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1994-2: Guidelines for Contributions via Electronic Fund Transfers

Thursday, May 12, 1994

Re:New York City Administrative Code §3-702(3); 3-703(1)(f), (6), (7); 3-714; Campaign Finance Board Rules 1-04(c)(2), (g)(2), (3); 3-03(a), (c)(1)(i), (6); 3-08; 4-01(a), (b)(2), (4); 4-02; 5-01(d); Op. No. 1994-2

Advisory opinions have been requested on behalf of the Friends of Ruth Messinger, Inc. (the “Committee") regarding whether certain contributions may be accepted and matched with public funds under the New York City Campaign Finance Act. Specifically, the Committee proposes requesting contributors to authorize contributions to the Committee either by: (1) periodic electronic funds transfers from the contributor's bank account to the Committee's bank account; or (2) periodic charges to the contributor's credit card account. Because these two requests raise similar issues, they will be addressed together in this opinion.1 For purposes of this opinion, the Board assumes that the candidate will join the New York City Campaign Finance Program for the election for which these contributions are accepted. The Board approves these proposals, based upon the specific facts described in the requests, subject to the conditions described below, the purpose of which is to ensure compliance with the Act and Campaign Finance Board rules.2

As described in the requests, the contributor will be asked to fill out and sign a pre-printed authorization card, on which he or she would select the contribution amount and the frequency of the electronic funds transfer (“EFT") or credit charge. The amount chosen will be charged periodically to the bank account or credit card account that is specified by the contributor. The authorization card will state that only the bank account or credit card account holder may authorize these contributions. The authorization card will clearly inform the contributor that the periodic contributions will continue to be made throughout the 1997 election cycle, unless the contributor discontinues the authorization by contacting the Committee, or either the contributor's bank (in the case of the EFT contributions) or the contributor's credit card issuer (in the case of credit card contributions).3

For an EFT authorization, the contributor will provide an unsigned, voided personal check, including the bank name and contributor's account number. For credit card charges, the contributor will list on the authorization card his or her credit card number, its expiration date, and the name of the financial institution issuing the card. In both cases, the authorization card will request that the contributor provide all information required to comply with the Act. Upon receipt of the authorization card, the Committee will mail a letter to the contributor, reiterating the amount and duration of the periodic contributions and the contributor's right to discontinue the arrangement.

The Committee will initiate an EFT, at the frequency specified by the contributor, by communication to the Committee's bank and to the contributor's bank. The result will be a debit to the contributor's bank account and a credit to the Committee's bank account. The Committee's bank will provide a periodic statement of the amount of each contribution made by EFT.

Similarly, at the frequency specified by the contributor, the Committee will process a credit card contribution by contacting the relevant financial institution, such as American Express, or the credit card company with which the Committee has contracted. Upon a determination by the credit card company that the charge is valid and payable, the company will charge the contribution against the contributor's credit card account and provide the Committee with a record of the charge. The company will transfer to the Committee the amount of these contributions, less service fees, and provide periodic reports showing the amount of each such contribution.

The Committee will retain the authorization cards and the contributor documentation generated by the Committee's bank, in the case of an EFT, or by the financial institution with which the Committee contracts, in the case of credit card contributions.

In essence, whether by EFT or credit card charge, the contributor's authorization is a pledge to contribute in regular installments an indefinite total amount, since the contributor may discontinue the contributions at any time. The Board has not previously addressed whether or how a series of contributions made pursuant to a single authorization may comply with the requirements of the New York City Campaign Finance Program and may qualify as matchable contributions.4

The Committee must comply with the following Program requirements:

1) Authorization Card. The contribution must be paid by its purported contributor. Advisory Opinion Nos. 1993-1 (February 17, 1993) and 1989-5 (January 25, 1989). Thus, contributors must sign an authorization card that contains, in the case of an EFT authorization, the contributor's bank name, account name, and account number, or, in the case of a credit card authorization, the name of the credit card issuer, account name, account number, and expiration date. The authorization card must advise the contributor that contributions cannot be accepted under an individual's name unless drawn from that individual's personal account. See Advisory Opinion No. 1993-1, noted above.

The Committee must use the authorization card to obtain the information about the contributor that must be disclosed under the Act: the name and residential address of the contributor and the contribution amount. Unless the total contributions authorized by the contributor will in no event exceed $99, the card must also request the name and address of the contributor's employer, and the contributor's occupation. See New York City Administrative Code §3-703(6); Campaign Finance Board Rules 3-03(c)(1)(i), (6); 4-01(b)(4); 4-02(b).

The Committee's treasurer must verify that its disclosure statements contain information about the contributor that is accurate, and that any matchable contributions claimed meet the applicable legal requirements, at the time the periodic contribution is received. Rule 3-08. Thus, the authorization card must direct the contributor to notify the Committee of any change in the information that must be disclosed under the Act. In any event, if the Committee has reason to know that any of this information has or may have changed, the Committee must verify the information, update its records and disclosure statements, and, if necessary, amend previous disclosure statements, accordingly. The Committee must also undertake other affirmative measures to verify that the information subject to the disclosure requirement has not become outdated by the time the periodic contribution is received, in order to: (1) demonstrate that it has used its best efforts to obtain and report complete and accurate information, and (2) ensure that matchable contributions are “reported in full". Administrative Code §3-702(3); 3-703(6); Rule 4-02(a).

2) Date and Amount of Contribution. The date of receipt for each periodic contribution is the date that the funds for the contribution are actually received by the Committee, not the date that the contributor submitted the authorization card. The receipt date must be reported in the appropriate disclosure statement, together with the other information required about the contribution. Rule 3-03(a). See also Administrative Code §3-703(10); Rule 1-04(b), (c)(2).

The gross amount received from the contributor will be subject to the contribution limit applicable under Administrative Code §3-703(1)(f), as adjusted pursuant to §3-703(7), regardless of any fees paid to the Committee's bank or other parties, including credit card companies, for the performance of the services described in the requests. The Committee must report these fees as expenditures.5 See Advisory Opinion No. 1993-1, noted above.

3) Discontinuing the Authorization. Unless the contributor intends to make each periodic contribution, the Committee may not accept and use the contributions. Thus, an essential element of these fund raising plans is the contributor's right to discontinue the authorization at any time. Once the contributor discontinues the authorization, the Committee may not receive further periodic contributions pursuant to the discontinued authorization.

In addition to providing clear notice of the right to discontinue, as described in the requests, the Committee must make the contributor's exercise of this right as simple as possible. If an authorization is disputed by the actual holder of the relevant bank or credit card account, no future contributions may be received pursuant to the authorization and all previous contributions so authorized must be refunded by the Committee, regardless of any restriction otherwise provided pursuant to Rule 1-04(c)(2). See Advisory Opinion No. 1993-1, noted above.

4) Recordkeeping. Rule 4-01(b)(2) requires the Committee to maintain a photocopy of a “monetary instrument" for each contribution. Ordinarily, this requires a separate record for each contribution accepted. In this case, however, a completed authorization card containing the contributor's original signature, as described in the requests, will suffice to meet this requirement for all periodic contributions it authorizes. In addition, the Committee must keep a complete record of its affirmative efforts to obtain and report information that is complete and accurate as of the day the periodic contribution is received and that matchable contributions are “reported in full". See Item 1, above.

The Committee must also maintain a copy of the bank or other relevant financial institution record, as described in the requests, that identifies the contributor for each contribution forwarded to it by EFT or via credit card charge. Rule 4-01(a); Advisory Opinion No. 1993-1, noted above. In addition, the Committee must keep records that fully document its handling of disputed authorizations and requests to discontinue authorizations. Rule 4-01(a).

5) Matchable Contributions. To be matchable, a contribution must be made by a natural person who is a resident of the City of New York. Administrative Code §3-702(3); Rule 5-01(d). The Committee must verify that the contribution meets these requirements. The Committee must also verify that the matchable contribution claim is valid, based on all criteria set forth in the Campaign Finance Act and Board rules, including that the bank account or credit card account from which the contribution is debited belongs or is issued to the individual contributor, and not to a business, organization, or other person. Advisory Opinion No. 1993-1, noted above.

If the Committee adheres to the procedures outlined in this advisory opinion, the contributions received pursuant to the authorizations described in the request will meet Program requirements.

NEW YORK CITY CAMPAIGN FINANCE BOARD

1 The requests were made by Craig Kaplan, counsel to the Committee, in letters to Nicole Gordon, both dated April 21, 1994.

2 This opinion is predicated on the hypothetical facts presented in the requests. Any application of this opinion will of course depend on the actual facts of a given case, and even minor changes in the hypothetical facts presented could result in a different opinion.

3 The requests state that any contributor who requests to discontinue the periodic contributions will have that request honored immediately. The Committee will notify the appropriate financial institution to effectuate the termination of the periodic EFT or credit card charge, as the case may be. The Committee will also refund contributions received through the EFT or credit card program in the event the contributor so requests.

4 The Federal Election Commission has ruled that such contributions are permissible under federal law. See Federal Election Commission Advisory Opinions No. 1989-26 (December 1, 1989)(contributor authorized periodic contributions via automatic funds transfers from the contributor's bank account) and No. 1991-1 (March 18, 1991)(contributor authorized periodic contributions via credit card charge).

The Board has previously discussed the Program requirements applicable to credit card contributions authorized by telephone calls to a campaign's “800" number. Advisory Opinion No. 1993-1 (February 17, 1993). That opinion is distinguishable from the hypothetical facts presented here because each call described in Advisory Opinion No. 1993-1 authorized only one contribution, not a series over time, and because authorization by telephone call raises special concerns about verifying contributions that are not at issue here.

The issue whether contributions raised in the manner described in the requests comply with the requirements of Article 14 of the New York State Election Law is beyond the scope of this Advisory Opinion. In particular, the Board notes that the State Board of Elections has not addressed by formal opinion whether contributors may make and political committees may accept contributions by electronic funds transfers. To the extent these contributions are not permitted under State or other applicable law, they are not permitted under the New York City Campaign Finance Act. New York City Administrative Code §3-714.

5 The amounts paid must be at the fair market value for the services provided; otherwise these services will be in-kind contributions to the Committee. See Rule 1-04(g)(2), (3).