A proposed rule to require financial institutions to use the Treasury Check Verification System, or a similar authorized system, to verify Treasury checks would place a significant burden on those institutions, ABA and three banking and credit union associations said this week in a letter to the Treasury Department. Currently, when the Treasury Department or a payment certifying agency puts a “stop payment” on a Treasury check to cancel it, the canceled check may still be negotiated, which leads to a payment over cancellation. Stopped payments amount to approximately $98 million each year, and resolving them also costs the federal government approximately $1.3 million each year, according to the agency.
In their letter, the associations said they support reasonable efforts to improve the TCVS but implementing the proposed mandate would require a significant commitment of resources for financial institutions of all sizes. As an alternative, the groups suggested the department should concentrate efforts to reduce payments on canceled checks within the Federal Reserve Banks, which act on behalf of the Treasury to pay and otherwise process the checks.
“This solution would require that the Federal Reserve Banks upgrade and integrate their own systems into an improved TCVS database, which should include real-time information about canceled Treasury checks,” the associations said. “When a Treasury check is presented to a Federal Reserve Bank for payment, they should be able to flag a canceled check, and act to ensure the expeditious return of the check to the bank of first deposit.”