Treasury seeks input on phase-out of federal paper checks

Bloomberg News

The Treasury Department Friday sought public feedback on its planned elimination of most paper checks as part of a government-wide shift to electronic payments.

The move comes as part of a March executive order that mandates a government-wide shift from paper checks to electronic payments by September 30, 2025. The order also directs the Treasury to conduct a public awareness campaign on the shift and address financial access for underbanked Americans. Comments on the RFI will be accepted for 30 days following publication in the Federal Register.

"This RFI will help Treasury seek stakeholder input on these directives," a Treasury release said. "Additionally, the E.O. directs Treasury to review and, as appropriate, revise procedures for granting limited exceptions where electronic payment and collection methods are not feasible."

President Donald Trump's executive order bars the federal government from issuing paper checks as payment, saying they "impose unnecessary costs, delays, and risks of fraud, lost payments, theft, and inefficiencies." Banking groups welcomed the move as a viable means of reducing instances of check fraud, which have been growing in recent years.

The Treasury has been working to phase out paper checks for years. The agency created a prepaid debit card program for federal benefits recipients in 2008. That program, known as Direct Express, was managed by Comerica Bank from its inception until last year, when the contract was awarded to BNY. Comerica was the subject of a class action lawsuit and a separate lawsuit from the Consumer Financial Protection Bureau concerning allegations that the bank did little to combat theft and fraud of public benefits through the Direct Express program and possibly violated the terms of its contract by subcontracting some customer service operations overseas. The CFPB under president Trump has dropped its suit against Comerica and the class action lawsuit has settled.

The order specifies that all disbursements — including payments across agencies, government benefits, payments to vendors and tax refunds — are included in the order. Where permissible by law, all payments to the government by citizens — such as fees, fines, taxes and loan payments — must also be paid electronically. 

The administration said it will make exceptions for Americans without electronic payment access, for emergency payments and for certain law enforcement activities that may still require paper checks. 

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Some people may continue to need to receive paper checks, particularly older retired Americans who receive their Social Security benefits through the mail. The Treasury began to phase out paper Social Security checks for new applicants in 2011, but many still receive them. The Social Security Administration estimates that 455,601 beneficiaries received checks in March 2025 out of 68,154,135 total payments — less than 1% of the total.

Check fraud has grown as a concern for the banking industry in recent years; reports indicate that instances of such fraud doubled from 2021 to 2022. Target stores said last year that they would stop accepting paper checks, citing customers' low usage of the payment format. Just last week, a former executive at the Bank of O'Fallon pleaded guilty to a $2 million check-kiting scheme, in which he exploited internal systems and deposited bogus checks to fund personal expenses.

Federal Reserve data shows that while paper checks made up roughly half of noncash payments in the United States in 2003, only 15% of such payments were paid by check in 2012.

Paper checks are also a low volume of Treasury payments. In 2024, the department issued 36 million paper checks — only 3% of the total payment transactions that year, according to research by Adam J. Levitin, the Carmack Waterhouse Professor of Law and Finance at Georgetown Law School.