VA Goes "All Electronic Payments" for Lien Resolution
***NEWSLETTER***
The long-standing method of issuing checks from a client trust account to disburse settlement funds once made it relatively simple to meet accounting and documentation requirements under State Bar rules. Attorneys could obtain copies of cancelled checks and match them to account statements, creating a straightforward audit trail.
That process is evolving. Electronic funds transfers are now replacing paper drafts across many areas of legal disbursement, and this shift is accelerating.
Veterans Affairs Now Requires Electronic Payment
As of March 2024, when resolving a lien held by the United States Department of Veterans Affairs, paper drafts are no longer accepted. Pursuant to 31 U.S.C. § 3332, all federal payments, other than those made under the Internal Revenue Code, must be issued through Electronic Funds Transfer (EFT). The implementing regulations under 31 C.F.R. Part 208, including § 208.3, reinforce this requirement. Waivers are only granted in limited circumstances by the Secretary of the Treasury.
The change is also aligned with Executive Order 14247, issued in March 2025. This directive, titled Modernizing Payments to and from America’s Bank Account, mandates that all federal agencies transition to electronic disbursements and receipts as soon as practicable.
The VA Finance Policy Manual confirms that EFT is the agency’s primary collection method, consistent with 31 C.F.R. § 206.4, and that the VA will follow guidance from the Treasury Department, Government Accountability Office, and Office of Management and Budget.
The VA Office of General Counsel has further clarified that payment in satisfaction of the VA’s claim must be made electronically. The bill ledger provided in VA lien correspondence contains a direct link to their electronic payment portal, which is now the exclusive method for submitting payment.
What This Means for Plaintiff Firms
Once a VA lien has been negotiated and resolved, payment must now be submitted electronically. Firms must ensure they have established clear accounting procedures for EFTs made from client trust accounts. The same diligence that previously applied to paper checks now applies to electronic transfers, including compliance with all applicable professional conduct rules.
For reference, review standards such as the ABA Model Rule 1.15, local interpretations of the Client Trust Account Protection Program (CTAPP), and in California, Rule 1.15 of the Rules of Professional Conduct.
It is essential to treat EFT transactions with the same evidentiary and audit preparedness as traditional check-based disbursements. This includes preserving transfer confirmations, matching entries on trust account ledgers, and maintaining clear documentation for State Bar review.
Will Medicare Be Next?
The Centers for Medicare and Medicaid Services (CMS) began accepting electronic payment for Secondary Payer Act lien resolution in 2019. While CMS has not yet made EFT mandatory, the trajectory is clear. It is likely only a matter of time before Medicare follows the VA in requiring electronic payment as the exclusive form of disbursement.
Expect this model to expand. Other federal agencies and even state-level systems may soon mandate electronic payment, creating a new national standard for lien resolution and trust account practices.
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