Bank organizations are pushing the Treasury to stop using paper checks due to fraud concerns.

2025-07-04

Three major banking trade groups have called on the US Treasury to phase out paper checks in favor of electronic payments for government disbursements.

Key Benefits Highlighted

In a joint letter submitted as part of a Treasury request for information related to the Executive Order on Modernising Payments, the Bank Policy Institute, The Clearing House Association, and the Consumer Bankers Association emphasized the advantages of faster adoption of digital payment methods. They cited fraud prevention and quicker access to funds as critical benefits.

Reducing Fraud and Theft

The groups argued that discontinuing paper Treasury checks would help reduce instances of theft and fraud, especially considering the high volume and immediate availability associated with these payments. According to the Federal Reserve, check fraud accounted for approximately 32% of all fraud losses in 2024. Much of this fraud was due to mail theft, which resulted in reported losses of USD 688 million between February and August 2023, based on data from the Financial Crimes Enforcement Network (FinCEN).

Supporting Recipients Who Prefer Checks

Treasury checks are often targeted because of their predictability and the regulatory requirement for funds to be available the day after deposit. While electronic payments offer a faster and more secure alternative, some segments of the population, especially older adults, continue to favor paper checks. One study noted that the likelihood of preferring paper checks increases by about 0.5% with each additional year of age.

Proposed Steps for Treasury

To support the transition to digital payments, the banking associations proposed several steps:

Launching a national education campaign to inform recipients about the benefits of digital payments.
Expanding the use of existing payment platforms like The Clearing House’s EPN network and Early Warning Services’ Zelle-based disbursement tools.
Investing in fraud prevention technologies, including identity verification systems.
Restricting exceptions that allow continued use of checks and working with financial institutions to identify altered or counterfeit items.
Analyzing payment data to better understand why some recipients continue to rely on paper checks.