Rule2023-24039
Indorsement and Payment of Checks Drawn on the United States Treasury
Primary source
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Published
November 1, 2023
Effective
December 1, 2023
Issuing agencies
Treasury DepartmentBureau of the Fiscal Service
Abstract
The Bureau of the Fiscal Service (Fiscal Service) of the Department of the Treasury (Treasury) is amending its regulations that govern the payment of checks drawn on the United States Treasury (Treasury checks). The amendments coincide with the development of Fiscal Service's enhanced check post payment processing system, which will provide Treasury check return information to financial institutions more quickly than today. Financial institutions will receive this information through their existing communication channels with the Federal Reserve Banks (FRBs), generally prior to the expiration of the time periods in which financial institutions must make Treasury check deposits available for withdrawal as prescribed by Regulation CC, Availability of Funds and Collection of Checks. Accordingly, Fiscal Service is amending its regulations so that, with certain exceptions, a financial institution will be liable if it pays a canceled Treasury check, also known as a payment over cancellation (POC), without waiting to receive the return information that would enable the financial institution to know the check has been canceled.
Full Text
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[Federal Register Volume 88, Number 210 (Wednesday, November 1, 2023)]
[Rules and Regulations]
[Pages 74884-74890]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-24039]
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DEPARTMENT OF THE TREASURY
Bureau of the Fiscal Service
31 CFR Part 240
RIN 1530-AA22
Indorsement and Payment of Checks Drawn on the United States
Treasury
AGENCY: Bureau of the Fiscal Service, Treasury.
ACTION: Final rule.
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SUMMARY: The Bureau of the Fiscal Service (Fiscal Service) of the
Department of the Treasury (Treasury) is amending its regulations that
govern the payment of checks drawn on the United States Treasury
(Treasury checks). The amendments coincide with the development of
Fiscal Service's enhanced check post payment processing system, which
will provide Treasury check return information to financial
institutions more quickly than today. Financial institutions will
receive this information through their existing communication channels
with the Federal Reserve Banks (FRBs), generally prior to the
expiration of the time periods in which financial institutions must
make Treasury check deposits available for withdrawal as prescribed by
Regulation CC, Availability of Funds and Collection of Checks.
Accordingly, Fiscal Service is amending its regulations so that, with
certain exceptions, a financial institution will be liable if it pays a
canceled Treasury check, also known as a payment over cancellation
(POC), without waiting to receive the return information that would
enable the financial institution to know the check has been canceled.
DATES: Effective December 1, 2023.
FOR FURTHER INFORMATION CONTACT: Gary Swasey, Director, Post Payment
Division at (215) 816-8230 or <a href="/cdn-cgi/l/email-protection#c2a5a3b0bbecb1b5a3b1a7bb82a4abb1a1a3aeecb6b0a7a3b1b7b0bbeca5adb4"><span class="__cf_email__" data-cfemail="f79096858ed984809684928eb7919e8494969bd9838592968482858ed9909881">[email protected]</span></a>; or
Thomas Kearns, Senior Counsel, at (202) 874-6680 or
<a href="/cdn-cgi/l/email-protection#ec988483818d9fc287898d9e829fac8a859f8f8d80c2989e898d9f999e95c28b839a"><span class="__cf_email__" data-cfemail="1c687473717d6f3277797d6e726f5c7a756f7f7d7032686e797d6f696e65327b736a">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
Currently, when either Fiscal Service or a payment certifying
agency puts a ``stop payment'' (also known as a ``check stop'') on a
Treasury check to cancel it, there is a possibility that the canceled
check may still be paid. Fiscal Service or an agency may put a ``stop
payment'' on a check payment because the payee submitted a check claim
(i.e., claimed that the check was either lost or stolen), because the
certifying agency realized the payment was incorrect, or because it was
otherwise improper. When a canceled or ``stopped'' check is
subsequently paid, this leads to what is known as a payment over
cancellation (POC). POCs are improper payments, which can amount to
$100 million or more each year.
Fiscal Service is developing enhancements to its post payment
processing system that will result in Treasury check return information
being made available to financial institutions sooner than is the case
today. With Fiscal Service's current post payment processing system,
several days often pass before Fiscal Service can provide information
on Treasury check returns that the Federal Reserve Banks (FRBs)
transmit to financial institutions through existing communication
channels. The system enhancements will enable Fiscal Service to provide
check return information to financial institutions through these
existing channels within the time periods prescribed by Regulation CC,
Availability of Funds and Collection of Checks (12 CFR part 229), for
when a financial institution must make funds deposited by Treasury
check available for withdrawal.
Under the current regulations at 31 CFR part 240, a financial
institution generally is not liable for a POC if the institution has
taken ``reasonable efforts'' to ensure the check is authentic.\1\ The
final rule amends the definition of ``reasonable efforts'' found at 31
CFR 240.2 to include a requirement that financial institutions wait for
check return information within the time periods set out by Regulation
CC to help verify that a Treasury check is valid \2\ and authentic. It
is also making conforming changes to 31 CFR part 240 to require that
financial institutions ensure a Treasury check has not been canceled
before making the funds associated with that check available for
withdrawal.
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\1\ ``Authenticity'' is a presentment guaranty, as described by
31 CFR 240.4.
\2\ ``Validity'' and ``valid check'' are defined in the final
rule. See section III.B., below.
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In those instances where a financial institution has taken
reasonable efforts but check return information for a POC on a properly
presented check is not transmitted to the financial institution prior
the funds availability timeframe specified in Regulation CC, the
financial institution would not be liable for releasing the funds
associated with the Treasury check. While Fiscal Service expects this
circumstance to be uncommon, it understands that compliance with
Regulation CC requires the release of the funds within certain
timeframes, and thus under the final rule a financial institution will
not be liable for a POC due to complying with Regulation CC. (Note,
however, that this does not affect the presentment guarantees found in
31 CFR 240.4. As is currently the case, if Fiscal Service declines a
check due to improper presentment and reverses the provisional credit,
the presenting financial institution may still be liable for payment on
the check regardless of Regulation CC's requirements.)
After enhancements to Treasury's post payment processing system
have been implemented and the final rule's requirements become
effective (no sooner than 30 days after publication of the final rule),
the system and rule changes should greatly reduce payment issues
involving Treasury checks and more closely align the treatment of
canceled Treasury checks with industry practices for other canceled
checks in the banking system. The changes will eliminate many POCs,
because they will allow a certifying agency to place a ``true stop'' on
a Treasury check. The system changes will also help reduce instances
where a Treasury check (or an item purporting to be a Treasury check)
may be charged back to the financial institution, because they will
allow the financial institution to verify that the check is not
counterfeit, that the amount has not been altered, that the check is
not stale-dated, and that the check has not been previously negotiated.
For these non-POC circumstances, financial institutions are already
liable for accepting such instruments. While the final rule does not
impact a financial institution's liability in these other
circumstances, Fiscal Service's enhanced post payment processing
[[Page 74885]]
system will help financial institutions avoid the liability.
Furthermore, in those instances where a financial institution does
release the funds associated with a Treasury check prior to receiving
the check return information, that financial institution has an
increased likelihood of being able to recover those funds, because the
return information will be available a short time after the funds are
released (typically no more than a few days, as opposed to up to 18
months later if a reclamation following a check claim were to occur).
In addition to receiving check return information through existing
channels, a financial institution may choose to obtain early notice
regarding the validity and authenticity of Treasury checks by using the
Fiscal Service's Treasury Check Verification System (TCVS). While
financial institutions will not be required to use TCVS, the use of
TCVS may allow financial institutions to catch canceled, duplicate, or
other problematic checks at the time of presentment, as opposed to
after presentment but before the financial institution makes deposited
funds available for withdrawal. TCVS, in conjunction with the enhanced
post payment system, will help financial institutions avoid accepting
duplicate presentations, thus avoiding the associated liability. The
enhancements to Treasury's post payment processing system will not
eliminate acceptance of duplicate presentations entirely, but in those
instances where the subsequent presentation of a Treasury check occurs
after Treasury's records have been updated, TCVS will allow a financial
institution to avoid liability by declining the previously negotiated
Treasury check when presented again. TCVS will similarly be of
assistance to financial institutions in identifying Treasury checks
where the payment amount has been altered, as well as for counterfeit
instruments purporting to be Treasury checks.
II. Response to Comments
During the comment period, Fiscal Service received nine comments on
the notice of proposed rulemaking (NPRM) that was published on February
1, 2023 (88 FR 6674), from individuals and from the banking industry.
The industry commenters supported Fiscal Service's effort to combat
check fraud and to reduce POCs. However, some commenters also expressed
concerns with aspects of the NPRM. As many of these comments addressed
the same or similar issues, below we respond to these comments in the
following categories:
<bullet> Required Use of TCVS,
<bullet> Financial Institution Liability for POCs,
<bullet> Presentment to Non-Financial Institutions,
<bullet> Communicate Check Cancellation Information to Federal
Reserve Banks, and
<bullet> Reduce the Number of Treasury Checks.
A. Required Use of TCVS
A majority of the comments expressed concerns over the proposed
requirement to use TCVS to verify that a Treasury check has not been
canceled for a financial institution to avoid liability for a POC.
Issues raised related to the required use of TCVS included: concerns
regarding what would happen if TCVS is out of service when a financial
institution attempts to verify a Treasury check; the amount of time
required for tellers to manually verify a Treasury check using TCVS;
unavailability of TCVS when Treasury checks are deposited remotely or
by ATM; and the expense and time for financial institutions to
implement technological upgrades or alterations of their systems to
integrate the use of TCVS.
The final rule addresses these concerns by removing the requirement
that a financial institution use TCVS to verify that a Treasury check
has not been canceled to avoid liability for a POC. Instead, to avoid
liability for a POC, and in alignment with comments received, the final
rule allows a financial institution to rely on the check return
information that it already receives through the FRBs' established
channels of communication. Fiscal Service's enhanced post payment
processing system will enable the FRBs to provide check return
information on a properly presented Treasury check to the financial
institution within the timeframes prescribed by Regulation CC for
making funds from a deposited Treasury check available for withdrawal.
The financial institution will not be required to make changes to its
check processing system to receive the check return information from
the FRBs because the information will move through existing
communication channels.
Although the use of TCVS is not required under the final rule, TCVS
will still be available for financial institutions to voluntarily
obtain information regarding the status of a Treasury check. In
addition to giving financial institutions early notice of check
cancellation information, TCVS may assist financial institutions in
reducing the risk of liability for counterfeit instruments and
duplicate presentations of Treasury checks.
B. Financial Institution Liability for POCs
Several commenters expressed concern over the shift in liability to
financial institutions for POCs on Treasury checks. Some of these
concerns were tied to issues arising from the requirement to use TCVS
to avoid liability and, thus, have been resolved because the final rule
does not contain such a requirement (see preceding section 2.A.). The
approach under the final rule to avoid liability for a POC on a
Treasury check instead relies on the FRBs' existing channels of
communication for check return information. The onus is on Fiscal
Service's post payment processing system to provide the check return
information to the FRBs in an accelerated fashion, so that financial
institutions may receive this information from the FRBs within the
timeframes prescribed by Regulation CC for making funds deposited by
Treasury check available for withdrawal.
However, other commenters expressed concerns regarding the shift in
liability for POCs that were not related to the use of TCVS. Fiscal
Service believes that because (1) the enhanced post payment system will
make check return information available on an accelerated basis
compared to today, and (2) financial institutions will receive
information confirming that a Treasury check has been canceled through
existing communication channels, it is not unreasonable for financial
institutions to accept liability for POCs. Further, this shift in
liability will bring the processing of Treasury checks more in
alignment with the processing of checks generally, where the liability
for releasing funds on a canceled non-Treasury check falls on the
financial institution accepting the check. A financial institution may
avoid this liability by not making the funds associated with a Treasury
check available for withdrawal until the financial institution receives
the check return information from an FRB, provided that it receives
notice of a POC prior to the expiration of the Regulation CC funds
availability time periods. Additionally, in those instances where the
return information is unavailable for the financial institution to
verify the status of a properly presented Treasury check before the
financial institution is required to release the funds under Regulation
CC, the financial institution will not be liable if the release of
funds necessary to comply with Regulation CC results in a POC.
[[Page 74886]]
C. Presentment to Non-Financial Institutions
A few commenters raised the issue of how the proposed rule and its
shift in liability for POCs would operate in conjunction with Treasury
checks presented to businesses that cash checks that are not financial
institutions, and the financial institutions that service them. One
commenter pointed out that the NPRM did not address whether the
agreements between these businesses and financial institutions could
continue to address how the liability for POCs would be assigned. The
final rule is silent on that issue and is not intended to alter the
ability of entities entering into such agreements to assign liability
for POCs or otherwise declined checks. To the extent that such
assignment of liability is allowable by other applicable laws and
rules, the final rule does not affect these entities' ability to
negotiate such agreements. However, such agreements will have no impact
on financial institutions' liability due to POCs on Treasury checks
with regard to the Federal Government, as described by the final rule.
To the extent that commenters identified concerns with the
unavailability of TCVS in situations where businesses that are not
financial institutions cash Treasury checks, the final rule addresses
those concerns by removing the requirement to use TCVS to avoid
liability for a POC on a Treasury check.
D. Communicate Check Cancellation Information to Federal Reserve Banks
A few commenters suggested that a better method for addressing
POCs, rather than require the use of TCVS by financial institutions,
would be to communicate the check cancellation information to the FRBs'
check processing system and have the system communicate this
information to financial institutions with the FRBs' check return
information. These commenters pointed out this approach would not
require financial institutions to modify their check processing systems
to accommodate the required use of TCVS, would work with the financial
institutions' current systems, and would entail little or no cost to
the financial institutions.
Consistent with these comments, under the final rule, financial
institutions will continue to receive check return information from the
FRB check processing system's existing channels of communication, as
they currently do. The enhancements to Fiscal Service's post payment
processing system will enable Fiscal Service to communicate check
information to the FRBs more quickly, including the information that a
Treasury check has been canceled. Financial institutions do not need to
make any changes to continue receiving this information from the FRB's
check processing system; the information will simply be available more
rapidly through the channels already in use.
Two commenters suggested that the FRBs should provide this check
cancellation information to the financial institution of first deposit,
rather than the presenting financial institution. This suggestion is
out of scope and nonviable at this time because of the changes that
would be required of the FRBs' check processing system (and possibly of
the financial institutions receiving the cancellation information).
However, Fiscal Service is receptive to considering this possibility at
a later date. In the meantime, although not required, financial
institutions of first deposit can use TCVS to help reduce their risk of
liability for POCs prior to receiving the check return information
through existing communication channels.
E. Reduce the Number of Treasury Checks
One commenter pointed out that an effective method of reducing POCs
is to reduce the number of Treasury checks issued in the first place
and that Fiscal Service should educate payment-issuing agencies
regarding the benefits of electronic payments. Fiscal Service agrees
that reducing the number of checks issued for Federal payments is a
worthy objective. Fiscal Service has long worked with Federal agencies
to reduce the number of checks they issue and to make payments
electronically. For more than a decade, the number of Treasury checks
issued each year has generally declined, from approximately 170 million
in 2012, for example, to approximately 45 million in fiscal year 2023.
Despite the effort to reduce the number of Treasury checks issued,
Treasury checks will continue to be issued for the foreseeable future
(although in reduced numbers). Additionally, although 31 U.S.C. 3332
requires most Federal payments to be made electronically, this
provision does not apply to payments made pursuant to the Internal
Revenue Code. Within these limitations, Fiscal Service fully supports
and actively works to promote the continued decrease in the number of
Treasury checks issued each year.
III. Summary of Proposed Rule Changes
A. Amendment to the Definition of, and Guarantee Regarding,
``Reasonable Efforts''
Part 240 currently includes a presentment guarantee, made by the
guarantor of a check presented to Treasury for payment, that the
guarantor has made all reasonable efforts to ensure that the check is
an authentic Treasury check and not a counterfeit check. The existing
definition of ``reasonable efforts'' focuses on the watermark or other
security features of a security check, to ensure that the Treasury
check is authentic and not counterfeit. The final rule amends the
definition of ``reasonable efforts'' to add the requirement of
verifying not only the Treasury check's authenticity, but also the
check's validity, by requiring a financial institution to receive the
check return information before making funds from a Treasury check
available for withdrawal to ensure that the check has not been
canceled. An exception to this requirement will apply if the check's
return information is not transmitted to the financial institution
prior the appropriate funds availability timeframe specified in
Regulation CC, and the financial institution must make the funds
available for withdrawal in order to remain in compliance with
Regulation CC. In such cases, the financial institution would not be
held liable for releasing the funds associated with the Treasury check
if it results in a POC (unless the financial institution is otherwise
subject to liability under the presentment guarantees found in Sec.
240.4).
A corresponding amendment to the presentment guarantees found in
current regulations would change the guarantee of Treasury check's
authenticity to include a presentment guarantee regarding the check's
validity as well, as described below.
B. Adding a Definition of ``Validity''
Part 240 had not previously included a definition of ``validity.''
The final rule adds a definition of ``validity'' or ``valid check'' as
proposed.
The definition describes a valid Treasury check as a payable
instrument (i.e., not a counterfeit check, as defined in the existing
regulations) that has not been previously negotiated or canceled (i.e.,
meets the criteria for negotiability). A corresponding amendment to the
presentment guarantees would add a new presentment guarantee regarding
the check's validity.
[[Page 74887]]
C. Adding a Definition of ``Cancellation'' or ``Canceled''
Part 240 had not previously defined ``cancellation'' or
``canceled'' with regard to a Treasury check. The final rule adds a
definition of ``cancellation'' or ``canceled'' as proposed.
This definition describes a canceled Treasury check as one that was
once a valid and negotiable instrument, but is no longer due to a
reason other than the Treasury check's negotiation. A Treasury check
may be canceled because it has limited payability (i.e., it is older
than one year past its issuance date, and thus stale-dated), or because
Treasury or the certifying agency has placed a ``stop payment'' (as
defined below) on it.
D. Adding a Definition of ``Stop Payment''
The regulations had not previously defined a ``stop payment'' with
regard to a Treasury check. The final rule adds a definition of this
term as proposed.
This definition describes the situation where Treasury or the
certifying agency has indicated in its systems that an authentic
Treasury check should not be paid. Reasons for issuing a stop payment
on a Treasury check include that the Treasury check has been reported
lost or stolen, it has been issued to a deceased payee, or it was
discovered to be improper. Once a stop payment has been placed on a
Treasury check, the check has been canceled and is no longer a valid
Treasury check (even though it is an authentic Treasury check).
E. Amendment to the Processing of Checks, Declination, and the Reasons
for Refusal
Current Treasury regulations require that an FRB cash a Treasury
check presented to it, except in certain circumstances where the FRB
must instead refuse to pay the Treasury check. The check must be
refused if (1) the check bears a material defect or alteration, (2) the
check was presented more than one year later than the check's date of
issuance, or (3) the FRB has been notified by Treasury, pursuant to
Treasury regulations, that a check was issued to a deceased payee. As
proposed, the final rule adds a fourth circumstance in which an FRB
must refuse to pay a Treasury check: when Treasury has notified the FRB
that a Treasury check is not valid.
As noted above, under this definition, a Treasury check is invalid
if the Treasury check is counterfeit, previously negotiated, or
canceled.
A corresponding amendment to the regulation regarding Treasury's
right of first refusal is the instruction for Treasury to decline
payment of a Treasury check when Treasury is being requested to make
payment on a check that is not valid.
IV. Section-by-Section Analysis
A. Section 240.2--Definitions
The final rule amends the definitions section of part 240, found at
31 CFR 240.2, by removing the lettering within that section (the list
letters (a), (b), (c), etc.), and simply listing the terms in
alphabetical order within the section. This comports with the Office of
the Federal Register's recommendation for a list of definitions found
in regulations, as stated in section 2-13 of the Document Drafting
Handbook. This change also removes the need to re-letter the list of
definitions when new definitions are added to the list.
For the reasons set forth above, the final rule amends Sec. 240.2
to revise the definition of ``reasonable efforts''; add the definition
of ``cancellation'' or ``canceled''; add the definition of ``stop
payment'' or ``check stop'' or ``stop''; and add the definition of
``validity'' or ``valid check.'' Except for these four definitions,
none of the definitions in Sec. 240.2 are being substantively changed.
These other definitions are listed herein only to reflect the removal
of the list lettering schema and a few minor changes made for clarity.
B. Section 240.4--Presentment Guarantees
The final rule amends the presentment guarantees to include a
guarantee that the guarantor has made reasonable efforts to ensure that
the check is an authentic Treasury check and that it is valid at the
time of acceptance.
C. Section 240.6--Provisional Credit; First Examination; Declination;
Final Payment
The final rule amends the reasons that Treasury will decline a
Treasury check upon first examination to include the fact that the
check has been canceled, in addition to when the check has already been
paid.
D. Section 240.12--Processing of Checks
The final rule amends the reasons that an FRB must refuse payment
of a Treasury check to include circumstances where the FRB has been
notified that the Treasury check has been canceled or is otherwise not
valid.
V. Procedural Analysis
Regulatory Planning and Review
The rule does not meet the criteria for a ``significant regulatory
action'' as defined in Executive Order 12866, as amended. Therefore,
the regulatory review procedures contained therein do not apply.
Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that
agencies review proposed and final rules for their potential economic
impact on small entities, including small businesses, and identify
alternatives that may reduce such impact, unless the agency certifies
that the rule will not, if promulgated, have a significant economic
impact on a substantial number of small entities. In the NPRM published
on February 1, 2023, Fiscal Service certified that the final rule will
not have a significant economic impact on a substantial number of small
entities.
Fiscal Service received some comments from the entities in the
banking industry stating that requiring financial institutions to use
TCVS prior to negotiating a Treasury check would place burdens on these
entities by necessitating changes and upgrades to their check
processing systems. In the final rule, the requirement in the NPRM to
use TCVS has been eliminated. Instead, financial institutions will
receive check return information for a properly presented Treasury
check from the FRBs, through existing communication channels. Due to
enhancements to Fiscal Service's post payment processing system, this
check return information typically will be provided to financial
institutions within the time periods for making funds available
prescribed by Regulation CC. In the uncommon instances where a
financial institution does not receive the return information within
the appropriate time period, and must release the funds to comply with
Regulation CC, the financial institution will not be held liable if
that results in a POC (unless the financial institution would otherwise
be subject to liability due to the presentment guarantees in Sec.
240.4).
Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.
1532 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating any rule likely to
result in a Federal mandate that may result in the expenditure by
state, local, and tribal governments, in the aggregate, or by the
[[Page 74888]]
private sector, of $100 million or more in any one year. If a budgetary
impact statement is required, section 205 of the Unfunded Mandates Act
also requires the agency to identify and consider a reasonable number
of regulatory alternatives before promulgating the rule. Fiscal Service
has determined that this final rule will not result in expenditures by
state, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. Accordingly,
we have not prepared a budgetary impact statement or specifically
addressed any regulatory alternatives.
List of Subjects in 31 CFR Part 240
Authenticity, Canceled, Cancellation, Check, Check return, Check
return information, Check stop, Declination, Financial institutions,
Presentment, Presentment guarantees, Processing, Reasonable efforts,
Stop, Treasury check, Valid check, Validity, Verification.
For the reasons set out in the preamble, we amend 31 CFR part 240
as follows:
PART 240--INDORSEMENT AND PAYMENT OF CHECKS DRAWN UPON THE UNITED
STATES TREASURY
0
1. The authority citation for part 240 continues to read as follows:
Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 321, 3327,
3328, 3331, 3334, 3343, 3711, 3712, 3716, 3717; 332 U.S. 234 (1947);
318 U.S. 363 (1943).
0
2. Revise Sec. 240.2 to read as follows:
Sec. 240.2 Definitions.
Administrative offset or offset, for purposes of this part, has the
same meaning as defined in 31 U.S.C. 3701(a)(1) and 31 CFR part 285.
Agency means any agency, department, instrumentality, office,
commission, board, service, or other establishment of the United States
authorized to issue Treasury checks or for which checks drawn on the
United States Treasury are issued.
Cancellation or canceled means that a Treasury check is no longer a
valid instrument, due to the one-year limitation on negotiability and
payment described in Sec. 240.5(a), or the placement of a stop payment
on the check by Treasury or the certifying agency.
Certifying agency means an agency authorizing the issuance of a
payment by a disbursing official in accordance with 31 U.S.C. 3325.
Check or checks means an original check or checks; an electronic
check or checks; or a substitute check or checks.
Check payment means the amount paid to a presenting bank by a
Federal Reserve Bank.
Counterfeit check means a document that purports to be an authentic
check drawn on the United States Treasury, but in fact is not an
authentic check.
Days means calendar days. For purposes of computation, the last day
of the period will be included unless it is a Saturday, Sunday, or
Federal holiday; the first day is not included. For example, if a
reclamation was issued on July 1, the 90-day protest period under Sec.
240.9(b) would begin on July 2. If the 90th day fell on a Saturday,
Sunday, or Federal holiday, the protest would be accepted if received
on the next business day.
Declination means the process by which Treasury refuses to make
final payment on a check, i.e., declines payment, by instructing a
Federal Reserve Bank to reverse its provisional credit to a presenting
bank.
Declination date means the date on which Treasury issues the
declination.
Disbursing official means an official, including an official of the
Department of the Treasury, the Department of Defense, any Government
corporation (as defined in 31 U.S.C. 9101), or any official of the
United States designated by the Secretary of the Treasury, authorized
to disburse public money pursuant to 31 U.S.C. 3321 or another law.
Drawer's signature means the signature of a disbursing official
placed on the front of a Treasury check as the drawer of the check.
Electronic check means an electronic image of a check drawn on the
United States Treasury, together with information describing that
check, that meets the technical requirements for sending electronic
items to a Federal Reserve Bank as set forth in the Federal Reserve
Banks' operating circulars.
Federal Reserve Bank means a Federal Reserve Bank or a branch of a
Federal Reserve Bank.
Federal Reserve Processing Center means a Federal Reserve Bank
center that images Treasury checks for archiving check information and
transmitting such information to Treasury.
Financial institution means:
(1) Any insured bank as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make
application to become an insured bank under section 5 of such Act (12
U.S.C. 1815);
(2) Any mutual savings bank as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) or any bank which is eligible to
make application to become an insured bank under section 5 of such Act
(12 U.S.C. 1815);
(3) Any savings bank as defined in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813) or any bank which is eligible to make
application to become an insured bank under section 5 of such Act (12
U.S.C. 1815);
(4) Any insured credit union as defined in section 101 of the
Federal Credit Union Act (12 U.S.C. 1752) or any credit union which is
eligible to make application to become an insured credit union under
section 201 of such Act (12 U.S.C. 1781);
(5) Any savings association as defined in section 3 of the Federal
Deposit Insurance Act (12 U.S.C. 1813) which is an insured depositary
institution (as defined in such Act) (12 U.S.C. 1811 et seq.) or is
eligible to apply to become an insured depositary institution under the
Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.); and
(6) Any financial institution outside of the United States if it
has been designated by the Secretary of the Treasury as a depositary of
public money and has been permitted to charge checks to the General
Account of the United States Treasury.
First examination means Treasury's initial review of a check that
has been presented for payment. The initial review procedures, which
establish the authenticity and integrity of a check presented to
Treasury for payment, may include reconciliation; retrieval and
inspection of the check or the best available image thereof; and other
procedures Treasury deems appropriate to specific circumstances.
Forged or unauthorized drawer's signature means a drawer's
signature that has been placed on the front of a Treasury check by a
person other than:
(1) A disbursing official; or
(2) A person authorized to sign on behalf of a disbursing official.
Forged or unauthorized indorsement means:
(1) An indorsement of the payee's name by another person who is not
authorized to sign for the payee; or
(2) An indorsement of the payee's name made by another person who
has been authorized by the payee, but who has not indorsed the check in
accordance with Sec. Sec. 240.4 and 240.13 through 240.17; or
(3) An indorsement added by a financial institution where the
financial institution had no authority to supply the indorsement; or
[[Page 74889]]
(4) A check bearing an altered payee name that is indorsed using
the payee name as altered.
Guarantor means a financial institution that presents a check for
payment and any prior indorser(s) of a check.
Master Account means the record of financial rights and obligations
of an account holder and the Federal Reserve Bank with respect to each
other, where opening, intraday, and closing balances are determined.
Material defect or alteration means:
(1) The counterfeiting of a check; or
(2) Any physical change on a check, including, but not limited to,
a change in the amount, date, payee name, or other identifying
information printed on the front or back of the check (but not
including a forged or unauthorized drawer's signature); or
(3) Any forged or unauthorized indorsement appearing on the back of
the check.
Minor means the term minor as defined under applicable State law.
Monthly statement means a statement prepared by Treasury that
includes the following information regarding each outstanding
reclamation:
(1) The reclamation date;
(2) The reclamation number;
(3) Check identifying information; and
(4) The balance due, including interest, penalties, and
administrative costs.
Original check means the first paper check drawn on the United
States Treasury with respect to a particular payment transaction.
Payee means the person that the certifying agency designated to
receive payment pursuant to 31 U.S.C. 3528.
Person means an individual, institution, including a financial
institution, or any other type of entity; the singular includes the
plural.
Presenting bank means:
(1) A financial institution which, either directly or through a
correspondent banking relationship, presents checks to and receives
provisional credit from a Federal Reserve Bank; or
(2) A depositary which is authorized to charge checks directly to
Treasury's General Account and present them to Treasury for payment
through a designated Federal Reserve Bank.
Provisional credit means the initial credit provided to a
presenting bank by a Federal Reserve Bank. Treasury may reverse a
provisional credit until Treasury deems completion of first examination
or final payment made pursuant to Sec. 240.6(d).
Reasonable efforts means, at a minimum:
(1) Confirming the validity of a check by obtaining the check
return information prior to making the funds from the check available
for withdrawal (except when the check return information has not been
provided within the applicable timeframe prescribed by Regulation CC,
and making funds available for withdrawal is necessary to comply with
Regulation CC; however, this exception does not apply if the presenting
bank is otherwise subject to liability due to the presentment
guarantees found in Sec. 240.4); and
(2) Confirming the authenticity of the check such as by verifying
the existence of the Treasury watermark on an original check.
(3) Acceptance of a check by electronic image or other non-physical
means does not impact reasonable efforts requirements. Based upon the
facts at hand, including whether a check is an original check, a
substitute check, or an electronic check, reasonable efforts may
require the verification of other security features.
Reclamation means a demand for the amount of a check for which
Treasury has requested an immediate refund.
Reclamation date means the date on which Treasury issues a
reclamation. Normally, Treasury sends demands to presenting banks or
other indorsers within two business days of the reclamation date.
Reclamation debt means the amount owed as a result of Treasury's
demand for refund of a check payment, and includes interest, penalties
and administrative costs assessed in accordance with Sec. 240.8.
Reclamation debtor means a presenting bank or other indorser of a
check from whom Treasury has demanded a refund in accordance with
Sec. Sec. 240.8 and 240.9. The reclamation debtor does not include a
presenting bank or other indorser who may be liable for a reclamation
debt, but from which Treasury has not demanded a refund.
Recurring benefit payment includes but is not limited to a payment
of money for any Federal Government entitlement program or annuity.
Stop payment means that Treasury or a certifying agency has
indicated that a Treasury check should not be paid and instead should
be canceled. A stop payment could be placed on a Treasury check for
reasons including that the check was reported lost or stolen; the check
was determined to have been issued improperly; the payee was deceased
prior to the issuance of the check; or any other allowable reason.
Substitute check means a paper reproduction of a check drawn on the
United States Treasury that meets the definitional requirements set
forth at 12 CFR 229.2(aaa).
Treasury means the United States Department of the Treasury, or
when authorized, an agent designated by the Secretary of the Treasury
or his or her delegee.
Treasury Check Offset means the collection of an amount owed by a
presenting bank in accordance with 31 U.S.C. 3712(e).
Truncate means to remove a paper check from the forward collection
or return process and send to a recipient, in lieu of such paper check,
a substitute check or an electronic check.
U.S. securities means securities of the United States and
securities of Federal agencies and Government corporations for which
Treasury acts as the transfer agent.
Validity or valid check means an authentic Treasury check that is a
payable instrument and has not been previously negotiated or canceled.
Writing includes electronic communications when specifically
authorized by Treasury in implementing instructions.
0
3. Amend Sec. 240.4 by revising paragraph (d) to read as follows:
Sec. 240.4 Presentment guarantees.
* * * * *
(d) Authenticity and validity. That the guarantors have made all
reasonable efforts to ensure that a check is both an authentic Treasury
check (i.e., it is not a counterfeit check) and a valid Treasury check
(i.e., it has not been previously negotiated or canceled).
* * * * *
0
4. Amend Sec. 240.6 by revising paragraph (c)(3) to read as follows:
Sec. 240.6 Provisional credit; first examination; declination; final
payment.
* * * * *
(c) * * *
(3) Treasury has already received presentment of a substitute
check, electronic check, or original check relating to the check being
presented, such that Treasury is being requested to make payment on a
check it has already paid; or Treasury is being requested to make
payment on a check that is not valid due to a stop payment or other
cancellation.
* * * * *
0
5. Amend Sec. 240.12 by revising paragraphs (a)(1)(ii) and (iii) and
adding paragraph (a)(1)(iv) to read as follows:
Sec. 240.12 Processing of checks.
(a) * * *
[[Page 74890]]
(1) * * *
(ii) A check was issued more than one year prior to the date of
presentment;
(iii) The Federal Reservice Bank has been notified by Treasury, in
accordance with Sec. 240.15(c), that a check was issued to a deceased
payee; or
(iv) The Federal Reserve Bank has been notified by Treasury that a
check is not valid.
* * * * *
David A. Lebryk,
Fiscal Assistant Secretary.
[FR Doc. 2023-24039 Filed 10-31-23; 8:45 am]
BILLING CODE 4810-AS-P
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</html>Indexed from Federal Register on November 1, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.