CUNA Regulatory Comment Call

May 27, 1999

Treasury’s Proposed Financial Agency Agreement for ETA Accounts

We have a short window of time in which to provide informal comments to the Treasury Department (Treasury). Treasury requests comments regarding the language of a proposed Financial Agency Agreement (FAA) that a financial institution would have to sign in order to provide Electronic Transfer Accounts (ETAs). Treasury presented the proposed FAA on May 26, 1999, and requested comments by close of business on June 1, 1999. Treasury announced that the final FAA and the final rules for ETA accounts will be published in June in a notice within the Federal Register (Notice). We realize this is a short timeframe, however, the timeframe is not within our control. Please submit your comments to CUNA by May 28, 1999 by fax to CUNA at 202/371-8240 or e-mail to CUNA’s Assistant General Counsel Michelle Profit at You may also contact CUNA if you would like a copy of the proposed rule. The proposed rule is available at (PDF document requiring Adobe Acrobat Reader. If you don't have a copy, you can get one here.)


The Debt Collection Improvement Act of 1996 (Act) amends 31 U.S.C. 3332 to allow Federal payments, other than payments under the Internal Revenue Code, to be made by electronic funds transfer (EFT) beginning January 2, 1999. The Treasury published a final rule implementing this mandate, 31 CFR Part 208 (Part 208), on September 25, 1998. 63 FR 51490. Part 208 provides that any individual who receives a Federal benefit, wage, salary, or retirement payment is eligible to open an ETA at any federally insured financial institution that elects to offer ETAs. The preamble to the final rulemaking indicated that Treasury would separately publish a notice of the features of the ETA. As mentioned above, this notice will be published in June along with the final FAA form.


Institution Requirements
The FAA requires a participating institution to have authority from it board of directors to offer and maintain ETAs, and it requires a participating credit union to have federal insurance from the National Credit Union Share Insurance Fund. A participating institution is also required to meet the standard for Year 2000-preparedness set by the Federal Financial Institutions Examination Council.

Obligations of Institution
The FAA requires an institution to offer ETAs within 60 days of execution of the FAA and to offer ETAs at all of its branch and ATM locations. An institution is required to maintain its status as an insured financial institution.

Account Opening
The FAA requires an institution to open accounts for any individual who receives a federal benefit, wage, salary or retirement payment, unless that individual was the previous owner of an ETA which was closed because of fraud or account abuse. Prior to opening an ETA, an institution must provide disclosure to the ETA customer regarding the amount of any fees the institution may impose as well as a list of the institution’s hours, phone numbers, and branches.

Under the FAA, an institution may charge a fixed monthly fee that Treasury will set in the Notice. An institution may not charge any other fee, with the exception that it may charge the same account-related fees that it would ordinarily apply to other customers. For instance, a credit union may charge lost card fees and account research fees. An overdraft fee also may be charged, but it may not exceed the amount that will be established by Treasury in the Notice.

The FAA does not allow the institution to exercise set off rights against an ETA, unless it is for the monthly fee, any maintained fees incurred by the holder, overdrafts, and any amount for which the account holder is liable under Regulation E.

The FAA states that Treasury shall pay a one-time fee that will be published in the Notice.

Additional Deposits
Under the FAA, institutions may allow ETA customers to deposit into the ETA other funds that are not federal benefits. At its option, an institution may limit the form of these deposits and how these deposits can be made. The institution may not charge an additional fee for this service

Payment of Interest
An institution may choose to pay interest, but it is not required to do so. If it pays interest, it may not charge a fee more than the monthly fee set by Treasury.

Account Closing
The FAA allows an institution to close an ETA, only if the institution believes that the account has been misused. Misuse may include negligence in safeguarding an ATM and fraud determined by the institution pursuant to an investigation. An institution may also close an account if the ETA customer requests it or if the ETA customer stops receiving federal benefits.

Reporting Requirements
The FAA requires an institution to complete an enrollment form. In addition, each month the institution must report to Treasury the number of ETAs opened and closed, the current number of ETAs open, and an account number to which payment shall be made.

Terms and Termination
The FAA allows the Treasury to amend the FAA 60 days after written notice to an institution. The FAA shall last two years and shall automatically be extended for one-year terms, unless the institution informs the Treasury in writing, 60 days in advance, that it intends to terminate the agreement. Treasury may terminate the FAA at any time with written notice to the institution. An institution may only terminate this agreement prior to the expiration if Treasury consents.

No liability
Under the FAA, an institution acknowledges that the Treasury and its agent shall not have any liability to an institution for any loss or liability incurred in connection with an ETA.

This proposed FAA incorporates CUNA’s suggested changes, by allowing an institution to pay interest on ETAs and to close ETAs if the recipient has abused the ETA. In addition, the FAA has adopted CUNA’s suggestion to allow customers to add other funds to the account besides federal benefits.

Eric Richard • General Counsel • (202) 508-6742 •
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 •
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 •
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 •