The U.S. Treasury is phasing out the issuance of paper checks under an executive order signed March 25.
Effective Sept. 30, the Treasury will cease to issue paper checks for tax refunds, vendor payments, benefit payments and intergovernmental transfers. The executive order also covers the use of paper checks to pay the federal government, with that change taking effect “as soon as practicable, and to the extent permitted by law.”
The policy change is meant to promote operational efficiency, as well as reduce financial fraud and improper payments. According to the order, the federal government’s use of paper-based payments “imposes unnecessary costs; delays; and risks of fraud, lost payments, theft, and inefficiencies.” The order notes that checks issued by the U.S. Department of Treasury “are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer.”
To comply with the order, all executive departments and agencies must transition to electronic funds transfer (ETF) methods, such as direct deposit and prepaid card accounts.
The Treasury Department must now develop a comprehensive public awareness campaign around the policy change that includes “guidance on accessing and setting up digital payment options.”
The executive order includes exceptions for instances where electronic payment and collection methods are not feasible, such as individuals who do not have access to banking services or electronic payment systems and national security- or law enforcement-related activities where non-ETF transactions are necessary.
Rob Nichols, president and CEO of the American Bankers Association, said in a statement that the organization welcomes the change.
“Despite a continued decline in business and consumer use of checks, check fraud has continued to rise,” Nichols said. “That is why ABA and banks across the country launched the #PracticeSafeChecks campaign last October to educate consumers, including encouraging them to use digital banking options to send money whenever possible. The bottom line: Electronic payments are a much faster, cheaper and safer choice for consumers and the federal government.”