View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Federal

reserve

Ba n k

DALLAS. TEXAS

of

Dallas

75222

Circular No. 75-192
December 26, 1975

A m e ric a n R e v o lu tio n B ic e n te n n ia l

INTERIM GUIDELINES FOR THE DELIVERY
OF FEDERAL RECURRING PAYMENTS
BY FEDERAL RESERVE BANKS

TO ALL BANKS IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
The Board of Governors of the Federal Reserve System has
adopted interim guidelines for the delivery of federal recurring payments
by Federal Reserve Banks. Printed on the following pages is a copy of
the press release and FEDERAL REGISTER document relating to this
decision.
If you have any questions regarding these guidelines, please
contact J . A . Clymer, Assistant Vice President, at (214) 651-6337, or the
appropriate Branch Officer having responsibility over the Check Collec­
tion function.

S in c e r e ly y o u r s ,
T . W. Plant
F ir s t Vice P r e s id e n t

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

FEDERAL
press

RESERVE

release

S-2303-A
For immediate release

December 18, 1975

The Board of Governors of the Federal Reserve System today approved
interim guidelines for the delivery of electronically recorded payments to
financial institutions of all types participating in the Treasury Department's
program for direct deposit of Federal payments that are made on a recurring basis.
In the electronic payments phase of the Treasury's direct deposit
program, payments are made by magnetic tape through Federal Reserve offices.
The Reserve offices sort the payments by computer according to the financial
institutions involved, carry out the necessary accounting and deliver
financial institutions the payments instructions concerning them.

to the

The

financial institutions credit the accounts of their customers.
In February 1976, in cooperation with this phase of the Treasury
program, the Federal Reserve will begin distributing, according to the terms
of the guidelines announced today, social security payments to beneficiaries
who have elected to have their benefits deposited directly in financial
institutions.

Beneficiaries who prefer to receive social security payments as

previously may continue to do so.

Since November 1974 the Federal Reserve has

been distributing electronically recorded payroll deposits to financial
institutions on behalf of U.S. Air Force personnel who have elected direct
deposit of their pay.
The cost of issuing, clearing and transporting a check is many times
greater than making payments by electronic means.

Since the Federal Govern­

ment issues hundreds of millions of checks annually, there is a potential in
electronic handling of payments for large savings.

-2-

For recipients of government payments, direct deposit reduces the risk
of theft and offers the convenience of an automatic deposit of funds in a
financial institution.
In general, the guidelines provide that financial institutions currently
receiving checks on a Federal Reserve courier route will also have direct deposit
payments information delivered to them by courier.

Payments to financial insti­

tutions and processing centers not currently served by courier may have payments
information delivered by courier if their payments volume is sufficient, and
if they are located on a courier route.

Other financial institutions may receive

direct deposit payments instructions by mail, through a correspondent or a
processing center or by picking up the payments information at a Federal Reserve
office.
The Board indicated that the guidelines announced today are of an
interim nature since they may be modified in the future as this program develops.
In approving the guidelines the Board took action on the government payments
section of its proposal of June 10, 1975 regarding access to Federal Reserve
facilities used to clear payments instructions recorded on magnetic tape. Further
action on access to Federal Reserve facilities for private payments will be
considered later.
The Board action on delivery of direct deposit Federal payments followed
issuance by the Treasury Department of regulations governing the processing of
such payments effective January 1, 1976.
The guidelines approved by the Board are attached.

-

0 -

S-2303-B

TITLE 12— BANKS AND BANKING
CHAPTER II— FEDERAL RESERVE SYSTEM
Delivery of "Federal Recurring Payments"
to Financial Institutions
On June 10, 1975, the Board of Governors of the Federal
Reserve System requested comments regarding use of Federal Reserve
facilities for clearing and settling of payment instruments evidenced
by information contained in magnetic tape and other media (40 Federal
Register 25641).

The proposal pertained to the delivery of items

to institutions belonging to private associations exchanging such
payments instruments as well as the program of the United States Department
of the Treasury involving the processing of "Federal recurring payments."
(See 40 Federal Register 47492 for an explanation of the Treasury's
program.)

The Federal Reserve Banks are acting as fiscal agents of

the Treasury Department for the recurring payments program and the
Board of Governors, after review of all comments received, has adopted
interim guidelines for the delivery of such recurring payments under
the Treasury Department's program by the Federal Reserve Banks.
The Board believes its interim position is cost-effective,
operationally feasible, and affords all financial institutions a number
of options for receiving payments on an equitable basis.

From the

comments received and reviewed by the Board regarding its June 10th

-2proposal, a clear majority of each class of all financial institutions
favored the proposal on delivery of payments in the form adopted by
the Board.

Federal Reserve Bank representatives will, of course, be

able to discuss features of this proposal further with individual
institutions.
The interim guidelines announced today may be modified in
the future to conform to the position finally adopted by the Board on
sending and receiving commercial payments on magnetic tape.

The

Federal Reserve is currently in the process of reviewing the comments
received on its June 10, 1975, proposal.

It should be recognized also

that the findings and recommendations of the National Commission on
Electronic Fund Transfers could call for some further modification
in these interim guidelines.
The guidelines adopted by the Board provide for the delivery
of Federal recurring payments by Federal Reserve Banks in the following
fashion:
(1)

Payments to beneficiaries maintaining accounts at
a financial institution offering demand deposit
accounts may be delivered directly to that institution
in the same manner that checks are presented.

(2)

Payments to beneficiaries maintaining accounts at
a financial organization not offering demand deposit
accounts may be delivered directly to that insti­
tution provided such institution receives sufficient
volume of such payments to warrant separate delivery
and is located on an existing check courier route.

-3(3)

Payments may be delivered to a data processing
service bureau provided the service bureau receives
sufficient volume of such payments to warrant separate
delivery and is located on an existing check courier
route.

(4)

Any financial organization may pick up payments
at the local Federal Reserve office provided
that volume is sufficient to warrant the
separate sort required.

(5)

Any financial organization may have payments
delivered to an endpoint that currently receives
checks directly from the Federal Reserve office
(i.e., the pass-through method).

(6)

Payments may be mailed to any financial organization
by the Federal Reserve regardless of its location.
Board of Governors of the Federal Reserve System, December 18,

1975.

(Signed)

Theodore E. Allison

Theodore E. Allison
Secretary of the Board

[SEAL]

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