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5 4 5 FEDERAL RESERVE BOARD WASHINGTON address official correspondence t o the federal reserve board X-7193 June 30, 1932. SUBJECT: P r o t e s t of Checks i n Event of Closing of Drawee Bank. Dear S i r ; I i n c l o s e herewith a copy of a l e t t e r r e c e i v e d "by the Federal Reserve Board from Mr. George DeCamp, Chairman of the Board of D i r e c t o r s of the Federal Reserve Bank of Cleveland, a d v i s i n g t h a t h i s "bank has decided t o d i s c o n t i n u e t h e p r a c t i c e of r e q u i r i n g the p r o t e s t of checks f o r which a c t u a l payment has not "been received due to t h e c l o s i n g of t h e drawee "bank and which have been t r e a t e d as dishonored a t t h e request of the i n d o r s e r s under the p r o v i s i o n s of t h e Uniform Bank C o l l e c t i o n Code, together with a copy of the l e t t e r of advice used "by the Federal r e s e r v e hank i n such cases. This i s submitted f o r the information and c o n s i d e r a - t i o n of your hank. Yours very t r u l y , Chester M o r r i l l , Secretary. Inclosures. TO CHAIRMEN OF ALL F. R. BANKS EXCEPT CLEVELAND. 546 COPY X-7193-a FEDERAL RESERVE BAM OF CLEVELAND June 25, 1932. Mr. Chester M o r r i l l , S e c r e t a r y , Federal Reserve Board, Washington, D. C. Dear Mr, M o r r i l l j I have your l e t t e r of June 22, with r e f e r e n c e t o your l e t t e r of A p r i l 4 and my r e p l y of A p r i l 11, regarding t h e p r o t e s t of a check f o r $28.00 drawn on the C i t i z e n s National Bank, Harlan, Kentucky, which was t r e a t e d as dishonored under the Uniform Bank C o l l e c t i o n Code i n e f f e c t i n the Commonwealth of Kentucky. I advised you i n my l e t t e r of A p r i l 11, t h a t we had under c o n s i d e r a t i o n and would undoubtedly adopt a change i n our i n s t r u c t i o n s r e g a r d i n g t h e p r o t e s t of checks dishonored a s a r e s u l t of t h e c l o s i n g of the drawee bank. Wa have now d e f i n i t e l y d e c i d ed upon a p o l i c y which w i l l make i t unnecessary to change the p r o v i s i o n s of our c i r c u l a r l e t t e r . You w i l l n o t e from the enclosed c u r r e n t c i r c u l a r l e t t e r No. 7 on t h e s u b j e c t "Collection of Cash Items" t h a t t h e r i g h t i s reserved t o r e t u r n without p r e s e n t a t i o n any items drawn on "banks which may have withdrawn, or may have been removed, from the par l i s t , or which may have been reported c l o s e d . I t has long been our p r a c t i c e t o waive p r o t e s t on checks which a r e r e t u r n e d a s a r e s u l t of the c l o s i n g of the drawee bank; t h i s disposes of t h e matter of p r o t e s t i n so f a r a s i t a p p l i e s t o checks which a r e a c t u a l l y r e t u r n e d b e f o r e they a r e charged t o t h e maker's account. With r e s p e c t t o checks which have been charged t o the drawer's account p r i o r t o suspension but f o r which a c t u a l payment has not been r e c e i v e d , i t was our p r a c t i c e as i n d i c a t e d i n my l e t t e r of A p r i l 11 t o r e q u i r e t h e p r o t e s t of such checks a s may have been t r e a t e d as dishonored a t the request of t h e endorsers under the p r o v i s i o n s of the Uniform Bank C o l l e c t i o n Code adopted i n seve r a l of t h e s t a t e s i n t h i s d i s t r i c t . We have now d e f i n i t e l y changed our p r a c t i c e i n t h i s r e g a r d , and s h a l l h e r e a f t e r when such checks a r e charged back t o t h e endorsers under the p r o v i s i o n s of Regulation J and our c i r c u l a r , n o t i f y the endorsers t h a t t h e r i g h t to t r e a t as dishonored may be e x e r c i s e d , but t h a t i n t h e event t h e X-?193-a FEDERAL EE SERVE BAH OF CLEVELAND Mr. Chester M o r r i l l , Secretary - 2 - June 25, 1932. endorsers e l e c t to t r e a t such checks as dishonored, p r o t e s t w i l l be waived u n l e s s we a r e i n s t r u c t e d t o t h e c o n t r a r y . A specimen copy of our l e t t e r of advice i n such cases i s a l s o enclosed. Our counsel a r e of the opinion t h a t t h i s p r a c t i c e i s sound and w i l l avoid t h e r e p e t i t i o n of complaints such a s t h a t which was t h e s u b j e c t of your l e t t e r of A p r i l 4 . Very t r u l y y o u r s , (S) Geo. DeCamp Chairman of t h e Board. 547, COPY . Wl93-b FEDERAL EBSERVE BAH OF CLEVELAND Date N a t i o n a l Bank Gentlemen: We have charged your account t o cover t h e items l i s t e d below forwarded t o t h e f o r c o l l e c t i o n and r e m i t t a n c e , hut t h a t hank was placed i n t h e hands of t h e National Bank Examiner b e f o r e a c t u a l payment was r e c e i v e d . Unless you n o t i f y us t o do otherwise, we w i l l i n c l u d e t h e s e items i n the claim which we w i l l f i l e a~ g a i n s t t h e a s s e t s of the f a i l e d bank. Under t h e law now i n e f f e c t we a s the agent c o l l e c t i n g bank a r e a l s o permitted by giving n o t i c e t o t h e Receiver or Examiner i n charge t o e l e c t to t r e a t checks drawn on a closed bank as dishonored and s e c u r e t h e i r r e t u r n . I n t h e event such checks a r e t r e a t e d a s dishonored t h e h o l d e r s w i l l have recourse a g a i n s t p r i o r p a r t i e s but they cannot be included i n our claim. The s t a t u t e r e q u i r e s t h i s e l e c t i o n to be " e x e r c i s e d with reasonable d i l i g e n c e " . T h e r e f o r e , i n the event you d e s i r e t h a t we e l e c t t o t r e a t any of t h e checks as dishonored, you must forward your i n s t r u c t i o n s t o g e t h e r with t h e name of the Drawer and Payee t o us a s soon as p o s s i b l e . P r o t e s t w i l l be waived on a l l items so r e t u r n e d u n l e s s we a r e s p e c i f i c a l l y i n s t r u c t e d t o t h e contrary. Very t r u l y y o u r s , Date and t o t a l of your cash l e t t e r Assistant Cashier. Amount of items
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