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federal

R e se r v e Ba n k

DALLAS. TEXAS

of

Dallas

75222

C ir c u la r N o . 82-100
A u g u st 12, 1982

MODIFICATIONS TO CHECK COLLECTION SERVICES
TO ALL DEPOSITORY INSTITUTIONS IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
T h e F e d e ra l R e s e rv e S ystem is p ro p o s in g sig n ific a n t im p ro v em en ts in
c h e c k collection s e r v ic e s a v a ila b le to d e p o sitin g in s titu tio n s . T h e se im p ro v em en ts
w ould b r in g a b o u t a m ore efficien t a n d s p e e d y p ro c e s s of c o llectin g c h e c k s th a t
w ou ld p ro v id e in d iv id u a ls a n d b u s in e s s e s m ore r e a d ily a v a ila b le fu n d s r e p r e s e n te d
b y c h e c k s th ey d e p o s it. M o re o v er, th is im p ro v e d p r o c e s s w ill o b ta in fa s te r c r e d it
for d e p o sitin g in s titu tio n s a n d re d u c e th e am ount of float in th e c h e c k collection
sy ste m . A ttached a r e th e B o a r d 's P r e s s R elease a n d p ro p o s a l d e s c rib in g th e se
im p ro v e m e n ts .
We b e lie v e th a t d is tin c t a d v a n ta g e s , b o th to d e p o sitin g in s titu tio n s a n d
the p u b l i c , e x is t in th is p r o p o s a l. Y our v ie w s w ith r e s p e c t to th e s e c h a n g e s a r e
e n c o u ra g e d a n d w ill be s u b s ta n tiv e to th e B o ard of G o v e rn o rs ' d e lib e ra tio n s in
d e te rm in in g th e m e rits of th e s e im p ro v e m e n ts.
If you h a v e a n y q u e s tio n s , p le a s e c o n tact Don J a c k s o n a t th e D allas
O ffice, (214) 651-6118; R o b ert W . S c h u ltz a t th e El Paso B r a n c h , (915) 544-4730;
V ern o n L. B a rte e a t th e H ouston B ra n c h , (713) 659-4433; o r Jo h n A . B ullock at
th e S an A ntonio B ra n c h , (512) 224-2141.
A d ditional co pies of th is c ir c u la r w ill be f u r n is h e d u pon r e q u e s t to the
D e p artm en t of C om m unications, F in a n c ia l a n d Com m unity A ffa irs, E x t. 6289.
S in c e re ly y o u r s ,

William H . Wallace
F ir s t Vice P r e s id e n t
A ttachm ents

Banks and others are encouraged to use the following incoming W A T S numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the
extension referred to above.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

FEDERA^RESERV^pres^Blease
For immediate release

August 4 , 1982

The Federal Reserve Board today requested comment on a proposal
by the Federal Reserve Banks to improve the speed and efficiency of the
nation's payments mechanism by modifying the System's check processing
--and collection procedures.
The Board asked for comment on the proposal
1982.

by September 20,

In doing so, the Board said it would consider the matter promptly

after the end of the comment period and requested, consequently, that
comment be made as early as practicable.
The proposal was made in view of the objectives of the Monetary
Control Act of 1980.

In announcing the proposal the Board said:

The Monetary Control Act requires that the Federal
Reserve establish a structure of fees for Reserve
Bank services in accordance with pricing principles
adopted by the Board. As indicated in the Act and
its legislative history, promoting competition
between Reserve Banks and other providers of payments
mechanism services will improve the efficiency of the
nation's payments system and lead to a more efficient
allocation of society's resources. These objectives
can be accomplished through collecting checks more
rapidly and through more efficient utilization of
Federal Reserve resources.
The Board noted that in accordance with the Act it adopted a set
of principles for pricing its services in December 1980 and that since then
the System has put in place fee schedules for virtually all Reserve Bank services.
The proposed modification

of the check collection system would

allow banks, savings and loan associations, credit unions and other depository
institutions that send checks to the Federal Reserve for collection to
obtain faster payment for many of the checks, and reduce the amount of
(OVER)

-2-

float—^ in the check collection system.

The proposal would also make it

possible for depository institutions to give individuals and businesses
quicker use of funds represented by checks they deposit.
To these ends, the Reserve Banks propose:

1.

To allow institutions to deposit their checks
at Federal Reserve offices later in the day than
at present.
— This would permit more checks to be
collected within 24 hours.

2.

Complementing this change, to establish 12 noon
as the earliest final time at which Federal
Reserve offices will present for payment to
depository institutions checks deposited with
the Federal Reserve for collection.
— There is no change intended in the present
practice at Federal Reserve offices to make
processed checks available to paying banks
throughout the processing schedule, so that
the number of checks to be presented at the
later presentment time can be minimized.

It is anticipated that a significant
proportion of checks will continue to be
made available through current arrangements
The Board estimated that these proposed revisions taken in
conjunction with reconfiguration of the Federal Reserve's transportation
system, wouldaccelerate by

24 hours collection of 50 percent or more of

certain checkscleared between Federal Reserve offices.
The Federal Reserve Banks will in the near future make public the
fee schedules for check services that would apply if their proposal is adopted.
The Federal Reserve expects to announce in the next several months
details of its program to reduce float.

The Reserve Bank proposal and their implications are spelled out in
the atached notice.

-

Float begins as soon as a transaction occurs in which a person receives
a check and continues until the check is finally paid and the recipient
is permitted to use the funds represented by the check.
-0 -

Attachment

FEDERAL RESERVE SYSTEM

[Docket No. R-0414]
M od if ic a tio n s t o Federal Reserve Bank Check C o l l e c t i o n S e rv i c e s
AGENCY:

Board o f Governors o f t h e Federal Reserve System.

ACTION:

Request f o r comments.

SUM ARY: The Board of Governors i s r e q u e s t i n g p u b l i c comment on a proposal
M
t o improve th e speed and e f f i c i e n c y of t h e n a t i o n ' s payments mechanism by
modifying c e r t a i n a s p e c t s of t h e Reserve Banks' check c o l l e c t i o n s e r v i c e s .
Public comment i s re que sted on a proposal t o extend t h e t i m es d uring which
checks may be d e p o s it e d a t Federal Reserve o f f i c e s fo r c o l l e c t i o n and t o
implement a system-wide program t o extend t h e time in which checks a re p r e ­
s ent ed t o c e r t a i n paying banks.
DATE:

Comments must be re c ei ve d by September 20, 1982.

ADDRESS: Comments, which should r e f e r t o Docket No. R-0414, may be mailed t o
Mr. William W Wile s, S e c r e t a r y , Board o f Governors of t h e Federal Reserve
.
System, 20th S t r e e t and C o n s t i t u t i o n Avenue, N.W., Washington, D.C. 20551,
or d e l i v e r e d t o Room B-2223 between 8:45 a.m. and 5:15 p.m. Comments receiv e d
may be in sp ec t ed a t Room B-1122 between 8: 45 a.m. and 5:15 p . m . , ex cep t as
provided in § 261.6(a) of th e Board's Rules Regarding t h e A v a i l a b i l i t y o f
I n f o r m at io n , 12 C.F.R. § 2 6 1 . 6 ( a ) .
FOR FURTHER INFORMATION, CONTACT:
G i l b e r t T. Schwartz, Ass o ci at e General
Counsel (202/452-3625),
Daniel L. Rhoads, Attorney
(2 02 /4 52 -37 1 1), o r
J oseph R. Alexander, Attorney (2 02 /4 5 2-2 48 9), Legal D i v i s i o n ; o r E l l i o t t C.
McEntee, A s s i s t a n t D i r e c t o r (202/ 452-22 31), Di vi s io n of Federal Reserve Bank
O p e r a t io n s , Board of Governors o f t h e Federal Reserve System, Washington, D.C.
SUPPLEMENTARY INFORMATION:
The Monetary Control Act o f 1980 (P . L. 96-221)
("Act") was enac te d by Congress t o f a c i l i t a t e t h e development o f a more e f f i ­
c i e n t payments me chanism.I/
S ec t i o n 107 o f t h e Act (12 U.S.C. § 248a)
r e q u i r e s t h a t th e Federal Reserve e s t a b l i s h a s t r u c t u r e of fe e s f o r Reserve
Bank s e r v i c e s in accordance with p r i c i n g p r i n c i p l e s adopted by t h e Board.
As i n d i c a t e d in th e Act and i t s l e g i s l a t i v e h i s t o r y , promoting c o m p e t it i o n
between Reserve Banks and o t h e r p r o v i d e rs o f payments mechanism s e r v i c e s w i l l
improve th e e f f i c i e n c y of t h e n a t i o n ' s payments mechanism and l ead t o a more
e f f i c i e n t a l l o c a t i o n of s o c i e t y ' s r e s o u r c e s . These o b j e c t i v e s can be accom­
p l i s h e d through c o l l e c t i n g checks more r a p i d l y and t hrough more e f f i c i e n t
u t i l i z a t i o n of Federal Reserve r e s o u r c e s .
On December 31, 1980, t h e Board
adopted a s e t of p r i c i n g p r i n c i p l e s and fee s ch edu les f o r c e r t a i n Federal
Reserve s e r v i c e s . Subsequently , t h e Board adopted fe e s ch e d u l es f o r v i r t u a l l y
a l l Reserve Bank s e r v i c e s in accordance with t h e Act.
1 / See remarks of Senator Proxmire, 126 Cong. Rec. S 3167 ( d a i l y ed. March 27,
1980).

-2In o r d e r to improve t h e e f f i c i e n c y of t h e payments mechanism, t he
Reserve Banks a re proposing m o d i f i c a t i o n s desi gn ed t o speed up t h e i r c o l l e c ­
t i o n of checks, which w il l a ll ow d e p o s i t o r y i n s t i t u t i o n s t o o b t a i n f a s t e r
payment f o r many checks de po si t e d with t h e Federal Reserve.
The proposal
should reduce t h e delay in th e c o l l e c t i o n p ro ces s t h a t now e x i s t s and, as a
r e s u l t , d e p o s it o r y i n s t i t u t i o n s should be ab le t o p ro vi de funds t o t h e i r
d e p o s i t o r s more r a p i d l y .
In a d d i t i o n , i n c r e a s i n g t h e speed with which checks
a r e c o l l e c t e d w ill reduce th e amount o f f l o a t t h a t c u r r e n t l y e x i s t s n a t i o n ­
w id e .^ /
In o r d e r t o accomplish t h e s e r e s u l t s , t h e Reserve Banks a re r e v i s ­
ing t h e i r check t r a n s p o r t a t i o n system and a re propos ing an i n t e g r a t e d plan
t o extend the times duri ng which checks may be d e p o s i t ed a t Federal Reserve
o f f i c e s f o r c o l l e c t i o n and t o implement a system-wide program t o extend t h e
time in which checks a re pre s en t e d t o paying banks.
P ub l i c comment i s r e ­
quested in o r d e r t o a s s i s t t h e Board o f Governors in e v a l u a t i n g t h i s p ro p o s a l .
Change in Deposit Times
The Reserve Banks have begun implementing t h e i r improved I n t e r d i s ­
t r i c t T r a n s p o r ta ti o n System (" IT S " ).
This re co n fi g u re d system i s desi gne d
t o change th e method by which checks are t r a n s p o r t e d among Federal Reserve
o f f i c e s and reduce the time ne ces s ary t o c o l l e c t checks t hrough t h e Federal
Reserve. When f u l l y implemented t h e re v i s e d ITS w i l l en ab l e Reserve Banks
t o acc ept c e r t a i n c a t e g o r i e s of checks d ep o s i t ed by d e p o s i t o r y i n s t i t u t i o n s
a t a l a t e r hour than i s the c as e a t p r e s e n t .
S p e c i f i c a l l y , a Reserve Bank
would permit a d e p o s i t o r y i n s t i t u t i o n t h a t uses i t s l o cal Federal Reserve
o f f i c e to proc ess or ship checks t o be c o l l e c t e d t hrough o t h e r Federal Reserve
o f f i c e s t o d e p o s i t such checks s u b s t a n t i a l l y l a t e r t h an a t p r e s e n t (up t o 2 t o
5 hours l a t e r ) . As a r e s u l t , d e p o s i t o r y i n s t i t u t i o n s w i l l have a l o n g e r time
t o proces s checks and r e c e i v e improved a v a i l a b i l i t y o f funds f o r such c h ec k s .
C u r r e n t l y , Federal Reserve Banks g ra n t d e p o s i t o r y i n s t i t u t i o n s t h e
p r i v i l e g e of by-passing th e lo cal Federal Reserve o f f i c e by s h ip p i n g checks
d i r e c t l y t o o t h e r Federal Reserve o f f i c e s f o r c o l l e c t i o n . Under t h e p r o p o s a l ,
d e p o s i t o r y i n s t i t u t i o n s w i l l co n t i n u e t o be p er m i t t ed t o send checks d i r e c t l y
t o o t h e r Federal Reserve o f f i c e s .
I n i t i a l l y , because o f o p e r a t i o n a l a d j u s t ­
ments n e c e s s i t a t e d by s h i f t s in workload d e p o s i t d e a d l i n e s now in e f f e c t f o r
such arrangements will not change. However, as ex p e ri en c e i s gained with t h e
modif ied pr o c e d u re s, Reserve Banks w i l l c o n s i d e r ad o pt i n g l a t e r d e p o s i t dead­
l i n e s f o r d i r e c t sending d e p o s i t o r y i n s t i t u t i o n s .
The Board b e l i e v e s t h a t changing d e p o s i t d e a d l i n e s wi ll s u b s t a n ­
t i a l l y enhance th e check c o l l e c t i o n p ro ces s and improve t h e e f f i c i e n c y of
th e n a t i o n ' s payments mechanism.
Under t h e proposed d e p o s i t d e a d l i n e s , t h e

y

F loat begins as soon as a t r a n s a c t i o n o ccu rs in which a person re c e i v e s
a check and co nt in ue s u n t i l t h e check i s f i n a l l y paid and t h e r e c i p i e n t
i s pe rm itt e d t o use th e funds r e p re s e n t e d by t h e check.

-3-

Board ex pects t h a t 50 t o 70 pe r cen t of i n t e r - t e r r i t o r y RCPC itemsJV w il l be
c o l l e c t e d and c r e d i t e d w it h in one d a y - - t h e r e b y a c c e l e r a t i n g by 24 hours t h e
c o l l e c t i o n of many of t h e s e check s .
( I t i s e s t i m a t e d t h a t t h e value of t h e s e
checks i s between $1.6 and $2.6 b i l l i o n p er d ay . ) P ub l i c comment i s re q u e s t e d
r e g a r d in g th e p o s s i b l e e f f e c t s t h e s e proposed changes t o d e p o s i t d e a d l i n e s a t
c o l l e c t i n g Federal Reserve o f f i c e s may have upon d e p o s i t o r y i n s t i t u t i o n s and
t h e i r cus tomers.
Changes of Presentment Time
Under t h e Federal R e s e r v e 's c u r r e n t p ro c e d u re s , Reserve Banks p r e ­
s e n t checks f o r payment t h a t day t o d e p o s i t o r y i n s t i t u t i o n s w i t h i n each Fed­
e r a l Reserve t e r r i t o r y a t times dependent upon d i s t a n c e or agreement s . Typ­
i c a l l y , checks p re s e n te d t o i n s t i t u t i o n s o u t s i d e Federal Reserve o f f i c e c i t i e s
may be d e l i v e r e d up t o 2:00 p . m . , while checks p re s en t e d t o i n s t i t u t i o n s
through a c i t y c le a r i n g h o u s e a re p re s en t e d in accordance with a p re arra n g e d
time s ch e d u le .
Presentment times now range from app ro x imat el y 7:00 a.m. t o
2:00 p.m.
The Reserve Banks propose t o e s t a b l i s h 12:00 noon as t h e uniform
e a r l i e s t f i n a l pre se ntment time fo r checks t hey c o l l e c t drawn on i n s t i t u t i o n s
d e s i gn a te d as c i t y i n s t i t u t i o n s .
No change in presentment ti mes i s planned
f o r th o s e pre sentme nts t h a t now occur a f t e r 12:00 noon. As a r e s u l t of l a t e r
presentment t i m e s , Federal Reserve o f f i c e s w i l l be ab l e t o c l e a r checks f o r
d e p o s i t o r y i n s t i t u t i o n s t h a t now r e q u i r e an a d d i t i o n a l day f o r c l e a r i n g .
In
a d d i t i o n , some Federal Reserve f l o a t w i l l be e l i m i n a t e d with l a t e r p res en t m e n t ,
which i s c o n s i s t e n t with System e f f o r t s t o d ecr eas e and u l t i m a t e l y e l i m i n a t e
f l o a t . There i s no change intend ed in t h e p r e s e n t p r a c t i c e a t Federal Reserve
o f f i c e s t o make proc essed checks a v a i l a b l e t o paying banks t hrou g h o u t t h e p ro ­
c es s in g s ch e du le , so t h a t th e number of checks t o be p re s en t e d a t t h e l a t e r
pr es entment time can be minimized.
It i s a n t i c ip a te d t h a t a s i g n i f i c a n t pro­
p o r ti o n of checks will c ont inu e t o be made a v a i l a b l e t hrough c u r r e n t a r r a n g e ­
ments.
C e r ta in d e p o s it o r y i n s t i t u t i o n s l o c a t e d in RCPC o r co u n try a re a s may
a l s o r e c ei v e checks l a t e r than under c u r r e n t arran g em en t s .
G e n e ra l l y , l a t e r
presentmen t times w ill a f f e c t only t h o s e d e p o s i t o r y i n s t i t u t i o n s t h a t re c e i v e
a s u b s t a n t i a l d o l l a r value of checks each day and where s p e c i a l t r a n s p o r t a t i o n
arrangements a re w a rra nt e d .
The p r o p o s a l , t h e r e f o r e , would t r e a t such i n s t i ­
t u t i o n s in th e same manner as t h o s e l o c a t e d in Federal Reserve c i t i e s .
This proposed change does not c o n s t i t u t e an amendment t o e x i s t i n g
Federal Reserve r e g u l a t i o n s and i s taken under t h e r i g h t s c o n fe rr e d on p r e ­
s e n t i n g i n s t i t u t i o n s under th e Uniform Commercial Code.

y

I n t e r - t e r r i t o r y RCPC items a re checks d e p o s i t e d in one Federal Reserve
o f f i c e t e r r i t o r y t h a t are drawn on a d e p o s i t o r y i n s t i t u t i o n l o c a t e d in
an a n o th e r Federal Reserve o f f i c e t e r r i t o r y in an area d e s i g n a t e d by t h a t
Federal Reserve o f f i c e as a Regional Check P r o ces s i n g C en t er.

-4 -

La te r presentment w ill a s s u r e t h a t checks recei v ed by Reserve Banks
e a r l i e r t h a t day a re c o l l e c t e d t h e same day , t hu s speeding up t h e c o l l e c t i o n
o f checks to the b e n e f i t of d e p o s i t i n g i n s t i t u t i o n s and t h e i r cus tom er s .
This p r o p o s a l , which c o n s i s t s of l a t e r d e p o s i t hours and l a t e r p resentment
h o u r s , t o g e t h e r with t h e re co nfi g u r ed and more e f f i c i e n t ITS, a l s o a s s u r e s
t h a t Federal Reserve f l o a t w ill not i n c r e a s e .
The Federal Reserve b e l i e v e s t h a t t h e p r o p o s a l , i f ad o pt ed, w i ll
not r e s u l t in any ab rupt changes t o t h e o p e r a t i o n s o f d e p o s i t o r y i n s t i t u t i o n s
in t h e nea r term s in ce adequate time w i l l be provided t o a d j u s t t o t h e pr o ­
posed change.
Reserve Banks w i l l co n t i n u e t o p a r t i c i p a t e in check c l e a r i n g s
in c i t i e s in which they a re l o c a t e d , but in a d d i t i o n , i f t h e c l e a r i n g hour
is p r i o r
to noon, w ill p r e s e n t checks o u t s i d e of t h e c l e a r i n g u n t i l 12:00
noon. To a s s i s t paying i n s t i t u t i o n s t h a t wi ll r e c e i v e checks l a t e r than a t
p r e s e n t , Reserve Banks a re c o n s i d e ri n g development o f s p eci al s e r v i c e s such
as pr ovidi ng t h e MICR l i n e data from checks on computer t a p e and p ro vi di n g
account in formation and d o l l a r t o t a l s t o payors by t e l ep h o n e in advance o f
t h e presentment of t h e checks where req u es t e d by t h e paying bank.
The Board has co nsidered t h e impact
o f t h e proposal on s m al l e r
depository i n s t i t u t i o n s . ^ /
Since s m a l l e r d e p o s i t o ry i n s t i t u t i o n s g e n e r a l l y
a r e l o c a te d o u t s i d e of th e Federal Reserve c i t i e s , t hey t y p i c a l l y would not be
a f f e c t e d by th e l a t e r pre sentment p r o p o s a l .
Smaller i n s t i t u t i o n s , however,
should b e n e f i t from t h e proposed l a t e r d e p o s i t d e a d l i n e s s i n c e checks t he y
d e p o s i t f o r c o l l e c t i o n w il l be c o l l e c t e d f a s t e r t h an a t p r e s e n t . The proposal
w ill not impose any a d d i t i o n a l r e p o r t i n g , reco r d k eep i n g , or o t h e r compliance
requir ements on s m a l le r i n s t i t u t i o n s , and w i l l not d u p l i c a t e , o v e rl a p o r con­
f l i c t with any fe de ral r u l e or r e g u l a t i o n .
Comment i s re q u e st e d on t h i s proposal by September 20, 1982.
In
p a r t i c u l a r , comments are reque s t ed on t h e e f f e c t s t h e proposal may have upon
d e p o s i t i n g and paying i n s t i t u t i o n s .
In view of t h e importance of t h e p ro ­
po s a ls to improving the e f f i c i e n c y o f t h e n a t i o n ' s payments mechanism, t h e
Federal Reserve in te nd s t o c o n s i d e r t h i s m a t t e r promptly a f t e r t h e c l o s e of
th e comment pe riod on September 20, 1982.
Accordi ngly, i n t e r e s t e d p a r t i e s
a r e urged t o submit t h e i r comments on t h e s e p ro p o s a l s prompt ly. Publi c com­
ment is being re queste d on t h i s proposal because o f t h e i n t e r e s t ex pres s e d
in r e c e n t weeks by d e p o s i t o r y i n s t i t u t i o n s co ncern ing t h e proposed changes.
The Federal Reserve Banks w i l l , in t h e n ear f u t u r e , make a v a i l a b l e
t h e fee sche dule s f o r check s e r v i c e s t h a t would be in e f f e c t i f t h e s e p ro ­
pos als ar e a dopted.
F u r t h e r , t h e Federal Reserve ex p ect s t o announce t h e
d e t a i l s o f t h e e lements of i t s f l o a t red u c t i o n plan in t h e next s eve r al
months. A d i s c u s s i o n of th e f l o a t re d u c t i o n plan was r e c e n t l y i s s u e d by t h e
Chairman o f the Syste m' s P r i c i n g P o l i cy Committee. Ad di ti on al d e t a i l s , such

4-/ Of th e approxima tely 22,000 i n s t i t u t i o n s s erved by t h e Federal
approxima tely 50 p e rc e n t have d e p o s i t s o f l e s s t h a n $25 m i l l i o n .

Res erve ,

-5-

as specific proposed deposit deadlines and presentment tiroes, may be obtained
from local Federal Reserve o ffic e s.
By order of the Board of Governors of the Federal Reserve System,
August 4, 1982.

(signed) William W. Wiles

William W Wiles
.
Secretary of the Board

[S E A L ]

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