Title 31—Money and Finance: Treasury--Volume 1
PART 240—INDORSEMENT AND PAYMENT OF CHECKS DRAWN ON THE UNITED STATES TREASURY
§ 240.1   Scope of regulations.
(a) The regulations in this part prescribe the requirements for indorsement and the conditions for payment of checks drawn on the United States Treasury. These regulations also establish procedures for collection of amounts due the United States Treasury based on claims arising from the breach of presentment guarantees by presenting banks and other indorsers of Treasury checks when checks bearing material defects or alterations or forged disbursing officer (drawer) signatures are presented for payment and are paid.
(b) Standards contained in this regulation supersede existing Federal common law to the extent that they are inconsistent with Federal common law rules relating to counterfeit checks. Under the provisions of this regulation, the risk of loss on certain counterfeit checks is placed on presenting banks and other indorsers unless Treasury fails to timely reclaim on a check payment in accordance with 31 U.S.C. 3712(a) and § 240.8 of this regulation. Treasury will reclaim on counterfeit checks that are deemed paid under § 240.6(d) of this regulation when a presenting bank or other indorser fails to make all reasonable efforts to ensure that a check is an authentic Treasury check.
(c) Nothing in this regulation supercedes the rights or obligations of Treasury or any other person that are set forth in Regulation CC, 12 CFR part 229, with respect to substitute checks, as defined therein.
(d) A financial institution's indorsement or presentment of a U.S. Treasury check shall constitute its agreement to this part. The financial institution hereby authorizes its servicing Federal Reserve Bank to debit the financial institution's Federal Reserve Master Account for the amount of the reclamation and any accrued interest, penalties and/or administrative costs in accordance with the provisions of § 240.9.
§ 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 § 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 § 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 §§ 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
(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 § 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 § 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 § 240.8.
Reclamation debtor means a presenting bank or other indorser of a check from whom Treasury has demanded a refund in accordance with §§ 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.
§ 240.3   Electronic checks and substitute checks.
(a) Legal equivalence of electronic checks. An electronic check for which a presenting bank has provided the guarantees described in § 240.4 is the legal equivalent of an original or substitute check for purposes of this part if the electronic check accurately represents all of the information on the front and back of the check that the presenting bank truncated. If a financial institution presents an electronic check for payment and the check is subject to return, Treasury may effect the return using an electronic check, but this part does not create any right for the presenting bank to return the check to the payee or any other person using an electronic check.
(b) Safekeeping of original checks. Any financial institution that creates a substitute check or electronic check shall prevent unauthorized access to the original or substitute check that was truncated by storing the check, until it is destroyed, in a manner consistent with federal banking agency guidelines for safeguarding customer information.
§ 240.4   Presentment guarantees.
The guarantors of a check presented to the Treasury for payment are deemed to guarantee to the Treasury all of the following:
(a) Indorsements. That all prior indorsements are genuine, whether or not an express guarantee is placed on the check. When the first indorsement has been made by one other than the payee personally, the presenting bank and the indorsers are deemed to guarantee to the Treasury, in addition to other guarantees, that the person who so indorsed had unqualified capacity and authority to indorse the check on behalf of the payee.
(b) Alterations. That the check has not been materially altered.
(c) Drawer's signature. That the guarantors have no knowledge that the signature of the drawer is forged or unauthorized.
(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).
(e) Electronic check. If the check is an electronic check, that—
(1) The check accurately represents all of the information on the front and back of the original or substitute check that was truncated and meets the technical requirements for sending electronic items to a Federal Reserve Bank as set forth in the Federal Reserve Banks' operating circulars;
(2) Treasury will not receive presentment of, or otherwise be charged for, the electronic check, the original check, or a substitute check (or a paper or electronic reproduction of any of the foregoing) such that Treasury will be asked to make payment based on a check it already has paid; and
(3) Treasury's receipt of the electronic check instead of the original or substitute check will not result in the loss of Treasury's ability to determine whether the check contains a material defect or alteration.
(f) Substitute check. If the check is a substitute check, that the guarantors make the warranties set forth at 12 CFR 229.52(a)(1) and (2) and the indemnity set forth at 12 CFR 229.53.
§ 240.5   Limitations on payment; cancellation and distribution of proceeds of checks.
(a) Limitations on payment. (1) Treasury shall not be required to pay any check that is not negotiated to a financial institution within 12 months after the date on which the check was issued.
(2) All checks shall bear a legend, stating “Void After One Year.” The legend is notice to payees and indorsers of a general limitation on the payment of checks. The legend, or the inadvertent lack thereof, does not limit, or otherwise affect, the rights of Treasury under the law.
(b) Cancellation and distribution of proceeds of checks. (1) Any check that has not been paid and remains outstanding for more than 12 months after the issue date will be canceled by Treasury.
(2) The proceeds from checks canceled pursuant to paragraph (b)(1) of this section will be returned to the payment certifying or authorizing agency for ultimate credit to the appropriation or fund account initially charged for the payment.
(3) On a monthly basis, Treasury will provide to each agency that authorizes the issuance of checks a list of those checks issued for such agency which were canceled during the preceding month pursuant to paragraph (b)(1) of this section.
§ 240.6   Provisional credit; first examination; declination; final payment.
(a) Any credit issued by a Federal Reserve Bank to a financial institution shall be a provisional credit until Treasury completes first examination of the check, or as provided in paragraph (d) of this section.
(b) Treasury shall have the right as a drawee to complete first examination of checks presented for payment, to reconcile checks, and, when appropriate, to make a declination on any check.
(c) Treasury will decline payment on a check when first examination by Treasury establishes that:
(1) The check has a material defect or alteration;
(2) The check bears a forged or unauthorized drawer's signature;
(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.
(4) In the case of an electronic check, Treasury cannot determine whether the check contains a material defect or alteration without examining the original check or a better quality image of the check and Treasury is on notice of a question of law or fact about whether the check is properly payable; or
(5) In the case of a substitute check, Treasury has a warranty or indemnity claim arising under 12 CFR 229.52 or 229.53.
(d) Treasury shall have a reasonable amount of time to complete first examination. However, except as provided in paragraph (e) of this section, if Treasury has not declined payment on a check within 60 days after the check is presented to a Federal Reserve Processing Center for payment, Treasury will be deemed to have made final payment on the check.
(e) Notwithstanding the provisions of paragraph (d) of this section, in accordance with 31 U.S.C. 3328(a)(2), if, upon presentment for payment, Treasury is on notice of a question of law or fact about whether a check is properly payable, Treasury may defer final payment until the question is settled.
(f) If a Federal Reserve Bank debits a financial institution's reserve account as a result of an erroneous declination, Treasury will promptly refund the amount of the payment.
§ 240.7   Declination protest.
(a) Who may protest. Only a presenting bank may protest the declination of a check that it has presented to a Federal Reserve Bank for payment.
(b) Basis for protest. Where Treasury, in accordance with § 240.6, has made a declination of a check presented for payment and a Federal Reserve Bank has reversed its provisional credit to the presenting bank, the presenting bank may file a protest challenging the factual basis for such declination. Protests may be filed challenging the following determinations:
(1) Counterfeit checks. The presenting bank may offer evidence that the check is not a counterfeit.
(2) Altered checks. The presenting bank may offer evidence that the check is not altered.
(3) Checks bearing forged or unauthorized drawer's signatures. The presenting bank may offer evidence that the drawer's signature was authentic or was authorized.
(4) Checks bearing a forged or unauthorized indorsement. The presenting bank may offer evidence that an indorsement on the back of the check was not forged or was otherwise authorized in accordance with the requirements of §§ 240.13 through 240.17.
(5) Prior presentment. The presenting bank may offer evidence that the check or a paper or electronic representation thereof has not already been presented to, and paid by, Treasury.
(6) Adequacy of substitute check or electronic check. The presenting bank may offer an original check or a copy of the check that is sufficient to support a determination that the check does not contain a material defect or alteration.
(c) Procedures for filing a protest. A declination protest must be in writing, and must be sent to: Department of the Treasury, Bureau of the Fiscal Service, Branch Manager, Financial Processing Division, Check Reconciliation Branch, Room 700-A, 3700 East-West Highway, Hyattsville, MD 20782, or to such other address as Treasury may publish in the Treasury Financial Manual, which can be found at http://www.fiscal.treasury.gov. Treasury will not consider any protest unless it is received within 90 days from the declination date.
(d) Review of a declination protest. The responsible Fiscal Service Director, or an authorized designee, will make every effort to decide any protest properly submitted under this section within 60 days, and will notify the presenting bank of Treasury's decision. In those cases where it is not possible to render a decision within 60 days, the responsible Fiscal Service Director, or an authorized designee, will notify the presenting bank of the delay. Neither the responsible Fiscal Service Director, nor an authorized designee, will have any involvement in the decision to deny payment of a check under § 240.6 of this part.
(1) If, based on the evidence provided, the responsible Fiscal Service Director, or an authorized designee, finds that the presenting bank has met, by a preponderance of the evidence, the criteria in paragraph (b) of this section, Treasury will reverse its decision to decline payment on the check by directing a Federal Reserve Bank to provide credit in the amount of the check to the presenting bank.
(2) If, based on the evidence provided, the responsible Fiscal Service Director, or an authorized designee, finds that the presenting bank has failed to meet, by a preponderance of the evidence, the criteria in paragraph (b) of this section, the declination will not be reversed.
§ 240.8   Reclamation of amounts of paid checks.
(a) If, after making final payment in accordance with § 240.6, Treasury determines that any guarantor has breached a presentment guarantee listed in § 240.4, the guarantor shall be liable to Treasury for the full amount of the check payment. Treasury may reclaim the amount of the check payment from any such guarantor prior to:
(1) The end of the 1-year period beginning on the date that a check is processed for payment by a Federal Reserve Processing Center; or
(2) The expiration of the 180-day period beginning on the close of the period described in paragraph (a)(1) of this section if a timely claim under 31 U.S.C. 3702 is presented to the certifying agency.
(b) Treasury will not reclaim on a check that bears a forged or unauthorized drawer's signature unless it has evidence that the reclamation debtor had knowledge of the forged or unauthorized drawer's signature.
(c) Treasury will not reclaim on a counterfeit check unless the reclamation debtor has failed to make all reasonable efforts to ensure that a check is an authentic check and not a counterfeit check. Guidance on the key security features found on U.S. Treasury checks is available on the Fiscal Service website at: http://www.fiscal.treasury.gov/checkclaims/check_security_new.pdf. Institutions may contact the Fiscal Service Questioned Documents Branch at (202) 874-7640 for additional information about these security features or to request training.
(d) Reclamation debts are due to be paid upon receipt of the reclamation by the reclamation debtor. Interest, penalties, and administrative costs associated with unpaid balances will accrue as follows:
(1) Interest. Treasury will assess interest on the unpaid principal of the reclamation debt beginning on the 61st day following the reclamation date, and will calculate interest based on the rate published annually by Treasury in accordance with 31 U.S.C. 3717. Interest will continue to accrue until the full amount of the reclamation is paid or Treasury determines that payment is not required.
(2) Penalties. Treasury will assess a penalty beginning on the 91st day following the reclamation date. The penalty will be assessed in accordance with 31 U.S.C. 3717 on the unpaid principal of the reclamation debt, and will continue to accrue until the full amount of the reclamation debt is paid or Treasury determines that payment is not required.
(3) Administrative costs. Treasury will assess administrative costs associated with the unpaid reclamation debt beginning on the 61st day following the reclamation date. Administrative costs will continue to accrue until the full amount of the reclamation debt is paid or Treasury determines that payment is not required.
(e) If Treasury is unable to fully collect a reclamation debt from a reclamation debtor, after pursuing all appropriate means of collection (including, but not limited to, administrative offset in accordance with § 240.10 and Treasury Check Offset in accordance with § 240.11), Treasury will discharge the unpaid reclamation debt. See 31 CFR 903.5 (Discharge of indebtedness; reporting requirements). Treasury or the certifying agency will report the amount of the unpaid reclamation debt to the Internal Revenue Service in accordance with the requirements of 26 U.S.C. 6050P and 26 CFR 1.6050P-1.
§ 240.9   Reclamation procedures; reclamation protests.
(a) Reclamation procedures. (1) Treasury will send a “NOTICE OF DIRECT DEBIT (RECLAMATION)” to the reclamation debtor in accordance with § 240.8(a). This notice will advise the reclamation debtor of the amount demanded and the reason for the demand. Treasury will provide notice to the reclamation debtor that:
(i) If the reclamation debt is not paid within 30 days after the reclamation date, Treasury intends to collect the amount outstanding by instructing the appropriate Federal Reserve Bank to debit on the 31st day the Master Account used by the reclamation debtor. The Federal Reserve Bank will provide advice of the debit to the reclamation debtor;
(ii) The reclamation debtor has an opportunity to inspect and copy Treasury's records with respect to the reclamation debt;
(iii) The reclamation debtor may, by filing a protest in accordance with § 240.9(b), request Treasury to review its decision that the reclamation debtor is liable for the reclamation debt. If such a protest is filed within 30 days after the reclamation date, Treasury will not instruct the appropriate Federal Reserve Bank to debit the Master Account used by the reclamation debtor while the protest is still pending; and
(iv) The reclamation debtor has an opportunity to enter into a written agreement with Treasury for the repayment of the reclamation debt. A request for a repayment agreement must be accompanied by documentary proof that satisfies Treasury that the reclamation debtor is unable to repay the entire amount owed when due.
(2) Requests by a reclamation debtor for an appointment to inspect and copy Treasury's records with respect to a reclamation debt and requests to enter into repayment agreements must be sent in writing to the address provided on the Check Claims Web site at http://www.fiscal.treasury.gov/checkclaims or to such other address as Treasury may publish in the Goldbook: The Check Reclamation Guide, which can be found at http://www.fiscal.treasury.gov.
(3) If Treasury determines a reclamation debt is due and the Federal Reserve Bank is unable to debit the financial institution's Master Account, Fiscal Service will assess interest, penalties, and administrative costs in accordance with § 240.8. Additionally, Treasury will proceed to collect the reclamation debt through offset in accordance with § 240.10 and Treasury Check Offset in accordance with § 240.11.
(4) If Treasury determines a reclamation has been made in error, Treasury will abandon the reclamation. If Treasury already has collected the amount of the reclamation from the reclamation debtor, Treasury will promptly refund to the reclamation debtor the amount of its payment.
(b) Reclamation protests —(1) Who may protest. Only a reclamation debtor may protest a reclamation.
(2) Basis for protest. Where Treasury, in accordance with § 240.8 and paragraph (a) of this section, reclaims the amount of a check payment, the reclamation debtor may file a protest challenging such reclamation. Protests may be filed challenging the following determinations:
(i) Counterfeit checks. The reclamation debtor may offer evidence that it made all reasonable efforts to ensure that a check is authentic. The reclamation debtor must include evidence that the check was examined for a watermark as required under §§ 240.2(bb) and 240.4. Depending on the circumstances, Fiscal Service may require evidence that the reclamation debtor also examined the check for evidence of additional security features as described in guidance provided by Treasury or on Treasury's behalf.
(ii) Altered checks. The reclamation debtor may offer evidence that the check is not altered.
(iii) Checks bearing forged or unauthorized drawer's signatures. The reclamation debtor may offer evidence that the reclamation debtor did not have knowledge of the forged or unauthorized drawer's signature.
(iv) Checks bearing a forged or unauthorized indorsement. The reclamation debtor may offer evidence that the indorsement was not forged or was otherwise authorized in accordance with the requirements of §§ 240.13 through 240.17.
(v) Prior presentment. The presenting bank may offer evidence that the check or a paper or electronic representation thereof has not already been presented to, and paid by, Treasury.
(vi) Adequacy of substitute check or electronic check. The presenting bank may offer an original check or a copy of the check that is sufficient to support a determination that the check does not contain a material defect or alteration.
(3) Procedures for filing a protest. A reclamation protest must be sent in writing to the address provided on the Check Claims Web site at http://www.fiscal.treasury.gov/checkclaims or to such other address as Treasury may publish in the Goldbook: The Check Reclamation Guide, which can be found at http://www.fiscal.treasury.gov.
(i) The reclamation protest must include supporting documentation (including, but not limited to, affidavits, account agreements, and signature cards) for the purpose of establishing that the reclamation debtor is not liable for the reclamation debt.
(ii) Treasury will not consider reclamation protests received more than 60 days after the reclamation date.
(iii) Treasury may, at its discretion, consider information received from a guarantor other than the reclamation debtor. However, in so doing, Treasury does not waive any of its rights under this part, nor does Treasury grant rights to any guarantor that are not otherwise provided in this part.
(4) Review of a reclamation protest. The responsible Fiscal Service Director, or an authorized designee, will make every effort to decide any protest properly submitted under this section within 60 days, and will notify the reclamation debtor of Treasury's decision. In those cases where it is not possible to render a decision within 60 days, the responsible Fiscal Service Director, or an authorized designee, will notify the reclamation debtor of the delay. Neither the responsible Fiscal Service Director, nor an authorized designee, will have any involvement in the process of making determinations under § 240.8(a) of this part or sending a “REQUEST FOR REFUND (CHECK RECLAMATION)” under § 240.9(a) of this part.
(i) Treasury will refrain from the collection activities identified in §§ 240.10 and 240.11 while a timely protest is being considered. However, interest, penalties, and administrative costs will continue to accrue and will be added to the reclamation debt until a final determination on the protest has been made.
(ii) If, based on the evidence provided, the responsible Fiscal Service Director, or an authorized designee, finds that the reclamation debtor has met, by a preponderance of the evidence, the criteria in paragraph (b)(2) of this section, Treasury will notify the reclamation debtor, in writing, of his or her decision to terminate collection and will refund any amounts previously collected for the reclamation debt. Treasury may refund the amount either by applying the amount to another reclamation debt owed by the reclamation debtor in accordance with this part or other applicable law, or by returning the amount to the reclamation debtor.
(iii) If the responsible Fiscal Service Director, or an authorized designee, finds, by a preponderance of the evidence, the reclamation debtor is liable for the reclamation debt, Treasury will notify the reclamation debtor of his or her decision in writing. If the reclamation debtor has not paid the reclamation in full, Treasury will direct the Federal Reserve Bank to debit the financial institution's Master Account immediately, provided at least 30 days have passed after the date of the NOTICE OF DIRECT DEBIT (RECLAMATION). If at least 30 days have not yet passed after the date of the NOTICE OF DIRECT DEBIT (RECLAMATION), Treasury will direct the Federal Reserve Bank to debit the financial institution's Master Account on the 31st day after the date of the NOTICE OF DIRECT DEBIT (RECLAMATION). The Federal Reserve Bank will provide advice of the debit to the reclamation debtor. If the appropriate Federal Reserve Bank is unable to debit a reclamation debtor's Master Account, Treasury will proceed to collect the reclamation debt through offset in accordance with § 240.10 and § 240.11.
(5) Effect of protest decision. The notice provided to the reclamation debtor under paragraph (b)(4)(iii) of this section shall serve as the final agency determination under the Administrative Procedure Act (5 U.S.C. 701, et seq. ). No civil suit may be filed until the reclamation debtor has filed a protest under this section, and Treasury has provided notice of its final determination.
§ 240.10   Offset.
(a) If a reclamation debt remains unpaid for 120 days after the reclamation date, Treasury will refer the reclamation debt, if eligible, to Treasury's centralized offset program (see 31 CFR part 285) or another Federal agency for offset in accordance with 31 U.S.C. 3716. Prior to making a referral for offset, Treasury, in accordance with § 240.9(a)(3), will send at least one monthly statement to the reclamation debtor informing the reclamation debtor that Treasury intends to collect the reclamation debt by administrative offset and Treasury Check Offset.
(b) If a reclamation debtor wishes to make payment on a reclamation debt referred for offset, the reclamation debtor should contact Treasury at the address listed in § 240.9(b) to resolve the debt and avoid offset.
(c) If Treasury is unable to collect a reclamation debt by use of the offset described in paragraph (a) of this section, Treasury shall take such action against the reclamation debtor as may be necessary to protect the interests of the United States, including, but not limited to, Treasury Check Offset in accordance with § 240.11, or referral to the Department of Justice.
(d) If Treasury effects offset under this section and it is later determined that the reclamation debtor already had paid the amount of the reclamation debt, or that a reclamation debtor which had timely filed a protest was not liable for the amount of the reclamation, Treasury will promptly refund to the reclamation debtor the amount of its payment. Treasury may refund the amount either by applying the amount to another reclamation debt owed by the reclamation debtor in accordance with this part or other applicable law, or by returning the amount to the reclamation debtor.
§ 240.11   Treasury Check Offset.
(a) If Treasury is unable to effect collection pursuant to § 240.8, § 240.9, or § 240.10, of this part, Treasury will collect the amount of the reclamation debt through Treasury Check Offset. Treasury Check Offset occurs when, at the direction of the Treasury, a Federal Reserve Bank withholds, that is, offsets, credit from a presenting bank. The amount of credit offset is applied to the reclamation debt owed by the presenting bank. By presenting Treasury checks for payment, the presenting bank is deemed to authorize Treasury Check Offset.
(b) If Treasury effects offset under this section and it is later determined that the presenting bank paid the reclamation debt in full, or that a presenting bank was not liable for the amount of the reclamation debt, Treasury will promptly refund to the presenting bank the amount of its overpayment. Treasury may refund the amount either by applying the amount to another reclamation debt in accordance with this part or other applicable law, or by returning the amount to the presenting bank.
(c) Treasury Check Offset is used for the purpose of collecting debt owed by a presenting bank to the Federal Government. As a consequence, presenting banks shall not be able to use the fact that Treasury checks have not been paid as the basis for a claim against Treasury, a Federal Reserve Bank, or other persons or entities, including payees or other indorsers of checks, for the amount of the credit offset pursuant to 31 U.S.C. 3712(e) and this section.
(d) This section does not apply to a claim based upon a reclamation that has been outstanding for more than 10 years from the date of delinquency.
§ 240.12   Processing of checks.
(a) Federal Reserve Banks. (1) Federal Reserve Banks must cash checks for Government disbursing officials when such checks are drawn by the disbursing officials to their own order, except that payment of such checks must be refused if:
(i) A check bears a material defect or alteration;
(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 § 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.
(2) Federal Reserve Banks are not required to cash checks presented directly to them by the general public.
(3) As a depositary of public funds, each Federal Reserve Bank shall:
(i) Receive checks from its member banks, nonmember clearing banks, or other depositors, when indorsed by such banks or depositors who guarantee all prior indorsements thereon;
(ii) Give immediate provisional credit therefore in accordance with their current Time Schedules and charge the amount of the checks cashed or otherwise received to the General Account of the United States Treasury, subject to first examination and payment by Treasury;
(iii) Forward payment records and requested checks to Treasury; and
(iv) Release the original checks and substitute checks to a designated Regional Records Services Facility upon notification from Treasury.
(4) If a check is to be declined under § 240.6, Treasury will provide the Federal Reserve Bank with notice of declination upon the completion of first examination. Federal Reserve Banks must give immediate credit therefor to Treasury's General Account, thereby reversing the previous charge to the General Account for such check.
(5) Treasury authorizes each Federal Reserve Bank to release a copy of the check to the presenting bank when payment is declined.
(b) Treasury General Account (TGA) designated depositaries outside the United States. (1) Financial institutions outside the United States designated by Treasury as depositaries of public money in accordance with 31 U.S.C. 3303 and permitted to charge checks to the General Account of the United States Treasury in accordance with Treasury implementing instructions shall be governed by the operating instructions contained in the letter of authorization to them from Treasury and are, as presenting banks, subject to the provisions of §§ 240.4, 240.8, and 240.9.
(2) If a check is to be declined under § 240.6, Treasury will provide the presenting bank with notice of declination upon the completion of first examination and will provide the presenting bank with a copy or image of the check. Such presenting bank must give immediate credit therefore to the General Account of the United States Treasury, thereby reversing the previous charge to the Account for such check. Treasury authorizes the designated Federal Reserve Bank to return to such presenting bank the original check when payment is declined in accordance with § 240.5(a) or § 240.15(c).
(3) To ensure complete recovery of the amount due, reclamation refunds require payment in United States dollars with checks drawn on or payable through United States financial institutions located in the United States. Reclamation refunds initiated by financial institutions outside of the United States must be sent through their headquarters or U.S. correspondent financial institution only. The payments should be accompanied by documentation identifying the check that was the subject of the reclamation (such as a copy of the reclamation notice or the current monthly statement). Reclamation refunds shall not be deposited to Treasury's General Account.
(4) Additional information relating to designated depositaries outside the United States may be found in Volume VI, Chapter 2000, of the Treasury Financial Manual, which can be found at http://www.fiscal.treasury.gov.
§ 240.13   Indorsement by payees.
(a) General requirements. Checks shall be indorsed by the named payee or by another on behalf of such named payee as set forth in this part.
(b) Acceptable indorsements. (1) A check is properly indorsed when:
(i) The check is indorsed by the payee in a form recognized by general principles of law and commercial usage for negotiation, transfer or collection of negotiable instruments.
(ii) The check is indorsed by another on behalf of the named payee, and sufficiently indicates that the indorser has indorsed the check on behalf of the payee pursuant to authority expressly conferred by or under law or other regulation. An example would be: “John Jones by Mary Jones.” This example states the minimum indication acceptable. However, §§ 240.14, 240.15, and 240.17(f) specify the addition of an indication in specified situations of the actual capacity in which the person other than the named payee is indorsing.
(iii) Absent a signature, the check is indorsed “for collection” or “for deposit only to the credit of the within named payee or payees.” The presenting bank shall be deemed to guarantee good title to checks without signatures to all subsequent indorsers and to Treasury.
(iv) The check is indorsed by a financial institution under the payee's authorization.
(2) Indorsement of checks by a duly authorized fiduciary or representative. The individual or institution accepting a check from a person other than the named payee is responsible for determining whether such person is authorized and has the capacity to indorse and negotiate the check. Evidence of the basis for such a determination may be required by Treasury in the event of a dispute.
(3) Indorsement of checks by a financial institution under the payee's authorization. When a check is credited by a financial institution to the payee's account under the payee's authorization, the financial institution may use an indorsement substantially as follows: “Credit to the account of the within-named payee in accordance with the payee's instructions. XYZ [Name of financial institution].” A financial institution using this form of indorsement will be deemed to guarantee to all subsequent indorsers and to the Treasury that it is acting as an attorney-in-fact for the payee, under the payee's authorization, and that this authority is currently in force and has neither lapsed nor been revoked either in fact or by the death or incapacity of the payee.
(4) Indorsement of checks drawn in favor of financial institutions. All checks drawn in favor of a financial institution, for credit to the account of a person designating payment so to be made, must be indorsed in the name of the financial institution as payee in the usual manner. However, no check drawn in favor of a financial institution for credit to the account of a payee may be negotiated by the financial institution after the death of the payee.
(c) Unacceptable indorsements. (1) A check is not properly indorsed when the check is signed or otherwise is indorsed by a person without the payee's consent or authorization.
(2) Failure to include the signature of the person signing the check as required by paragraph (b)(1)(ii) of this section will create a rebuttable presumption that the indorsement is a forgery and is unacceptable.
(3) Failure to include sufficient indication of the indorser's authority to act on behalf of the payee as required by paragraph (b)(1)(ii) of this section will create a rebuttable presumption that the indorsing person is not authorized to indorse a check for the payee.
§ 240.14   Checks issued to incompetent payees.
(a) Handling of checks when a guardian or other fiduciary has been appointed. (1) A guardian appointed in accordance with applicable State law, or a fiduciary appointed in accordance with other applicable law, may indorse checks issued for the following classes of payments the right to which under law does not terminate with the death of the payee: payments for the redemption of currencies or for principal and/or interest on U.S. securities; payments for tax refunds; and payments for goods and services.
(i) A guardian or other fiduciary indorsing any such check on behalf of an incompetent payee, must include, as part of the indorsement, an indication of the capacity in which the guardian or fiduciary is indorsing. An example would be: “John Jones by Mary Jones, guardian of John Jones.”
(ii) When a check indorsed in this fashion is presented for payment by a financial institution, it will be paid by Treasury without submission of documentary proof of the authority of the guardian or other fiduciary, with the understanding that evidence of such claimed authority to indorse may be required by Treasury in the event of a dispute.
(2) A guardian or other fiduciary may not indorse a check issued for any class of payment other than one specified in paragraph (a)(1) of this section. When a check other than one specified in paragraph (a)(1) of this section is received by a guardian or other fiduciary, the check must be returned to the certifying agency with information as to the incompetence of the payee and documentary evidence showing the appointment of the guardian or other fiduciary in order that a replacement check, and future checks, may be drawn in favor of the guardian or other fiduciary.
(b) Handling of checks when a guardian or other fiduciary has not been appointed. If a guardian or other fiduciary has not been appointed, all checks issued to an incompetent payee must be returned to the certifying agency for determination as to whether, under applicable law, payment is due and to whom it may be made.
(c) Handling of certain checks by an attorney-in-fact. Notwithstanding paragraph (a)(2) of this section, if a check was issued for a class of payments the right to which under law terminates upon the death of the beneficiary, such as a recurring benefit payment or annuity, the check may be negotiated under a durable special power of attorney or springing durable special power of attorney subject to the restrictions enumerated in § 240.17. After the end of the six-month period provided in §§ 240.17(d) and (e), such checks must be handled in accordance with paragraph (a)(2) of this section.
§ 240.15   Checks issued to deceased payees.
(a) Handling of checks when an executor or administrator has been appointed. (1) An executor or administrator of an estate that has been appointed in accordance with applicable State law may indorse checks issued for the following classes of payments the right to which under law does not terminate with the death of the payee: payments for the redemption of currencies or for principal and/or interest on U.S. securities; payments for tax refunds; and payments for goods and services.
(i) An executor or administrator indorsing any such check must include, as part of the indorsement, an indication of the capacity in which the executor or administrator is indorsing. An example would be: “John Jones by Mary Jones, executor of the estate of John Jones.”
(ii) When a check indorsed in this fashion is presented for payment by a financial institution, it will be paid by Treasury without the submission of documentary proof of the authority of the executor or administrator, with the understanding that evidence of such claimed authority to indorse may be required by Treasury in the event of a dispute.
(2) An executor or administrator of an estate may not indorse a check issued for any class of payment other than one specified in paragraph (a)(1) of this section. Other checks, such as recurring benefit payments and annuity payments, may not be negotiated after the death of the payee. Such checks must be returned to the certifying agency for determination as to whether, under applicable law, payment is due and to whom it may be made.
(b) Handling of checks when an executor or administrator has not been appointed. If an executor or administrator has not been appointed, all checks issued to a deceased payee must be returned to the certifying agency for determination as to whether, under applicable law, payment is due and to whom it may be made.
(c) Handling of checks when a certifying agency learns, after the issuance of a recurring benefit payment check, that the payee died prior to the date of issuance. (1) A recurring benefit payment check, issued after a payee's death, is not payable. As a consequence, when a certifying agency learns that a payee has died, the certifying agency must give immediate notice to Treasury, as prescribed at Volume I, Part 4, Chapter 7000 of the Treasury Financial Manual, which can be found at http://www.fiscal.treasury.gov. Upon receipt of such notice from a certifying agency, Treasury will instruct the Federal Reserve Bank to refuse payment of the check upon presentment. Upon receipt of such instruction from Treasury, the Federal Reserve Bank will make every appropriate effort to intercept the check. If the check is successfully intercepted, the Federal Reserve Bank will refuse payment, and will return the check unpaid to the presenting bank with an annotation that the payee is deceased. If a financial institution learns that a date of death triggering action under this section is erroneous, the financial institution must advise the payee to contact the payment certifying agency.
(2) Nothing in this section shall limit the right of Treasury to institute reclamation proceedings under the provisions of §§ 240.8 and 240.9 with respect to a check issued to a deceased payee that has been negotiated and paid over a forged or unauthorized indorsement.
§ 240.16   Checks issued to minor payees.
(a) Checks in payment of principal and/or interest on U.S. securities that are issued to minors may be indorsed by:
(1) Either parent with whom the minor resides; or
(2) If the minor does not reside with either parent, by the person who furnishes the minor's chief support.
(b) The parent or other person indorsing on behalf of the minor must present with the check the indorser's signed statement giving the minor's age, and stating that the payee either resides with the parent or receives his or her chief support from the person indorsing on the minor's behalf and that the proceeds of the check will be used for the minor's benefit.
§ 240.17   Powers of attorney.
(a) Specific powers of attorney. Any check may be negotiated under a specific power of attorney executed in accordance with applicable State or Federal law after the issuance of the check and describing the check in full (check serial and symbol numbers, date of issue, amount, and name of payee).
(b) General powers of attorney. Checks may be negotiated under a general power of attorney executed, in accordance with applicable State or Federal law, in favor of a person for the following classes of payments:
(1) Payments for the redemption of currencies or for principal and/or interest on U.S. securities;
(2) Payments for tax refunds, but subject to the limitations concerning the mailing of Internal Revenue refund checks contained in 26 CFR 601.506(c); and
(3) Payments for goods and services.
(c) Special powers of attorney. Checks issued for classes of payments other than those specified in paragraph (b) of this section, such as a recurring benefit payment, may be negotiated under a special power of attorney executed in accordance with applicable State or Federal law, which describes the purpose for which the checks are issued, names a person as attorney-in-fact, and recites that the special power of attorney is not given to carry into effect an assignment of the right to receive such payment, either to the attorney-in-fact or to any other person.
(d) Durable special powers of attorney. A durable special power of attorney is a special power of attorney that continues despite the principal's later incompetency, and is created by the principal's use of words explicitly stating such intent. Classes of checks other than those specified in paragraph (b) of this section may be negotiated under a durable special power of attorney executed in accordance with applicable State or Federal law, which describes the purpose for which the checks are issued, names a person as attorney-in-fact, and recites that the special power of attorney is not given to carry into effect an assignment of the right to receive such payment, either to the attorney-in-fact or to any other person. For the purpose of negotiating Treasury checks, durable special powers of attorney are effective only during the six-month period following a determination that the named payee is incompetent.
(e) Springing durable special powers of attorney. A springing durable special power of attorney is similar to a durable power of attorney except that its terms do not become effective until the principal's subsequent incompetence. As with a durable special power of attorney, a springing durable special power of attorney is created by the principal's use of language explicitly stating that its terms become effective at such time as the principal is determined to be incompetent. Classes of checks other than those specified in paragraph (b) of this section may be negotiated under a springing durable special power of attorney executed in accordance with applicable State or Federal law, which describes the purpose for which the checks are issued, names a person as attorney-in-fact, and recites that the springing durable special power of attorney is not given to carry into effect an assignment of the right to receive payment, either to the attorney-in-fact or to any other person. For the purpose of negotiating Treasury checks, springing durable special powers of attorney are effective only during the six-month period following a determination that the named payee is incompetent.
(f) Proof of authority. Checks indorsed by an attorney-in-fact must include, as part of the indorsement, an indication of the capacity in which the attorney-in-fact is indorsing. An example would be: “John Jones by Paul Smith, attorney-in-fact for John Jones.” Such checks when presented for payment by a financial institution, will be paid by Treasury without the submission of documentary proof of the claimed authority, with the understanding that evidence of such claimed authority to indorse may be required by Treasury in the event of a dispute.
(g) Revocation of powers of attorney. Notwithstanding any other law, for purposes of negotiating Treasury checks, all powers of attorney are deemed revoked by the death of the principal and may also be deemed revoked by notice from the principal to the parties known, or reasonably expected, to be acting on the power of attorney.
(h) Optional use forms. Optional use power of attorney forms are listed in the appendix to this part. These forms are available on the Fiscal Service website at: http://www.fiscal.treasury.gov/ checkclaims/ regulations.html.
§ 240.18   Lack of authority to shift liability.
(a) This part neither authorizes nor directs a financial institution to debit the account of any person or to deposit any funds from any account into a suspense account or escrow account or the equivalent. Nothing in this part shall be construed to affect a financial institution's contract with its depositor(s) under authority of state law.
(b) A financial institution's liability under this part is not affected by any action taken by it to recover from any person the amount of the financial institution's liability to the Treasury.
§ 240.19   Reservation of rights.
The Secretary of the Treasury reserves the right, in the Secretary's discretion, to waive any provision(s) of this regulation not otherwise required by law.