[Federal Register: January 4, 2010 (Volume 75, Number 1)]
[Proposed Rules]
[Page 95-97]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04ja10-24]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 240
RIN 1510-AB25
Endorsement and Payment of Checks Drawn on the United States
Treasury
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Notice of proposed rulemaking, with request for comment.
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SUMMARY: The Department of the Treasury, Financial Management Service
(FMS), is proposing to amend its regulation governing the endorsement
and payment of checks drawn on the United States Treasury, to provide
that Treasury may direct Federal Reserve Banks to debit a financial
institution's account at the financial institution's servicing Federal
Reserve Bank for all check reclamations that the financial institution
has not protested. Financial institutions will continue to have the
right to file a protest with FMS if they believe a proposed reclamation
is in error.
DATES: Comments on the proposed rule must be received by March 5, 2010.
ADDRESSES: The Financial Management Service (FMS) participates in the
U.S. government's eRulemaking Initiative by publishing rulemaking
information on http://www.regulations.gov. Regulations.gov offers the
public the ability to comment on, search, and view publicly available
rulemaking materials, including comments received on rules.
Comments on this rule, identified by docket FISCAL-FMS-2009-0002,
should only be submitted using the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions on the Web site for submitting comments.
Mail: Larry Phelps, Financial Management Service, 3700
East-West Highway, Room 7-D-24, Hyattsville, Maryland 20782.
The fax and e-mail methods of submitting comments on rules to FMS
have been retired.
Instructions: All submissions received must include the agency name
(``Financial Management Service'') and docket number FISCAL-FMS-2009-
0002 for this rulemaking. In general, comments received will be
published on Regulations.gov without change, including any business or
personal information provided. Comments received, including attachments
and other supporting materials, are part of the public record and
subject to public disclosure. Do not enclose any information in your
comment or supporting materials that you consider confidential or
inappropriate for public disclosure.
You may also inspect and copy this proposed rule at: Treasury
Department Library, Freedom of Information Act (FOIA) Collection, Room
1428, Main Treasury Building, 1500 Pennsylvania Avenue, NW.,
Washington, DC 20220. Before visiting, you must call (202) 622-0990 for
an appointment.
FOR FURTHER INFORMATION CONTACT: Larry Phelps, Management and Program
Analyst, Check Resolution Division, at (202) 874-8263 or larry.phelps@
fms.treas.gov; or William J. Erle, Senior Counsel, at (202) 874-6975 or
william.erle@fms.treas.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Department of the Treasury (Treasury), Financial Management
Service (FMS),\1\ is proposing revisions to its regulation, 31 CFR part
240 (Part 240), governing the endorsement and payment of checks drawn
on the United States Treasury. The rules in Part 240 set forth how
checks may be endorsed, and the remedies available to Treasury when
checks are improperly negotiated, such as a negotiation over a forged
endorsement. Part 240 provides for the allocation of loss between the
Government and endorsers of the check. The regulation also provides
information on how Treasury will collect debts owed by financial
institutions and other endorsers when they fail to pay check
reclamations made by Treasury pursuant to the regulation.
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\1\ FMS is the bureau within Treasury that is charged with
implementing Treasury's authority in this area. The terms Treasury
and FMS are used interchangeably in this proposed rule.
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FMS is proposing to amend Part 240 to provide that Treasury may
direct Federal Reserve Banks to debit a financial institution's account
at the financial institution's servicing Federal Reserve Bank for all
check reclamations for which the financial institution has not
submitted a valid protest with supporting documentation. Financial
institutions will continue to have the right to file a protest with FMS
if they believe a proposed reclamation is in error and are able to
supply supporting documentation.
Under the existing regulation, Treasury sends a ``Request for
Refund (Reclamation)'' to the financial institution that presented the
check being reclaimed. The request advises the
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financial institution of the amount demanded and the reason for the
demand. If the debtor financial institution does not make payment,
Treasury presents follow-up demands by sending monthly statements to
the financial institution and begins to assess interest, penalties and
administrative costs at intervals after the 60th calendar day.
Under the existing regulation, if the reclamation debt is not paid
within 120 calendar days of the reclamation date, Treasury attempts to
collect the debt through administrative offset. If administrative
offset is unsuccessful, Treasury attempts to collect the debt through
Treasury Check Offset (TCO). Finally, if administrative offset and TCO
are unsuccessful, Treasury discharges the debt under 31 CFR 903.5 and
reports the unpaid amount to the IRS. This is a time-consuming process
that unnecessarily burdens both FMS systems and human resources.
FMS intends to expedite and streamline the process of collecting
unpaid reclamations by instructing a financial institution's servicing
Federal Reserve Bank to debit that financial institution's Federal
Reserve account if that financial institution has neither paid nor
filed a valid protest with supporting documentation within 30 days of
the date of the reclamation. FMS will notify the financial institution
of the reclamation by sending a Notice of Direct Debit, which will also
inform the financial institution that, if the reclamation is not paid
by the 30th calendar day from the direct debit notice date, the
financial institution's reserve account will be debited by its
servicing Federal Reserve Bank. FMS will allow, as FMS currently does
for all reclamations, the ability to challenge the debit both before
and after it occurs. The financial institution may protest within the
30 calendar days from the direct debit notice. After the direct debit
occurs, the financial institution has an additional 30 calendar days
from the direct debit date to submit a valid protest with supporting
documentation.
The vast majority of reclamation debts (currently 91 percent) are
already paid by financial institutions within 30 calendar days. The
remaining 9% of reclamations either have protests pending, which means
the debt would not be subject to direct debit, or are for financial
institutions that have ignored repeated notices. In most cases,
directly debiting the financial institution's reserve account would
simply streamline the reclamation and collection processes. FMS
believes this change would result in operational efficiencies for both
Treasury and the financial institutions.
If Treasury is unable to debit a financial institution's reserve
account, the current procedures for assessing interest, penalty and
administrative cost amounts and for attempting to collect the
reclamation debt through administrative offset and TCO would continue
to apply.
II. Procedural Analyses
Request for Comment on Plain Language
Executive Order 12866 requires each agency in the Executive branch
to write regulations that are simple and easy to understand. We invite
comment on how to make the rule clearer. For example, you may wish to
discuss: (1) Whether we have organized the material to suit your needs;
(2) whether the requirements of the rules are clear; or (3) whether
there is something else we could do to make these rules easier to
understand.
Regulatory Planning and Review
The proposed rule does not meet the criteria for a ``significant
regulatory action'' as defined in Executive Order 12866. Therefore, the
regulatory review procedures contained therein do not apply.
Regulatory Flexibility Act Analysis
It is hereby certified that the rule will not have a significant
economic impact on a substantial number of small entities. This rule
would eliminate certain administrative fees and interest and penalty
charges in order to streamline and automate reclamation procedures. The
proposed changes to the regulation related to automating reclamations
should have a minimal economic impact on small financial institutions
and in fact, may reduce some costs for financial institutions affected
by the changes. Accordingly, a regulatory flexibility analysis under
the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) is not required.
FMS invites comments on this determination.
List of Subjects in 31 CFR Part 240
Banks, Banking, Checks, Counterfeit checks, Federal Reserve system,
Forgery, Guarantees.
For the reasons set forth in the preamble, we are amending 31 CFR
part 240 as follows:
PART 240--INDORSEMENT AND PAYMENT OF CHECKS DRAWN ON THE UNITED
STATES TREASURY
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, 3711, 3712; 332 U.S. 234 (1947); 318 U.S. 363
(1942).
2. In Sec. 240.1, add new paragraph (d) to read as follows:
Sec. 204.1 Scope of regulations.
* * * * *
(d) A financial institution's endorsement 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 its Federal Reserve account for the amount of the
reclamation and any accrued interest, penalties and/or administrative
costs in accordance with the provisions of Sec. 240.9.
3. In Sec. 240.9, revise paragraphs (a) and (b)(4)(iii) to read as
follows:
Sec. 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 Sec. 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 calendar days of
the reclamation date, Treasury intends to collect the amount
outstanding by instructing the appropriate Federal Reserve Bank to
debit the account utilized 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 Sec. 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 calendar days of the reclamation date,
Treasury will not instruct the appropriate Federal Reserve Bank to
debit the account utilized 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
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Treasury's records with respect to a reclamation debt and requests to
enter into repayment agreements must be sent in writing to: Department
of the Treasury, Financial Management Service, Check Resolution
Division, Reclamation Branch, Room 700D, P.O. Box 1849, Hyattsville, MD
20788, or to such other address as Treasury may publish in the Treasury
Financial Manual, which can be found at http://www.fms.treas.gov.
(3) If the Federal Reserve Bank is unable to debit the financial
institution's reserve account, FMS will assess interest, penalties, and
administrative costs in accordance with Sec. 240.8. Additionally,
Treasury will proceed to collect the reclamation debt through offset in
accordance with Sec. 240.10 and Treasury Check Offset in accordance
with Sec. 240.11.
(4) If Treasury determines that 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) * * *
(4) * * *
(iii) If the Director, Check Resolution Division, or an authorized
designee, finds, by a preponderance of the evidence, that the
reclamation debtor is liable for the reclamation debt, Treasury will
notify the reclamation debtor, in writing, of his or her decision. If
the reclamation debtor has not paid the reclamation in full, Treasury
will direct the Federal Reserve Bank to debit the financial
institution's reserve account immediately, provided that at least 30
calendar days have passed from the date of the Notice of Direct Debit.
If at least 30 calendar days have not yet passed from the date of the
Notice of Direct Debit, Treasury will direct the Federal Reserve Bank
to debit the financial institution's reserve account on the 30th
calendar day from the date of the Notice of Direct Debit. 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 reserve account, Treasury will proceed to collect
the reclamation debt through offset in accordance with Sec. 240.10 and
Sec. 240.11.
* * * * *
Dated: December 23, 2009.
Richard L. Gregg,
Acting Fiscal Assistant Secretary.
[FR Doc. E9-31166 Filed 12-31-09; 8:45 am]
BILLING CODE 4810-35-P