Request for Decision Concerning Bank's Compliance With Collection Procedures

B-201557: Sep 28, 1981

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A decision was requested as to whether the Department of the Treasury may return to a California bank a sum which was charged to the bank's Federal Reserve account pursuant to Treasury regulations. The bank entered a three party agreement with a depositor and the Treasury for direct deposit of recurring monthly Federal benefit payments. The depositor died, but the next month's payment was made before the account could be closed. The bank ended the agreement with the Treasury, sent a refund of the erroneous payment, and debited the account of the deceased depositor. The Treasury returned the check to the bank, stating that the date of death entitled the depositor to the payment. The bank accepted the payment, credited the account of the deceased depositor, and subsequently closed that account. The Treasury error was detected, and the bank was asked to make another payment. The bank protested that, since the account had been closed, it could not make the payment and credit the correct account. The Treasury then debited the bank's Federal Reserve account for the sum in question. GAO held that this action by Treasury was inappropriate since the error was not made by the bank, but by the Treasury itself. Therefore, Treasury did not have the right to debit the bank's account. Accordingly, the amount of the debit should be recredited to the bank's Federal Reserve account.