On November 1, 2023, the Bureau of the Fiscal Service of the United States Department of the Treasury (“Treasury”) issued a final rule amending its regulations governing the payment of checks drawn on the Treasury to shift liability for canceled Treasury checks to financial institutions (“Final Rule”).
Treasury’s proposed rule on this topic would have required financial institutions to use the Treasury Check Verification System (“TCVS”) to determine whether Treasury checks had been canceled prior to sending them for forward collection to avoid liability for the canceled check. In its comment letter, The Clearing House argued that the proposed requirements were inconsistent with existing operational practices for check deposits and presentment, that the Treasury should consider an alternative approach in which the Federal Reserve would return canceled Treasury checks expeditiously, and that use of the TCVS should remain optional.
The Final Rule does not include a requirement to use TCVS to avoid liability for a canceled Treasury check. Instead, financial institutions will be required to confirm the validity of a Treasury 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 … [)]”. The Final Rule, which is effective December 1, 2023, coincides with enhancements to Treasury’s post-payment processing system that will result in faster returns of Treasury checks to financial institutions.
A copy of The Clearing House’s comment letter, which was submitted jointly with Bank Policy Institute, is available here.