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The U.S. Department of the Treasury proposed sweeping changes to phase out paper checks for federal payments, a move that could significantly impact how credit unions interact with government disbursements.
The proposal, published in the Federal Register, would require nearly all federal payments to be made electronically, tightening the circumstances under which paper checks can be issued. Treasury said the shift is aimed at reducing fraud, lowering costs and improving efficiency, noting that paper checks are far more likely to be lost, stolen or altered than electronic payments.
For credit unions, the rule could accelerate growth in digital account usage, as more federal benefits, vendor payments and other disbursements move into electronic channels such as ACH, prepaid accounts and digital wallets.
At the same time, the proposal highlighted challenges for underserved and rural communities, areas where many credit unions operate, by acknowledging barriers such as limited financial access, digital literacy and infrastructure gaps.
The rule also expanded the role of federal agencies in approving hardship waivers and introduced new exceptions for certain populations, including those on tribal lands.
Industry stakeholders are expected to weigh in before the June 15 comment deadline, as the proposal could reshape payment flows across the financial system.
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