[Code of Federal Regulations]
[Title 31, Volume 2]
[Revised as of July 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR240.6]

[Page 85]
 
                  TITLE 31--MONEY AND FINANCE: TREASURY
 
         CHAPTER II--FISCAL SERVICE, DEPARTMENT OF THE TREASURY
 
PART 240_INDORSEMENT AND PAYMENT OF CHECKS DRAWN ON THE UNITED STATES 
 
Sec.  240.6  Provisional credit; first examination; declination; final 

payment.

    (a) Any credit issued by a Federal Reserve Bank to a financial 
institution shall be a provisional credit until Treasury completes first 
examination of the check, or as provided in paragraph (d) of this 
section.
    (b) Treasury shall have the right as a drawee to complete first 
examination of checks presented for payment, to reconcile checks, and, 
when appropriate, to make a declination on any check.
    (c) Treasury will decline payment on a check when first examination 
by Treasury establishes that:
    (1) The check has a material defect or alteration;
    (2) The check bears a forged or unauthorized drawer's signature;
    (3) Treasury has already received presentment of, and made payment 
on, a substitute check, electronic check or original check relating to 
the check being presented, such that Treasury is being requested to make 
payment on a check it has already paid;
    (4) In the case of an electronic check, Treasury cannot determine 
whether the check contains a material defect or alteration without 
examining the original check or a better quality image of the check and 
Treasury is on notice of a question of law or fact about whether the 
check is properly payable; or
    (5) In the case of a substitute check, Treasury has a warranty or 
indemnity claim arising under 12 CFR 229.52 or 229.53.
    (d) Treasury shall have a reasonable amount of time to complete 
first examination. However, except as provided in paragraph (e) of this 
section, if Treasury has not declined payment on a check within 60 days 
after the check is presented to a Federal Reserve Processing Center for 
payment, Treasury will be deemed to have made final payment on the 
check.
    (e) Notwithstanding the provisions of paragraph (d) of this section, 
in accordance with 31 U.S.C. 3328(a)(2), if, upon presentment for 
payment, Treasury is on notice of a question of law or fact about 
whether a check is properly payable, Treasury may defer final payment 
until the question is settled.
    (f) If a Federal Reserve Bank debits a financial institution's 
reserve account as a result of an erroneous declination, Treasury will 
promptly refund the amount of the payment.