Treasury Tax & Loan Deposits? And "Off-us" Checks

by Roger Snell-Principal, J.D. Carreker and Associates

If you think you have figured out a way to pass float along to customers who present "off-us" checks (checks not drawn on your own institution) for Treasury Tax and Loan deposits, think again.

A recent inquiry was directed to the Financial Management Service Area of the Department of the Treasury and also to the Legal Division of the Federal Reserve concerning their regulations in this matter. This inquiry resulted in discussions between these two entities and a written opinion from the Acting Manager of the Treasury Programs Branch in the Funds Flow division at Treasury.

This response states, in writing, that TT&L accounts are not subject to Regulation CC (12 C.F.R. Part 229). It goes on to explain that the contract established between a depositary institution and the Treasury Department under 31 C.F.R. Part 214 Section 214.6(a)(1) states that:

"?A depositary may at its discretion accept a check drawn on another financial institution, but it does so purely on a voluntary basis and absorbs for its own account any float involved.

Additionally Section 214.6(a)(7) states that:

"?A depositary shall not accept compensation from taxpayers for accepting deposits of Federal taxes and handling them as required by this section."

Thus, if an "off-us" check is used by a customer to make a TT&L deposit, the depositary institution may not put a hold on another account for that customer. It also is not permitted to charge an analysis fee on any basis for the off-us check.

HOW WILL YOU HANDLE THESE DEPOSITS?
One alternative a financial institution might consider is to require any customer presenting an "off-us" check for a TT&L payment to deposit that check into the customer's existing deposit account. Then a check from that account could be drawn to pay for the TT&L deposit. Float could then be assigned according to Regulation CC to the deposit into the existing account.

Another alternative is to refuse acceptance of "off-us" checks for TT&L deposits.

The third alternative, of course, is simply to accept the "off-us" check, knowing your exposure, but knowing your customer.

Whichever way your institution chooses to handle this situation, it would be wise to establish ways to notice which of your customers use "off-us" checks to make their TT&L deposits.

Then decide which of the alternatives you can live with best. Make the tellers and front line aware of the guidelines.

Be consistent! TT&L chargebacks are among the most bothersome of operations' problems. So if exceptions are to be made, make it very clear that the individual making the exception will be held accountable for the complications that will, most certainly, occur.

Copyright © 1990 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 1, No. 8, 8/90