.S.C. 1396r(c)(6)(B)(iii).

To protect personal funds of residents deposited with a nursing 
facility, the nursing facility must purchase a security bond to assure 
the security of all personal funds. 42 U.S.C. 1396r(c)(6)(C). Lastly, 
nursing facilities cannot charge anything for these services. A 
facility may not impose a charge against the personal funds of a 
resident for any item or service for which payment is made under 
Medicare or Medicaid. 42 U.S.C. 1396r(c)(6)(D). It can only offset the 
bank service fee on the patient fund account against the interest 
earned.
    In light of the extensive protections provided to residents of 
nursing facilities whose funds are maintained in resident trust or 
patient fund accounts, we believe it is appropriate to permit the 
delivery of Federal benefit payments to these accounts, which are 
typically master/sub accounts. We are therefore requesting comment on a 
proposed amendment to the existing ``in the name of the recipient'' 
requirement in order to permit payments to be deposited into resident 
trust or patient fund accounts established by nursing facilities.
2. Accounts for Members of Religious Orders Who Have Taken Vows of 
Poverty
    SSA's Federal Register notice regarding master/sub accounts 
specifically requested comment on accounts established by religious 
orders for members of such orders who have taken vows of poverty. The 
comments received did not indicate that there are any problems 
associated with these accounts, and commenters recommended that they be 
permitted. Accordingly, we are proposing to allow payments disbursed to 
a member of a religious order who has taken a vow of poverty to be 
deposited to an account established by the religious order.
    For purposes of defining who is a ``member of a religious order who 
has taken a vow of poverty,'' we are proposing to utilize existing 
guidance issued by the Internal Revenue Service (IRS). The treatment 
for Federal tax purposes of services performed by a member of a 
religious order who has taken a vow of poverty is addressed in IRS 
Publication 517 (2008). For example, IRS Publication 517 states that a 
member of a religious order who has taken a vow of poverty is exempt 
from Self-Employment (SE) tax on earnings for services performed for 
the member's church or its agencies. For purposes of Federal income tax 
withholding and employment tax (FICA), a member of a religious order 
who has taken a vow of poverty may be entitled to receive Social 
Security benefits if the order (or an autonomous subdivision of the 
order) has elected coverage for its current and future vow-of-poverty 
members. In that case, the religious order pays all FICA taxes, 
including the employee's share. See IRS Publication 517 (2008). 
Organizations and individuals may request rulings from IRS on whether 
they are religious orders, or members of a religious order, 
respectively, for FICA, SE tax and Federal income tax withholding 
purposes. We request comment on whether it is appropriate to define the 
phrase ``member of a religious order who has taken a vow of poverty'' 
in the same way that the phrase would be defined by IRS for Federal tax 
purposes.
3. Prepaid Debit and Stored Value Card Accounts
    The utilization of prepaid debit cards and stored value cards has 
expanded substantially over the last decade, and cards have become a 
vital payment delivery mechanism for the under-banked. Typically, 
prepaid card programs are set up so that cardholders' funds are pooled 
in a master account with each individual cardholder having a subaccount 
established in the underlying records maintained by the financial 
institution. Thus, in most cases the individual cardholder's name is 
not on the title of the deposit account in which the funds are held, 
even though the cardholder's name may be

[[Page 27245]]

embossed on the card itself. We believe that the ``in the name of the 
recipient'' requirement may be impeding the use of prepaid card 
programs that may be beneficial to the unbanked and underbanked 
populations. In view of developments in the prepaid and stored value 
card industry during the past ten years, we are proposing to add an 
exception to the ``in the name of the recipient'' requirement of Sec.  
210.5 to adjust to the changing payment environment and the financial 
products that support the private sector. As part of this proposal, we 
are seeking comment on whether the ``in the name of the recipient'' 
requirement unduly hampers account options for Federal payment 
recipients. We request comment from consumers and consumer groups, 
industry associations, Federal agencies, financial institutions and 
payment services providers on this issue.
    The ``in the name of the recipient'' requirement was put in place 
to ensure that the payment reaches the intended recipient through a 
deposit account, and that the recipient has the usual consumer control 
and protections associated with a deposit account. We believe that 
account structures underlying prepaid and stored value cards can be set 
up to ensure that the recipient receives and has control of payments, 
even if the cardholder's name is not on the account title in which the 
funds are held. In this regard, we have taken into consideration the 
Federal Deposit Insurance Corporation's (FDIC) issuance in 2008 of New 
General Counsel's Opinion No. 8 (GC8). See 73 FR 67155. The FDIC's 
Legal Division, noting that stored value cards now commonly serve as 
the delivery mechanism for vital funds such as employee payroll and 
government payments such as benefits and tax refunds, clarified that 
deposit insurance coverage would be provided to the holders of prepaid 
and stored value cards. The FDIC's Legal Division concluded that funds 
underlying prepaid and stored value cards that are held for 
cardholders' benefit at insured depository institutions should always 
be treated as deposits, without regard to whether the funds are 
accessed by a plastic card or a paper check. Under GC8, all funds 
underlying stored value cards and other nontraditional access 
mechanisms will be treated as ``deposits'' to the extent that the funds 
have been placed at an insured depository institution. If cardholders' 
funds are commingled in a pooled account, each cardholder will be 
treated as the insured owner of the funds held on his or her behalf in 
the pooled account, provided that the three requirements for pass-
through insurance are met. Those requirements are:
    (1) The account records of the insured depository institution must 
disclose the existence of the agency or custodial relationship. This 
requirement can be met by opening the account under a title such as: 
``ABC Company as Custodian for Cardholders;''
    (2) The records of the insured depositor institution or records 
maintained by the custodian or other party must disclose the identities 
of the actual owners and the amount owned by each such owner; and
    (3) The funds in the account actually must be owned (under the 
agreements among the parties or applicable law) by the purported owners 
and not by the custodian or other party. See GC8, 73 FR67157. See 73 FR 
67155, 67157.
    We are proposing to allow the delivery of Federal payments to 
prepaid and stored value card accounts, provided that the card bears 
the cardholder's name and meets the following requirements:
    <bullet> The account accessed by the card is held at an insured 
depository institution and meets the requirements for pass-through 
insurance under 12 CFR part 330 such that the cardholder's balance is 
FDIC insured to the extent permitted by law; and
    <bullet> The card account constitutes an ``account'' as defined in 
12 CFR 205.2(b) such that the consumer protections of Regulation E 
apply to the cardholder.

Stored value or prepaid cards that do not meet the foregoing 
requirements would not fall under the proposed exception. For example, 
some merchants, such as book stores and coffee shops, offer prepaid 
cards that function in the same manner as gift certificates. These 
cards do not typically bear the cardholder's name, do not provide 
access to money at a depository institution and do not meet the FDIC's 
requirements for pass-through insurance. See 73 FR 67156. These types 
of cards also are not covered by the Federal Reserve's Regulation E. 
Therefore, they could not be used to deliver certain Federal payments, 
such as Federal benefit payments.
    We request comment on the implications of allowing delivery of 
Federal benefit payments to accounts that meet the requirements listed 
above. We are mindful of concerns that account arrangements may be 
structured to facilitate payday lending and similar arrangements that 
are inappropriate for Federal benefit recipients, and we are 
particularly interested in comment on whether the consumer protections 
required in the proposed exceptions are adequate to prevent potential 
abuses. In addition, we request comment on whether to revise the 
wording in 31 CFR 210.5(a) which provides that ``an ACH credit entry 
representing a Federal payment other than a vendor payment shall be 
deposited into a deposit account at a financial institution.'' We are 
considering revising that sentence to read ``an ACH credit entry 
representing a Federal payment other than a vendor payment shall be 
deposited into a deposit account held by a financial institution and 
directly accessible by the recipient.'' The purpose of the revision 
would be to make it clear that accounts established by payday lenders 
or other third parties under terms that prevent the recipient from 
being able to freely withdraw or access funds in the account do not 
satisfy the requirements of 31 CFR 210.5.

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 2007 ACH Rules book 
with references to the 2009 ACH Rules book. No change to Part 210 is 
necessary in order to exclude the amendments to the rules enforcement 
provisions, since Part 210 already provides that the rules enforcement 
provisions of Appendix 11 of the ACH Rules do not apply to Federal 
agency ACH transactions. See Sec.  210.2(d).

Sec.  210.2(d)

    We are proposing to amend the definition of applicable ACH Rules at 
Sec.  210.2(d) to reference the rules published in NACHA's 2009 Rules 
book rather than the rules published in NACHA's 2007 Rules book. 
Proposed Sec.  210.2(d)(6) is revised to reflect a numbering change to 
the ACH Rules pursuant to which former ACH Rule 2.11.2.3 is now ACH 
Rule 2.12.2.3. In addition, we are proposing to revise 210.2(d)(7) to 
remove a reference to former ACH Rule 2.13.3, which required reporting 
regarding unauthorized Telephone-Initiated entries. NACHA has replaced 
that reporting requirement with a broader reporting requirement which 
we are proposing not to adopt. Proposed Sec.  210.2(d)(7) sets forth 
ACH Rule 2.18, which contains those broader reporting requirements and 
which we are proposing not to adopt.
    Proposed Sec.  210.2(d)(8) has been added in order to exclude 
entries other than Federal benefit payments delivered to Mexico, Canada 
and Panama through the FedGlobal<SUP>SM</SUP> ACH Payment Service

[[Page 27246]]

from ACH Rule 2.11 (International ACH Transactions) until January 1, 
2012.

Sec.  210.3(b)

    We are proposing to amend Sec.  210.3(b) by replacing the 
references to the ACH Rules as published in the 2007 Rules book with 
references to the ACH Rules as published in the 2009 Rules book.

Sec.  210.5(b)

    We are proposing to redesignate paragraph (b)(5) as paragraph 
(b)(8) and to add new paragraphs (b)(5), (b)(6) and (b)(7), which 
create additional exceptions to the requirement in paragraph (a) that 
all payments other than vendor payments be delivered to an account in 
the name of the recipient. Proposed paragraph (b)(5) would allow 
payments disbursed to a resident of a nursing facility, as defined in 
42 U.S.C. 1396r, to be deposited into a resident trust or patient fund 
account established by the nursing facility. Proposed paragraph (b)(6) 
would allow payments disbursed to a member of a religious order who has 
taken a vow of poverty to be deposited to an account established by the 
religious order. Proposed paragraph (b)(7) would allow payments to be 
deposited to an account accessed through a stored value card, prepaid 
card or similar card that bears the cardholder's name and meets certain 
requirements. The requirements include that the account meets the 
FDIC's pass-through insurance requirements so that cardholder's balance 
is FDIC insured to the cardholder, and that the card constitutes an 
``account'' for purposes of requiring compliance with the Federal 
Reserve's Regulation E.

Sec.  210.10

    Proposed Sec.  210.10(a) retains certain provisions not affected by 
the proposed changes to the reclamation process. RDFIs must return all 
payments after becoming aware of the death or incapacity of a 
recipient. Also, an RDFI must notify an agency issuing payments if it 
learns of the death or legal incapacity of a recipient or beneficiary 
from a source other than the agency.
    Proposed Sec.  210.10(b) sets forth the automated reclamation 
process for payments not exceeding the 45-day Amount. Proposed Sec.  
210.10(c) sets forth the process for payments exceeding the 45-day 
Amount, which is unchanged from the current process.
    Proposed Sec. Sec.  210.10(d), 210.10(e) and 210.10(f) contain the 
language currently located in current Sec. Sec.  210.10(c), 210.10(d) 
and 210.10(e), without any changes. Proposed Sec.  210.10(f) sets forth 
the procedure by which financial institutions can protest a debit 
carried out under proposed Sec.  210.10(b).
    Proposed Sec. Sec.  210.10(b) and (f) would not become effective 
until January 1, 2012.

Sec.  210.11

    We are proposing to amend Sec.  210.11(b)(3)(i) in order to require 
RDFIs to provide the name and last-known address and phone number for 
account owners and others who have withdrawn, or were authorized to 
withdraw, funds from the account, as permitted by the Payment 
Transactions Integrity Act of 2008. This requirement applies only to 
reclamations for an amount exceeding the 45-day Amount.

IV. Procedural Analysis

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 proposed rule clearer. For example, you may 
wish to discuss: (1) Whether we have organized the material to suit 
your needs; (2) whether the requirements of the rule are clear; or (3) 
whether there is something else we could do to make these rule easier 
to understand.

Regulatory Planning and Review

    The proposed 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 proposed rule will not have a 
significant economic impact on a substantial number of small entities. 
The proposed changes to the regulation related to automating 
reclamations may nominally reduce costs for financial institutions, 
including financial institutions that are small entities, because the 
costs of completing reclamation forms and mailing them back to Treasury 
would be eliminated. However, the economic impact of this cost 
reduction would be minimal. Accordingly, a regulatory flexibility 
analysis under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) is 
not required.

Unfunded Mandates Act of 1995

    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 proposed 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.

    For the reasons set out in the preamble, we propose to amend 31 CFR 
part 210 as follows:

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

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

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

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


Sec.  210.2  Definitions.

* * * * *
    (d) Applicable ACH Rules means the ACH Rules with an effective date 
on or before September 18, 2009, as published in Parts IV, V and VII of 
the ``2009 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 2.12.2.3 (requiring that originating depository 
financial

[[Page 27247]]

institutions (ODFIs) establish exposure limits for Originators of 
Internet-initiated debit entries);
    (7) ACH Rule 2.18 (requiring reporting and reduction of high rates 
of entries returned as unauthorized); and
    (8) ACH Rule 2.11 (International ACH Transactions), which shall not 
apply until January 1, 2012 to entries other than Federal benefit 
payments delivered to Mexico, Canada and Panama through the 
FedGlobal\SM\ ACH Payment Service.
* * * * *
    3. Revise Sec.  210.3, paragraph (b), to read as follows:
* * * * *
    (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 
18, 2009, as published in Parts IV, V, and VII of the ``2009 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 ``2009 ACH Rules'' are available from NACHA--The Electronic 
Payments Association, 13450 Sunrise Valley Drive, Suite 100, Herndon, 
Virginia 20171. Copies also are available for public inspection at the 
Office of the Federal Register, 800 North Capitol Street, NW., Suite 
700, Washington, DC 20002; and the Financial Management Service, 401 
14th Street, SW., Room 400A, Washington, DC 20227.
    (2) Any amendment to the applicable ACH Rules that is approved by 
NACHA--The Electronic Payments Association after January 1, 2009, shall 
not apply to Government entries unless the Service expressly accepts 
such amendment by publishing notice of acceptance of the amendment to 
this part in the Federal Register. An amendment to the ACH Rules that 
is accepted by the Service shall apply to Government entries on the 
effective date of the rulemaking specified by the Service in the 
Federal Register notice expressly accepting such amendment.
* * * * *
    4. In Sec.  210.5, redesignate paragraph (b)(5) as (b)(8) and add 
new paragraphs (b)(5), (b)(6) and (b)(7), to read as follows:


Sec.  210.5  Account requirements for Federal payments.

* * * * *
    (b) * * *
    (5) Where a Federal payment is disbursed to a resident of a nursing 
facility as defined in 42 U.S.C. 1396r, the payment may be deposited 
into a resident trust or patient fund account established by the 
nursing facility.
    (6) Where a Federal payment is disbursed to a member of a religious 
order who has taken a vow of poverty, the payment may be deposited to 
an account established by the religious order. As used in this 
paragraph, the phrase ``member of a religious order who has taken a vow 
of poverty'' is defined as it would be by the Internal Revenue Service 
for Federal tax purposes.
    (7) Where a Federal payment is to be deposited to an account 
accessed through a stored value card, prepaid card or similar card that 
bears the cardholder's name and meets the following requirements:
    (i) The account accessed by the card is held at an insured 
depository institution and meets the requirements for pass through 
insurance under 12 CFR part 330 such that the cardholder's balance is 
FDIC insured to the extent permitted by law; and
    (ii) The card account constitutes an ``account'' as defined in 12 
CFR 205.2(b) such that the consumer protections of Regulation E apply 
to the cardholder.
* * * * *
    5. Revise Sec.  210.10 to read as follows:


Sec.  210.10  RDFI liability.

    (a) RDFI obligations. An RDFI must return any benefit payments 
received after RDFI becomes aware of the death or legal incapacity of a 
recipient or the death of a beneficiary, regardless of the manner in 
which the RDFI discovers such information. If the RDFI learns of the 
death or legal incapacity of a recipient or death of a beneficiary from 
a source other than notice from the agency issuing payments to the 
recipient, the RDFI must immediately notify the agency of the death or 
incapacity. The proper use of the R15 or R14 return reason code shall 
be deemed to constitute such notice.
    (b) Liability for 45-day Amount. An RDFI is liable to the Federal 
Government for the full amount of all benefit payments received by the 
RDFI from an agency within 45 days after the death or legal incapacity 
of the recipient or death of the beneficiary (45-day Amount). When an 
agency notifies the Service that benefit payments in an amount not 
exceeding the 45-day Amount were originated to a deceased or 
incapacitated recipient, the Service will instruct the appropriate 
Federal Reserve Bank to debit the RDFI's reserve account for the 45-day 
Amount. The Service will notify the RDFI at least 30 days prior to the 
debit. If the RDFI returns the amount specified in the notice during 
the 30-day period, the Service will not proceed with the debit. If the 
RDFI files a reclamation dispute notice during the 30-day period before 
the debit is carried out, the Service will not proceed with the debit 
until a final decision has been reached, in accordance with paragraph 
(g), that the debit is proper.
    (c) Liability for amounts exceeding 45-day Amount. An RDFI is 
liable to the Federal Government for the full amount of all benefit 
payments received by the RDFI after 45 days following the death or 
legal incapacity of the recipient or death of the beneficiary unless 
the RDFI has the right to limit its liability under 210.11 of this 
part. When an agency notifies the Service that benefit payments in an 
amount exceeding the 45-day Amount were originated to a deceased or 
incapacitated recipient, the Service will send a notice of reclamation 
to the RDFI. Upon receipt of the notice of reclamation, the RDFI must 
provide the information required by the notice of reclamation and 
return the amount specified in the notice of reclamation in a timely 
manner.
    (d) Exception to liability rule. An RDFI shall not be liable for 
post-death benefit payments sent to a recipient acting as a 
representative payee or fiduciary on behalf of a beneficiary, if the 
beneficiary was deceased at the time the authorization was executed and 
the RDFI did not have actual or constructive knowledge of the death of 
the beneficiary.
    (e) Time limits. An agency that initiates a request for a 
reclamation must do so within 120 calendar days after the date that the 
agency first has actual or constructive knowledge of the death or legal 
incapacity of a recipient or the death of a beneficiary. An agency may 
not reclaim any post-death or post-incapacity payment made more than 
six years prior to the date of the notice of reclamation; provided, 
however, that if the account balance at the time the RDFI receives the 
notice of reclamation exceeds the total amount of post-death or post-
incapacity payments made by the agency during such six-year period, 
this limitation shall not apply and the RDFI shall be liable for the 
total amount of all post-death or post-incapacity payments made, up to 
the amount in the account at the time the RDFI receives the notice of 
reclamation and has had a reasonable opportunity to act on the notice 
(not to exceed one business day).
    (f) Debit of RDFI's account. If an RDFI does not return the full 
amount of the outstanding total or any other amount for which the RDFI 
is liable under this subpart in a timely manner, the Federal Government 
will collect the amount outstanding by instructing the

[[Page 27248]]

appropriate Federal Reserve Bank to debit the account utilized by the 
RDFI. The Federal Reserve Bank will provide advice of the debit to the 
RDFI.
    (g) Reclamation disputes. Where the Service, in accordance with 
paragraph (b) of this section, has instructed a Federal Reserve Bank to 
debit the account of a financial institution for the 45-day Amount, the 
financial institution may file a dispute notice challenging the 
reclamation. A dispute notice filed under this paragraph must be in 
writing, and must be sent to the Claims Manager, Department of the 
Treasury, Financial Management Service, at the address listed on the 
notice of the debit, or to such other address as the Service may 
publish in the Green Book. The reclamation dispute notice must include 
supporting documentation. The Service will not consider reclamation 
dispute notices received more than 90 days after the date on which the 
financial institution's reserve account was debited. The Claims 
Manager, or an authorized designee, will make every effort to decide 
any dispute notice submitted under this section within 60 days. If it 
is not possible to render a decision within 60 days, the Claims Manager 
or an authorized designee will notify the financial institution of the 
delay and may take up to an additional 60 days to render a decision. 
If, based on the evidence provided, the Claims Manager, or an 
authorized designee, finds that the financial institution has proved, 
by a preponderance of the evidence, that debit was improper or 
excessive, the Service will notify the financial institution in writing 
and, within ten days of the decision, recredit the financial 
institution's reserve account for the amount improperly debited. Such 
notice shall serve as the final agency determination under the 
Administrative Procedure Act (5 U.S.C. 701 et seq.). No civil suit may 
be filed until the financial institution has filed a dispute notice 
under this section, and the Service has provided notice of its final 
determination.
    6. Revise Sec.  210.11, paragraph (b)(3)(i) to read as follows:


Sec.  210.11  Limited liability.

* * * * *
    (b) * * *
    (3)(i) Provide the name and last known address and phone number of 
the following person(s):
    (A) The recipient and any co-owner(s) of the recipient's account;
    (B) All other person(s) authorized to withdraw funds from the 
recipient's account; and
    (C) All person(s) who withdrew funds from the recipient's account 
after the death or legal incapacity of the recipient or death of the 
beneficiary.
* * * * *

    Dated: May 10, 2010.
Richard L. Gregg,
Acting Fiscal Assistant Secretary.
[FR Doc. 2010-11492 Filed 5-13-10; 8:45 am]
BILLING CODE 4810-35-P


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