Did you know that ALL U.S. Treasury checks, regardless of the payment type, are subject to check reclamation procedures? That is correct!
According to the Bureau of the Fiscal Service’s Gold Book, reclamation actions may be initiated against a presenting financial institution when a U.S. Treasury Check:
- Is presented for payment over a forged or unauthorized endorsement,
- A benefit check is negotiated after the payee’s death or
- When the check was materially altered.
Check reclamation is a recovery procedure used by the Bureau of the Fiscal Service (Fiscal Service) to obtain refunds (reclamations) from a presenting financial institution for paid U.S. Treasury checks.
Timeframe Fiscal Service must reclaim funds from the presenting institution:
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If the Payee is:
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The Bureau of the Fiscal Service has:
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Deceased
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One year from the date the check was presented for payment.
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Not Deceased
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One year and 180 calendar days from the date the check was presented for payment, providing the payee filed a timely claim.
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A presenting institution will be liable for the principal amount of the check and accrued interest, penalties and administrative fees (if applicable). The presenting institution should be aware that its liability is not contingent upon its ability to collect from prior endorsers. It's their responsibility to pay reclamations timely to avoid the direct debit process that will occur on the 31st calendar day if the reclamation has not been paid or protested, and Fiscal Service will only accept reclamation protests from presenting institutions, not their clients or other correspondents.
All check reclamations are sent to the presenting institution via a Notice of Direct Debit (U.S. Treasury Check Reclamation). This notice will advise the presenting institution of the amount demanded and the reason for the demand; it will also contain instructions for processing the Notice of Direct Debit.
How to Respond to the Notice of Direct Debit
Presenting institutions have 30 calendar days from the date of the Notice of Direct Debit to make full payment or submit a protest to the Fiscal Service to avoid the direct debit on their Federal Reserve master account. The Fiscal Service will automatically process the Direct Debit on the 31st day if no protest has been entered.
However, if the presenting institution protests within 30 days from the date of the Notice of Direct Debit, the direct debit will not occur. If a presenting institution enters a protest after the direct debit has occurred, and the protest is substantiated, the Fiscal Service will refund the presenting institution the amount of the reclamation.
Unacceptable protest examples would include:
- Protests received after 60 calendar days from the reclamation date,
- Protests that include no or insufficient documentation to substantiate the protest,
- Protests that attempt to transfer liability from the presenting institution to a prior endorser and
- Protests from any other entity than the presenting bank to which the reclamation was directed.
To learn more about the U.S. Treasury check reclamation process, check out the Gold Book.
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