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F ederal

reserve

bank

DALLAS, TEXAS

of

Dallas

75222

Circular No. 7^-9
January 9? 197**

TO ALL BANKS
IN THE ELEVENTH FEDERAL RESERVE DISTRICT:

As part of a program recently adopted by all Reserve Banks,
to encourage improved efficiency in the processing of paper checks among
the Nation’s commercial banks, and strengthen the future viability of
this existing payments mechanism, the following uniform changes in check
collection services are announced:

Nonmachineable Checks
Effective July 1, 197**> a close-off hour of
6:00 a.m. daily Monday through Friday will be es­
tablished for cash letter deposits consisting of
checks which have been rejected as unreadable by
the depositing bank's computer systems or bear
other physical faults to be unprocessable on high
speed equipment. Credit availability for such
deposits will be deferred one additional business
day, up to a maximum of two business days.

Non-Amount Encoded Checks
Effective January 1, 1975? the Federal Reserve
Banks will discontinue handling as cash items all
checks, drafts and similar items received by them
on which the dollar amount of the items has not
been previously encoded in magnetic ink characters
in the prescribed location assigned by the American
Bankers Association. (Thus, the present sort option
provided in our Bulletin No. 10 which permits member
banks to deposit up to 300 unencoded items daily in
a single cash letter, commingled as to credit avail­
ability of the enclosed checks will be rescinded. Up
to 2,000 amount encoded checks may be included in
such cash letters on the effective date.)

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

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The restrictive action on non-machineable checks has been
taken to provide necessary time for the processing of such items at
slow speeds, and establishes a realistic deferment of credit avail­
ability consistent with the time required for collection of the items.
This action does not apply to photocopies of checks which will continue
to be handled as cash items in accordance with current provisions of
this Bank's operating circular.
The discontinuance of the handling of checks which do not
bear the encoded dollar amounts is another uniform step taken by all
Reserve Banks to encourage conformity by all banks with the principle
adopted by the American Bankers Association in 1958. An important
concept enbodied in the original M.I.C.R. plan was that the first
bank of deposit in the check collection cycle should prepare the items
for subsequent high speed handling.
It is hoped that this prior announcement of the forthcoming
change in procedures will provide ample time for affected banks to
acquire the necessary encoding equipment, or alter the capability of
existing machinery, and permit continued use of the Federal Reserve
System's check collection service. The operating circulars of this
Bank will be revised to reflect the actions described in this letter,
and distributed at a later date.
Questions about the new procedures may be referred to this
Bank's officers or appropriate branch officers having responsibility
over the check collection function.
Yours very truly,

P. E. Coldwell
President

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