[Federal Register Volume 67, Number 101 (Friday, May 24, 2002)]
[Rules and Regulations]
[Pages 36517-36518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13033]



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DEPARTMENT OF THE TREASURY

Fiscal Service

31 CFR Part 240

RIN 1510-AA45


Indorsement and Payment of Checks Drawn on the United States 
Treasury

AGENCY: Financial Management Service, Fiscal Service, Treasury.

ACTION: Interim rule with request for comments.

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SUMMARY: This interim rule amends 31 CFR Part 240, which governs the 
indorsement and payment of checks drawn on the United States Treasury 
(Treasury), by incorporating procedures relating to the implementation 
of the Debt Collection Improvement Act of 1996 (DCIA). In particular, 
this rule describes Treasury Check Offset, a new debt collection tool 
established by the DCIA. The DCIA authorizes the Secretary of the 
Treasury to collect certain debts, owed to the Treasury by financial 
institutions presenting Treasury checks to a Federal Reserve Bank, by 
directing Federal Reserve Banks to withhold credit from such presenting 
banks. This rule also renumbers certain sections and updates various 
addresses provided in 31 CFR Part 240.

DATES: Effective May 24, 2002. Comments will be accepted until June 24, 
2002.

ADDRESSES: All comments concerning this interim rule should be 
addressed to Lester Smalls, Reclamation Branch Manager, Financial 
Processing Division, Financial Management Service, Prince Georges 
Center II Building, 3700 East-West Highway, Room 724-D, Hyattsville, 
Maryland 20782. Comments also may be emailed to: 
[email protected].

FOR FURTHER INFORMATION CONTACT: Lester Smalls, Reclamation Branch 
Manager, Financial Processing Division, at (202) 874-7945; Ronda Kent 
or Randall S. Lewis, Senior Attorneys, at (202) 874-6680.

SUPPLEMENTARY INFORMATION:

Background

    This interim rule revises 31 CFR Part 240 by adding new provisions 
in a new [sect] 240.9 relating to TCO, a debt collection tool 
authorized by the DCIA, Pub. L. 104-134, Title III, [sect] 31001(d)(4), 
codified at 31 U.S.C. 3712(e). The DCIA authorizes the Secretary to 
collect amounts owed to the Treasury by financial institutions 
presenting Treasury checks to the Federal Reserve for payment by the 
United States (``presenting banks''). Under TCO, the Department of the 
Treasury (Department) will direct a Federal Reserve Bank to withhold 
credit from such presenting banks and apply the funds to satisfy a 
presenting bank's debt to the Treasury. In accordance with the DCIA, 
the Department will collect by means of TCO only if reclamation demand 
and protest as described in 31 CFR 240.7 and administrative offset as 
described in 31 CFR 240.8 are unsuccessful. This interim rule is 
unrelated to the Notices of Proposed Rulemaking published on September 
21, 1995 (60 FR 48940) and May 30, 1997 (62 FR 29314).

Regulatory Analyses

Executive Order 12866, Regulatory Planning and Review

    It has been determined that this regulation is not a significant 
regulatory action. This interim rule will not have an annual effect of 
$100 million or more on the economy, and will not adversely affect in a 
material way the economy, productivity, competition, jobs, environment, 
public health or safety, or State, local, or tribal governments or 
communities. Further, this interim rule will not create a serious 
inconsistency or otherwise interfere with an action taken or planned by 
another agency, nor will it materially alter the budgetary effects of 
entitlements, grants, user fees, or loan programs, or the rights or 
obligations of their recipients. This interim rule does not raise novel 
legal or policy issues.

Clarity of Regulations

    Executive Order 12866 and the President's memorandum of June 1, 
1998, require each agency to write all rules in plain language. We 
invite your comments on how to make this interim rule easier to 
understand. For example:
    [sbull] Have we organized the material in this interim rule to suit 
your needs?
    [sbull] Are the requirements in the interim rule clearly stated?
    [sbull] Does the rule contain technical language or jargon that 
isn't clear?
    [sbull] What else could we do to make this interim rule easier to 
understand?
    Please send any comments you have on the clarity of this interim 
rule to the address specified in the ADDRESSES section.

Regulatory Flexibility Act

    Because no notice of proposed rulemaking is required, the 
provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) do 
not apply. Accordingly, a regulatory flexibility analysis is not 
required. The revisions to part 240 in this interim rule incorporate 
statutory changes, and do not create, in and of themselves, a new debt 
collection tool or otherwise create a new limit on the rights of 
affected parties, including small entities. Moreover, the revisions to 
part 240 concern the collection of delinquent debts by means of TCO, 
and are in furtherance of specific authority established by the DCIA. 
In particular, the DCIA provides that, ``by presenting Treasury checks 
for payment a presenting bank is deemed to authorize this offset.'' 31 
U.S.C. 3712(e)(1). Consequently, any economic impact on small entities 
will be the result of specific statutory authority, rather than a 
direct result of this interim rule.

Administrative Procedure Act

    We find good cause for issuing this interim rule without prior 
notice and comment. Under the Administrative Procedure Act, an agency 
is permitted to issue a rule without prior notice and comment when the 
agency for good cause finds that notice and public procedure thereon 
are impracticable, unnecessary or contrary to the public interest. 5 
U.S.C. 553(b)(B). The provisions of the DCIA codified at 31 U.S.C. 
3712(e) authorize the collection of amounts owed by presenting banks by 
means of the withholding of credit from financial institutions 
presenting Treasury checks for ultimate charge to the account of the 
Treasury. This rule merely incorporates the TCO provisions of the DCIA 
into 31 CFR part 240, and clarifies the interaction between the TCO 
provisions and pre-existing provisions relating to reclaiming amounts 
owed to the Treasury by presenting banks and collection of such amounts 
by means of administrative offset. With one exception, this interim 
rule does not substantively amplify the plain language of the DCIA. The 
only substantive revision to 31 CFR part 240 that is not included in 
the TCO provisions of the DCIA is the provision codified at 31 CFR 
240.9(d) which provides that TCO does not apply to claims based on 
reclamations that have been outstanding for more than 10 years. Given 
that this provision limits the application of the TCO provisions of the 
DCIA and, therefore, in itself does not adversely affect presenting 
banks, we find that it is unnecessary to require prior notice and 
comment for that provision. Nevertheless, the public is invited to 
submit comments on the interim rule. Comments received will be

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taken into account before a final rule is issued.
    For the same reasons, it has been determined that a delayed 
effective date is not required pursuant to 5 U.S.C. 553(d)(3).

List of Subjects in 31 CFR Part 240

    Banks, Banking, Checks, Counterfeit checks, Federal Reserve system, 
Forgery, Guarantees.

Authority and Issuance

    For the reasons set out in the preamble, 31 CFR Part 240 is amended 
as follows.

PART 240--INDORSEMENT AND PAYMENT OF CHECKS DRAWN ON THE UNITED 
STATES TREASURY

    1. The authority citation for part 240 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 12 U.S.C. 391; 31 U.S.C. 3328, 3331, 
3343, 3711, 3712, 3716, 3717; 332 U.S. 234 (1947); 318 U.S. 363 
(1943).


[sect][sect] 240.9-240.15  [Redesignated as [sect][sect]240.10-240.16]

    2. Sections 240.9-240.15 are redesignated as [sect][sect] 240.10-
240.16.

    3. Section 240.7 is amended by revising paragraphs (a)(1), (b), and 
(c)(1) to read as follows:
    (a) * * *
    (1) That Treasury intends to collect the debt through 
administrative offset in accordance with [sect] 240.8 if the 
reclamation is not paid within 120 days of the reclamation date, and if 
administrative offset is unsuccessful, that Treasury intends to collect 
the debt through Treasury Check Offset in accordance with [sect] 240.9; 
* * *
    (b) Requests for an appointment to inspect and copy Treasury's 
records with respect to a reclamation and requests to enter into 
repayment agreements should be sent in writing to: Department of the 
Treasury, Financial Management Service, Financial Processing Division, 
Reclamation Branch, Room 700-D, P.O. Box 1849, Hyattsville, MD 20788.
    (c)(1) If a presenting bank wishes to contest its liability for the 
principal amount demanded, it shall send a protest, i.e., a written 
statement and copies of all documentary evidence (e.g., affidavits, 
account agreements, signature cards) and other written information 
raising a question of law or fact which, if resolved in the presenting 
bank's favor, would show that the presenting bank is not liable, to: 
Department of the Treasury, Financial Management Service, Financial 
Processing Division, Reclamation Branch, Room 700-D, P.O. Box 1849, 
Hyattsville, MD 20788. The Director, Financial Processing Division, who 
has supervisory authority over the Reclamation Branch, or his/her 
authorized subordinate, shall consider and decide any protest properly 
submitted under this paragraph. Neither the Director, Financial 
Processing Division, nor any of his/her subordinates, shall have any 
involvement in the process of making findings or demands under [sect] 
240.6(a). In order to be considered, and to be timely, a protest must 
be received not later than 90 days after the reclamation date. Treasury 
will refrain from collection in accordance with [sect] 240.8 or [sect] 
240.9 while a timely protest is being considered. Unresolved protested 
items will be appropriately annotated on the monthly summary of debt 
statement.
* * * * *

    4. Section 240.8(c) is revised to read as follows:


[sect] 240.8  Offset.

* * * * *
    (c) If Treasury is unable to collect an amount owed by use of the 
offset described in paragraph (a) of this section, Treasury shall take 
such action against the presenting bank as may be necessary to protect 
the interests of the United States, including Treasury Check Offset in 
accordance with [sect] 240.9 or referral to the Department of Justice.
* * * * *

    5. New [sect] 240.9 is added to read as follows:


[sect] 240.9  Treasury Check Offset.

    (a) If Treasury is unable to effect collection pursuant to [sect] 
240.7 or [sect] 240.8 of this part, it will collect the principal 
amount of the reclamation, accrued interest, penalty, and 
administrative costs through Treasury Check Offset. Treasury Check 
Offset occurs when, at the direction of Treasury, a Federal Reserve 
Bank withholds, that is, offsets, credit from a presenting bank (e.g., 
a financial institution presenting a Treasury check for ultimate charge 
to the account of the United States Treasury). The amount of credit 
offset is applied to the principal amount of the reclamation, accrued 
interest, penalties, and administrative costs owed by the presenting 
bank. As provided by the provisions of 31 U.S.C. 3712(e), 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 principal amount of the 
reclamation and accrued interest, penalties, and administrative costs 
thereon, or that a presenting bank was not liable for the amount of the 
reclamation, Treasury will promptly refund to the presenting bank the 
amount of its payment. 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 presented for payment 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.

    6. Redesignated [sect] 240.13(a)(2)(ii) is revised to read as 
follows:


[sect] 240.13  Checks issued to incompetent payees.

    (a) * * *
    (2) * * *
    (ii) Was issued in payment of principal or interest on U.S. 
securities, it shall be forwarded to the Bureau of the Public Debt, 
Division of Customer Service, P.O. Box 426, Parkersburg, WV 26106.
* * * * *

    Dated: May 16, 2002.
Richard L. Gregg,
Commissioner.
[FR Doc. 02-13033 Filed 5-23-02; 8:45 am]
BILLING CODE 4810-35-P