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FEDERAL R E SE R V E B A N K OF DALLAS
Station K, Dallas, Texas 7 5 2 2 2

Circular No. 84-120
December 10, 1984

TO:

All depository
Reserve District

ATTENTION:

Operations Officer/Reserve Account Manager

SUBJECT:

New procedures regarding automated clearinghouse (ACH)
paper return item processing and notifications of
change

DETAILS:

Beginning February 7, 1985, all ACH paper return items
and notifications of change deposited with the Federal
Reserve will be converted to automated form at the
Federal
Reserve
office of first deposit.
This
improvement should help eliminate paper items being
returned to the originating institution by a Federal
Reserve office.
In addition, the new process will
make it possible for all Federal Reserve offices to
provide improved availability for paper return items.

institutions

in the Eleventh Federal

In conjuction with the new process, the deposit
closing time for paper items will be 7:00 a.m. Central
Time. Settlement for al_[ items — both interregional
and intraregional —
received by this time will be
settled on the same day.
All paper return items
received after this closing time will be settled the
next day. This means that more items can receive
same-day availability.
Previously, only those items
deposited in an intraregional return item letter could
be processed on a same-day basis.
On July 1, 1985, the practice of allowing originating
institutions to receive return items and notifications
of change in paper form when all other ACH payments
are delivered in machine readable form will
be
discontinued. Although July 1 is the cutoff date, the
Federal Reserve Bank of Dallas
encourages
each
originating
institution
to
convert as soon as
possible. This date has been established to provide
originating institutions lead time to accommodate the

Banks and others are enc oura ge d to use the follow ing in co m ing W A T S num bers in co n ta c tin g this Bank: 1-800-442-7140

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
(in trastate) and 1 -800-527-9200 (in terstate). For calls p laced locally, ple a s e use 651 plus the extension referred to above.

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changes.
Continuing delivery of return items to
originators in paper form would mean that items
automated by the Federal Reserve would have to be
reconverted to paper.
In an effort to encourage a fully automated ACH, a fee
of $2.50 will be assessed to the returning institution
for each paper return item and notification of change
deposited with the Federal Reserve.
This method of
charging for paper items will allocate the cost of
handling the paper items to those institutions that
have the most control over the decision to use
paper-based or automated methods. This fee is part of
the 1985 ACH fee schedule approved by the Board of
Governors of the Federal Reserve System on November
14, 1984.
We believe that these changes will contribute to the
evolution of the ACH toward a fully
electronic
payments mechanism. A great deal of planning has gone
into preparing for the automation of paper items and
formatting procedures to accomplish the conversion
from paper.
These changes
will
be
officially
incorporated into the National Automated Clearinghouse
Association's (NACHA) rules and guidelines which will
be updated on February 7, 1985. The Federal Reserve's
implementation date for the automation process has
been coordinated with the release of their rules and
guidelines.
In this regard, it is important for originating
institutions to be aware of changes in the use of
automated return items fields for items which have
been converted from paper.
For example, automated
return items created from paper will bear the standard
entry class code "RET" in field six of the batch
header record and the routing/transit number of the
Federal Reserve office performing the automation will
appear in field seven.
We realize that these changes may involve questions
and additional planning for depository institutions.
If you have any questions related to these changes or
wish to know the details about the format used to
convert the items, please contact the person listed
below.

MORE INFORMATION:

B.B. Sessions, Extension 6403

ADDITIONAL COPIES:

Public Affairs Department, Extension 6289

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