Federal Election Commission Main Page
January 14, 2000
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1999-36
Joseph E. Sandler
Sandler & Reiff, P.C.
6 E Street SE
Washington, DC 20003
Dear Mr. Sandler:
This refers to your letters dated November 10, 1999,
and January 5, 2000, on behalf of Campaign Advantage
("Advantage"), a division of Science Writers, Inc.,
concerning the application of the Federal Election Campaign
Act of 1971, as amended ("the Act"), the Presidential
Primary Matching Payment Account Act ("the Matching Act"),
26 U.S.C. 9031-9042, and Commission regulations to
Advantage's proposed methods to assist various political
committee and candidate clients in fundraising through the
Internet.
In general, Advantage asks whether its process for
receiving and transmitting contributions by electronic
check, online over the Internet, will comply with both the
cited Acts and Commission regulations, including the
regulations that apply to matchable contributions in a
Presidential campaign.
FACTS
You state that Advantage is a division of Science
Writers, Inc., a Maryland corporation, which provides web
sites, systems publications and technical requirements
analysis to a range of government, corporate and non-profit
clients. Advantage "designs and provides online solutions
for Democratic [Party] candidates and progressive
organizations, offering to such campaigns and organizations
services including the design
and maintenance of web sites; secure online
fundraising; electronic voter contact; online volunteer
recruitment; and training and seminars."
In addition to offering candidates a system of
fundraising online via credit card, Advantage plans to offer
candidates, including presidential candidates and other
candidates for Federal office, a system for receiving
contributions online, over the Internet, via electronic
check using electronic funds transfer. Advantage has been
retained by the authorized committees of certain candidates
for Federal office who wish to solicit contributions online,
via the Internet, through the use of on-line checking. The
system to be offered by Advantage will work as follows:
1. The option of contributing to the campaign via
electronic check will be built into the campaign's web site.
Prior to offering this option, the campaign will enter an
agreement with Advantage and with the electronic payment
processing company, eMoney.NET, authorizing use of the
system described below.
2. The candidate's web site will then offer a
potential donor the option of contributing online to the
candidate's campaign by credit card or by check.
3. If the donor clicks on the "online check" option, a
contribution form will appear on the screen. A sample form
is included with the request. This form will include, in
the case of all Federal candidates, the disclaimer language
required by the Commission's rules, including the "best
efforts" language prescribed by 11 CFR 104.7(b)(1). The
form will also notify the prospective donor of the source
restrictions and contribution limits of the Act using the
language set forth in Advisory Opinions 1995-9 and 1999-9.
To contribute, the donor will have to complete the form
on the web site. The form will require the donor to provide
his or her first and last name; address; city, state and zip
code; various phone numbers; e-mail address; occupation and
employer; and either a social security number or driver's
license number. If the donor fails to provide any of the
required information, or leaves any of the fields blank, the
web site will reject the form and prompt the prospective
donor to provide the missing information.
4. In a series of instant steps not visible to the
donor, the donor's web browser is then redirected to the
encrypted web site of eMoney.NET, an Internet payments
processing company. The donor is then asked to "proceed"
with payment.
5. The site informs the donor that he or she is
receiving a digital signature authentication code via the e-
mail address the donor submitted. This digital signature
authentication code is received within a few seconds via e-
mail. The site displays a check form in which the donor can
enter his or her check number (i.e., the next check number
from his or her checkbook). The donor should also, for the
sake of good recordkeeping, write "void" on the paper check
bearing this check number. The donor is
also asked to enter the uniform bank routing (ABA)
number; account number; bank name; and the digital signature
authentication code.
6. The donor then enters this information on the form,
including the digital signature authentication code.
7. The form will ask the donor to check a series of
boxes attesting that his or her contribution is made with
funds within the source restrictions and contribution limits
of the Act, using the language set forth in Advisory
Opinions 1995-9 and 1999-9. Specifically, the contributor
will be required to attest that he or she is a U.S. citizen
or legal permanent resident residing in the U.S.; that he or
she is contributing his or her own personal funds; that he
or she is not a minor; that the funds do not come from the
general treasury funds of a corporation, labor organization
or national bank; and that the donor is not a Federal
contractor. You state that, as in Advisory Opinions 1995-9
and 1999-9, the failure to check any of the attestation
boxes will cause the web site to reject the form, and
display a message noting the applicable source restriction.
The web site will then prompt the donor to answer the
question. If any question is answered in a way that
disqualifies the contribution, the web site will inform the
donor that he or she is ineligible to contribute. The web
site will then prompt the donor to correct any missing or
inaccurate information, or to cancel the transaction.
8. The donor is then asked to "submit contribution."
When the donor clicks this button, if the contribution is
excessive, the site will so inform the donor and request
that
an amount within the limit be entered into the check form.
After the donor clicks "submit contribution," and
before the contribution is processed, the Internet payments
processing company eMoney.NET automatically performs four
screening functions on the donor information:
ú The ABA transit number is checked with a check-sum
algorithm for validity;
ú The checking account number is put through a filter to
determine only if there is any identifiable problem with the
number itself (but the account number is not checked against
any other information about the checking account, such as
the name or address of the account holder);
ú The check number is put through a filter to determine
if it appears to be in proper sequence;
ú The donor's phone number is checked to ensure it is
consistent with the donor's zip code.
9. At the option of the candidate, an additional
screening process may be imposed, through transmission of
the checking information to a check verification system.
This system is a match of the information provided by the
contributor against a database of information supplied by
participating merchants about checking accounts with which
they have experienced some problem, such as a bounced check
or closed account. If no information has been reported by a
participating merchant about a particular checking account,
this verification system will not verify any further
information about the donor or his or her account. If any
merchant has reported any information about the donor that
includes the donor's driver's license number or social
security number, that information will be called up based on
the driver's license or social security number provided by
the donor on the Advantage form, but may not be reported to
Advantage if such reporting is barred by the Fair Credit
Reporting Act and/or Fair Debt Collection Act.1 If the
checking account cannot be verified through the check
authorization system, or does not pass the system's
verification screen, the web site will display to the donor,
and an e-mail will also be sent to the donor with, a
declined transaction number and a toll-free number to
contact for further information.
10. If this additional screening option is used and
the verification is successful, or if the additional
screening option is not used but all of the information
entered by the donor on the electronic form can be
understood by the computer system in place, then an
Automated Clearing House ("ACH") debit entry is
automatically and securely submitted through the system of a
third party processor to a bank offering electronic funds
transfer services. This "originating financial
institution," you explain, has its own Federal Reserve
System line account, allowing it to clear transactions with
other banks over the "fed wire," which is the system banks
use to settle with each other for items drawn on a bank and
presented to that drawee bank for payment. The originating
financial institution directly debits the bank account of
the donor. Thereafter, after allowing for the typical 72-
hour "Hold in Lieu of Returns," the originating financial
institution directly credits the bank account of the
campaign.2
11. A confirmation of the transaction is generated to
the donor, instantly, on the screen and via e-mail. The
donor's web browser is then transferred back to the
candidate's web site.
12. The entire transaction, from the time the donor
submits the contribution payment order form to the time
conformation of the payment transaction is received, takes
on average only 8 to 15 seconds. You also emphasize that
all of the checking account and other information submitted
by the donor on the payment order form is transmitted at all
times over the Internet in encrypted form.
13. After the electronic check "clears," that is, the
campaign's account is credited, the campaign will receive,
on a timely basis, in electronic form or on paper, all
necessary information about the donation, including all
required contributor information, date, amount, etc., for
inclusion (electronically if possible) in the campaign's
database used to generate its reports to the Commission.
Confirmation that the electronic check has "cleared" is also
received by the campaign directly from eMoney.NET via e-
mail.3
14. For purposes of the itemized reporting of
contributions pursuant to 11 CFR 104.8, the campaign will
report the date of the credit to its account as the date of
receipt of the contribution, in accordance with the
Commission's guidance in Advisory Opinion 1989-26.
15. For the use of this system, each participating
campaign will pay certain fees to Advantage. For purposes
of this request, you ask the Commission to assume that these
are the usual and normal charges for electronic checking
transactions of this nature.
ACT AND COMMISSION REGULATIONS
The Act defines the term "contribution" to include,
inter alia, a gift or "deposit of money" by any person for
the purpose of influencing any election for Federal office.
2 U.S.C. 431(8)(A)(i). While the Act prohibits
contributions of currency which, in the aggregate, exceed
$100, it does not require that contributions be made only by
check or similar paper draft. See 2 U.S.C. 441g.
For purposes of entitlement to Federal matching
payments, the term contribution "means a gift of money made
by a written instrument which identifies the person making
the contribution by full name and mailing address, but does
not include a subscription, loan, advance, or deposit of
money, or anything of value or anything described in
subparagraph (B), (C), or (D) of section 9032(4)." 26
U.S.C. 9034(a); see also 11 CFR 9034.2.
With regards to a contribution made by credit card or
debit card, recently revised Commission regulations define
"written instrument" to mean either a transaction slip or
other writing signed by the cardholder, or in the case of
such a contribution made over the Internet, an electronic
record of the transaction created and transmitted by the
cardholder, and including the name of the cardholder and the
card number, which can be maintained electronically and
reproduced in a written form by the recipient candidate or
candidate's committee. 11 CFR 9034.2(b); the text of these
recently revised regulations is at 64 Fed. Reg. 32397 (June
17, 1999).
The written instrument shall be: payable on demand; and
to the order of, or specifically endorsed without
qualification to, the Presidential candidate, or his or her
authorized committee. The written instrument shall contain:
the full name and signature of the contributor(s); the
amount and date of the contribution; and the mailing address
of the contributor(s). For purposes of this section, the
term signature means, in the case of a
contribution by a credit card or debit card, either an
actual signature by the cardholder who is the donor on a
transaction slip or other writing, or in the case of such a
contribution made over the Internet, the full name and card
number of the cardholder who is the donor, entered and
transmitted by the cardholder. 11 CFR 9034.2(b) and (c).
Contributions by credit or debit card are matchable
contributions provided that evidence is submitted by the
committee that the contributor has affirmed that the
contribution is from personal funds and not from funds
otherwise prohibited by law. 11 CFR 9034.2(c)(8)(ii).
APPLICATION TO PROPOSAL
Within the context of Federal candidates who do not
propose to receive matchable contributions, the Commission
has previously sanctioned the use of the Internet to make
contributions "using credit cards, electronic fund transfers
and potentially other electronic means." See Advisory
Opinion 1995-9. Your on-line check process is a form of
electronic fund transfer and, therefore, is permissible for
Federal candidates not seeking matching funds.
The Commission notes that this opinion considers
directly, for the first time, the use of electronic checks
through the Internet to make matchable contributions to
Presidential candidates.4 Recently revised Commission
regulations describe the matchability of credit card
contributions or those made by debit card. However, in
Advisory Opinion 1999-9, which first discussed the
permissibility of credit card contributions, the Commission
used the term "credit card" to include the use of a "debit
card," as well as "other similar electronic fund transfer
methods." The Commission, therefore, concludes that its
regulations on the matchability of credit card contributions
are applicable to contributions made by the online
electronic check system, as described in your proposal.
In this regard, the Commission notes that the screening
procedures in your proposal for electronic check
contributions raised over the Internet are well within the
"safe harbor" discussed in Advisory Opinion 1999-9 for
matchable contributions. See Advisory Opinion 1999-9 and
the Explanation and Justification for the Commission's
revised regulations permitting credit card contributions at
64 Fed. Reg. 32394 (June 17, 1999), see also Advisory
Opinion 1999-22. They would permit an authorized committee
of a Presidential candidate, relying on Advantage 's
services, to submit evidence that "the contributor has
affirmed that the contribution is from personal funds and
not from funds otherwise prohibited by law." 11 CFR
9034.2(c)(8)(ii).5 Therefore, with some modifications your
proposal is permissible under the Matching Act and
Commission regulations.
Since the Commission has determined that the new
regulations, which cover the use of credit and debit cards,
are applicable to the on-line electronic check system
described in your proposal, the Commission also concludes
that the documentation requirements developed for credit
cards and debit cards, as discussed in the Commission's
Guideline for Presentation in Good Order, would apply as
well (with some modifications) to the on-line check system.
See 11 CFR 9033.1(b)(9).6 For example, any information from
the third party processors, documenting the transmission of
funds in a credit card or debit card situation, would
likewise be required where an electronic check transaction
is transmitted through any third party processor, as
described in your request.
Another provision in the Commission's Guidelines, in
particular, requires the documentation and verification of a
donor's address when the Internet is used for credit or
debit card contributions. However, you explain that for on-
line checks there is no "universal means of verifying donor
information against a database of checking account
information provided by banks." Despite this technological
limitation, the Commission concludes that some documentation
is both possible and required for the on-line check system
you describe. To assist the Commission with the
documentation of the matchable on-line check contributions,
Advantage must provide to Presidential campaigns seeking
matching funds (and these committees must provide to the
Commission) each contributor's checking account number and
bank transit number for that account. The Commission notes
that this documentation would also be provided to the
Commission if
the matchable contributions were made on traditional
paper checks. See 11 CFR 9036.1(b)(3) and 9036.2(b)(1)(vi).
In this regard, the Commission notes your statement
that "the campaign will receive, on a timely basis, in
electronic form or on paper, all necessary information about
the donation, including all required contribution
information, date, amount, etc., for inclusion
(electronically if possible) in the campaign's data base...
." The Commission notes that as an agent of the political
committee it assists, Advantage is required to furnish, to
any client Presidential committee receiving matching funds,
all documents and records that may be necessary for the
Commission to conduct its audit of that committee. See 26
U.S.C. 9033(a)(1),(2),(3); see also 11 CFR 9033.1(b),
9033.11, and 9033.12.
This response constitutes an advisory opinion
concerning the application of the Act, the Matching Act and
regulations prescribed by the Commission, to the specific
transaction or activity set forth in your request. See 2
U.S.C. 437f.
Sincerely,
(signed)
Darryl R. Wold
Chairman
Enclosures (AOs 1999-22, 1999-9, 1995-9 and 1989-26)
_______________________________
1 You state that this optional screening process does not
provide any universal means of verifying donor information
against a database of checking account information provided
by banks. You state that it is your understanding that no
such universal screening process exists. In other words,
when a paper check is provided to a merchant, in person,
there is no system in existence that will allow the
merchant, in real time, to verify that the address on the
check or provided by the customer matches the address on
file with the drawee bank for the checking account, unless
that customer is flagged by the type of database of
information supplied by participating merchants described
above.
2 You explain that this transaction works in essentially
the same way as customer-authorized electronic funds
transfers used by checking account customers to allow a
mortgage company to withdraw the mortgage payment
automatically from their account each month, or to
authorize, e.g., a utility company to take the amount of the
customer's utility bill out of the customer's checking
account each month.
3 The campaign also receives confirmation of the credit
entry on its bank account statement, so that the electronic
check contribution can be included in the reconciliation of
the campaign's bank account, for purposes of determining
cash on hand, just like the clearing and crediting of any
paper check.
4 In Advisory Opinion 1989-26, the Commission approved the
use of automatic fund transfer from a contributor's bank
account to a candidate committee as a means to facilitate
the making of contributions. And again, in Advisory Opinion
1995-9 with respect to contributions that were not to be
matched, the Commission approved the making of contributions
through the Internet "using credit cards, electronic fund
transfers and potentially other electronic means."
5 The Commission stated in its Explanation and
Justification that:
A committee should take steps to insure that controls
and procedures are in place to minimize the
possibility of contributions by foreign nationals, by
Federal Government contractors, and by labor
organizations, or by an individual using corporate or
other business entity credit accounts.
Such controls and procedures should also help the
recipient committee identify contributions made by the
same individual using different or multiple credit card
accounts; and contributions by two or more individuals
who are each authorized to use the same account, but
where the legal obligation to pay the account only
extends to one (or more) of the card holders, and not
to all of them. 64 Fed. Reg. 32396.
6 Not all of these requirements, however, would be
applicable to your situation. The Commission notes, for
example, that the on-line check process discussed in this
request differs from the credit card system for making
Internet contributions discussed in Advisory Opinion 1999-
22. The on-line check process, since it directly transfers
funds from the contributor's bank account to the account of
the campaign, does not require the services of a vendor to
clear a credit card contribution or hold the contribution
funds in the vendor's own accounts. Therefore, the need for
a separate vendor merchant account number (for matchable
contributions), or for the segregation of all contributions
(matchable or not) from the vendor's corporate accounts,
does not arise in this situation.