Unknown. Final rule

7,011 words·~32 min read·/register/2018/09/17/2018-20029

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

--- schema: federal-register doc_type: fedreg source_file: FR-2018-09-17.xml --- 83 180 Monday, September 17, 2018 Contents Agency Health Agency for Healthcare Research and Quality NOTICES Meetings: Subcommittee Meetings, 46949-46950 2018-20126 Agriculture Agriculture Department See Rural Business-Cooperative Service See Rural Utilities Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 46910 2018-20070 Antitrust Division Antitrust Division NOTICES Changes Under the National Cooperative Research and Production Act:

Border Security Technology Consortium, 46971 2018-20135 Southwest Research Institute--Cooperative Research Group on Corrosion Under Insulation, 46972 2018-20137 The Open Group, LLC, 46971-46972 2018-20156 Safety Enviromental Enforcement Bureau of Safety and Environmental Enforcement NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Pollution Prevention and Control, 46969 2018-20094 Centers Disease Centers for Disease Control and Prevention NOTICES Draft Update to the Centers for Disease Control and Prevention Infection Prevention and Control Recommendation Categorization Scheme, 46950 2018-20118 Centers Medicare Centers for Medicare & Medicaid Services NOTICES Meetings:

Medicare and Medicaid Programs, and Other Program Initiatives, and Priorities; Advisory Panel on Outreach and Education, September 26, 2018; Correction, 46950-46951 2018-20153 Privacy Act; Systems of Records, 46951-46954 2018-20063 Children Children and Families Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 46954-46957 2018-20068 2018-20085 2018-20087 Civil Rights Civil Rights Commission NOTICES Meetings: Florida Advisory Committee, 46912 2018-20114 Tennessee Advisory Committee, 46912 2018-20115 Coast Guard Coast Guard RULES Drawbridge Operations:

James River, Isle of Wight and Newport News, VA, 46879-46880 2018-20067 Commerce Commerce Department See Industry and Security Bureau See International Trade Administration See National Oceanic and Atmospheric Administration Corporation Corporation for National and Community Service NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application Package for Senior Corps Grant Application, 46920-46921 2018-20149 Defense Department Defense Department NOTICES Revised Non-Foreign Overseas Per Diem Rates, 46921-46924 2018-20077 Education Department Education Department NOTICES Applications for New Authorities:

Innovative Assessment Demonstration, 46924-46931 2018-20152 Energy Department Energy Department See Federal Energy Regulatory Commission PROPOSED RULES Requests for Information: Energy Conservation Program: Emerging Smart Technology Appliance and Equipment Market, 46886-46888 2018-20131 NOTICES Meetings: Environmental Management Site-Specific Advisory Board, Portsmouth, 46931-46932 2018-20128 Petitions for Waivers: Johnson Controls, Inc., 46932-46933 2018-20136 Environmental Protection Environmental Protection Agency RULES Air Quality State Implementation Plans;

Approvals and Promulgations: Tennessee; Knox County NSR Reform, 46880-46882 2018-20041 Wisconsin; Particulate Matter Standard, 46882-46884 2018-20038 Significant New Use Rules on Certain Chemical Substances, 47004-47025 2018-19950 PROPOSED RULES Significant New Use Rules on Certain Chemical Substances, 47026 2018-19949 NOTICES Clean Water Act: West Virginia National Pollutant Discharge Elimination System; Revision, 46945-46946 2018-20037 Final Approval for an Alternative Means of Emission Limitation:

ExxonMobil Corp.; Marathon Petroleum Co., LP (for Itself and on Behalf of Its Subsidiary, Blanchard Refining, LLC); Chalmette Refining, LLC; and LACC, LLC, 46939-46945 2018-20148 Federal Aviation Federal Aviation Administration RULES Airworthiness Directives: Airbus Defense and Space S.A. (Formerly Known as Construcciones Aeronauticas, S.A. (CASA)) Airplanes, 46857-46859 2018-19756 Airbus Helicopters, 46862-46864 2018-19750 Fokker Services B.V. Airplanes, 46859-46862 2018-19754 Honeywell International Inc.

Turboprop and Turboshaft Engines, 46853-46857 2018-20142 Amendment of Class E Airspace: Lyons, KS, 46864-46865 2018-19977 Operating Limitations at John F. Kennedy International Airport, 46865-46867 2018-20138 PROPOSED RULES Airworthiness Directives: Airbus SAS Airplanes, 46905-46909 2018-19932 Bombardier, Inc., Airplanes, 46895-46898 2018-19841 GA 8 Airvan

(Pty)Ltd Airplanes, 46900-46902 2018-19889 Pratt and Whitney Canada Corp. Turboshaft Engines, 46898-46900 2018-19862 The Boeing Company Airplanes, 46902-46905 2018-19840 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Safety Management Systems for Domestic, Flag, and Supplemental Operations Certificate Holders, 46990-46991 2018-20145 Environmental Assessments; Availability, etc.: Runway 14/32 Relocation/Extension and Associated Improvements Project for the Lake Elmo Airport

(21D)in Lake Elmo, MN, 46991-46992 2018-20144 Federal Communications Federal Communications Commission NOTICES Meetings: World Radiocommunication Conference Advisory Committee, 46946 2018-20069 Federal Deposit Federal Deposit Insurance Corporation NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 46946-46947 2018-20125 Federal Election Federal Election Commission PROPOSED RULES Rulemaking Petitions: Personal Use of Leadership PAC Funds, 46888-46889 2018-20095 Federal Energy Federal Energy Regulatory Commission NOTICES Applications: Columbia Gas Transmission, LLC, 46936-46937 2018-20100 Authorizations for Continued Project Operation: City of Holyoke Gas and Electric Department, 46937 2018-20103 Great Lakes Hydro America, LLC, 46934 2018-20104 Combined Filings, 46935-46936, 46938 2018-20082 2018-20083 Filings: Lawrence J. Reilly, 46938-46939 2018-20101 Initial Market-Based Rate Filings Including Requests for Blanket Section 204 Authorizations: RED-Rochester, LLC, 46933 2018-20084 License Applications: KEI (Maine) Power Management

(III)LLC, 46934-46935 2018-20079 Meetings: Winter 2018-2019 Operations and Market Performance in Regional Transmission Organizations and Independent System Operators; Technical Conference, 46933 2018-20080 Petitions for Declaratory Orders: Medallion Pipeline Company, LLC, 46933-46934 2018-20102 Reinstatement of Authorization for Continued Project Operation: Alabama Power Co., 46937 2018-20081 Federal Highway Federal Highway Administration NOTICES Surface Transportation Project Delivery Program: Utah Department of Transportation Audit Report, 46992-46996 2018-20097 Federal Housing Finance Agency Federal Housing Finance Agency PROPOSED RULES Uniform Mortgage-Backed Security, 46889-46895 2018-20124 Federal Motor Federal Motor Carrier Safety Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application for Certificate of Registration for Foreign Motor Carriers and Foreign Motor Private Carriers, 46996 2018-20158 Electronic Logging Device Vendor Registration, 46997 2018-20157 Qualification of Drivers; Exemption Applications: Diabetes, 46998-47000 2018-20160 Federal Railroad Federal Railroad Administration RULES Hours of Service Recordkeeping; Automated Recordkeeping; Correction, 46884-46885 2018-20150 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 47000-47001 2018-20052 Petitions for Waivers of Compliance, 47001-47002 2018-20134 Federal Reserve Federal Reserve System RULES Availability of Funds and Collection of Checks, 46849-46853 2018-20029 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 46948 2018-20139 Fish Fish and Wildlife Service NOTICES Meetings: Hunting and Shooting Sports Conservation Council, 46964-46965 2018-20129 Permits: Foreign Endangered Species; Marine Mammals, 46965-46966 2018-20078 Food and Drug Food and Drug Administration RULES Guidance: Determination of Status as a Qualified Facility Under the Current Good Manufacturing Practice, Hazard Analysis, and Risk-Based Preventive Controls for Human and Animal Food Rules, 46878-46879 2018-20109 NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals: Obtaining Information for Evaluating Nominated Bulk Drug Substances for Use in Compounding Drug Products Under Section 503B of the Federal Food, Drug, and Cosmetic Act, 46957-46959 2018-20092 Charter Renewals: Oncologic Drugs Advisory Committee, 46959 2018-20108 Meetings: Anesthetic and Analgesic Drug Products Advisory Committee; Establishment of a Public Docket; Request for Comments; Correction, 46959 2018-20091 Pathogen Reduction Technologies for Blood Safety; Public Workshop, 46959-46960 2018-20090 General Services General Services Administration NOTICES Environmental Assessments; Availability, etc.: Edward J. Schwartz Federal Building Structural Enhancements Project, 46949 2018-20165 Health and Human Health and Human Services Department See Agency for Healthcare Research and Quality See Centers for Disease Control and Prevention See Centers for Medicare & Medicaid Services See Children and Families Administration See Food and Drug Administration See National Institutes of Health NOTICES Meetings: Advisory Council on Alzheimer's Research, Care, and Services, 46960-46961 2018-20110 Homeland Homeland Security Department See Coast Guard See U.S. Customs and Border Protection NOTICES Meetings: Homeland Security Science and Technology Advisory Committee, 46963-46964 2018-20055 Industry Industry and Security Bureau NOTICES Effectiveness of Licensing Procedures for Agricultural Commodities to Cuba, 46912-46913 2018-20123 Interior Interior Department See Bureau of Safety and Environmental Enforcement See Fish and Wildlife Service See National Indian Gaming Commission International Trade Adm International Trade Administration NOTICES Antidumping or Countervailing Duty Investigations, Orders, or Reviews: Certain Hot-Rolled Carbon Steel Flat Products From the People's Republic of China, 46914-46915 2018-20071 Certain Steel Nails From the People's Republic of China, 46916-46917 2018-20122 Panel Reviews: North American Free Trade Agreement, 46913-46916 2018-20120 2018-20121 International Trade Com International Trade Commission NOTICES Investigations; Determinations, Modifications, and Rulings, etc.: Rubber Bands From China and Thailand, 46969-46971 2018-20086 Justice Department Justice Department See Antitrust Division NOTICES Proposed Consent Decrees, 46972 2018-20088 Labor Department Labor Department See Occupational Safety and Health Administration National Credit National Credit Union Administration NOTICES Meetings; Sunshine Act, 46973-46974 2018-20290 National Indian National Indian Gaming Commission NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 46966-46968 2018-20130 National Institute National Institutes of Health NOTICES Meetings: Center for Scientific Review, 46961-46963 2018-20112 2018-20113 National Institute on Aging, 46961 2018-20111 National Oceanic National Oceanic and Atmospheric Administration NOTICES Meetings: Mid-Atlantic Fishery Management Council, 46918 2018-20132 South Atlantic Fishery Management Council, 46918-46920 2018-20133 National Science National Science Foundation NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 46974-46975 2018-20147 Meetings: Proposal Review Panel for International Science and Engineering, 46974 2018-20155 Occupational Safety Health Adm Occupational Safety and Health Administration NOTICES Requests for Nominations: Advisory Committee on Construction Safety and Health, 46972-46973 2018-20117 Rural Business Rural Business-Cooperative Service NOTICES Applications: Rural Energy for America Program for Fiscal Year 2019; Correction, 46910-46911 2018-20119 Rural Utilities Rural Utilities Service NOTICES Environmental Assessments; Availability, etc.: Financial Support for Deployment of the Telecommunications Programs to Rural America, 46911-46912 2018-20051 Securities Securities and Exchange Commission NOTICES Self-Regulatory Organizations; Proposed Rule Changes: Cboe C2 Exchange, Inc., 46983-46984 2018-20072 MIAX PEARL, LLC, 46985-46987 2018-20191 National Futures Association, 46976-46977 2018-20075 New York Stock Exchange LLC, 46975-46981 2018-20076 2018-20192 NYSE Arca, Inc., 46981-46983 2018-20073 Small Business Small Business Administration NOTICES Agency Information Collection Activities; Proposals, Submissions, and Approvals, 46987-46989 2018-20180 State Department State Department NOTICES Environmental Impact Statements; Availability, etc.: Proposed Keystone XL Pipeline Mainline Alternative Route in Nebraska, 46989-46990 2018-20064 General Delegation: Palestine Liberation Organization, 46990 2018-20065 Transportation Department Transportation Department See Federal Aviation Administration See Federal Highway Administration See Federal Motor Carrier Safety Administration See Federal Railroad Administration RULES Increasing Charter Air Transportation Options, 46867-46878 2018-18345 Customs U.S. Customs and Border Protection NOTICES Accreditation and Approval as a Commercial Gauger and Laboratory: Thionville Surveying Company, Inc., Harahan, LA, 46963 2018-20177 Veteran Affairs Veterans Affairs Department NOTICES Meetings: Veterans' Rural Health Advisory Committee, 47002 2018-20074 Separate Parts In This Issue Part II Environmental Protection Agency, 47004-47026 2018-19950 2018-19949 Reader Aids Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws. To subscribe to the Federal Register Table of Contents electronic mailing list, go to https://public.govdelivery.com/accounts/USGPOOFR/subscriber/new, enter your e-mail address, then follow the instructions to join, leave, or manage your subscription. 83 180 Monday, September 17, 2018 Rules and Regulations FEDERAL RESERVE SYSTEM 12 CFR Part 229 [Regulation CC; Docket No. R-1620; RIN 7100 AF-14] Availability of Funds and Collection of Checks AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule. SUMMARY: The Board is publishing a final rule that amends Subpart C of Regulation CC to address situations where there is a dispute as to whether a check has been altered or was issued with an unauthorized signature, and the original paper check is not available for inspection. This rule adopts a presumption of alteration for disputes between banks over whether a substitute check or electronic check contains an alteration or is derived from an original check that was issued with an unauthorized signature of the drawer. DATES: Effective January 1, 2019. FOR FURTHER INFORMATION CONTACT: Clinton N. Chen, Senior Attorney (202-452-3952), Legal Division; or Ian C.B. Spear, Manager (202-452-3959), Division of Reserve Bank Operations and Payment Systems; for users of Telecommunication Devices for the Deaf

(TDD)only, contact 202-263-4869; Board of Governors of the Federal Reserve System, 20th and C Streets NW, Washington, DC 20551. SUPPLEMENTARY INFORMATION: I. Statutory and Regulatory Background Congress enacted the Expedited Funds Availability Act of 1987 (EFA Act) to provide prompt funds availability for deposits in transaction accounts and to foster improvements in the check collection and return processes. Section 609(c) authorizes the Board to regulate any aspect of the payment system and any related function of the payment system with respect to checks in order to carry out the provisions of the EFA Act. 1 1 EFA Act section 609(c)(1) states that in order to carry out the provisions of this chapter, the Board of Governors of the Federal Reserve System shall have the responsibility to regulate—(A) any aspect of the payment system, including the receipt, payment, collection, or clearing of checks; and

(B)any related function of the payment system with respect to checks. See, 12 U.S.C. 4008(c)(1). Regulation CC implements the EFA Act. Subpart C of Regulation CC implements the EFA Act's provisions regarding forward collection and return of checks. II. Summary of UCC and Current Regulation CC Under the Uniform Commercial Code (UCC), an alteration is a change to the terms of a check that is made after the check is issued that modifies an obligation of a party by, for example, changing the payee's name or the amount of the check. 2 By contrast, a forgery is a check on which the signature of the drawer ( *i.e.,* the account-holder at the paying bank) was made without authorization at the time of the check's issuance. 3 In general, under UCC 4-401, the paying bank may charge the drawer's account only for checks that are properly payable. 4 Neither altered checks nor forged checks are properly payable. In the case of an altered check under the UCC, the banks that received the check during forward collection, including the paying bank, have warranty claims against the banks that transferred the check ( *e.g.,* a collecting bank or the depositary bank). In the case of a forged check, however, the UCC places the responsibility on the paying bank for identifying the forgery. 5 Therefore, the depositary bank typically bears the loss related to an altered check, whereas the paying bank bears the loss related to a forged check. 2 UCC 3-407. The UCC is a body of laws approved by the American Law Institute and the Uniform Law Commission, which has been enacted by state legislatures on a generally uniform basis. Article 3 addresses negotiable instruments, while Article 4 addresses bank deposits and collections. 3 The term “forgery” is not defined in the UCC. However, the term “unauthorized signature” is defined as “a signature made without actual, implied, or apparent authority” and “includes a forgery.” UCC 1-201(41). 4 The term “bank” as used in this notice and in Regulation CC (12 CFR 229.2(e)) includes a commercial bank, savings bank, savings and loan association, credit union, and a U.S. agency or branch of a foreign bank. 5 The presenting bank warrants to the paying bank only that it has no knowledge of an unauthorized drawer's signature. *See* UCC 3-417(a)(3) and 4-208(a)(3). These provisions of the UCC reflect the long-standing rule set forth in *Price* v. *Neal* that the paying bank must bear the loss when a check it pays is not properly payable by virtue of the fact that the drawer did not authorize the item. 6 The *Price* v. *Neal* rule reflects the assumption that the paying bank, rather than the depositary bank, is in the best position to judge whether the drawer's signature on a check is the authorized signature of the account-holder. By contrast, the depositary bank is arguably in a better position than the paying bank to inspect the check at the time of deposit and detect an alteration to the face of the check, to determine that the amount of the check is unusual for the depositary bank's customer, or to otherwise take responsibility for the items it accepts for deposit. 6 *Price* v. *Neal,* 97 Eng. Rep. 871 (K.B. 1762). Regulation CC does not currently address whether a check should be presumed to be altered or forged in cases of doubt. For example, an unauthorized payee name could result from an alteration of the original check that the drawer issued, or from the creation of a forged check bearing the unauthorized payee name and an unauthorized/forged drawer's signature. Courts have reached opposite conclusions as to whether a paid, but fraudulent, check should be presumed to be altered or forged in the absence of evidence (such as the original check). 7 Since the time of these decisions, the check collection system has become virtually all-electronic, and the number of instances in which the original paper check is available for inspection in such cases will be quite low. 8 Unlike the 2006 court cases, where the paying bank received and destroyed the original check, in today's check environment the original check is typically truncated by the depositary bank or a collecting bank before it reaches the paying bank. 7 *See, e.g., Chevy Chase Bank* v. *Wachovia Bank, N.A.,* 208 Fed. App'x. 232, 235 (4th Cir. 2006) and *Wachovia Bank, N.A.* v. *Foster Bancshares, Inc.* , 457 F.3d 619 (7th Cir. 2006). 8 For example, by the beginning of 2017 the Federal Reserve Banks received over 99.99 percent of checks electronically from 99.06 percent of routing numbers and presented over 99.99 percent of checks electronically to over 99.76 percent of routing numbers. As of the same time, the Federal Reserve Banks received 99.63 percent of returned checks electronically from over 99.37 percent of routing numbers and delivered 99.41 percent of returned checks electronically to 92.84 percent of routing numbers. III. Summary of Proposal and Comments A. Summary of Proposal On June 2, 2017, the Board published a notice of proposed rulemaking intended to clarify the burden of proof in situations where there is a dispute as to whether the check has been altered or is a forgery, and the original paper check is not available for inspection. 9 The Board proposed to adopt a presumption of alteration with respect to any dispute arising under Federal or State law as to whether the dollar amount or the payee on a substitute check or electronic check has been altered or whether the substitute check or electronic check is derived from an original check that is a forgery. Under the proposed rule, the presumption of alteration may be overcome by a preponderance of evidence that the substitute check or electronic check accurately represents the dollar amount and payee as authorized by the drawer, or that the substitute check or electronic check is derived from an original check that is a forgery. In the proposed rule, the presumption of alteration shall cease to apply if the original check is made available for examination by all parties involved in the dispute. The Board requested comment on whether the presumption should apply to a claim that the date was altered. The Board also requested comment on whether the presumption should apply if the bank claiming the presumption received and destroyed the original check. 9 In response to a 2011 proposed rulemaking, two commenters requested that the Board address the uncertainty caused by the divergent appellate court decisions, even though the Board did not raise the issue. 76 FR 16862 (March 25, 2011). The Board described these comments in greater detail as part of its 2014 Regulation CC proposal and requested comment on whether it should adopt a presumption of alteration. 79 FR 6673, 6703 (Feb. 4, 2014). Based on its analysis of the comments received in the 2014, the Board requested comment on proposed regulatory text and commentary on June 2, 2017. 82 FR 25539 (June 2, 2017). B. Summary of General Comments The Board received eleven responses to its proposal from a variety of commenters, including financial institutions, trade associations, and clearinghouses. Ten commenters, including a comment letter submitted by a group of institutions and trade associations (“group letter”), generally supported the Board's proposal to adopt a presumption of alteration. Commenters supported the presumption of alteration because it aligned Regulation CC with current practices and created a uniform rule. One commenter stated that the proposed presumption was not necessary because the difference between alteration and forgery are well-known in the industry and the use of an evidentiary presumption may require institutions to unnecessarily increase the expense to store documents. Detailed comments are discussed in the description of the final rule below. C. Consultation With Other Agencies As directed by section 609(e) of the EFA Act, the Board consulted with the Comptroller of the Currency, the Board of Directors of the Federal Deposit Insurance Corporation, and the National Credit Union Administration Board during the rulemaking process. 10 10 12 U.S.C. 4008(e). IV. Summary of Final Rule The Board has considered all comments received and has adopted a presumption of alteration. The Board has made certain modifications to the proposed presumption in light of comments received, as discussed below. *Altered Date.* The Board's proposed presumption covered alterations to the dollar amount and payee. The Board requested comment on whether the presumption of alteration should apply to a claim that the date was altered. Six commenters, including the group letter, supported applying the presumption to claims that the date was altered and one commenter requested the Board investigate whether applying the presumption to such claims would promote greater certainty in the check collection process. Two commenters, including the group letter, noted that a claim that the date was altered may be alleged

(1)where the date of a post-dated check is altered to make the check currently payable, and as a result, the paying bank pays the check when presented and incurs a loss to its customer which would not have resulted had the paying bank paid the check upon or following the date on the check was issued by the customer; and

(2)where the date is altered to a more recent date in order to convey holder-in-due-course status on the depositor or to otherwise avoid a “stale-date” rejection by the paying bank. Three commenters suggested that the Board align the definition of “alteration” with the definition in the UCC, which would include alteration of the date field. 11 One Federal Reserve Bank commenter stated that fraud could be committed by altering a number of fields, including name of payee, amount, date, check number, routing number, payee's indorsement, etc., and that the Board should address the entire scope of the legal uncertainty by using the UCC definition of alteration. 11 Under the UCC, alteration means

(i)an unauthorized change in an instrument that purports to modify in any respect the obligation of a party, or

(ii)an unauthorized addition of words or numbers or other change to an incomplete instrument relating to the obligation of a party. UCC section 3-407. Based on the comments received, the Board has modified the presumption in the final rule so that the term “alteration” is used as defined in the UCC. The Board believes that aligning the presumption with the UCC's definition of “alteration” appropriately expands the scope of the presumption to cover instances of fraud beyond changes to the dollar amount or payee. The Board notes in the commentary that terms that are not defined in section 229.2, such as “alteration,” have the meanings set forth in the UCC and provides examples of alterations. *Bank that received and destroyed the original check.* The presumption in the proposed rule would apply to disputes involving a substitute check or an electronic check, and thus the presumption could not be asserted by a bank that received the original check. The Board requested comment on whether the presumption should apply if the bank claiming the presumption received and destroyed the original check. Six commenters, including the group letter, stated that the presumption should not apply to paying banks that received and destroyed the original check. These commenters noted that it is rare for a paying bank to receive an original check. A paying bank may receive the original check from the depositary bank via direct presentment if it is a very high dollar check or if the depositary bank has concerns with certain aspects of the check, such as unclear terms or a smudged signature. A paying bank may also request and receive the original check after receiving presentment of an electronic check due to a dispute about the check image. These commenters stated that receipt of an original check by a paying bank puts the paying bank on notice about the possible importance of the original check, and the paying bank should not have the benefit of the presumption of alteration if it receives the original check. Commenters were split on whether the presumption should apply to a bank, other than the paying bank, if it received and destroyed the original check. The group letter stated that the presumption should apply in these cases because it would promote check truncation by not creating a legal disincentive to the destruction of checks by such banks. Three commenters stated that the presumption should not apply to any bank that received and destroyed the original check because a bank should not benefit from a presumption against another party when it had in its possession potential evidence to resolve a dispute regarding alteration or forgery. In the final rule, the presumption of alteration applies to a dispute between banks where an electronic check or a substitute check was transferred between those banks. The presumption applies in such a dispute regardless of where in the chain, or by whom, the original check was truncated. However, as noted in the commentary, the presumption does not apply to a dispute between banks where the original check was transferred between those banks, even if that check is subsequently truncated and destroyed. The Board believes that the final rule addresses the concerns raised by the commenters who argued that the presumption of alteration should not apply if the paying bank received the original check. As a presumption of alteration generally favors the paying bank (the depositary bank is generally liable for alterations), the commenters' concern was that the application of the presumption should not incentivize a paying bank to destroy the original check after being put on notice of potentially high-risk items by receiving the original check. When a paying bank receives presentment of the original check, the presumption of alteration would not apply, as the presumption applies only to disputes concerning substitute checks or electronic checks. In another example noted by commenters, a paying bank may request and receive the original check after receiving presentment of an electronic check due to a dispute about the check image. In that scenario, the presumption of alteration would not apply pursuant to § 229.38(i)(3), which states that the presumption no longer applies if the original check is made available for examination by all parties involved in the dispute. The Board does not believe that limiting the application of the presumption to the transfer of electronic checks or substitute checks will create a material incentive for depositary banks or collecting banks to bypass the check imaging process and send forward a substantial number of original checks merely to preserve the presumption of alteration. As the commenters noted, the expense of handling checks physically would likely be merited only in rare cases where a bank had substantial concerns about certain aspects of the check. *Rebutting the presumption and effect of producing the original check.* One Federal Reserve Bank commenter suggested that the Board allow the presumption to be overcome only by the production of the original check, and not by proving by a preponderance of the evidence that the check was not altered or was forged. The commenter stated that a stronger evidentiary presumption in favor of alteration would be more efficient, as parties may continue to expend resources litigating the issue of whether an item is an alteration or forgery. Two commenters requested that the Board specify who would have the authority to determine whether evidence satisfied a preponderance of evidence burden. One commenter requested that the Board provide additional clarity as to what type of evidence would be adequate to overcome the presumption of alteration. Two commenters suggested that the Board set a time limitation in which a financial institution could request the original check in cases of doubt, such as ten business days. Additionally, one commenter requested that the Board allow a scanned image of the original check in lieu of the original to avoid the presumption of alteration. In proposing the presumption of alteration, the Board did not intend to eliminate the opportunity for banks to provide additional evidence and engage in further litigation. The presumption was intended to create a uniform starting point that recognized the operational realities of check fraud in the absence of evidence. The comments requesting that the Board specify who can make the determination, what types of evidence would be adequate for overcoming the presumption of alteration, and the time limitation within which the original check must be provided would be matters for the court or other dispute resolution process and are outside of the scope of this final rule. A scanned image of the original check would generally provide no better evidentiary value than a substitute check or an electronic check, and thus the final rule does not permit such an image to overcome the presumption of alteration. Accordingly, the Board has adopted provisions on the rebuttal of the presumption in § 229.38(i)(2) substantially as proposed. *Use of term “forgery.”* One Federal Reserve Bank commenter suggested that the Board use the phrase “issued without the account holder's authorization” instead of the term “forgery.” The Federal Reserve Bank commenter stated that under the UCC, the payor bank is generally liable for paying a check if the issuance of the check was not authorized by the accountholder, whether there is a forged drawer's signature on the check or not. In the Board's final rule, the Board has adopted this suggestion. The presumption will apply to disputes as to whether a substitute check or electronic check contains an alteration or is derived from an original check that was issued with an unauthorized signature of the drawer. The Board believes that adopting the phrase “issued with an unauthorized signature of the drawer” appropriately covers the entire scope of the payer bank's liability for paying an item that is not properly payable because the accountholder has not authorized the issuance of the item. As stated in relation to “alteration,” the Board notes in the commentary that terms that are not defined in § 229.2, such as “unauthorized signature,” have the meanings set forth in the UCC and provides examples of unauthorized signatures. *Other topics.* The Board also received comments on a variety of other topics. Two commenters, including the group letter, suggested that the Board clarify that the presumption also applies to alteration of the electronic image and not just the original check. The group letter also requested that the Board clarify that the parties should have the ability to vary the presumption to the maximum extent permitted under § 229.37. In the final rule, the Board has clarified in the commentary that the alteration claim may be related to the original check or the electronic or substitute check. The Board also included in the commentary a sentence stating that the presumption of alteration may be varied by agreement to the extent permitted under § 229.37. One commenter requested that the Board ensure that the presumption can be applied only in disputes between banks, and not disputes between banks and customers. In the final rule, the Board has specified in § 229.38(i)(1) that the presumption applies to disputes between banks. The group letter requested that the Board clarify that the presumption applies to disputes where the loss allocation rules for bank and non-bank parties are established under private contract or by laws other than Regulation CC and the UCC, such as private presentment arrangements or Federal regulations that apply to Treasury checks. As stated earlier, the intent behind the presumption of alteration is to create a uniform starting point in the absence of evidence under Federal and State laws. As stated above, the final rule does not prevent banks from varying the presumption of alteration by agreement to the extent permitted under § 229.37. However, the Board did not intend to override any other Federal statute or regulation, such as U.S. Treasury rules governing Treasury checks, to the extent that they already address the issue that the presumption is intended to address. In the final rule, the Board has indicated that the presumption applies in the absence of any Federal statute or regulation to the contrary. One commenter requested that the Board require banks that receive original checks to preserve them for a set period of time. A retention requirement for physical checks would impose a record-keeping and storage burden for banks. The Board believes a more appropriate approach is for the rule to establish responsibilities with respect to the handling of checks and for banks to determine their own physical check retention policies based on their assessment of risk. IV. Competitive Impact Analysis The Board conducts a competitive impact analysis when it considers an operational or legal change, if that change would have a direct and material adverse effect on the ability of other service providers to compete with the Federal Reserve in providing similar services due to legal differences or due to the Federal Reserve's dominant market position deriving from such legal differences. All operational or legal changes having a substantial effect on payments-system participants will be subject to a competitive-impact analysis, even if competitive effects are not apparent on the face of the proposal. If such legal differences exist, the Board will assess whether the same objectives could be achieved by a modified proposal with lesser competitive impact or, if not, whether the benefits of the proposal (such as contributing to payments-system efficiency or integrity or other Board objectives) outweigh the materially adverse effect on competition. 12 12 Federal Reserve Regulatory Service, 7-145.2. *See, https://www.federalreserve.gov/publications/reginfo.htm.* The Board does not believe that the amendments to Regulation CC will have a direct and material adverse effect on the ability of other service providers to compete effectively with the Reserve Banks in providing similar services due to legal differences. The amendments would apply to the Reserve Banks and private-sector service providers alike and would not affect the competitive position of private-sector banks vis-à-vis the Reserve Banks. V. Paperwork Reduction Act In accordance with the Paperwork Reduction Act

(PRA)of 1995 (44 U.S.C. 3506; 5 CFR part 1320 Appendix A.1), the Board may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a valid Office of Management and Budget

(OMB)control number. The Board reviewed the final rule under the authority delegated to the Board by the OMB and determined that it contains no collections of information under the PRA. 13 Accordingly, there is no paperwork burden associated with the rule. 13 *See* 44 U.S.C. 3502(3). VI. Regulatory Flexibility Act An initial regulatory flexibility analysis

(IRFA)was included in the proposal in accordance with section 3(a) of the Regulatory Flexibility Act (RFA), 5 U.S.C. 601 *et seq.* (RFA). In the IRFA, the Board requested comment on the effect of the proposed rule on small entities and on any significant alternatives that would reduce the regulatory burden on small entities. The Board did not receive any comments. The RFA requires an agency to prepare a final regulatory flexibility analysis

(FRFA)unless the agency certifies that the rule will not, if promulgated, have a significant economic impact on a substantial number of small entities. In accordance with section 3(a) of the RFA, the Board has reviewed the final regulation. Based on its analysis, and for the reasons stated below, the Board certifies that the rule will not have a significant economic impact on a substantial number of small entities. The final rule will apply to all depository institutions regardless of their size. 14 Pursuant to regulations issued by the Small Business Administration (13 CFR 121.201), a “small banking organization” includes a depository institution with $550 million or less in total assets. Based on 2017 call report data, there are 9,631 depository institutions that have total domestic assets of $550 million or less and thus are considered small entities for purposes of the RFA. The presumption of alteration shifts the burden to the bank that warrants that a check has not been altered, which could be a depositary bank or collecting bank. In order to overcome the presumption of alteration, a depositary bank or collecting bank must prove by a preponderance of evidence either the substitute check or electronic check does not contain an alteration, or that the substitute check or electronic check is derived from an original check that was issued with an unauthorized signature of the drawer. Under the final rule, the presumption of alteration shall cease to apply if the original check is made available for examination by all parties involved in the dispute. Furthermore, the presumption of alteration will not apply if the paying bank received the original check from which the substitute check or electronic check was derived. 14 The rule would not impose costs on any small entities other than depository institutions. A depositary bank or collecting bank that destroys all original checks after truncation may incur additional risk, as it may not be able to overcome the presumption of alteration. The Board expects the additional risk to be minimal. According to Federal Reserve data, only 0.015% of forward items collected through the Reserve Banks were returned due to a claim of alteration or forgery in March 2018. The Board expects depositary banks and collecting banks to weigh the costs and benefits of destroying or retaining original checks, such as for large dollar amounts, so that the presumption of alteration will not apply. In their roles as paying banks, however, those same banks could benefit from the presumption. Additionally, a depositary bank that permits remote deposit capture may also incur additional risk, as it may not be able to obtain the original check to overcome the presumption of alteration. The Board expects depositary banks to examine their protocols for remote deposit capture, such as limiting the amount of money that may be deposited remotely. The Board expects that depository institutions will benefit from a uniform rule when there is an absence of evidence over whether a check has been altered or forged and may have reduced litigation and dispute resolution costs. The Board does not expect the rule to have a significant economic impact on a substantial number of small entities. List of Subjects in 12 CFR Part 229 Banks, Banking, Federal Reserve System, Reporting and recordkeeping requirements. Authority and Issuance For the reasons set forth in the preamble, the Board to amends 12 CFR part 229 as follows: PART 229—AVAILABILITY OF FUNDS AND COLLECTION OF CHECKS (REGULATION CC) 1. The authority citation for part 229 continues to read as follows: Authority: 12 U.S.C. 4001-4010, 12 U.S.C. 5001-5018. Subpart C—Collection of Checks 2. In § 229.38, paragraph

(i)is added to read as follows: § 229.38 Liability.

(i)*Presumption of Alteration* —(1) *Presumption.* Subject to paragraphs (i)(2) and

(3)of this section and in the absence of a Federal statute or regulation to the contrary, the presumption in this paragraph applies with respect to any dispute between banks arising under Federal or State law as to whether a substitute check or electronic check transferred between those banks contains an alteration or is derived from an original check that was issued with an unauthorized signature of the drawer. When such a dispute arises, there is a rebuttable presumption that the substitute check or electronic check contains an alteration.

(2)*Rebuttal of presumption.* The presumption of alteration may be overcome by proving by a preponderance of evidence that either the substitute check or electronic check does not contain an alteration, or that the substitute check or electronic check is derived from an original check that was issued with an unauthorized signature of the drawer.

(3)*Effect of producing original check.* If the original check is made available for examination by all banks involved in the dispute, the presumption in paragraph (i)(1) of this section shall no longer apply. 3. In appendix E, section XXIV, add reserved paragraphs E through H and paragraph I to read as follows: Appendix E to Part 229—Commentary XXIV. Section 229.38 Liability E through H [Reserved] I. 229.38(i) Presumption of Alteration 1. This paragraph applies to disputes between banks where one bank has sent an electronic check or a substitute check for collection to the other bank. The presumption of alteration does not apply to a dispute between banks where one bank sent the original check to the other bank, even if that check is subsequently truncated and destroyed. The presumption of alteration applies with respect to claims that the original check or to the electronic check or substitute check was altered or contained an unauthorized signature. 2. The presumption of alteration applies when the original check is unavailable for review by the banks in context of the dispute. If the original check is produced, through discovery or other means, and is made available for examination by all the parties, the presumption no longer applies. 3. This paragraph does not alter the transfer and presentment warranties under the UCC that allocate liability among the parties to a check transaction with respect to an item that has been altered or that was issued with an unauthorized signature of the drawer. The UCC or other applicable check law continues to apply with respect to other rights, duties, and obligations related to altered or unauthorized checks. In addition, the presumption does not apply if it is contrary to another Federal statute or regulation, such as the U.S. Treasury's rules regarding U.S. Treasury checks. The presumption of alteration may be varied by agreement to the extent permitted under § 229.37. 4. As stated in § 229.2, terms that are not defined in that section have the meanings set forth in the Uniform Commercial Code. “Alteration” is defined in UCC 3-407 and includes both

(i)an unauthorized change in a check that purports to modify in any respect the obligation of a party, and

(ii)an unauthorized addition of words or numbers or other change to an incomplete check relating to the obligation of a party. Alterations could include, for example, an unauthorized change to a payee name or a change to the date on a post-dated check that purports to make the check currently payable. “Unauthorized signature” is defined in UCC 1-201 and further discussed in UCC 3-403. An unauthorized signature could include a forgery as well as a signature made without actual or apparent authority. By order of the Board of Governors of the Federal Reserve System, September 11, 2018. Ann Misback, Secretary of the Board. [FR Doc. 2018-20029 Filed 9-14-18; 8:45 am]

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