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FEDERAL RESERVE BANK
OF N E W YORK
Check Department

Circular No. 309, October 15,1920
Supplement to Circular No. 258, entitled "Collection of Checks," dated
March 1, 1920 as supplemented by
Circulars No. 278 of May 17, 1920 and
No. 286 of June 1, 1920.

UncdUo -b*>r, 3«a, 3 f 5 ,

Omission of Protest of Checks in Certain States
To all Member Banks in the Second Federal Reserve District:
Your attention is directed to the appended laws enacted by the States of Louisiana,
Mississippi and South Dakota regarding the charging of exchange for the payment or
remittance of the proceeds of checks. You will observe that they contain provisions
purporting in effect to prohibit notaries public or other State officers within their respective jurisdictions from protesting for nonpayment any cash item, if nonpayment is
due solely to the refusal of the collecting bank or other collecting agency to pay exchange.
While these statutes are in effect it will be impossible for the Federal Reserve
Bank of New York to require compliance with the protest instructions set forth in its
circular No. 258, entitled "Collection of Checks," dated March 1, 1920, should a bank
or banks in Mississippi, Louisiana or South Dakota fail to honor checks because of the
refusal of our collecting agent to pay exchange. I t must be understood, therefore, that
any checks t h a t we accept drawn on banks located in those states will be forwarded by
us subject to the omission of protest. In conformity with our circular No. 258, we will
contiune to request telegraphic advice of non-payment of items of $500. or over.
With respect to omission of protest you will no doubt have in mind the following
provisions of the uniform Negotiable Instruments Law, which we are informed are in
force in the three states mentioned:
Section 185. Check Defined.—A check is a bill of exchange drawn on a
bank payable on demand. Except as herein otherwise provided, the provisions
of this act applicable to a bill of exchange payable on demand apply to a check.
Section 129. Inland and Foreign Bills of Exchange.—An inland bill of
exchange is a bill which is, or on its face purports to be, both drawn and payable
within this state. Any other bill is a foreign bill. Unless the contrary appears
on the face of the bill, the holder may treat it as an inland bill.
Section 152. In WTiat Cases Protest Necessary.— * * * Where a bill
does not appear on its face to be a foreign bill, protest thereof in cases of dishonor
is unnecessary.
Very truly yours,




J. H.

CASE,

Acting Governor

b'ff:

STATUTES REGARDING PAYMENT O F EXCHANGE AND PROTEST

Louisiana

Section

1.

Be it

enacted

by

Assembly of the State of Louisiana:

the

General

payable to a person in this State, and drawn on a

That for the

bank, trust company or person within or without

purpose of providing for the solvency, protection

this State, but it shall be optional with such banks

and safety of the banking institutions of Louisiana,

whether they shall charge exchange on checks or

the established custom on the part of the banks of

drafts payable to a person within this State, and

this State to charge a service fee (commonly called

drawn on a bank, trust company or person within

exchange) for collecting and remitting by exchange

or without this State.

or otherwise the proceeds of checks, drafts, bills,

Section 2.

That no officer in this State shall

etc., (commonly known among banks as "Cash

protest for non-payment any such "Cash Items"

Items") is hereby declared to be the law of this State,

when such non-payment is solely on account of the

and the banks of this State, both State and national,

failure or refusal of any of said agencies to pay such

shall have the right to make such charge as fixed

exchange; and there shall be no right of action,

by custom when such "Cash I t e m s " are presented

either at law or in equity, against any bank in this

to the payer bank for payment, through or by any

State for a refusal to pay such cash item, when

bank, banker, trust company, Federal Reserve Bank,

such refusal is based alone on the ground of the

post office, express company, collection agency, or

non-payment of such exchange.

by any other agency whatsoever; and the amount of
Section 3.

such charge shall not exceed one-tenth of one per

for any reason the courts should hold that the

centum of the total amount of such "Cash I t e m s "

national banks in this State are not required to

so presented and paid at any one time, and the min-

charge and collect such exchange still this act shall

imum charge shall be ten cents; provided, however,

remain in full force and effect as to all other banks

that no such charge shall be made on checks or

in this State; and in the event of such holding by

drafts given or drawn in settlement of obligations
due the State of Louisiana or any

Be it further enacted, etc., That if

the courts, or the refusal of any national bank in

subdivision

this State to comply with this act, then it shall be

thereof, or of the United States. And t h a t no such

optional with State banks located in the same

charge can be made by banks for the collection of

municipality with a national bank or State banks

checks deposited with said banks, when the check

which are members of the Federal Reserve System

is drawn on any other bank in the same municipality,

as to whether such charge shall be made.

city, town or village, this being the long established
custom of such banks. And, provided that nothing

Section 4.

Be it further enacted, etc., T h a t

in this act shall be deemed to be mandatory upon

all laws or parts of laws in conflict herewith be and

the banks to charge exchange on checks or drafts

the same are hereby repealed.




*

3>«?*

C^Uu^c/.

Mississippi

Section 1.

to charge exchange on checks or drafts payable to

Be it enacted by the Legislature of

the State of Mississippi: That for the purpose of

a person in this State, and drawn on a bank, trust

providing for the solvency, protection, and safety

company, or person within or without the State, but

of the banking institutions of Mississippi, the estab-

it shall be optional with such banks whether they

lished custom on the part of the banks of this State

shall charge exchange on checks or drafts payable

to charge a service fee (commonly called "exchange")

to a person within this State, and drawn on a bank,

for collecting and remitting, by exchange or other-

trust company, or person within or without this

wise, the proceeds of checks, drafts, bills, etc.

State.

(commonly known among banks as "cash items")

Section 2.

is hereby declared to be the law of this State; and

protest for nonpayment any such "cash

the banks of this State, both State and national,

item"

when such nonpayment is solely on account of the

shall continue to make such charge as fixed by

failure or refusal of any of said agencies to pay such

custom when such "cash items" are presented to

exchange; and there shall be no right of action,

the payer bank for payment through or by any

either at law or in equity, against any bank in this

bank, banker, trust company, Federal reserve bank,
post office, express company, or any

That no officer in this State shall

State for a refusal to pay such cash item, when such

collection

refusal is based alone on the ground of the non-

agency, or by any other agency whatsoever; and

payment of such exchange.

the amount of such charge is hereby fixed at onetenth of 1 per cent of the total amount of such

Section 3.

That if for any reason the courts

"cash items" so presented and paid at any one

should hold t h a t the national banks in this State are

time, and not less than 10 cents on any one such

not required to charge and collect such exchange,

transaction; provided, however, no such

charge

still this act shall remain in full force and eflFect as to

shall be made on checks or drafts given or drawn

all other banks in this State; and in the event of such

in settlement of obligations due the State of Missis-

holding by the courts, or the refusal of any national

sippi or any subdivision thereof, or of the United

bank in this State to comply with this act then it

States.

And t h a t no such charge can be made

shall be optional with State banks located in the same

by banks for the collection of checks deposited with

municipality with a national bank or State banks

said banks, where the check is drawn on any other

which are members of the Federal Reserve System

bank in the same municipality, city, town, or

as to whether such charge shall be made.

village, this being the long-established custom of
such banks; and provided, t h a t nothing in this act

Section 1+ That this act shall take'effect and

shall be deemed to be mandatory upon the banks




be in force from and after its passage.

3

3 ^ 9 ~ c-G^-h+t*** <?

South Dakota
Section 1.

Be it enacted by the Legislature of

payment is refused solely on account of the pre-

That the banks of this

senter's refusal to pay exchange, shall be guilty of

State may charge a service fee for collecting and re-

a misdemeanor, and there shall be no right of action

mitting by exchange or otherwise checks, drafts, bills,

either in law or in equity against any bank in this

etc., commonly known as "cash items," and the

State for a refusal to pay such cash item when such

banks of this State may make such charge when

refusal is based alone on the ground of the non-

such "cash items" are presented to the payer bank for

payment of such exchange.

the State of South Dakota:

payment through any bank, banker, trust company,
Federal Reserve Bank, Post Office, Express Company,

Section 3.

That whenever one or more checks

or any collectors agency, or by other agency whatso-

on any bank in the hands of a single holder or holders

ever; and the amount of such charge is hereby fixed

for an aggregate sum exceeding amount of such

at one-tenth of one per cent of the total amount of

bank's legal reserve required to be kept in its vault

such cash items so presented and paid at any one

shall be presented on the same date and payment

time, and not less than ten cents on any one trans-

thereof demanded, the said bank may elect to make

action, provided, however, that no such charge can

such payment in exchange instead of cash.

be made by banks for collecting a check presented
to said banks where the check is drawn on any bank
in the same municipality, city, town or village and
does not bear an out-of-town endorsement.
Section 2.

That any officer or notary public

who shall protest checks for nonpayment where




Section 1±. W H E R E A S , This Act is necessary
for the immediate support of existing institutions of
this State, an emergency is declared to exist and
this act shall take effect and be in force from and
after its passage and approval.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102