[Federal Register Volume 60, Number 94 (Tuesday, May 16, 1995)]
[Rules and Regulations]
[Pages 25990-25995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-11984]
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DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 247
RIN 1510-AA44
Regulations Governing FedSelect Checks
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Final rule.
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SUMMARY: The Financial Management Service, U.S. Department of the
Treasury, is issuing a final rule to govern FedSelect checks, a new
payment instrument for use by Federal agencies in paying Federal
obligations. This final rule sets forth procedural instructions for
using FedSelect checks, and defines the rights and liabilities of the
Federal Government, Federal Reserve Banks, and banks in connection with
FedSelect checks.
EFFECTIVE DATE: June 15, 1995.
FOR FURTHER INFORMATION CONTACT: Gary Garner, Program Analyst, Cash
Management Policy and Planning, 202-874-6751; or Brad Ipema, Principal
Attorney, 202-874-6680.
SUPPLEMENTARY INFORMATION: This portion of the preamble discusses the
basis and purpose of 31 CFR part 247. It also responds to comments on
the Financial Management Service's (FMS) notice of proposed rulemaking
(NPRM) on this subject issued October 21, 1994 (59 FR 53125). A notice
to extend the comment period for the notice of proposed rulemaking to
December 21, 1994 was issued November 28, 1994 (59 FR 60739).
The FMS currently offers Federal agencies two payment mechanisms
for paying Federal obligations. A Federal agency may either request the
issuance of a Treasury check or the initiation of an electronic funds
transfer. However, the FMS is making available to Federal agencies a
third payment option called FedSelect, a new check instrument to be
used with imprest fund transactions and other ``on-demand'' payment
needs. The preferred method of payment is electronic. However,
FedSelect is the FMS's response to customer needs for a new paper
instrument and is to be used only when checks are deemed appropriate
and consistent with FMS policy as contained in 31 CFR part 206.
General Comments and Responses on the NPRM
The Department received eight written comments on the NPRM from
Federal agency officials and the financial community. One organization
expressed concern that the Government proposes direct competition to
the current third party draft industry. The Report of the National
Performance Review (NPR), September 1993, FM08, stated that since third
party drafts are like checks, agencies essentially pay someone else to
have a bank account for them. It was recommended that the Secretary of
the Treasury eliminate the use of third party drafts and allow the use
of commercial checking accounts. FedSelect grew out of this NPR
recommendation, with an FMS desire to offer an alternative to third
party drafts and improve customer services.
Several questions were raised regarding the operation of FedSelect.
One organization and one bank wanted to know whether existing Federal
Reserve bank routing numbers will be utilized on FedSelect checks.
FedSelect checks will be drawn on the Federal Reserve Bank of Chicago
and will bear that Reserve Bank routing number.
One organization requested identification of the types of
transactions for which FedSelect checks will be used. FedSelect checks
potentially may be used to pay all Government financial obligations;
e.g., benefit and vendor payments.
Two organizations wanted to know how many FedSelect checks will be
issued for each type of payment. It is undetermined at this time how
many checks will be issued for each type of payment.
One organization requested to know the types of persons and
entities that will be payees of such instrument. All types of persons
and entities doing business with the Government will be payees of such
instrument.
One organization wanted to know the start-up date of FedSelect. The
start-up date for FedSelect will be July through October 1995.
Two organizations requested that the FMS provide banks with sample
FedSelect checks so that their personnel can become familiar with them.
It will be recommended that area banks be provided sample FedSelect
checks by Federal agencies utilizing FedSelect checks in their
respective locale. This will allow bank personnel to become familiar
with the FedSelect checks.
Several organizations requested that the FMS describe plans to
prevent fraud losses due to counterfeiting, forgery and
[[Page 25991]] alterations. FedSelect checks will be fraud-evident
checks with built-in security features such as:
Chemical-sensitive paper that reveals attempts to alter
checks with solvents and ink eradicators.
Watermark paper that is visible when held to a light
source, and impossible to reproduce with a photocopier or scanner.
Micro-print signature line: Tiny type, visible when viewed
through a magnifying glass, which appears as a dotted line when
reproduced.
One organization recommended that the FMS initiate a nationwide
educational program to lessen the potential for confusion and
facilitate acceptance of FedSelect checks by banks. It will be
recommended that area banks be provided sample FedSelect checks by
Federal agencies utilizing FedSelect checks in their respective locale.
This will allow bank personnel to become familiar with FedSelect
checks. A nationwide educational program will not be provided at this
time.
One organization suggested that the FMS establish a FedSelect
``hotline'' to address banker concerns and/or questions regarding
FedSelect checks. A dedicated telephone number is provided on the face
of each FedSelect check to facilitate verification of FedSelect checks.
One organization recommended that a $5,000 standard dollar limit be
placed on FedSelect checks to minimize potential losses to banks, and
that the amount should be preprinted on the FedSelect check. FedSelect
checks will have a dollar limit of $10,000, which will be preprinted on
the FedSelect check. Federal agencies can request waivers for higher
amounts if their circumstances justify an increase above the $10,000
limit.
Section-by-Section Comments and Responses
Section 247.2
One organization requested changes in the language of this section
for purposes of clarity.
The words ``these regulations'' in Sec. 247.2 are changed to ``this
Part'' and other words are added for clarity. In addition, FedSelect
checks will not be governed by the Uniform Commercial Code (UCC), as
drafted by the National Conference of Commissioners on Uniform State
Laws, but will be governed by the UCC, as adopted by Illinois, and as
amended from time to time.
Section 247.3
One organization recommended that the term ``bank'' be used, as
defined in Regulation J of the Federal Reserve System, 12 CFR 210.2(b),
instead of ``depositary institution'' in order to achieve consistency
with the commercial law governing checks, (Regulation CC of the Federal
Reserve System, 12 CFR part 229; Regulation J of the Federal Reserve
System, 12 CFR part 210 and the UCC). The term ``bank'' is now used
instead of ``depositary institution.'' However, ``bank'' is defined as
it is defined in Regulation CC of the Federal Reserve System, 12 CFR
229.2(e).
In the definition of Reserve Bank, the phrase ``or any branch of a
Federal Reserve Bank'' was deleted and language was added clarifying
that ``Reserve Bank'' is limited to one of the twelve Reserve Banks in
order to conform with the manner of presentment identified in
Regulation CC, 12 CFR 229.36(b). Accordingly, FedSelect checks will not
be considered presented to the paying bank until they are presented to
the paying bank identified by the routing number placed on the
FedSelect check, which is currently the Federal Reserve Bank of
Chicago.
Section 247.4
One organization raised a concern regarding the clarity of the
relationship between the FMS and the Federal Reserve bank upon which
FedSelect checks are drawn. As referenced in Sec. 247.4, the FMS has
established a Memorandum of Understanding (MOU) between the Federal
Reserve Bank of Chicago (Reserve Bank) and the FMS which further
establishes the role and functions of the payor Reserve Bank on
FedSelect checks. Treasury Financial Manual, Volume II, Part 8, Chapter
5000, entitled ``Payment And Processing of FedSelect Checks By Federal
Reserve Banks'' will not be issued as the above referenced MOU provides
sufficient detail. Therefore, reference to that Treasury Financial
Manual chapter is deleted.
One organization suggested replacing the word ``settle'' in
Sec. 247.4(b) with the word ``pay'' for clarity and consistency with
Regulation J of the Federal Reserve System, 12 CFR 210.9. After review
of the cited law, the FMS agrees that the word ``settle'' more
accurately describes the role of the paying bank. Therefore, changes
were made to Sec. 247.4(b) which clarify that the Reserve Bank settles
for items, reserving the right to return the item, after which payment
becomes final.
One organization recommended that language be inserted stating that
Federal Reserve banks shall not be expected to cash FedSelect checks
presented directly to them by the general public. The FMS believes that
this subject is sufficiently covered under Sec. 247.8(a), which
provides for the presentment of FedSelect checks through normal banking
channels.
Section 247.6
One organization questioned the purpose of the ``warranty''
provision in Sec. 247.6(b). The warranty language in Sec. 247.6(b) was
derived from Regulation J of the Federal Reserve System, 12 CFR 210.5,
under which banks warrant good title to an item and warrant that the
item has not been materially altered. Specifically, however, the FMS
inserted the warranty language in Sec. 247.6, which is addressed to
``Banks'' in order to make clear that banks handling FedSelect checks
do so in accordance with commercial law (the UCC, Regulation J of the
Federal Reserve System and Regulation CC of the Federal Reserve System)
as opposed to the rules governing standard Treasury checks (i.e., 31
CFR part 240). Therefore, the warranty language was not taken out.
However, reference to the UCC was removed. As a result, by handling
FedSelect checks, a bank agrees to the provisions of ``this Part,''
which, in accordance with Sec. 247.2, makes clear that FedSelect checks
are governed by the UCC, Regulation J of the Federal Reserve System and
Regulation CC of the Federal Reserve System.
Section 247.8
In reference to the limited payability provisions of Sec. 247.8,
one bank stated that banks will be exposed to greater liability for
losses because banks will invariably accept for deposit checks that are
``stale'' (negotiated more than the number of days stated on the face
of the FedSelect check) and for which they will not receive payment
from the Government. The bank stated further that the practice will
inconvenience the bank's customers as they will have to petition the
Government for reissuance of the check, and the bank will bear the loss
where the bank's customer withdraws the proceeds of the check
immediately and disappears. One organization stated that it understood
the payability of an item to be determined based on the date of deposit
in the bank of first presentment (depositary bank), not the date the
check is presented to the payor Reserve Bank.
In general, the exposure of banks to liability for losses in
connection with FedSelect checks is no greater than a
[[Page 25992]] bank's current liability for losses in connection with
third party drafts in use today by Federal agencies. In addition, the
FMS has decided to limit the payability of all FedSelect checks to 90
days.
At the request of one organization, words in 31 CFR 247.8(d) were
changed as follows: ``refuse to pay'' was changed to ``return unpaid'';
``presented to'' was changed to ``negotiated to''; and ``bank of first
presentment'' was changed to ``depositary bank.'' Therefore, the
Reserve Bank generally will return unpaid a FedSelect check negotiated
to the depositary bank more than 90 days after it was issued. The
periods of payability written on the face of FedSelect checks are
instructions to the Government to return those checks unpaid, if it so
determines. The FMS, after contacting the Federal agency that issued
the FedSelect check, may pay the check even though it was negotiated to
the depositary bank after the period of payability. Therefore, not all
``stale'' FedSelect checks will be returned to the depositary bank.
This procedure is very similar to the manner in which banks may treat
checks more than six months old under the UCC. Section 4-404 of the UCC
provides that a bank is under no obligation to pay a check more than
six months old. However, as discussed in the UCC commentary following
Sec. 4-404, the bank may, after contacting the drawer, decide to pay
the item.
Regarding the bank's increased risk of loss because a customer
might withdraw funds and disappear immediately after a ``stale''
FedSelect check is negotiated, but just before the Reserve Bank has
returned the check, the return of the ``stale'' FedSelect check is no
different than that of the return of a standard commercial check; all
returns must comply with the midnight deadline in the UCC, Sec. 4-301,
and Regulation CC of the Federal Reserve System, 12 CFR 229.30, 229.31.
In addition, where depositary institutions face this risk of doing
business, Regulation CC of the Federal Reserve System, 12 CFR
229.10(c)(1)(iii)(A) makes clear that in order for the requirement of
next day availability to be applied, the check must be deposited in
person by the payee to an employee of the depositary bank, thereby
affording the depositary bank an opportunity to review the FedSelect
check for ``staleness.'' Regulation CC of the Federal Reserve System,
12 CFR 229.13(e), provides that the depositary bank may delay next day
availability when there is reasonable cause to doubt collectibility.
Furthermore, as made clear in Regulation CC of the Federal Reserve
System, 12 CFR 229.19(c)(2)(ii), as well as the official commentary
following that provision, the depositary bank's credit to its customer
may be provisional; the depositary bank may charge back against the
customer's account. Section 4-212(1) of the UCC would govern the
depositary bank's right of recovery of the provisional credit.
The FMS is of the opinion that the words ``more than the number of
days'' in the second sentence of Sec. 247.8(d), which is in reference
to the manner of determining stale-dated items, is sufficiently clear.
Nonetheless, the words ``after the date on which the FedSelect check
was issued'' are added in order to further clarify that FedSelect
checks generally will be returned unpaid if they are negotiated to a
depositary bank more than the number of days stated on the face of the
check after the date the check was issued (more than 90 days after the
date on which the check was issued).
One organization stated that noncash items were no longer handled
by Federal Reserve banks. In response, the third sentence of
Sec. 247.8(d) was changed to state that stale FedSelect checks should
be marked ``void'' on the face of the check and sent to the issuing
agency or the FMS.
Section 247.9
Comments were received from several organizations regarding the
warranty provisions in Sec. 247.9, stating that the warranty provisions
unfairly shifted the burden of loss to banks.
The warranty provisions of Sec. 247.9 were drafted in an attempt to
provide additional protection for public funds. However, after
reviewing the comments arguing that such provisions are unnecessary,
unfair to banks and inconsistent with commercial law (the UCC,
Regulation J of the Federal Reserve System and Regulation CC of the
Federal Reserve System), the FMS has decided to delete this section.
Section 247.10 (Now Section 247.9)
Two banks expressed a concern that a bank will not learn that a
FedSelect check with a stop payment order placed against it is being
returned until two to four days after the funds deposited must be made
available to the customer under Regulation CC of the Federal Reserve
System, thereby placing the depositary bank at significant risk. The
banks argued that the depositary bank is at risk of losing the funds
which must be made available by the next day if the Reserve Bank
returns a ``stopped'' FedSelect check.
The FedSelect proposed rule states that Federal agencies are to
request stop payment orders when the agency has notice that a FedSelect
check has not been received by the payee, or that a FedSelect check is
lost, stolen or destroyed. Stop payment orders protect both the
Government and the payee from loss. In addition, early detection of
potential fraud protects banks from loss.
As discussed under Sec. 247.8 above, while Regulation CC of the
Federal Reserve System requires next day availability for certain
checks, 12 CFR 229.10(c)(1)(iii)(A) makes clear that the check must be
deposited in person by the payee to an employee of the depositary bank,
thereby affording the depositary bank an opportunity to review the
FedSelect check. In addition, Regulation CC, 12 CFR 229.33(a), requires
that the paying bank provide notice of return to the depositary bank
for items of $2,500 or more. If the depositary bank is concerned about
potential loss, it can call the number stated on the face of the
FedSelect check. If the depositary bank receives an indication from the
Reserve Bank or the FMS that a stop payment order might be placed
against a FedSelect check, the depositary bank may delay next day
availability because there is reasonable cause to doubt collectibility
under 12 CFR 229.13(e). In addition, as made clear in Regulation CC of
the Federal Reserve System, 12 CFR 229.19(c)(2)(ii), as well as the
official commentary to that provision, the depositary bank's credit to
its customer may be provisional; the depositary bank may charge back
against the customer's account if a check is returned by reason of a
stop payment order. Section 4-212(1) of the UCC continues to govern the
depositary bank's right of recovery of a provisional credit against the
customer.
The word ``replacement'' has been deleted from the title of
Sec. 247.9 in order to avoid confusion; while agencies may issue
another FedSelect check or other form of payment to fulfill an
obligation, no ``replacement'' FedSelect checks will be issued.
Per the recommendation of one organization, the FMS changed the
words ``refuses payment on'' in the first sentence of Sec. 247.9(c) to
``returns unpaid'' in order to conform with terminology in Regulation J
of the Federal Reserve System, 12 CFR 210.9, and Regulation CC of the
Federal Reserve System, 12 CFR 229.30, which discuss the return of
unpaid items. In addition, the reference to ``Sec. 247.8(c)'' in the
first sentence of Sec. 247.9(c) was changed to Sec. 247.8(d).
[[Page 25993]]
One organization was confused regarding the intention of the second
sentence of Sec. 247.10(d). The second sentence of Sec. 247.10(d) was
drafted with the intention of clarifying for Federal agencies using the
services of FedSelect that any obligations for payment are the
responsibility of the issuing agency, not the FMS. Therefore, claims by
payees for any continuing obligations should be addressed to the agency
that issued the FedSelect check that was subsequently lost, stolen or
altered.
Section 247.11 (now Section 247.10)
One bank expressed a concern that this section does not
sufficiently detail the circumstances under which the Government would
be liable for fraud claims. While the FMS believes that sufficient
detail is provided, the purpose of this section is to allocate
accountability between the FMS and the issuing agencies.
Section 247.12 (now Section 247.11)
In response to a comment by an organization, currently the Reserve
Bank will not be involved in demanding refunds from presenting banks or
other debtors. However, contrary to the understanding of the
organization, the opportunity for the Reserve Bank to be involved in
such collection efforts is not precluded by Sec. 247.11(b).
Rulemaking Analysis
It has been determined that this regulation is not a significant
regulatory action as defined in E.O. 12866. Therefore, a regulatory
assessment is not required. It is hereby certified that this regulation
will not have a significant economic impact on a substantial number of
small entities. A regulatory flexibility analysis is not required. It
is anticipated that FedSelect checks will not negatively affect a
substantial number of small entities because of the relatively low
volume of checks to be issued in comparison to the use of other payment
mechanisms by Federal agencies.
List of Subjects in 31 CFR Part 247
Banks, Banking, Checks, Federal Reserve System.
Authority and Issuance
For the reasons set out in the preamble, title 31, part 247 of the
Code of Federal Regulations is added to read as follows:
PART 247--REGULATIONS GOVERNING FEDSELECT CHECKS
Sec.
247.1 Applicability.
247.2 Governing law.
247.3 Definitions.
247.4 Federal Reserve Banks.
247.5 Federal agencies and termination of services.
247.6 Banks.
247.7 Certification and internal agency control.
247.8 Presentment.
247.9 Notice, non-receipt, theft, loss or destruction; late
presentment.
247.10 Losses and accountability.
247.11 Debt collection.
247.12 Funds for losses.
247.13 Additional requirements.
247.14 Waiver of regulations.
247.15 Supplements, amendments or revisions.
Authority: 31 U.S.C. 3321, 3325 and 3327; 12 U.S.C. 391.
Sec. 247.1 Applicability.
The regulations in this part prescribe the rights and liabilities
of the United States, the Federal Reserve Banks, banks, and others on
FedSelect checks. These regulations apply to FedSelect checks issued on
behalf of the United States for payments in connection with United
States obligations. FedSelect checks are issued by Federal agencies on
Federal Reserve Bank check stock. FedSelect checks are drawn on the
payor Federal Reserve Bank in its banking capacity. The drawer of a
FedSelect check is the United States; the drawee is a Federal Reserve
Bank. Therefore, a FedSelect check shall not be deemed to be drawn on
the United States nor shall the Federal Reserve Bank be deemed its
drawer.
Sec. 247.2 Governing law.
Except as otherwise provided by statute or this Part, the
regulations governing checks drawn on the United States or on
designated depositaries of the United States (e.g., 31 CFR parts 235,
240, 245, and 248) are inapplicable to FedSelect checks. As to
definitions and other matters not specifically covered in this part,
FedSelect checks are governed by Regulation J of the Board of Governors
of the Federal Reserve System, 12 CFR part 210 (``Regulation J''),
Regulation CC of the Board of Governors of the Federal Reserve System,
12 CFR part 229 (``Regulation CC''), and to the extent not otherwise
inconsistent with this part, with Regulation J, and with Regulation CC,
FedSelect checks will be governed by the Uniform Commercial Code, as
adopted by Illinois (``UCC''), as all three may from time to time be
revised. Such matters include, but are not limited to, rules regarding
general presentment and transfer warranties, indorsement, and final
payment.
Sec. 247.3 Definitions.
For the purpose of this Part:
Agency means a department, agency, or instrumentality in the
executive branch of the United States Government.
Bank means an entity described in Regulation CC of the Federal
Reserve System, 12 CFR 229.2(e), as may be amended from time to time.
Department means the United States Department of the Treasury.
FedSelect check means a check drawn upon a Reserve Bank with the
designation ``FedSelect'' printed on the check.
Payee means the person to whom a FedSelect check is payable.
Payor Reserve Bank means the Reserve Bank on which a FedSelect
check is drawn.
Presenting bank means a bank which sends a FedSelect check directly
to a Reserve Bank for payment or collection.
Reserve Bank or Federal Reserve Bank means any one of the twelve
Federal Reserve Banks.
Sec. 247.4 Federal Reserve Banks.
(a) Where FedSelect checks are issued on Reserve Bank check stock
and drawn on the payor Reserve Bank in its banking capacity, the payor
Reserve Bank shall perform certain functions as fiscal agent of the
United States in the issuing, processing and final payment of FedSelect
checks. A payor Reserve Bank shall act as fiscal agent of the United
States on FedSelect checks only when authorized to do so by a
Memorandum of Understanding between the Financial Management Service,
U.S. Department of the Treasury (FMS), and the payor Reserve Bank.
(b) As authorized by a Memorandum of Understanding between a payor
Reserve Bank and the FMS and in accordance with this part, the payor
Reserve Bank shall settle with a presenting bank for the amount
specified in a FedSelect check upon presentment of the FedSelect check
through normal banking channels. Each payor Reserve Bank may issue
operating circulars, letters or bulletins not inconsistent with this
part governing details of its handling of payments under this part.
Sec. 247.5 Federal agencies and termination of services.
(a) Agencies may issue FedSelect checks in payment for United
States obligations.
(b) Issuance of a FedSelect check by an agency in payment of an
obligation shall constitute an agreement between the issuing agency and
the FMS. The issuing agency shall adhere to the terms of the agreement,
including those relating to fees for services provided by
[[Page 25994]] the FMS, as expressed in this part and in the Treasury
Financial Manual, Volume I, Part 4, Chapter 3500 (I TFM 4-3500),
entitled ``Issuance Of FedSelect Checks By Federal Agencies.''
(c) In addition to the provisions of this part, agencies issuing
FedSelect checks shall adhere to instructions, contained in I TFM 4-
3500, regarding items such as procedures for opening and closing
FedSelect accounts with the FMS, procedures for the adjustment of
agency FedSelect accounts where losses are the responsibility of the
agency, procedures for the adjustment of agency FedSelect accounts in
cases of termination of FedSelect services by the FMS, and performance
requirements in the issuance of FedSelect checks.
(d) When an agency fails to adhere to the provisions of this part
or to the instructions contained in I TFM 4-3500, the FMS, at its
discretion, may terminate the services of FedSelect checks. The FMS
shall provide the agency with prior notification of the date on which
services will be terminated.
Sec. 247.6 Banks.
(a) A bank's acceptance of a FedSelect check issued pursuant to
this part shall constitute its agreement to the provisions of this
part.
(b) Each bank by its action of handling a FedSelect check shall be
deemed to warrant to the Federal Government that it has handled the
FedSelect check in accordance with the requirements of this part.
Sec. 247.7 Certification and internal agency control.
(a) A FedSelect check is not a check drawn on the United States
Treasury. However, where the drawer of a FedSelect check is the United
States, the requirements and procedures for disbursing and certifying
activities under 31 U.S.C. 3321, 3527 and 3528 apply to agency
accountable officers issuing FedSelect checks.
(b) FedSelect checks shall be drawn by an individual who is duly
authorized by the agency, and shall be certified by a certifying
officer.
(c) When an agency issues a FedSelect check in payment of a United
States obligation, such agency certifies the issuance of the payment
contemporaneous to the issuance of the FedSelect check. Therefore,
where FedSelect checks are issued through an automated system,
certification occurs through the on-line data transfer between the
agency issuing a FedSelect check and the FMS.
(d) Agencies shall ensure that there are proper internal controls
over the issuance of FedSelect checks, including payment authorization,
check issuance, and reconciliations. Payment authorization is the
process by which vouchers or invoices are approved for payment by
individuals designated to do so by the head of the agency, or their
designees. Check issuance is the physical issuance of a FedSelect check
in payment of a duly approved voucher or invoice. Reconciliation is the
process by which amounts authorized for payment are verified against
amounts of checks issued.
Sec. 247.8 Presentment.
(a) Presentment of FedSelect checks must be made to the payor
Reserve Bank. FedSelect checks must be presented through normal banking
channels.
(b) FedSelect checks will have a standard period of payability of
90 days.
(c) FedSelect checks shall bear a pre-printed legend, ``Void After
90 Days.''
(d) When an outstanding FedSelect check reaches its stale-date, a
cancellation indicator will be placed against it and its status
reflected as cancelled due to stale-dating. A payor Reserve Bank will
return unpaid a FedSelect check negotiated to the depositary bank more
than the number of days stated on the FedSelect check after the date on
which the FedSelect check was issued. A FedSelect check which has
reached its stale-date before being negotiated to a depositary bank
should be marked ``void'' on the face of the check and sent to the
issuing agency or the FMS. The issuance of another FedSelect check or
other form of payment, to replace a lost, stolen, or destroyed
FedSelect check must be made in accordance with Sec. 247.9.
Sec. 247.9 Notice, non-receipt, theft, loss or destruction; late
presentment.
(a) If an agency has notice that a FedSelect check is not received
by the payee within a reasonable time after a payment is due, or that a
FedSelect check is lost, stolen or destroyed, the agency must request
to the FMS that a stop payment order be placed on that item. The notice
may be given by telephone or facsimile, but if it is given by
telephone, such notice must be confirmed in writing before another
payment is issued. The notification must contain sufficient information
to identify the account and/or the obligation to which the payment is
related. Payment on a FedSelect check is stopped if the notice of non-
receipt, loss, theft, or destruction is received from the agency at
such time and in such manner as to afford the payor Reserve Bank and
the FMS a reasonable opportunity to act on it prior to final payment,
as provided by applicable law. Once a stop payment order has been
placed against an outstanding FedSelect check, such stop payment order
will not be removed.
(b) The agency that issued the FedSelect check will issue another
FedSelect check to replace a lost, stolen or destroyed FedSelect check,
or other form of payment, at its discretion. Items an agency may
require before issuing another FedSelect check include:
(1) Written confirmation that the original FedSelect check was
lost, stolen, or destroyed;
(2) Confirmation from the FMS that the original FedSelect check is
unpaid;
(3) A determination that recovery of the original FedSelect check
is unlikely; and
(4) An indemnification agreement executed by the payee and/or
indorsee.
(c) If a payor Reserve Bank returns unpaid a FedSelect check solely
as a result of Sec. 247.8(d), the agency that issued the original
FedSelect check may issue, at its discretion, another FedSelect check,
or other form of payment, to a payee or holder upon surrender of the
original FedSelect check and execution of such indemnification
agreement as may be required by the agency.
(d) Upon verification of the existence of a forged or unauthorized
indorsement on a FedSelect check which has been finally paid, the
agency that issued the original FedSelect check may issue, at its
discretion, another FedSelect check or other form of payment to the
person entitled. Disputes as to any continuing obligations for payment
remain between the agency that issued the payment and the payee. Prior
to the issuance of another FedSelect check, the payee or indorsee of
the original FedSelect check may be required to execute an affidavit
asserting that the payee or indorsee was in no way involved in the
fraudulent or unauthorized indorsement of the original FedSelect check,
in addition to any indemnification agreement required by the agency.
(e) In the case of a FedSelect check payable to the order of two or
more persons, the requirements of this section apply to all designated
payees.
Sec. 247.10 Losses and accountability.
(a) Agencies will be accountable for all losses arising out of
agency activity related to the issuance of FedSelect checks. Such
activities include negligence, fraud perpetrated by an employee or
agent of the agency, and fraud perpetrated by a service-provider or
vendor receiving a FedSelect check as payment. [[Page 25995]]
(b) If an agency had notice that a FedSelect check was not received
by the payee within a reasonable time after a payment is due, or that a
FedSelect check is lost, stolen or destroyed, and the agency failed to
request to the FMS that a stop payment order be placed on that item
pursuant to Sec. 247.9(a), the agency will be accountable for any loss
occurring as a result of the failure to request stop payment in a
timely fashion.
(c) Losses caused by the fault or negligence of the FMS will be the
accountability of the FMS. Such losses include failure to adhere to a
request by an agency to place a stop payment order on an item in
accordance with Sec. 247.9(a).
(d) The FMS will be accountable for losses caused by third-parties,
including losses caused by alteration, counterfeit and forgery of the
payee indorsement, unless such losses occur as described in paragraphs
(a) and (b) of this section.
Sec. 247.11 Debt collection.
(a) Agencies are responsible for collection procedures on all
improperly paid items arising under the circumstances described in
paragraphs (a) and (b) of Sec. 247.10. However, excepting cases of
fraud, an agency should write off a debt and refer it to the FMS for
collection if it is not resolved within 90 days after the item was
paid. When the FMS collects on the debt, the funds will be returned to
the agency minus an administrative fee for the collection, in
accordance with rules set forth in I TFM 4-3500. Accountability for a
debt remains with the agency in accordance with Sec. 247.10.
(b) The FMS is responsible for collection procedures on all
improperly paid items arising under the circumstances described in
paragraphs (c) and (d) of Sec. 247.10. With all such items, the FMS
will make an initial demand for refund of the amount of a check payment
to the presenting bank or any other debtor. This demand shall advise
the presenting bank or debtor of the amount demanded and the reason for
the demand. All delinquent debts will be subject to interest, penalties
and administrative fees in accordance with the Federal Claims
Collections Standards. Any discrepancies should be brought to the
attention of the FMS.
Sec. 247.12 Funds for losses.
(a) If collection efforts by the FMS for debts arising under
paragraphs (c) and (d) of Sec. 247.10 are unsuccessful, sources of
funds for the payment of such losses include FMS appropriations, to the
extent available, funds collected from reimbursement fees for services
provided by the FMS pursuant to Sec. 247.5(b), and other available
sources.
(b) Reimbursement fees paid by agencies to the FMS for FedSelect
check services will be retained for payment of uncollectible losses,
consistent with all applicable laws.
Sec. 247.13 Additional requirements.
In any case or any class of cases arising under these regulations,
the FMS or the agency that issued the FedSelect check may require such
additional evidence of loss, improper indorsement or entitlement to a
replacement as may be necessary for the protection of the interests of
the United States.
Sec. 247.14 Waiver of regulations.
The FMS reserves the right to waive any provision(s) of these
regulations in any case or class of cases for the convenience of the
United States or in order to relieve any person(s) of unnecessary
hardship, if such action is not inconsistent with law, does not impair
any existing rights, and the FMS is satisfied that such action will not
subject the United States to any substantial expense or liability.
Sec. 247.15 Supplements, amendments or revisions.
The FMS may, at any time, prescribe supplemental, amendatory, or
revised regulations, or revoke the regulations in this part.
Dated: March 16, 1995.
Russell D. Morris,
Commissioner.
[FR Doc. 95-11984 Filed 5-15-95; 8:45 am]
BILLING CODE 4810-35-P
