I. BACKGROUND
Federal law has established limits on the period of time that treasury checks are negotiable. Banks should train their tellers and educate their customers on the requirements.
II. PROVISIONS OF LAW
The Competitive Equality Banking Act of 1987 (CEBA) established a limit on how long banks may honor federal checks such as social security checks, tax refund checks and government and military payroll checks. Beginning October 1, 1989, U.S. treasury checks will be negotiable for only one year after the date on which they were issued. Under previous law, treasury checks were negotiable regardless of when the check was issued and could be paid “at any time.”
The amended law allows banks to honor any treasury check issued prior to October 1, 1989 “regardless of when the check was issued,” but must be negotiated before October 1, 1990. However, checks written after October 1, 1989, will state “void after one year”. If these checks are not cashed within 12 months from the date of issuance, banks will not be able to accept them. Thus, beginning October 1, 1990, banks should not cash treasury checks which are more than one year old.
A customer does not lose entitlement to payment by failure to cash the check within 12 months from the date of issuance; however, failure to cash the check within the required time period renders the check void and requires the customer to contact the issuing federal agency to have a new check issued.
The law also significantly limits the time period within which the Treasury may recover funds that have been paid over a forged or unauthorized endorsement from the previous six year period to a one year period. The law gives the Treasury Department 18 months from the date the check is paid by the Treasury to begin an action for recovery of funds if there has been a claim of forgery or unauthorized endorsement filed by the payee.
III. CONCLUSION
Appropriate bank personnel should be made aware of these provisions as losses may be incurred without adequate verification of dates on treasury checks in the future.