Regulations Governing Agencies for the Issue and Offering of United States Savings Bonds, Including Sales by Electronic Means

DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Parts 317, 351, 353, and 370

Regulations Governing Agencies for the Issue and Offering of

United States Savings Bonds, Including Sales by Electronic Means

AGENCY: Bureau of the Public Debt, Fiscal Service, Treasury.

ACTION: Proposed rule.

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SUMMARY: The Department of the Treasury hereby publishes a proposed

rule governing the issue and offering of United States Savings Bonds.

This document proposes changes to create new categories of savings bond

issuing agents and to clarify and expand the means by which bonds may

be sold, including electronic means.

DATES: Submit comments on or before June 1, 1998.

ADDRESSES: Comments should be sent to the attention of Wallace L.

Earnest, Director, Division of Staff Services, Room 507, Bureau of the

Public Debt, 200 3rd St., Parkersburg, WV 26106-1328. Additionally,

comments may be sent by e-mail to the following address:

[email protected]>. When sending comments by e-mail, please

provide your full name and mailing address, and send the comments in

ASCII format. Comments received will be available for public inspection

and copying at the Treasury Department Library, Freedom of Information

Act (FOIA) Collection, Room 5030, Main Treasury Building, 1500

Pennsylvania Ave. NW, Washington, D.C. 20220. Individuals wishing to

visit the library should call (202) 622-0990 for an appointment. Copies

of this proposed rule can be downloaded from the Bureau of the Public

Debt at the following World Wide Web address: http://

www.savingsbonds.gov>.

FOR FURTHER INFORMATION CONTACT: Wallace L. Earnest, Director, Division

of Staff Services, at (304) 480-6319 or by e-mail at

[email protected]>; Troy D. Martin, Senior Program Analyst,

Division of Staff Services, at (304) 480-6545 or by e-mail at

[email protected]>; Edward C. Gronseth, Deputy Chief Counsel, at

(304) 480-5192 or by e-mail at [email protected]>; or Gregory J.

Till, Attorney-Adviser, Office of the Chief Counsel, at (202) 219-3320

or by e-mail at [email protected]>.

SUPPLEMENTARY INFORMATION:

I. Background

The growth of electronic commerce and the World Wide Web have led

to a flourishing of financial service providers and new payment

methods. However, the Bureau of the Public Debt has been unable to take

full advantage of these developments in the sale of United States

Savings Bonds because of apparent restrictions in existing regulations.

This document proposes changes to create new categories of savings bond

issuing agents and to clarify and expand the means by which bonds may

be sold, including electronic means.

The most important proposed changes are directed at four areas in

title 31 of the Code of Federal Regulations. First, changes in

Secs. 317.2 and 317.3 would amend the rules used to determine which

organizations may serve as issuing agents and the procedures used to

qualify these organizations as issuing agents. Second, changes to

Sec. 351.5 would expand the means by which issuing agents may sell

savings bonds. Third, a new subpart in part 370 would address the use

of Automated Clearing House debit entries for the sale of bonds issued

through the Bureau of the Public Debt. Fourth, another new subpart in

part 370 would address the electronic submission of purchase

applications and remittances for the sale of bonds issued through the

Bureau of the Public Debt. This second new subpart in part 370 would

facilitate Treasury's intention to sell savings bonds through

remittances by credit cards at the World Wide Web site of the Bureau of

the Public Debt.

II. Summary of Amendments

A. Regulations Governing Agencies for Issue of Savings Bonds (31 CFR

Part 317)

(1) Definitions (Sec. 317.1)

The revised definition of ``issuing agent'' would note the

authority of the Commissioner of the Public Debt or the Commissioner's

designee to qualify issuing agents, as explained in Sec. 317.2. The

definition also would clarify that an issuing agent acts as an agent of

the purchaser in handling the remittance. The proposed language

addressing the handling of the remittance is consistent with current

practice. The Secretary of the Treasury collects purchase funds from

issuing agents, not the public. If an issuing agent discovers that the

remittance is uncollectible or must be returned after the issuance of a

bond, the Secretary is nonetheless entitled to payment from the issuing

agent. The issuing agent bears the risk of loss for non-collection or

return of the remittance.

(2) Organizations Eligible to Serve as Issuing Agents (Sec. 317.2)

Currently, issuing agent eligibility is limited to financial

institutions (such as banks and credit unions), agencies of the United

States and state and local governments, and employers operating payroll

savings plans. This document proposes to expand the types of

organizations that are eligible to serve as issuing agents.

One proposed change, in Sec. 317.2(c), would allow organizations

that operate payroll savings plans on behalf of employers to serve as

issuing agents. The proposed change is designed to bolster payroll

savings plan sales from small businesses, which often do not have the

resources to maintain such plans themselves. As is the case with

employer organizations, an organization operating a payroll service

plan on behalf of an employer organization would be eligible for

issuing agent fees under the proposed rule only if it inscribes savings

bonds.

Another proposed addition, set out in Sec. 317.2(d), would give the

Commissioner of the Bureau of the Public Debt or the Commissioner's

designee the authority to qualify issuing agents when to do so would be

in the public interest. The Commissioner or the Commissioner's designee

could use such process as deemed to be appropriate in selecting the

issuing agent. The selected issuing agent would also be subject to such

conditions as deemed to be appropriate.

The new Sec. 317.2(d) would be used for the selection of entities

to sell bonds in unique ways as new methods of sales emerge. In

particular, this provision would facilitate the qualification of

issuing agents to sell savings bonds through electronic methods, such

as those offered by financial services providers through World Wide Web

access.

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In qualifying issuing agents under this provision, the Commissioner

or the Commissioner's designee would balance the convenience and cost-

effectiveness of using new purchase methods against the need to insure

the security and reliability of those methods.

(3) Procedures for Qualifying and Serving as an Issuing Agent

(Sec. 317.3)

All organizations currently must apply to a designated Federal

Reserve Bank to receive issuing agent qualification. The section would

be amended to state that an organization that seeks qualification under

Sec. 317.2(d) or because of its status as an organization operating a

payroll savings plan on behalf of an employer under Sec. 317.2(c) would

be approved by the Commissioner of the Bureau of the Public Debt or the

Commissioner's designee, though application still would be made through

a designated Federal Reserve Bank.

(4) Issuance of Bonds (Sec. 317.6)

The issuing agent fee provision would be simplified and continue to

emphasize that fee schedules are set out not in the regulations, but

through a separate publication in the Federal Register. The proposed

changes would have no effect on the current fee structure, though the

Bureau of the Public Debt would reserve the right to create new

categories of fees as new ways of selling bonds develop.

(5) Appendix to Sec. 317.8--Remittance of Sales Proceeds and

Registration Records, Department of the Treasury Circular, Public Debt

Series No. 4-67 (Third Revision), Fiscal Service, Bureau of the Public

Debt

The appendix would be revised, primarily for changes in

terminology. For instance, the definition of ``issuing agent'' would be

redefined to reflect the changes to that term in Sec. 317.2. The term

``over-the-counter'' would be redefined to reflect the expanded meaning

given to that term in Sec. 351.5 of this chapter. Among other minor

changes, paragraph (3) of subpart B would be removed because that

provision no longer has application.

B. Offering of United States Savings Bonds, Series EE (31 CFR Part 351)

(1) Governing Regulations for Series EE Bonds (Sec. 351.1)

This section would state that the regulations governing the

transfer of funds by electronic means on account of United States

securities in part 370 of this chapter would apply only to transactions

for the purchase of bonds issued through the Bureau of the Public Debt.

The regulations in part 370 would have no application to transactions

for the purchase of bonds accomplished through issuing agents

generally, unless and to the extent otherwise directed by the

Commissioner of the Bureau of the Public Debt or the Commissioner's

designee.

(2) Purchase of Bonds (Sec. 351.5)

Currently, this section provides for four categories of savings

bond sales: (1) ``payroll plans''; (2) ``over-the-counter/mail''; (3)

``bond-a-month plan''; and (4) ``employee thrift, savings, vacation,

and similar plans.'' Because some of these categories are limited and

outdated, they may actually inhibit sales rather than facilitate them.

Furthermore, a comparison with the appendix to Sec. 317.8 of this

chapter (which discusses the remittance of sales proceeds and

registration records by issuing agents) shows a lack of consistency in

the categories and terminology used to define bond sales. In discussing

bond sales, the appendix does not mirror Sec. 351.5 but rather combines

the four categories of sales described in Sec. 351.5 into two

categories: (1) ``payroll sale''; and (2) ``over-the-counter sale.''

The term ``payroll sale'' is not used in Sec. 351.5, which means that

different terminology is used in the two provisions despite the fact

that both provisions address bond sales. Also, the term ``over-the-

counter'' has an expanded meaning in the appendix to Sec. 317.8 as

compared to its use in Sec. 351.5, making the regulations more

difficult to understand.

The proposed rule would revise Sec. 351.5 (as well as the appendix

to Sec. 317.8), using the two categories in the appendix to Sec. 317.8:

(1) ``payroll sales''; and (2) ``over-the-counter sales.'' The proposed

payroll sales category would include sales through ``payroll savings

plans'' and ``employee thrift, savings, vacation, and similar plans,''

the provisions of which are already described in the substance of the

current Sec. 351.5. The proposed rule also states that employers and

the organizations operating payroll savings plans on behalf of

employers would be able to sell bonds only pursuant to payroll savings

plans. These types of issuing agents would not be allowed to sell bonds

over-the-counter.

Over-the-counter sales would be all sales that are not payroll

sales. For over-the-counter sales, the proposed rule would provide that

``the purchase application and remittance may be submitted to an

issuing agent by any means acceptable to the issuing agent.'' This

broad provision would ensure that issuing agents have the flexibility

to sell bonds through channels in addition to those currently set out

in Sec. 351.5. For instance, the proposed rule would authorize issuing

agents to sell savings bonds through electronic means such as the World

Wide Web. Both the application and remittance could be submitted and

signed through electronic methods agreed upon by the parties.

The regulation would not impose limitations on the types of

remittances which an issuing agent may accept. As always, however, the

issuing agent would bear the burden of collection and risk of non-

collection for remittances it accepts. The Secretary of the Treasury

takes payment from the issuing agent, not the purchaser. The Secretary

of the Treasury has no obligation to return funds received from an

issuing agent after issuance of a bond if the issuing agent cannot

collect or must return the remittance.

Finally, although the proposed changes would have no effect on the

current issuing agent fee structure, the Bureau of the Public Debt

would reserve the right to make changes to the fee structure as new

ways of selling bonds develop.

C. Regulations Governing United States Savings Bonds, Series EE and HH

(31 CFR Part 353)

(1) Application for Relief--Non-Receipt of Bond (Sec. 353.27)

The regulations currently provide little guidance as to the status

of bond purchases if the Secretary of the Treasury does not receive

payment. While not likely, an issuing agent may fail after receiving

the remittance from a purchaser but before the Secretary collects the

sales proceeds from the issuing agent.

If an issuing agent has inscribed a bond, the Secretary will honor

the bond even if the Secretary cannot collect the sales proceeds from

the issuing agent. This policy is consistent with existing regulations,

which note that the registration of an issued bond is generally

conclusive of ownership. If a bond has not been inscribed, the proposed

rule states that the Secretary is authorized to issue bonds to preserve

the public's confidence in dealing with issuing agents, even if the

Secretary cannot collect the sales proceeds from the issuing agent.

D. Regulations Governing the Transfer of Funds by Electronic Means on

Account of United States Securities (31 CFR Part 370)

(1) Scope (Sec. 370.0)

This section would be amended to clarify that to the extent that

the rules

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in part 210 of this title apply to the purchase or payment of interest

and principal on United States securities, the rules in this part 370

would apply in the event of any inconsistencies.

(2) Definitions (Sec. 370.1)

Several definitions would be added to or changed in this section.

The definition of ``Automated Clearing House (ACH) entry'' would refer

to transactions accomplished in accordance with the applicable

Operating Rules and Operating Guidelines of the National Automated

Clearing House Association, as modified by these and other regulations

and law.

Other terms would be drawn from several authorities. The definition

of ``deposit account'' would be taken principally from Regulation E of

the Board of Governors of the Federal Reserve (12 CFR part 205). The

definition of ``financial institution'' would be the same as included

in a proposed rule to amend part 208 of this title, ``Management of

Federal Agency Disbursement,'' published in the Federal Register on

September 16, 1997, beginning at page 48714. The definition of

``originator'' would be derived from the Operating Rules and Operating

Guidelines of the National Automated Clearing House Association.

(3) Definition (Sec. 370.4)

The definition of ``payment'' would be removed from the general

definitional section in subpart A and placed into a specific

definitional section applying only to subpart B. The limited definition

of a payment as a deposit from the Department to the account of the

owner only has application in subpart B and may cause confusion by its

application throughout part 370.

(4) Governing Law (Sec. 370.30)

Subpart D would establish rules and the exclusive liability of the

Bureau of the Public Debt for debit entries to a purchaser's account to

buy bonds from the Bureau of the Public Debt. As set out in Sec. 351.1,

part 370 would apply only to transactions for the purchase of bonds

issued through the Bureau of the Public Debt. These rules would not

apply to transactions for the purchase of bonds accomplished through

issuing agents generally, unless and to the extent the Commissioner of

the Bureau of the Public Debt or the Commissioner's designee deems

otherwise.

It is anticipated that a purchaser would authorize an entity named

on an approved authorization form to be the originator for the debit

entries. This entity would forward collected funds to Treasury in

exchange for a fee (unless the Bureau of the Public Debt chooses to

name itself as the originator). The Bureau of the Public Debt would

then issue the bonds through a Federal Reserve Bank acting as a fiscal

agent for the United States.

(5) Authorization of Purchaser (Sec. 370.31)

This section would state that all debit authorizations must be

accomplished through a procedure approved by the Bureau of the Public

Debt. An authorization would have to be signed. The authorization would

allow for recurring debit entries. The section would also provide that

except to the extent required by the Bureau of the Public Debt, the

originator will not be required to take additional steps to verify the

identity of the purchaser or the authenticity of the signature.

The Bureau of the Public Debt would retain the right to name a

successor to the originator without additional notice to the purchaser,

though it may ask the successor to provide such notice as a customer

service. This provision is drawn from the official staff interpretation

to Sec. 205.10(b) of Regulation E of the Board of Governors of the

Federal Reserve (12 CFR part 205), which allows ``successor

institutions'' to assume a originator's role without notice or a new

authorization.

Finally, a purchaser's subsequent authorization would cancel a

previous authorization only if so noted by the purchaser on the

subsequent authorization form. This provision would allow a purchaser

to make additional recurring purchases of savings bonds through debit

entries without having to list anew all the recurring purchases on a

single form.

(6) Cancellation or Suspension by the Bureau of the Public Debt

(Sec. 370.32)

This section would state that the Bureau of the Public Debt could

terminate or suspend the availability of debit entries at any time, and

its decision to do so would be final.

(7) Cancellation or Suspension by Purchaser (Sec. 370.33)

Under this section, a purchaser would be able to cancel or suspend

debit ACH entries for the purchase of bonds by providing written notice

to the originator.

(8) Changes and Error Resolution (Sec. 370.34)

This section would provide that if a person gives an oral notice

relating to the correctness of bond purchase information or a debit

entry to the person's account, the originator could require a written

notice from the person, which must be received within thirty days. In

addition, the originator would be allowed to ignore the oral notice if

written notice is not received within thirty days. Finally, the

originator would be able to suspend further debit entries during a

resolution to any notice, written or oral.

(9) Prenotification (Sec. 370.35)

The section would leave the requirement of a prenotification, as

well as the length of the period during which the originator must wait

after sending a prenotification before sending a live debit entry, up

to the discretion of the Bureau of the Public Debt.

(10) Liability (Sec. 370.36)

This section would state that the Bureau of the Public Debt would

not be liable in disputes arising out of debit entries, unless the

Bureau of the Public Debt names itself as an originator. Disputes

arising out of debit entries would be the responsibility of the

originator. Also, unless the Bureau of the Public Debt designates

itself or a fiscal or financial agent as the originator, the originator

would serve as the agent of the purchaser in handling the remittance.

In any case, the Bureau of the Public Debt's liability would be

limited to the amount of the improper debit, less any losses caused due

to the failure of a claimant to exercise due diligence. The Bureau of

the Public Debt's responsibility would be to replace lost, stolen,

destroyed, mutilated, and defaced bonds, as well as to issue or replace

bonds not received, under the rules set out in subpart F of part 353 of

this chapter, as proposed to be amended.

(11) Governing Law (Sec. 370.50)

Subpart E would establish rules for the electronic submission of

purchase applications and remittances for the purchase of savings bonds

issued through the Bureau of the Public Debt. The subpart explicitly

would enable the Bureau of the Public Debt's acceptance of electronic

signatures, establish the rules of contract formation accomplished by

electronic means, address the admissibility of digital signatures, and

set out the exclusive liability of the Bureau of the Public Debt for

these transactions.

The first use of these provisions would be to facilitate the sale

of savings bonds over the World Wide Web through remittances paid for

by credit cards. On April 30, 1997, the Secretary of the Treasury

announced his support of this goal, stating:

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I am pleased to announce a number of steps we are taking to make

savings bonds more attractive investments for American savers. * * *

[W]e are using technology in an effort to make information about

the savings bond program more available to all Americans * * *. [W]e

will take another step to make savings bonds more available by

introducing credit card purchasing on-line.

The bonds will be available at World Wide Web site of the Bureau of

the Public Debt, at http://www.savingsbonds.gov>. These sales will

utilize the latest in technology (including the issuance of digital

certificates to credit card holders and the use of the Secure

Electronic Transactions protocol), which may hamper the initial

availability of bonds sold in this fashion but which will help insure

the security of these sales for the Government and purchasers.

It is important to note the limited scope and extent of these

proposed regulations. As would be stated in Sec. 351.1 of this chapter,

these rules would apply only to savings bond transactions accomplished

through the Bureau of the Public Debt. These regulations would not

apply to savings bond sales accomplished through issuing agents such as

banks and employers offering payroll savings plans. Furthermore, the

regulations are relatively brief, at least in comparison to work done

by the American Bar Association, the National Conference of

Commissioners on Uniform State Laws, the American Law Institute, and

the United Nations Commission on International Trade Law, among others.

Also, many states have passed or are contemplating comprehensive

legislation in this area.

Given the rapidly changing nature of the technology, its narrow

initial use by the Bureau of the Public Debt, and a desire to avoid

even the appearance of encroaching upon the right of states to pursue

their own legislative approaches, these electronic and digital

signature regulations must be drawn in a limited fashion. The

regulations would leave unchanged the right of states to determine

their own rules for electronic and digital signatures and would not

address any issues related to certification authorities. Some brief

federal contract law provisions addressing electronic and digital

signatures are necessary to facilitate the sale of savings bonds over

the Internet by the Bureau of the Public Debt, and that is what these

regulations seek to implement.

(12) Definitions (Sec. 370.51)

The section would list five definitions. The most fundamental would

be a definition of ``signature.'' A signature would be ``any symbol or

method executed or adopted by a party with present intention to be

bound,'' which is a traditional legal definition of a signature. The

definition would encompass electronic signatures. Case law on

signatures indicates that almost anything can constitute a signature,

from printed and typewritten names to account numbers, if executed with

an intent to be bound. Electronic signatures are no different from

other forms of signatures in this regard. To retain some control over a

new and uncertain process, an electronic signature submitted to the

Bureau of the Public Debt would have to be of a type approved by the

Bureau of the Public Debt.

In addition, the section would include a definition of ``digital

signature,'' which is a special type of electronic signature. Treasury

will use digital signatures in the sale of savings bonds over the

Internet. A digital signature uses ``public-key encryption'' and a

``message digest function'' in transforming an electronic ``record.''

The definitions of these terms largely are taken from model, proposed,

or existing authorities.

Public-key encryption is a process that relies upon an algorithm to

produce two mathematically related but different keys. If public-key

encryption is implemented securely, it is computationally infeasible to

derive one key from the other. The keys can be used for several

purposes, including the creation and verification of digital

signatures. One key (the private key) is kept private and can be used

to create a digital signature, while the other key (the public key) may

be distributed to anyone and may be used by a relying party to verify a

digital signature. The association of a public key (and by implication,

its corresponding private key) to the identity of a particular person

is accomplished through the use of digital certificates, issued by

certification authorities.

The use of a message digest function (also known as a hash

function) is an essential element in the creation and verification of

digital signatures. A message digest function is an algorithm that

typically provides a shortened, mathematical version of a longer

electronic record. Even a small change to an electronic record can

result in a dramatic change to a message digest, aiding in the

verification of a digital signature and any electronic record to which

the signature is attached. The signer uses the signer's private key to

encrypt the short message digest, rather than the entire electronic

record. This digital signature (the message digest, encrypted by the

signer's private key) is sent to the recipient, along with a copy of

the electronic record.

Upon receipt of the digital signature and electronic record, the

recipient uses the signer's public key to decrypt the digital signature

and recover the message digest. The recipient then runs the received

copy of the electronic record through the same message digest function

used to create the received message digest. If the two results are

identical, the recipient knows that the electronic record was encrypted

by the signer's private key and that the electronic record was not

tampered with from the time the signer created the digital signature.

(13) Contract Formation (Sec. 370.52)

The ``mailbox rule'' would be adopted for the acceptance of

purchase applications submitted electronically to the Bureau of the

Public Debt. An application for a purchase of a bond submitted by

electronic means would be an offer to create a bond contract.

Acceptance of the offer by the Bureau of the Public Debt would be

effective and a contract formed upon the transmittal of the message of

acceptance by the Bureau of the Public Debt, not upon receipt of that

message by the purchaser.

(14) Point of Sale (Sec. 370.53)

The point of sale for a bond issued as a result of a purchase

application submitted electronically under this subpart would be

Parkersburg, West Virginia.

(15) Effect of Electronic Signature (Sec. 370.54)

This section would overcome challenges to the legal effect of an

electronically signed record that are based upon the electronic form of

the record or signature. Some provisions of law, such as the Statute of

Frauds, require evidence of an agreement to be in writing. Other

provisions of law can require that an original record be produced in

court, rather than a copy, or may require that a record be signed.

However, there seems little reason to use these doctrines to preclude

the admissibility of electronically signed records. These records are

equivalent to signed writings, each copy of which is identical to the

original. Accordingly, this section would prevent such challenges from

stopping the introduction of electronically signed records into

evidence.

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(16) Admissibility of Digital Signature (Sec. 370.55)

This section would address the legal requirement that an item be

authenticated before being introduced into evidence. ``Authentication''

is a term that has a technical meaning specifically linked to the

security of electronic signatures, but also has a separate meaning in

the law of evidence, at which this section is directed.

Under Rule 901 of the Federal Rules of Evidence, ``The requirement

of authentication * * * as a condition precedent to admissibility is

satisfied by evidence sufficient to support a finding that the matter

in question is what its proponent claims.'' For instance, under Rule

901(b)(2), this evidentiary requirement may be met in regard to a

handwritten record by nonexpert testimony as to the genuineness of

handwriting. Although there have not as yet been any cases on the

matter, the requirement of authentication for digital signatures likely

can be met under Rule 901(b)(9), which allows for the sufficiency of

``[e]vidence describing a process or system used to produce a result

and showing that the process or system produces such a result.''

However, in some situations authentication evidence is not required

as a condition precedent to admissibility. As noted under Rule 902 of

the Federal Rules of Evidence, extrinsic evidence of authenticity is

not necessary for certified birth and death certificates, newspapers

and periodicals, trade inscriptions, commercial paper, and notarized

records, among other things. Because these items are likely to be

authentic, a strict adherence to preliminary authentication procedures

would unnecessarily expend a court's time and resources. Accordingly,

the items are considered to be self-authenticating and--barring other

objections to the evidence--may be admitted into evidence without

additional preliminary review.

The inclusion of a limited self-authentication provision for

digital signatures in these proposed regulations is appropriate. Under

this section, extrinsic evidence of authenticity would be unnecessary

to establish the existence of a digital signature that corresponds to a

public key pair, as well as that an electronic record to which a

digital signature is affixed has not been altered from its original

form. Importantly, the self-authentication provision would not tie a

digital signature to a particular person. Extrinsic evidence tying the

public key pair used in the creation of a digital signature to a

particular person still would have to be provided before a digital

signature and a record to which it has been affixed could be

admissible.

There are several reasons that support the insertion of a limited

self-authentication clause into this proposed rule. If public-key

encryption has been properly implemented, the risk of a successful

forgery or alteration of a digital signature is extremely remote, and

is significantly less than the risk of forgery or alteration for paper

records. Furthermore, although a legal showing of authenticity in the

absence of a self-authentication provision almost certainly could be

accomplished, such a showing would require considerable time and

resources. Among other things, it would entail extensive scientific

testimony on encryption, leading to an expensive and unproductive

``battle of the experts.'' Use of a self-authentication provision would

avoid this wasteful problem.

In almost all cases, the existence of a digital signature should be

beyond reasonable dispute. The most likely challenges to a digital

signature and an electronic record to which it is affixed will turn not

on whether a digital signature exists, but on whether it should be

attributed to a particular person. These challenges frequently will

focus on the issuance, protection, or revocation of the digital

certificates used to link a digital signature and accompanying record

to a particular person. This section would do nothing to prevent such

challenges. This section also would have no application in criminal

cases. Furthermore, even to the extent that a self-authenticated

digital signature and accompanying record could be introduced into

evidence under this section, this section would in no way prevent a

party against whom a digital signature is asserted from contesting the

existence or authenticity of the signature. However, any arguments

would go to the weight of the evidence, not to its admissibility.

(17) Negligence Contributing to Unauthorized Signature (Sec. 370.56)

This section would hold a person responsible for an unauthorized

signature if the person's failure to use ordinary care substantially

contributed to the creation or submission of the unauthorized

signature. Furthermore, the burdens will be on the person challenging a

signature to produce evidence that ordinary care was exercised and to

persuade a trier of fact that it is more likely than not that the

person exercised ordinary care.

This section is drawn from section 3-406 of the Uniform Commercial

Code (UCC). The responsibilities imposed upon persons in regard to the

technology used to create and submit electronic signatures are similar

to those imposed under the UCC in regard to rubber signature stamps

used to sign checks. Official Comment 3 to UCC section 3-406 is

enlightening in this regard. If a person's rubber signature stamp and

checks, kept in a unlocked drawer, are stolen and used by an

unauthorized party to forge a check, a bank may be able to successfully

argue that the person is precluded from disavowing the forged signature

because the person's lack of ordinary care substantially contributed to

the forgery.

Similarly, under the proposed rule if a person fails to take

adequate security precautions to protect access to electronic signature

technology (such as by not safekeeping a computer password, for

instance) and this failure substantially contributes to the creation or

submission of an unauthorized signature, the person would be precluded

from disavowing the signature.

(18) Liability (Sec. 370.57)

This section would limit the Bureau of the Public Debt's liability

for claims involving this subpart to the amount of the transaction,

less any losses caused by the failure of a claimant to exercise due

diligence. For instance, this section would have application to claims

involving errors in the handling of otherwise properly authorized

transactions.

III. Procedural Requirements

This 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.

This proposed rule relates to matters of public contract and

procedures for United States securities. Accordingly, although this

proposed rule is being issued to secure the benefit of public comment,

the notice and public comment provisions of the Administrative

Procedure Act do not apply, pursuant to 5 U.S.C. 553(a)(2).

As no notice of proposed rulemaking is required, the Regulatory

Flexibility Act (5 U.S.C. 601, et seq.) does not apply.

There are no new collections of information contained in this

proposed rule. Therefore, the Paperwork Reduction Act (44 U.S.C. 3507)

does not apply.

[[Page 23700]]

List of Subjects in 31 CFR Parts 317, 351, 353, and 370

Bonds, Electronic Funds Transfers, Government Securities.

For the reasons set forth in the preamble, 31 CFR parts 317, 351,

353, and 370 are proposed to be amended as follows:

PART 317--REGULATIONS GOVERNING AGENCIES FOR ISSUE OF UNITED STATES

SAVINGS BONDS

1. The authority citation for part 317 is revised to read as

follows:

Authority: 2 U.S.C. 901; 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C.

3105.

2. Revise Sec. 317.1 to read as follows:

Sec. 317.1 Definitions.

(a) Bond(s) means those series of United States Savings Bonds

currently being offered for sale by the Secretary of the Treasury.

(b) Federal Reserve Bank refers to the Federal Reserve Bank or

Branch providing savings bond services to the district in which the

issuing agent or the applicant organization is located. See

Sec. 317.9(a).

(c) Issuing agent refers to an organization that has been qualified

by a designated Federal Reserve Bank, the Commissioner of the Bureau of

the Public Debt, or the Commissioner's designee to sell savings bonds.

The definition encompasses:

(1) Each organization that accepts and processes purchase orders

for bonds sold over-the-counter, but does not inscribe bonds, and

(2) Each organization that is authorized to inscribe bonds sold

over-the-counter or through payroll savings plans. An issuing agent

acts as an agent of the purchaser in handling the remittance.

(d) Offering circular refers to Department of the Treasury

Circular, Public Debt Series No. 1-80, current revision.

(e) Organization means an entity, as described in Sec. 317.2, that

may qualify as an issuing agent of bonds.

3. Revise Sec. 317.2 to read as follows:

Sec. 317.2 Organizations authorized to act.

Organizations eligible to apply for qualification and serve as

issuing agents are the following:

(a) Banks, Federal credit unions in good standing, trust companies,

and savings institutions chartered by or incorporated under the laws of

the United States, or those of any State or Territory of the United

States, the District of Columbia, or the Commonwealth of Puerto Rico.

(b) Agencies of the United States and State and local governments.

(c) Employers operating payroll savings plans for the purchase of

United States Savings Bonds, as well as organizations operating payroll

savings plans on behalf of employers.

(d) Other organizations to be specifically and individually

qualified by the Commissioner of the Bureau of the Public Debt or the

Commissioner's designee, whenever the Commissioner or the

Commissioner's designee deems such a qualification to be in the public

interest. In selecting an issuing agent, the Commissioner or the

Commissioner's designee may use such process that the Commissioner or

the Commissioner's designee deems to be appropriate. The selected

issuing agent will be subject to such conditions that the Commissioner

or the Commissioner's designee deems to be appropriate.

4. Amend Sec. 317.3 as follows:

A. Revise paragraph (a) introductory text to read as follows:

Sec. 317.3 Procedure for qualifying and serving as issuing agent.

(a) Execution of application agreement. An organization seeking

issuing agent qualification shall obtain from and file with a

designated Federal Reserve Bank an application-agreement form. If an

organization seeks qualification under Sec. 317.2(d) or because of its

status as an organization operating a payroll savings plan on behalf of

an employer under Sec. 317.2(c), the completed application-agreement

form shall be forwarded by the designated Federal Reserve Bank to the

Bureau of the Public Debt for approval by the Commissioner of the

Bureau of the Public Debt or the Commissioner's designee.

* * * * *

B. Add the words ``or the Bureau of the Public Debt'' after the

words ``Federal Reserve Bank'' in paragraphs (b) and (c).

5. Revise Sec. 317.6(b) to read as follows:

Sec. 317.6 Issuance of bonds.

* * * * *

(b) Fees. Each issuing agent, other than a Federal agency, will be

paid fees. Only issuing agents are eligible to collect fees. With prior

approval, agents that are authorized to inscribe bonds and receive fee

payments will also be paid a bonus for presorting savings bond

mailings. Schedules reflecting the amount of the fees and presort

bonuses, and the basis on which they are computed and paid, will be

published separately in the Federal Register.

* * * * *

6. Amend the appendix to Sec. 317.8 as follows:

A. Revise the section heading to the appendix to read as set out

below;

B. Remove paragraph 3 of subpart B;

C. Revise paragraphs 2(c) and 2(e) of subpart A, all of subpart C,

and paragraphs 2(a)(i) and 2(b) of subpart D to read as follows:

Sec. 317.8 Remittance of sales proceeds and registration records.

* * * * *

Appendix to Sec. 317.8--Remittance of Sales Proceeds and

Registration Records, Department of the Treasury Circular, Public

Debt Series No. 4-67, Third Revision (31 CFR Part 317), Fiscal

Service, Bureau of the Public Debt

Subpart A--General Information

* * * * *

2. Definition of terms. As used in this appendix:

* * * * *

(c) Over-the-counter sale means any sale of savings bonds other

than payroll sales.

* * * * *

(e) Issuing agent, as provided in Sec. 317.1(c) of the Circular,

refers to an organization that has been qualified by a designated

Federal Reserve Bank, the Commissioner of the Bureau of the Public

Debt, or the Commissioner's designee to sell savings bonds.

* * * * *

Subpart C--Remittance of Payroll Sales Proceeds

1. Application of requirements. The remittance requirements for

payroll sales apply only to issuing agents. An employer that

maintains a payroll savings plan but does not issue bonds shall be

notified by the servicing issuing agent that it must remit sales

proceeds to the issuing agent in sufficient time to permit

compliance with the requirements.

2. Remittance of payroll sales deductions. Issuing agents shall

remit sales proceeds throughout the month shown in the issue date as

soon as the full amount of the purchase price of the bonds has been

received or accumulated. In no case should such proceeds be remitted

later than the second business day of the month following the month

shown in the issue date. The issuing agent shall ensure that its

system properly accounts for and recognizes when the full purchase

price has been received, or has been accumulated, so that timely

remittance can be made. The issuing agent shall transmit

registration records in an electronically processible format within

thirty (30) days following the month shown on the issue date.

Subpart D--Interest on Late Remittances

* * * * *

2. * * *

(a) Bonds inscribed by issuing agent--(i) Payroll sales. If,

during any three (3) month

[[Page 23701]]

period, the interest assessed on an issuing agent's late remittance

of proceeds from payroll savings plan sales or thrift, savings,

vacation, or similar plan sales accumulates to less than $50 for

each type of sales, the interest assessed for the first month will

be waived. The interest assessed for each type of sales for the

remaining two (2) months will then be carried forward to the next

period of three (3) consecutive months.

* * * * *

(b) Bonds inscribed by the designated Federal Reserve Bank. The

interest assessed on late remittance of all sales proceeds

transmitted during a given month will be waived if it is less than

$25.

* * * * *

PART 351--OFFERING OF UNITED STATES SAVINGS BONDS, SERIES EE

1. The authority citation for part 351 continues to read as

follows:

Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105.

2. Revise Sec. 351.1 to read as follows:

Sec. 351.1 Governing regulations.

Series EE bonds are subject to the regulations of the Department of

the Treasury, now or hereafter prescribed, governing United States

Savings Bonds of Series EE and HH, contained in Department of the

Treasury Circular, Public Debt Series No. 3-80 (part 353 of this

chapter). The regulations in part 370 of this chapter apply to

transactions for the purchase of United States Savings Bonds issued

through the Bureau of the Public Debt. The regulations in part 370 do

not apply to transactions for the purchase of bonds accomplished

through issuing agents generally, unless and to the extent otherwise

directed by the Commissioner of the Bureau of the Public Debt or the

Commissioner's designee.

3. Revise Sec. 351.5 to read as follows:

Sec. 351.5 Purchase of bonds.

(a) Payroll sales--(1) Payroll savings plans. Bonds in $100 and

higher denominations may be purchased through deductions from the pay

of employees of organizations that maintain payroll savings plans. The

bonds must be issued by an authorized issuing agent.

(2) Employee thrift, savings, vacation, and similar plans. Bonds

registered in the names of trustees of employee plans may be purchased

in book-entry form in $100 multiples through a designated Federal

Reserve Bank after Bureau of the Public Debt approval of the plan as

eligible for the special limitation under Sec. 353.13 of this chapter,

also published as Sec. 353.13 of Department of the Treasury Circular,

Public Debt Series No. 3-80.

(b) Over-the-counter sales--(1) Eligible issuing agents. Bonds may

be purchased through any issuing agent, except that an organization

serving as an issuing agent because of its status as an employer or an

organization operating an employer's payroll savings plan under

Sec. 317.2(c) of this chapter may sell bonds only through payroll

savings plans.

(2) Manner of sale. An application for the purchase of a bond must

be accompanied by a remittance to cover the issue price. The purchase

application and remittance may be submitted to an issuing agent by any

means acceptable to the issuing agent. An application may authorize

purchases on a recurring basis. The issuing agent bears the burden of

collection and the risk of loss for non-collection or return of the

remittance.

PART 353--REGULATIONS GOVERNING UNITED STATES SAVINGS BONDS, SERIES

EE AND HH

1. The authority citation for part 353 is revised to read as

follows:

Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3105, 3125.

Sec. 353.6 [Amended]

2. Remove the word ``deduction'' in Sec. 353.6(b)(4), and add, in

its place, the word ``savings.''

Sec. 353.13 [Amended]

3. Add the phrase ``, as amended'' after the word ``1954'' in

Sec. 353.13(c)(3).

4. Revise Sec. 353.27 to read as follows:

Sec. 353.27 Application for relief--Non-receipt of bond.

If a bond issued on any transaction is not received, the issuing

agent must be notified as promptly as possible and given all

information about the non-receipt. An appropriate form and instructions

will be provided. If the application is approved, relief will be

granted by the issuance of a bond bearing the same issue date as the

bond that was not received. Also, relief is authorized for the issuance

of bonds for which the Secretary has not received payment, in order to

preserve public confidence in dealing with issuing agents.

PART 370--REGULATIONS GOVERNING THE TRANSFER OF FUNDS BY ELECTRONIC

MEANS ON ACCOUNT OF UNITED STATES SECURITIES

1. The authority citation for part 370 is revised to read as

follows:

Authority: 12 U.S.C. 391; 31 U.S.C. chapter 31.

2. Revise Sec. 370.0 to read as follows:

Sec. 370.0 Scope.

The regulations in this part apply to the transfer of funds by

electronic means as employed by the Bureau of the Public Debt in

connection with United States securities, except as otherwise provided.

To the extent that the rules in part 210 of this title apply to the

purchase or payment of interest and principal on United States

securities, the rules in this part 370 apply in the event of any

inconsistencies. Among other things, the written authorization of the

Financial Management Service is not necessary for the issuance of

routing numbers by a Federal Reserve Bank or for the receipt,

origination, or reversal of any credit or debit entries accomplished

pursuant to this part.

3. Revise Sec. 370.1 to read as follows:

Sec. 370.1 Definitions.

In this part, unless the context indicates otherwise:

Automated Clearing House (ACH) entry means a transaction in

accordance with applicable Operating Rules and Operating Guidelines of

the National Automated Clearing House Association, as modified by these

and other regulations and law. The rules in this part control in the

event of any inconsistencies with the applicable Operating Rules and

Operating Guidelines.

Credit entry means an ACH entry for the deposit of money to a

deposit account.

Debit entry means an ACH entry for the payment of money from a

deposit account.

Deposit account means a demand deposit (checking), savings, or

asset account (other than an occasional or incidental credit balance in

a credit plan) held directly or indirectly by a financial institution.

Financial institution means:

(1) An entity described in section 19(b)(1)(A), excluding

subparagraphs (v) and (vii), of the Federal Reserve Act (12 U.S.C.

Sec. 461(b)(1)(A)). Under section 19(b)(1)(A) of the Federal Reserve

Act and for purposes of this part only, the term ``depository

institution'' means:

(i) Any insured bank as defined in section 3 of the Federal Deposit

Insurance Act (12 U.S.C. Sec. 1813) or any bank that is eligible to

make application to become an insured bank under section 5 of such Act

(12 U.S.C. Sec. 1815);

(ii) Any mutual savings bank as defined in section 3 of the Federal

Deposit Insurance Act (12 U.S.C. Sec. 1813) or any bank that is

eligible to make application to become an insured bank under section 5

of such Act (12 U.S.C. Sec. 1815);

[[Page 23702]]

(iii) Any savings bank as defined in section 3 of the Federal

Deposit Insurance Act (12 U.S.C. Sec. 1813) or any bank that is

eligible to make application to become an insured bank under section 5

of such Act (12 U.S.C. Sec. 1815);

(iv) Any insured credit union as defined in section 101 of the

Federal Credit Union Act (12 U.S.C. Sec. 1752) or any credit union that

is eligible to make application to become an insured credit union

pursuant to section 201 of such Act (12 U.S.C. Sec. 1781);

(v) Any savings association (as defined in section 3 of the Federal

Deposit Insurance Act) (12 U.S.C. Sec. 1813) that is an insured

depository institution (as defined in such Act) (12 U.S.C. Sec. 1811 et

seq.) or is eligible to apply to become an insured depository

institution under the Federal Deposit Insurance Act (12 U.S.C.

Sec. 1811 et seq.); and

(2) Any agency or branch of a foreign bank as defined in section

1(b) of the International Banking Act, as amended (12 U.S.C.

Sec. 3101).

Originator means an entity authorized by a person to initiate debit

or credit entries to the person's deposit account and that also has an

agreement with a financial institution to transmit the debit or credit

entries to the person's deposit account.

Owner means the person(s) in whose name(s) a security is

registered.

Security means any obligation issued by the United States that, by

the terms of the applicable offering circular, is made subject to this

part.

Settlement date means the date an exchange of funds with respect to

an entry is reflected on the books of the Federal Reserve Bank(s). For

a security held in the TREASURY DIRECT system, the issue date will in

most cases be the same as the settlement date. For United States

Savings Bonds, the issue date will in most cases be the first day of

the month in which settlement takes place.

4. Add Sec. 370.4 to subpart B to read as follows:

Sec. 370.4 Definition.

Payment means, for the purpose of this subpart, the deposit of

money from the Department to the deposit account of the owner.

5. Revise the heading of subpart C to read as follows:

Subpart C--Debit ACH Entries for the Sale of Securities in TREASURY

DIRECT

6. Redesignate subpart D as subpart F and Secs. 370.30 and 370.31

as Secs. 370.60 and 370.61.

7. Add subparts D and E to read as follows:

Subpart D--Debit ACH Entries for the Sale of United States Savings

Bonds Issued Through the Bureau of the Public Debt

Sec.

370.30 Governing law.

370.31 Authorization by purchaser.

370.32 Termination or suspension by the Bureau of the Public Debt.

370.33 Termination or suspension by purchaser.

370.34 Changes and error resolution.

370.35 Prenotification.

370.36 Liability.

Sec. 370.30 Governing law.

This subpart provides rules for Automated Clearing House debit

entries used for the sale of United States Savings Bonds issued through

the Bureau of the Public Debt. This subpart also establishes the

exclusive liability of the Bureau of the Public Debt for such entries.

This subpart does not apply to transactions for the purchase of bonds

accomplished through issuing agents generally, unless and to the extent

the Commissioner of the Public Debt or the Commissioner's designee

requires otherwise.

Sec. 370.31 Authorization by purchaser.

(a) General. The purchaser of a bond shall authorize an originator

to initiate Automated Clearing House debit entries and a financial

institution and deposit account to receive such entries. An

authorization shall be accomplished only through a form approved by the

Bureau of the Public Debt. The purchaser's signature is necessary for

the authorization to be effective. Except to the extent required by the

Bureau of the Public Debt, the originator will not be required to take

additional steps to verify the identity of the purchaser or the

authenticity of the signature.

(b) Recurring debit entries. A single authorization may allow debit

entries to be made to a deposit account on a recurring basis.

(c) Successor originator. The Bureau of the Public Debt reserves

the right to name a successor to the originator named on the debit

authorization form. The designation of a successor shall be effective

without additional notice to the purchaser.

(d) Subsequent authorizations. A purchaser's subsequent

authorization cancels a previous authorization only if so noted by the

purchaser on the subsequent authorization form.

Sec. 370.32 Termination or suspension by the Bureau of the Public

Debt.

The Bureau of the Public Debt may terminate or suspend the

availability of debit entries as a means of purchase for bonds at any

time. A decision to terminate or suspend the availability of debit

entries as a means of purchase is in the sole discretion of the Bureau

of the Public Debt and shall be final.

Sec. 370.33 Termination or suspension by purchaser.

The purchaser may terminate all future debits or suspend one or

more future debits by providing written notice to the originator. A

written notice is also necessary to lift a suspension of indefinite

length. All notices must be received by the originator at least three

business days before the debit is to be initiated.

Sec. 370.34 Changes and error resolution.

In response to an oral notice from a person relating to the

propriety of bond issuance information or a debit entry involving the

person's deposit account, the originator may request the person to

submit the notice in writing. If so asked, the person shall respond in

writing within thirty calendar days. The originator may ignore the oral

notice if written notice is not received within thirty days. The

originator may suspend debit entries while reaching a resolution in

response to any notice, written or oral.

Sec. 370.35 Prenotification.

The requirement of a prenotification prior to the initiation of any

debit entry, as well as the length of the period during which the

originator must wait after initiating a prenotification before

initiating a subsequent debit entry, is left to the discretion of the

Bureau of the Public Debt.

Sec. 370.36 Liability.

(a) Scope of liability. Unless the Bureau of the Public Debt has

designated itself or a fiscal or financial agent as an originator, the

Bureau of the Public Debt shall not be liable for any unauthorized,

erroneous, duplicative, or otherwise improper debit entries, and shall

not be liable for a failure to debit a deposit account. Unless the

Bureau of the Public Debt has designated itself or a fiscal or

financial agent as the originator, the originator serves as the agent

of the purchaser in handling the remittance. Any claims must be pursued

against the originator. The Bureau of the Public Debt shall not be

liable for its choice of an originator. The Bureau of the Public Debt

shall not be liable to any Automated Clearing House association.

(b) Extent of liability. For any claim that may proceed against the

Bureau of the Public Debt, the Bureau of the Public Debt's liability is

limited to the amount of the improper debit and does not extend to

other damages or costs, including consequential damages,

[[Page 23703]]

punitive damages, the costs of litigation, or payment of attorney fees.

The liability of the Bureau of the Public Debt also shall be reduced by

the amount of the loss resulting from a failure of the claimant to

exercise due diligence, including a failure to follow standard

commercial practices.

Subpart E--Electronic Submissions of Purchase Applications and

Remittances for the Purchase of United States Savings Bonds Issued

Through the Bureau of the Public Debt

Sec.

370.50 Governing law.

370.51 Definitions.

370.52 Contract formation.

370.53 Point of sale.

370.54 Effect of electronic signature.

370.55 Admissibility of digital signature.

370.56 Negligence contributing to unauthorized electronic

signature.

370.57 Liability.

Sec. 370.50 Governing law.

This subpart provides rules for the electronic submission of

purchase applications and remittances for the sale of United States

Savings Bonds issued through the Bureau of the Public Debt. This

subpart also establishes the exclusive liability of the Bureau of the

Public Debt for transactions submitted through electronic means. This

subpart does not apply to transactions for the sale of bonds

accomplished through issuing agents generally, unless and to the extent

the Commissioner of the Bureau of the Public Debt or the Commissioner's

designee requires otherwise.

Sec. 370.51 Definitions.

(a) Digital signature is a type of electronic signature. A digital

signature uses public-key encryption and a message digest function to

transform an electronic record. A person who has the initial electronic

record and the signer's public key can verify:

(1) Whether the transformation was accomplished by the private key

that corresponds to the signer's public key, and

(2) Whether the initial record has been altered since the

transformation was made.

(b) Message digest function means an algorithm mapping or

translating one sequence of bits into another, generally smaller, set

such that:

(1) An electronic record yields the same message digest result

every time the algorithm is executed using the same electronic record

as input,

(2) It is computationally infeasible that an electronic record can

be derived or reconstituted from the message digest result produced by

the algorithm, and

(3) It is computationally infeasible that two electronic records

can be found that produce the same message digest using the algorithm.

(c) Public-key encryption means a process which generates and

employs a key pair consisting of a private key and its mathematically

related public key, in which one use of the public key is to verify a

digital signature created by the private key.

(d) Record means information that is inscribed on a tangible medium

or that is stored in an electronic or other medium and is retrievable

in perceivable form.

(e) Signature means any symbol or method executed or adopted by a

party with present intention to be bound, and includes electronic

methods (such as those accomplished by digital and biometric means)

approved by the Bureau of the Public Debt.

Sec. 370.52 Contract formation.

An application for a purchase of a bond submitted by electronic

means is an offer to create a bond contract. An offer is accepted at

the moment the message of acceptance is sent to the purchaser, not when

the message is received by the purchaser, regardless of the method used

to transmit the acceptance.

Sec. 370.53 Point of sale.

For jurisdiction and venue purposes, the point of sale for a bond

purchased pursuant to this subpart is Parkersburg, West Virginia,

regardless of from where the application is transmitted or where the

application is actually processed.

Sec. 370.54 Effect of electronic signature.

In any dispute involving this subpart, an electronic signature and

any electronic record to which it is affixed shall not be denied legal

effect because the signature or record is in electronic form. To the

extent that the law requires a signature, a writing, or an original, an

electronic signature and any electronic record to which it is affixed

shall satisfy that rule of law.

Sec. 370.55 Admissibility of digital signature.

In any civil litigation or dispute involving this subpart,

extrinsic evidence of authenticity as a condition precedent of

admissibility shall not be necessary to establish:

(1) The existence of a digital signature that corresponds to a

specific public key pair and is affixed to an electronic record, and

(2) The electronic record to which the digital signature is affixed

has not been altered from its original form.

Sec. 370.56 Negligence contributing to unauthorized electronic

signature.

A person whose failure to exercise ordinary care substantially

contributes to the creation or submission of an unauthorized electronic

signature is precluded from disavowing the unauthorized signature and

the validity of any electronic record to which the signature is

affixed. In any dispute involving this subpart, the burden of

production and the burden of persuasion is on the person against whom

the signature is asserted to establish the exercise of ordinary care.

Sec. 370.57 Liability.

For any claim arising out of an electronic transaction that may

proceed against the Bureau of the Public Debt, the Bureau of the Public

Debt's liability is limited to the amount of the transaction and does

not extend to other damages or costs, including consequential damages,

punitive damages, the costs of litigation, or payment of attorney fees.

The liability of the Bureau of the Public Debt shall also be reduced by

the amount of the loss resulting from a failure of the claimant to

exercise due diligence, including a failure to follow standard

commercial practices.

Dated: April 6, 1998.

Donald V. Hammond,

Acting Fiscal Assistant Secretary.

[FR Doc. 98-11153 Filed 4-29-98; 8:45 am]

BILLING CODE 4810-39-P