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F

e d e r a l r e s e r v e

B

a n k

O F D A LLA S
T O N Y J. S A L V A G G I O
F IR S T V IC E PR E S ID E N T

June 18 , 1993

dallas,texas 75222

Notice 93-65
TO:

The Chief Operating Officer of
each financial institution in the
Eleventh Federal Reserve District
SUBJECT
Operating Circular 8
(Collection of Cash Items)
DETAILS

The Federal Reserve Bank of Dallas has begun renaming and reissuing
its Bulletins as Operating Circulars in order to conform to the language used
in the Uniform Commercial Code. Accordingly, Bulletin 8 is being reissued as
Operating Circular 8 (Collection of Cash Items).
In connection with this reissue, Operating Circular 8 has been
revised to provide additional clarification of procedures for handling check
adjustments and other matters.
Paragraphs 39, 70, 73, and 76 have been
changed and paragraphs 37A, 73A, and 76A have been added. These changes and
additions provide that
•

photocopies of lost or destroyed incoming cash
letters or returned check letters should be deposit­
ed as qualified letters within six months and

•

if a paying or depository bank receives a photocopy
after paying the original item, or vice versa, the
bank may return it as an adjustment within six
months.

The changes also outline procedures for returning checks when the
bank of first deposit cannot be identified and clarify procedures relating to
qualified returned checks.
In addition, due to the consolidation of this B a n k ’s noncash
collection service at the Jacksonville Branch of the Federal Reserve Bank of
Atlanta, Bulletin 9 has been deleted, paragraphs 7 and 8 of Operating Circular
8 have been changed, and paragraphs 10A and 10B have been added.

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas:
Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162,
Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

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

- 2 -

ENCLOSURE
Enclosed is Operating Circular 8. Please file it in your Operating
Circulars (Bulletins) binder and discard the old version.
MORE INFORMATION
For more information regarding collection of cash items, please
contact Terry Campbell, (214) 922-6603, at the Dallas Office; Eloise Guinn,
(915) 521-8201, at the El Paso Branch; Luke Richards, (713) 652-1544, at the
Houston Branch; or Herb Barbee, (512) 978-1402, at the Antonio Branch.
San
For additional copies of this B a n k ’s notice or Operating Circular 8,
please contact the Public Affairs Department at (214) 922-5254.
Sincerely

Operating Circular
F e d e r a l

R e s e r v e

B a n k

of

D a l l a s

Collection of
Cash Items

Scope
Operating Circular 8 contains the terms and conditions under which this Bank will handle cash
items for collection and gives other instructions regarding the handling, return, and adjustment
o f cash items.

F e d e ra l R ese rve B a n k o f D allas

•feMe of Coateats*?
COLLECTION OF CASH ITEMS
Paragraphs
G eneral...............................................................................................

1-4

Items That We Handle as Cash Ite m s.............................................

5 -6

Items That We Do Not Handle as Cash Item s............................... 7-1 OB
Preparation of Cash Letters and Return Letters............................. 11-16
Indorsements
Responsibility for back of check
Direct sending to other Federal Reserve offices
Time Schedules and Availability of C re d it........................................17-19C
Immediate credit
Deferred credit
Items payable outside a state (foreign items)
Routing Numbers; R ecords.................................................................. 20-22
Delivery and Presentment..................................................................... 23-26
Payment for Cash Letters..................................................................... 27-33
Differences and adjustments
Missent items
Returned Checks....................................................................................34-45
Preparation of returned checks
Qualified returned checks; identification of depositary bank
Delivery to depositary bank
Payment for returned checks
Breach of Warranty— Cash Items and Returned Checks............................ 46
Bank’s Liability for Judgment and Expenses................................................. 47
Disputed Return Procedure..................................................................48-50

06-9 3

F e d e r a l R e s e r v e B a n k o f D a lla s

W»of entente t COLLECTION OF CASH ITEMS
(continued)
Paragraphs
Notice of N onpaym ent..................................................................... 51-63
Content of notice of nonpayment
Acceptance of notice by depositary bank
Provision of notice by this Bank
Telephone notice to this Bank
Fedwire notice to depositary bank
Other provisions
P ro test................................................................................................

64

Charges...............................................................................................

65

Missing or Destroyed Cash Items and Returned Checks............... 66-77
Mutilated cash letters and return letters
Cash items discovered missing or destroyed
Handling of photocopies of cash items
Receipt of both photocopy and original of cash item or
returned check
Returned checks discovered missing or destroyed
Handling of photocopies of returned checks, notices in lieu
of returns
Right to A m end..................................................................................

78

Appendix 1: U.S. Government Checks
Appendix 2: Postal Money Orders
Appendix 3: Redeemed Savings Bonds and Savings Notes
Exhibit 1: Letter of Authority to Deliver Cash Letters
and/or Return Letters
Exhibit 2: Bank’s Claim of Late Return
Exhibit 3: Paying Bank’s Response to Claim of Late Return
Exhibit 4: Paying Bank’s Notification Agreement

iv

F e d e r a l R e s e r v e B a n k o f D a lla s

06-9 3

General

and time schedules. We give credit for the item
in accordance with our time schedules.

1. Subpart A of Regulation J of the Board of
Governors of the Federal Reserve System,
Subpart C of Regulation CC of the Board, this
Operating Circular, and our time schedules
apply to the handling of all cash items that we
accept for forward collection, all returned checks
that we accept for return, and any form of
payment that we receive for such items. This
Operating Circular also contains instructions to
paying and collecting banks for handling and
paying cash items received from us and instruc­
tions to returning and depositary banks for
handling and paying returned checks received
from us. This Operating Circular is issued
pursuant to Sections 4, 13, 14(e), and 16 of the
Federal Reserve Act, the Expedited Funds
Availability Act, and related statutes and in
conformity with Regulations J and CC. It is
binding on each party interested in an item we
handle.
1A. This Operating Circular, however, is not
binding on a bank outside a state to which a
subsequent collecting bank presents or sends a
cash item payable outside a state (“foreign cash
item”).' For example, paragraphs 23 through 28
regarding off-premise presentment and payment
for cash letters, paragraph 30 regarding differ­
ences with a paying bank, paragraph 34 regard­
ing return by a paying bank, and paragraph 38
regarding identification of a returned check are
not binding on a paying bank outside a state with
respect to a foreign cash item. In addition, the
late-return procedure in paragraphs 48-50, the
rules on notice of nonpayment in paragraphs
51-63, and the handling of photocopies as cash
items in paragraphs 69-73 do not apply to and
are not available for foreign cash items. A
Reserve Bank may further modify the application
of this Operating Circular to foreign cash items
in an agreement with a subsequent collecting
bank.
2. Each Reserve Bank issues an operating
circular substantially similar to this one. When
we send a cash item or a returned check to
another Federal Reserve Bank, that Reserve Bank
handles the item subject to its Operating Circular

Operating
Circular

8

3. The definitions of terms set forth or incor­
porated in Regulation J, as well as terms defined
in Regulation CC, apply in this Operating
Circular, except as otherwise provided. “Bank”
means a depository institution as defined in
Section 19 of the Federal Reserve Act. “Item”
applies to a cash item and a returned check.
“Cash item” excludes a returned check, and
“returned check” refers to a cash item and a
check, as defined in Regulation CC, that is
returned by a paying bank. The terms “prior”
and “subsequent” with respect to a bank are used
in relation to our handling of an item. For
example, a subsequent collecting bank is an
institution that handles a cash item after we
handle it. Many terms used in this Operating
Circular have specialized meanings that have
developed through law, custom, and commercial
usage. Unless otherwise stated, all references to
“this Bank” are to our Dallas Office and our El
Paso, Houston, and San Antonio Branches.
4. This Operating Circular applies to any state
or political subdivision of a state to which we
present direct as cash items any bills, notes, or
warrants that are issued by the state or political
subdivision and that are payable in the Eleventh
Federal Reserve District. Each such issuer is
treated as a paying bank, and each day on which
the issuer is open for the regular conduct of its
affairs or the accommodation of the public is
treated as a “banking day” for the issuer.

It e m s T h a t w e H a n d l e
AS CASH ITEMS
5. A sender may send the following items to us
for handling as cash items, unless otherwise
provided in this Operating Circular:
A. checks payable in a state (as defined in
Section 210.2 of Regulation J), including
postdated checks, except checks that
cannot be collected at par;
B. government checks, postal money
orders, redeemed savings bonds, and
food coupons;2

1 U nder Section 210.2 of Regulation J, “state” means a state of the U nited States, the District of Columbia, Puerto Rico, or a
territory, possession, or dependency o f the United States.
2 The provisions that govern the collection o f government checks, postal money orders, and redeemed savings bonds are in
Appendixes 1, 2, and 3 of this circular. Provisions governing the collection o f food coupons are in Operating Circular 5.

06-93

F e d e ra l R ese rve B a n k of D allas

1

Operating
Circular

8

routing num ber4 of the paying bank (or
nonbank payor) and (2) except as
provided in our time schedules, with thej
dollar am ount of the item. We handle
such an item as a cash item, however,
when we judge that special circum­
stances justify such handling or when
the item is a foreign item;

C. other demand items, collectible at par in
funds acceptable to the Reserve Bank of
the Federal Reserve District in which the
items are payable, that we are willing to
accept as cash items;3and
D. demand items payable in Canada,
collectible at par in funds acceptable to
the last collecting Reserve Bank, that we
are willing to accept as cash items.
6. When we accept an instrument for credit to
our own account, the account of another Reserve
Bank, or any account on our books, we handle
the instrument as a cash item if it qualifies as a
cash item, even though it is sent to us by a sender
other than one defined as a sender in Section
210.2 of Regulation J.

It e m s T h a t W e d o n o t
a s Ca s h it e m s

H andle

7. A sender should not send to us an item
eligible for handling as a cash item under para­
graph 5
A. if a passbook, certificate, or other
document is attrcbed to the item;
B. if special instructions, including a
request for special advice of payment or
dishonor, accompany the item;

E. if the item, other than a foreign item,
does not state on its face the name and
city and state address of the paying bank
associated with the routing num ber on
the item; or
F.

if, except as provided in paragraphs
69-70 and 76 regarding photocopies,
the item does not (1) bear the routing
number of the paying bank in fractional
form in the upper right corner in at least
8-point Gothic type or (2) conform to
the dimension standards of the Ameri­
can National Standard “Specifications
for Placement and Location of MICR
Printing, X9.13” (September 1983)—
between 2% inches and 3% inches in
width and between 6 inches and 8%
inches in length. We handle such an
item as a cash item, however, when we
judge that special circumstances justify
such handling or when the item is a
foreign item.

C. if the item consists of more than a single
thickness of paper, except as provided in
paragraphs 69-70 and 76 regarding
photocopies, but we do handle as a cash
item a mutilated, erroneously encoded,
or other cash item contained in a carrier
that qualifies for handling by high-speed
check processing equipment;

8. A sender should not send to us as a cash
item an item that has been dishonored two or
more times. We reserve the right to return an
item if it has been dishonored once or if we judge
that special conditions require that it not be
handled as a cash item. We reserve the right to
return an item payable by, at, or through a bank
that has been reported closed.

D. if, except as provided in paragraphs
69-70 and 76 regarding photocopies,
the item has not been preprinted or
postencoded— in accordance with the
American National Standard “Specifica­
tions for Placement and Location of
MICR Printing, X9.13” (September
1983)— before we receive it (1) with the

9. Under Section 4-204(1) of the Uniform
Commercial Code, a collecting bank must send
items by reasonably prom pt methods. Accord­
ingly, we discourage indirect routing of cash
items. A sender should not send to us, or to
another Reserve Bank for our account, an item
that is payable in another District and that bears
the indorsement of a bank located in another

The Virgin Islands and Puerto Rico are deemed to be in the Second District; Guam, American Samoa, and the Northern
Mariana Islands are deemed to be in the Twelfth District (Regulation J, note 1).
4 «

2

.

i

„

Routing num ber” means a num ber authorized by the routing num ber policy o f the American Bankers Association.

F e d e ra l R ese rve B a n k of D allas

06-93

District if it is evident that the item has been
routed indirectly. A sender should not send to us
an item payable by, at, or through an office of the
sender.
10. If an item that we do not handle as a cash
item is sent to us in a cash letter, we reserve the
right, in our discretion, to charge the item back
and return it to the sender. We do not have any
responsibility for delay in handling as a cash item
an instrument that should not have been sent to
us as a cash item. We also reserve the right to
return and charge back a cash letter that does not
conform to the sorting requirements of this
Operating Circular and our time schedules.
10A. This Bank gives credit, subject to final
payment, for coupons from obligations of the
United States and its agencies and instrumentali­
ties as fiscal agent of the obligor. Senders may
send coupons from obligations of the Interna­
tional Bank for Reconstruction and Develop­
ment or the Inter-American Development Bank
directly to the Federal Reserve Bank of New York
for payment.
10B. This Bank does not generally collect
noncash items. Senders in this District may send
bonds, debentures, coupons, and similar securi­
ties to the Federal Reserve Bank of Atlanta,
lacksonville Branch, for collection as noncash
items after making arrangements with that
Reserve Bank for settlement. That Reserve Bank
has agreed to handle securities sent by senders in
this District, subject to its Operating Circular
governing the collection of securities. The
payment of securities sent by a Federal Reserve
Bank to a bank or nonbank payor in this District
may be governed by agreement with this Bank. If
a sender in this District desires that we handle a
noncash item (other than a security), the sender
must first obtain the prior approval of the
Manager of the Securities Department and
execute an appropriate agreement with us.

PREPARATION OF CASH LETTERS
R e t u r n Le t t e r s

and

11. All cash items and returned checks sent to us
may be listed by amount, without further
description, in tape listings accompanying cash
letters or return letters. All letters and tape
listings should be dated and identified with the
sender’s (or paying or returning bank’s) name
and nine-digit routing number, if any.

06-93

12. Each sender (or paying or returning bank)
should keep records permitting it to identify the
depositor or indorser on a cash item or returned
check so that the bank can take appropriate
action if the item is lost or destroyed. We do not
usually keep copies or descriptions of items. We
do not keep any records of items in endpointsorted cash letters or return letters that we handle
without our indorsement. We have no responsi­
bility for describing a lost or destroyed item that
we charge back to a bank or for maintaining
insurance coverage or obtaining from another
party reimbursement for a sender’s (or paying or
returning bank’s) costs or other loss, except as
provided in Appendix 1 concerning government
checks.
13. We require that cash items be sorted sepa­
rately from returned checks, except that a bank
that agrees to accept from us intermingled sorts
of cash items and returned checks sent to it or its
agent may send to us, and direct to other Reserve
Banks accepting intermingling, intermingled
sorts of cash items and returned checks in
accordance with our time schedules. We reserve
the right to require separate sorts of government
checks, postal money orders, redeemed savings
bonds, and food coupons. We reserve the right
to require banks located in the same city, town,
metropolitan area, or similar area to sort, list,
and package cash items payable in the same area
according to the office of the paying bank where
the items are payable. We reserve the right to
require separate sorts of foreign cash items that
are payable in U.S. funds and those that are
payable in other than U.S. funds. Our time
schedules contain other instructions for sorting
and listing items.

Indorsements
14. All cash items and returned checks sent to us
should be indorsed in accordance with the
requirements of Section 229.35 and Appendix D
of Regulation CC. If we receive a cash item
without the sender’s indorsement or a returned
check without the returning bank’s indorsement,
we may (a) present or send the item as if it bore
the indorsement, (b) place on the item the
missing indorsement and the date we received it,
or (c) return the item for proper indorsement.
We handle an endpoint-sorted cash letter and
return letter without indorsing the items in the
letter. We make the warranties stated in Section
210.6(b) of Regulation I by presenting or sending

F e d e ra l R e s e rv e B a n k of D a lla s

a cash item (and the warranties stated in Section
229.34 of Regulation CC by sending a returned
check), whether or not the item bears our
indorsement.

Responsibility for Back of Check
15. Guidelines concerning the back of checks are
the following:
A. A bank issuing a check drawn on us is
responsible for ensuring that the condi­
tion of the back of the check when
issued does not adversely affect the
ability of a bank to indorse the check
legibly in accordance with Section
229.35 and Appendix D of Regulation
CC. The issuing bank agrees to indem­
nify us for any loss or expense we incur
(including attorneys’ fees and expenses
of litigation) as a result of the condition
of the back of the check when issued.
B. We reserve the right to refuse to accept a
deposit of a check if, in our judgment,
the condition of the back of the check at
the time of the deposit adversely affects
our or another bank’s ability to indorse
the check legibly in accordance with
Section 229.35 and Appendix D of
Regulation CC. If we do accept the
check, the depositor is responsible for
the condition of the back of the check
and agrees to indemnify us for any loss
or expense we incur (including attor­
neys’ fees and expenses of litigation) as a
result of the condition of the back of the
check at the time of deposit.

Direct Sending to Other Federal Reserve Offices
16. A sender (or a paying or returning bank)
that maintains or uses an account with us and
that has cash items (or returned checks) payable
in another District, or in the territory of any
office of this Bank, may send the items directly to
the Federal Reserve office of that District or
territory under procedures we prescribe. Under
Sections 210.4(b) and 210.12(f) of Regulation J,
items sent direct are deemed to have been
handled by us. A sender or bank that, by ar­
rangement, delivers items payable in another
District to us, or to another designated location
for consolidated shipment, should give us prior
notice of any deviation from that arrangement.

T im e S c h e d u l e s a n d
AVAILABILITY OF CREDIT
17. We give immediate credit or deferred credit
for all items that we accept as cash items or
returned checks in accordance with our pub­
lished time schedules. For letters containing
items not sorted as to credit availability, we may
defer credit for the longest period prescribed in
our time schedules for any item enclosed.
18. Because, in many instances, our time
schedules do not show the actual time required
for collection or return, our advices cannot be
considered advices of actual payment on the
dates we make credit available. In all instances,
credit is subject to charge-back by us in the event
we do not receive payment in actually and finally
collected funds. We reserve the right to refuse to
permit a bank to withdraw or otherwise use any
credit (immediate or deferred) for a period that
is reasonable under the circumstances, including
a reasonable time for us to receive notice that
another bank seeks to recover from us under
Section 229.35(b) of Regulation CC.
19. We enter credit at full face value, in the
reserve account or other appropriate account, on
the day we receive a cash item or returned check,
as follows:

Immediate Credit
19A. Immediate credit qualifies at once as
reserves for purposes of Regulation D and is
available for use by the bank.

Deferred Credit
19B. The amount entered as deferred credit does
not qualify as reserves for purposes of Regulation
D and is not available for use by the bank until
the time specified in our time schedules.

Items Payable Outside a State (Foreign Items)
19C. For a foreign cash item payable in U.S.
funds, we give deferred credit for the full face
value of the item in U.S. funds. For a foreign
cash item payable in other than U.S. funds, we
give deferred credit in U.S. funds, based on the
exchange rate applicable on the date we deliver
the item to the subsequent collecting bank. In
handling a foreign cash item, we act solely as
agent for collection. The sender bears all risk of

F e d e ra l R ese rve B a n k of D allas

06-93

loss arising from exchange rate fluctuation
during the processing of a foreign cash item. Our
agreements with subsequent collecting banks
governing the collection of foreign items are
available on request. Senders should recognize
that credit is provisional and that the time for
return of foreign items may vary under foreign
law.

R o u t in g N u m b e r s; Re c o r d s
20. We may present or send a cash item, under
Section 210.6(a)(2) of Regulation J, on the basis
of any routing number or other designation of a
paying bank appearing on the item when we
receive it. We are not responsible for any delay
resulting from our acting on a designation of a
paying bank, whether inscribed by magnetic ink
or by other means, even if the designation is
inconsistent with another designation of the
paying bank on the item.
21. If, in our judgment, processing of an
unencoded or misencoded cash item requires it,
we may inscribe on the item, in magnetic ink or
otherwise, (a) the am ount of the item or (b) the
routing number of the paying bank (or nonbank
payor). The sender assumes the risk of loss
resulting from any delay caused by our inscribing
the item and presenting or sending it accord­
ingly, except in the case of an item that is not
amount-encoded and is classified as a cash item
in our time schedules.
22. In addition to the record-keeping provisions
of this Operating Circular (see paragraphs 12
and 75), U.S. Treasury regulations (Title 31 of
Code o f Federal Regulations, Part 103) require
that banks keep legible records of many items.
These regulations apply whether or not the item
is capable of being photocopied.

D e l iv e r y a n d P r e s e n t m e n t
23. We do not, by this Operating Circular or
otherwise, agree to present, or cause presentment
of, a cash item earlier than is required by the
Uniform Commercial Code. We have no
responsibility for giving notice to a sender of
anticipated delays in presentment or return of
cash items unless the delay is expected to involve
at least 10 paying banks and to last at least three
banking days.

the paying bank is located. For arrangements
involving delivery of cash letters to a processing
organization, execution of a Letter of Authority
to Deliver Cash Letters and/or Return Letters,
Form TR-411, is required (see Exhibit 1). A
paying bank may also pick up cash items at this
Bank by arrangement with us. The paying bank
is considered to receive a cash item when it is
delivered as requested or made available for
pickup as arranged.
25. A paying bank may request that delivery of
cash items be made at an off-premises location in
a different Federal Reserve office territory from
where the paying bank is located, as provided in
this paragraph. For arrangements involving
delivery of cash letters to a processing organiza­
tion, execution of the agreement in Form
TR-411 (Exhibit 1) is required.
A. In appropriate cases, we will attempt to
arrange public transportation, at the
paying bank’s expense, that ensures
delivery to the out-of-territory location
in the ordinary course on the same
banking day that delivery would be
made within the territory where the
paying bank is located (“same-day
delivery”).
B. If we arrange same-day delivery, the
paying bank is considered to receive the
cash items (1) when the items are
delivered to the out-of-territory location
as requested or (2) when the items are
shipped if the scheduled transportation
is canceled or rescheduled and we do not
arrange alternative same-day delivery.
C. If we do not arrange same-day delivery,
the paying bank may arrange for trans­
portation of the items to the out-ofterritory location, and the bank is
considered to receive the cash items
when we make the items available for
shipment as requested.
26. We may commingle items delivered to or
picked up by the paying bank or a bank’s agent
on behalf of that bank with items delivered to or
picked up by that agent on behalf of other banks,
unless otherwise requested by the paying bank.

PAYMENT FOR CASH LETTERS
24. A paying bank may request that delivery of
cash items be made at an off-premises location in
the same Federal Reserve office territory where
06-93

27. A paying bank must pay for all cash items
that it has received from us and not returned

F e d e ra l R ese rve B a n k of D allas

Operating
Circular

8

before the close of its banking day of receipt.5
Payment shall be made at par and
A. by debit to an account on our books;
B. by cash; or
C. in our discretion, by any other form of
payment.
The proceeds of any payment shall be made
available to us by the close of our banking day on
the banking day on which the paying bank
receives the items. If the paying bank’s banking
day of receipt is not a banking day for us,
payment shall be made by the close of our next
banking day; we may make appropriate adjust­
ments as of the day of receipt (unless that day is a
Saturday or Sunday) for purposes of computing
reserves under the Board’s Regulation D. Our
terms for payment for cash items are contained
in Operating Circular 12 of this Bank.
28. As provided in Section 210.9(a)(2) of
Regulation J, a paying bank that closes volun­
tarily on a day that is a banking day for us shall,
with respect to a cash item made available to the
paying bank on that day, either (a) pay the
amount of the item by the close of our banking
day on that day or (b) compensate for the value
of the float associated with the item and pay the
amount of the item on the banking day of receipt
of the item by the paying bank. A list of standard
Reserve Bank holidays, as well as other holidays
not considered voluntary (“mandatory non­
standard holidays”), is distributed annually by
this Bank. We may charge the account on our
books maintained or used by the paying bank for
the amount of the item on the day we make the
item available, unless the paying bank elects to
compensate for the float associated with the
item. The paying bank may elect to eliminate
float by “as-of adjustment” or pay for the float by
explicit charge, as we prescribe with respect to
interterritory float. An item is available to the
paying bank if we deliver it or are prepared to
deliver it as if the paying bank were open. A
paying bank that pays for an item made available

to it, or compensates for the float associated with
the item, is not considered to receive the item
until the bank’s next banking day, such as for
purposes of determining the deadline for return
of the item. We do not charge a paying bank on a
mandatory nonstandard holiday for items made
available on that day.
29. A subsequent collecting bank (other than a
Reserve Bank) that is paid for a cash item shall
make the proceeds available to us not later than
the close of our banking day on the day the
subsequent collecting bank receives the proceeds.

Differences and Adjustments
30. Unless a paying or depositary bank has
otherwise agreed with us, a paying or depositary
bank may pay for our cash letter or return letter
in an amount different from the total of the letter
if the accompanying items do not prove to the
amount of the letter. At the time of payment, the
bank should furnish a complete explanation of
the difference on the form we provide. We
request that banks not report adjustments of $1
or less. We adjust for an amount encoding error
on a cash item or a qualified returned check
(a) upon receipt from a sender or a bank, within
six calendar months from the date of the entry
relating to the item, of a request and a photocopy
of the front and back of the item showing the
error and (b) subject to receipt from the bank or
the sender of the item, as the case may be, of the
amount of the requested credit or refund.
31. We provide a statement of account to each
bank maintaining an account on our books. An
account holder must promptly advise us in
writing of an objection to an entry in our state­
ment of its account. An account holder that fails
to advise us of its objection within one calendar
year of the date of the entry (and any bank that
has used the account and has handled the cash
item or returned check to which the entry
relates) is deemed to have approved the entry,
and the statement of account is deemed finally
adjusted. Reserve Banks generally keep records
for only one year. This paragraph does not

3A paying bank is deemed to receive a cash item on its next banking day if it receives the item
(1) on a day other than a banking day for it or
(2) on a banking day for it b u t
(a) after its regular banking hours;
(b) after a cutoff hour established by it in accordance with the Uniform Commercial Code; or
(c) during afternoon or evening periods when it is open for limited functions only.

6

F e d e ra l R e s e rv e B a n k of D a lla s

06-93

relieve an account holder from the duty of using
due diligence in examining statements of ac­
count sent to it and of notifying us immediately
on discovery of an error. Further, this paragraph
does not relieve a Reserve Bank from liability for
breach of warranty on an item to which an entry
relates. Section 229.38(g) of Regulation CC
requires that any action for a violation of Regula­
tion CC be brought within one year after the date
of the occurrence of the violation. Section
210.6(c) of Regulation J requires that action on a
claim against a Reserve Bank for failure to
exercise ordinary care or to act in good faith
under Regulation J be commenced within two
years after the claim accrues.

Missent Items
32. If we send to a bank, on the understanding
that it is the paying bank, a cash item that does
not contain either the routing number or the
name of the bank as paying bank and the bank
determines not to pay the item, the bank shall
send the item back to us promptly on a withoutentry basis, with a request for credit or refund
and a notation clearly indicating the reason for
nonpayment, and we will promptly grant the
credit or refund. The bank shall not send the
item to us in a cash letter or return letter.
33. A check, as defined in Section 229.2(k) of
Regulation CC, that contains the routing num ­
ber of a bank is considered to be payable by the
bank, even if the check does not contain the
name of the bank or contains the name of
another bank. Therefore, a paying bank shall
handle a cash item on which it is identified only
by routing num ber as a cash item drawn on it.
The paying bank is encouraged to invalidate any
erroneous use of its MICR (magnetic ink
character recognition) routing number on the
face of the item before return by obliterating only
the start and stop symbols of the routing number
(and by canceling any erroneous fractional
routing number) to prevent redelivery to the
paying bank.

RETURNED CHECKS
34. A paying bank may return a cash item
received from us and for which it has previously
made payment only if it returns the item within
the deadline of Section 210.12(a) of Regulation J,
Section 229.30(c) of Regulation CC, and the
Uniform Commercial Code. A paying bank may
return to us a cash item received from us without
making payment to us if it returns the item
06-93

before the close of its banking day of receipt. If
the paying bank receives a settlement from a
returning bank for a cash item received from us
and returned by it but for which it has not
previously made payment to us, it shall immedi­
ately remit the settlement to us. A bank may
return to us a foreign cash item received from us;
and we, any subsequent returning bank, and the
depositary bank shall handle the item as a
returned check under Regulation CC, Regulation
J, and this Operating Circular.

Operating
Circular

8

35. A paying or returning bank may send to us a
returned check not handled by us for forward
collection only if it sends the returned check
within the deadline of Regulation CC and the
Uniform Commercial Code. A bank shall not
intermingle returned checks with cash items
except as provided in paragraph 13.
36. A paying or returning bank that sends a
returned check to us and receives settlement for
the returned check (a) warrants to us and
subsequent parties that its return of the check
was within the deadline of Regulations CC and J
and the Uniform Commercial Code and
(b) agrees to indemnify us for any loss or ex­
pense we incur (including attorneys’ fees and
expenses of litigation) as a result of its breach of
this warranty. The paying or returning bank also
makes the other warranties and agreements set
forth in Section 210.12 of Regulation J and in
Section 229.34 of Regulation CC.
37. We do not, by this Operating Circular or
otherwise, agree to handle a returned check more
expeditiously than is required by Section 229.31
of Regulation CC or agree to convert a returned
check into a qualified returned check. We have
no responsibility for giving notice of anticipated
delays in return of returned checks unless the
delay is expected to involve at least 10 depositary
banks and to last at least three banking days.
37A. A paying or returning bank that is unable
to identify the depositary bank on a returned
check may send the check to us, as provided in
Section 229.30(b) or Section 229.31(b) of
Regulation CC. The check must not be sent as a
qualified returned check.
Preparation o f Returned Checks
38. A paying bank shall clearly write or stamp on
the face of a returned check that it is a returned
check and the reason for nonpayment as pro­
vided in Section 229.30(d) of Regulation CC. We

F e d e ra l R e s e rv e B a n k of D allas

7

may handle the returned check even if it does not
indicate the reason for nonpayment. We reserve
the right to send back to the paying or returning
bank a returned check if the depositary bank has
been reported closed. Paragraphs 11-19 and
30-31 apply to the preparation and sending of,
and the availability of credit and adjustments for,
returned checks.

Delivery to Depositary Bank
40. We deliver returned checks to a depositary
bank at the same location and subject to the
same terms under which we deliver cash items
payable by the bank, except as follows. If we do
not usually deliver cash items to the bank for
payment, we deliver returned checks to the
depositary bank in accordance with Section
229.32(a) of Regulation CC, which may include
delivery by mail. If a depositary bank requests
delivery of returned checks at a location other
than the location to which we deliver cash items
or other than by mail, we will deliver returned
checks to a location on an existing Reserve Bank
courier route in appropriate cases or will arrange
delivery as otherwise agreed with the depositary
bank. A depositary bank may also arrange to pick
up returned checks at offices of this Reserve
Bank.

Qualified Returned Checks;
Identification of Depositary Bank
39. We may rely on
A. the amount of a qualified returned check
encoded in magnetic ink,
B. the identification of an item as a quali­
fied returned check by a “2” properly
encoded in magnetic ink in position 44
of the MICR line,

41. We deliver returned checks to a depositary
bank or its agent separately sorted from cash
items, unless we and the depositary bank agree
otherwise in accordance with paragraph 13.

C. the identification of the depositary bank
by nine-digit routing number in mag­
netic ink on a qualified returned check,
and

Payment for Returned Checks
D. the identification of the depositary bank
by nine-digit routing num ber on the
face of a returned check received in a
separate sort of items requiring such
identification,
whether or not the am ount or identification is
consistent with any other information on the
returned check. We reserve the right to test
whether an item represented to be a qualified
returned check is properly machine-readable
and, also, to handle a nonmachinable item as a
raw return or to return it to our transferor. The
paying or returning bank from which we receive
the check agrees to indemnify us for any loss or
expense we incur (including attorneys’ fees and
expenses of litigation) as a result of our reliance
on such am ount or identification or as a result of
any delay in handling an item represented to be a
qualified returned check that is not able to be
processed on our automated check processing
equipment or that does not pass our testing
procedures.

42. A depositary bank must pay for a returned
check in full so that the proceeds are available to
us by the close of our banking day on the bank­
ing day the depositary bank receives the returned
check.6 If the depositary bank’s banking day of
receipt is not a banking day for us, payment shall
be made by the close of our next banking day; we
may make appropriate adjustments as of the day
of receipt (unless that day is a Saturday or
Sunday) for purposes of computing reserves
under the Board’s Regulation D. A depositary
bank that closes voluntarily on a day that is a
banking day for us shall pay for a returned check
or compensate for the float as provided with
respect to cash items in paragraph 28 of this
Operating Circular.
43. A depositary bank shall pay us for a returned
check in the same manner it pays us for a cash
item received for payment. If we do not usually
send cash items to the depositary bank for
payment, the depositary bank shall pay

A depositary bank is deemed to receive a returned check on its next banking day if it receives the item
(1) on a day other than a banking day for it or
(2) on a banking day for it b u t after its regular banking hours.

F e d e ra l R e s e rv e B a n k of D a lla s

06-93

A. by debit to an account on our books;
B. by cash;
C. by wire transfer; or
D. in our discretion, by any other form of
payment.
44. A subsequent returning bank (other than a
Reserve Bank) that has paid for a returned check
shall make the proceeds available to us not later
than the close of our banking day on the day the
subsequent returning bank receives the proceeds
and shall pay in the same m anner as for cash
items received for payment.
45. If we send a returned check or notice of
nonpayment to a bank, on the understanding
that it is the depositary bank, and the bank
determines that it is not the depositary bank but
the bank is able to identify the depositary bank,
we encourage the bank to send the returned
check or notice promptly to the depositary bank.
If the bank is unable to identify the depositary
bank, the bank shall promptly send the check or
notice back to us on a without-entry basis, with a
request for credit or refund, and we will
promptly grant the credit or refund. The bank
shall not send the returned check to us in a cash
letter or return letter.

Br ea c h o f W a r r a n t y —
a n d Re t u r n e d Ch eck s

C a s h it e m s

46. A bank that has received a cash item or
returned check from us and that had paid us for
the item may request, on a without-entry basis, a
credit or refund based on a claim of breach of
warranty, including a claim by a paying bank of
forged indorsement with affidavit of forgery. We
make refund to the requesting bank and charge
the bank from which we received the cash item
or returned check only if the latter bank specifi­
cally authorizes us to do so. The bank shall not
send the item to us in a cash letter or return
letter.

BANK’S LIABILITY FOR lUDGMENT
Ex p e n s e s

and

47. Under Sections 210.5 and 210.12 of Regula­
tion J, we may charge the account maintained or
used by the bank from which we have received a
cash item or returned check for the amount of
any judgment and attorneys’ fees and expenses

06-93

incurred by us in certain actions against us or
another Reserve Bank (or in certain actions
where defense is tendered to us or another
Reserve Bank), including actions alleging breach
of warranty, if we have tendered defense of the
action to the bank. We assume no responsibility
for defending the action if the bank does not
accept tender of the defense.

D is p u t e d Re t u r n P r o c e d u r e
48. If a depositary bank that settles for a re­
turned check in the am ount of $100 or more
believes that the paying bank has returned the
check late and breached its warranty under
Section 229.34(a)(1) of Regulation CC, the bank
may dispute the return by furnishing us (or its
Reserve Bank) with the returned check and a
signed statement that the bank believes the
paying bank did not return the check within the
paying bank’s deadline under the Uniform
Commercial Code, Regulation J, or Section
229.30(c) of Regulation CC. This procedure may
not be used unless the item was handled by this
Bank or another Reserve Bank either for forward
collection as a cash item or for return as a
returned check. The procedure may be used only
once and only with respect to the first time the
check was returned by the paying bank. The
statement must be on a form provided by this
Bank and must be sent by the bank within two
calendar months after the date the returned
check was received by the depositary bank. Upon
receipt of the statement, we credit the amount of
the returned check to the bank’s account (or to
the account of the forwarding Reserve Bank). We
also charge that amount to the account of, and
send the returned check and the statement to,
the paying bank or the paying bank’s Reserve
Bank.
49. We will revoke the credit given to the
disputing bank and recredit the paying bank or
other Reserve Bank
A. if, for any reason, we cannot obtain the
amount of the credit from the paying
bank or other Reserve Bank; or
B. if we (or another Reserve Bank) receive
from the paying bank— within 20
banking days, of the Reserve Bank, after
we (or the other Reserve Bank) sent the
check and the bank’s statement to the
paying bank— the returned check and a
statement, on a form provided by us,

F e d e ra l R e s e rv e B a n k of D a lla s

(1) that is signed by an officer of the
paying bank;

Additional nonbanking days may be observed by
the depositary bank.

(2) that says the paying bank returned
the check within its deadline under
the Uniform Commercial Code,
Regulation J, or Section 229.30(c) of
Regulation CC; and

52. A paying bank may provide notice of
nonpayment by any reasonable means, including

(3) that shows the banking day of
receipt and the date of return of the
check by the paying bank and
explains any difference in dates
exceeding one banking day.
50. In handling disputed return forms, we
assume no responsibility for determining
whether the paying bank returned a check within
its deadline under the Uniform Commercial
Code, Regulation J, or Section 229.30(c) of
Regulation CC. A bank m aybe subject to
criminal penalties under federal and/or state law
for knowingly making a false statement to
influence the action of a Reserve Bank in grant­
ing a credit. We undertake to handle forms and
make entries under the dispute procedure within
a reasonable time after receipt but not within the
time frames for handling an item.

A. return of the returned check to the
depositary bank;
B. telephone call or telex or other form of
telegraph to the depositary bank; or
C. return of the returned check to us,
telephone call to us, or Fedwire to the
depositary bank, with a request that we
forward notice of nonpayment, as
provided below.

Content of Notice of Nonpayment
53. Notice of nonpayment must include the
following:
A. name and routing number of the paying
bank,
B. name of the payee(s),
C. am ount of the item,

N o t ic e o f N o n p a y m e n t
51. A paying bank that determines to return a
returned check in the amount of $2,500 or more
m ust provide notice of nonpayment to the
depositary bank under Section 229.33 of Regula­
tion CC. The paying bank must ensure that the
notice is received by the depositary bank by 4:00
p.m. (local time for the depositary bank) on the
second business day following the banking day
on which the check was presented to the paying
bank. If the day on which the paying bank is
required to provide notice is not a banking day
for the depositary bank, the notice m ust be
received by the depositary bank on its next
banking day. The following days are not consid­
ered business or banking days for purposes of the
deadline for notice of nonpayment: Saturdays
and Sundays, January 1, the third Monday in
January, the third Monday in February, the last
Monday in May, July 4, the first Monday in
September, the second Monday in October,
November 11, the fourth Thursday in Novem­
ber, and December 25. If January 1, July 4,
November 11, or December 25 falls on a Sunday,
the next following Monday also is not considered
a business or banking day for this purpose.

D. date of the depositary bank’s
indorsement,
E. account num ber of the customer(s) of
the depositary bank,
F. branch name or num ber of the deposi­
tary bank from its indorsement,
G. trace number associated with the
indorsement of the depositary bank, and
H. reason for nonpayment.
The notice may include other information from
the check that may be useful in identifying the
check and the customer. A written notice must
include the name and routing num ber of the
depositary bank from its indorsement. If the
paying bank is not sure of a piece of information,
it shall include the required information to the
extent possible and identify questionable infor­
mation with question marks. If the paying bank
cannot identify the depositary bank, it is autho­
rized but not required to give notice to the

F e d e ra l R e s e rv e B a n k of D a lla s

06-93

earliest collecting bank it can identify, indicating
that it questions whether the bank is the
depositary bank.

Acceptance of Notice by Depositary Bank
54. The depositary bank shall accept notices
during its banking day
A. at the telephone or telegraph number
indicated in its indorsement or, if the
num ber is not present or legible, at the
general-purpose telephone number or
telegraph number of its head office or
the branch indicated in the indorsement;
B. at any other telephone or telegraph
number set up by the bank for receipt of
notice of nonpayment; and
C. in the case of written notice,
(1) at a location at which presentment
of checks for forward collection is
requested or
(2) (a) at a branch, the head office, or
other location consistent with
the name and address in the
indorsement;
(b) if no address appears in its in­
dorsement, at the branch or the
head office associated with the
routing num ber of the bank in
its indorsement, or
(c) if no routing number or address
appears in its indorsement, at
any branch or the head office of
the bank.
The depositary bank may transfer a telephone
call and may use a recording device.

Provision of Notice by This Bank
(Physical Item Service)
55. A paying bank may request us to provide
notice of nonpayment on its behalf by signing
and delivering to us a letter in the form of
Exhibit 3. The request shall apply to all returned
checks in the amount of $2,500 or more for
which notice of nonpayment is required, that are
returned by the paying bank to us, and that are
separately sorted and identified as checks for
which notice is desired (“applicable returned
06-93

checks”). If we receive applicable returned
checks by our cutoff hour for physical item
notice, as set forth in our time schedules, on a
banking day for us, we will provide notice of
nonpayment to the depositary bank by 4:00 p.m.
(local time for the depositary bank) that day or
on the next banking day if that day is not a
banking day for the depositary bank. For the
paying bank to comply with its obligation under
Section 229.33 of Regulation CC, we must
receive the returned check no later than our
cutoff hour on our second banking day following
the banking day of receipt of the check by the
paying bank.
56. Upon our acceptance of such a request,
beginning on an agreed-on effective date, we will
provide notice of nonpayment for applicable
returned checks received by our cutoff hour on
behalf of the paying bank under the standard of
care and measure of damages set forth in Section
210.38 of Regulation CC. Otherwise, we will
handle applicable returned checks as provided
elsewhere in Regulations CC and J and this
Operating Circular. We will provide notice of
nonpayment for applicable returned checks
received after our cutoff hour for notice of
nonpayment as if the checks had been received
before our cutoff hour on our next banking day,
and we shall have no responsibility for loss
caused by the failure of the paying bank to meet
our cutoff hour. The paying bank itself should
provide notice of nonpayment to the depositary
bank if the paying bank learns that we have not
received applicable returned checks by our cutoff
hours, and it should indicate to the depositary
bank that the notice may be duplicated by us.

Telephone Notice to This Bank
( Telephone Notice Service)
57. A paying bank may request us to forward to
the depositary bank notice of nonpayment given
by telephone to us by signing and delivering to
us a letter in the form of Exhibit 3. The request
shall apply to all returned checks for which
notice of nonpayment is telephoned to us. If we
receive telephone notice by our cutoff hour for
telephone notice, as set forth in our time sched­
ules, on a banking day for us, we will forward
notice of nonpayment to the depositary bank by
4:00 p.m. (local time for the depositary bank)
that day or on the next banking day if that day is
not a banking day for the depositary bank. For
the paying bank to comply with its obligations
under Section 229.33 of Regulation CC, we must
receive the notice no later than our cutoff hour

F e d e r a l R e s e r v e B a n k of D a l l a s

on our second banking day following the bank­
ing day of receipt of the check by the paying
bank.
58. Upon our acceptance of such a request,
beginning on an agreed-on effective date, we will
forward notice of nonpayment received by our
cutoff hour on behalf of the paying bank under
the standard of care and measure of damages set
forth in Section 229.38 of Regulation CC. We
will forward notice of nonpayment received after
our cutoff hour as if the telephone notice had
been received before our cutoff hour on our next
banking day, and we shall have no responsibility
for loss caused by the failure of the paying bank
to meet our cutoff hour. The paying bank itself
should provide notice of nonpayment to the
depositary bank if the paying bank is unable to
meet our cutoff hour.

Fedwire Notice to Depositary Bank
(Fedwire System Service)
59. A paying bank may request us to forward to
the depositary bank notice of nonpayment given
by Fedwire in proper format by signing and
delivering to us a letter in the form of Exhibit 3.
If we receive Fedwire notice by our cutoff hour
for Fedwire notice, as set forth in our time
schedules, on a banking day for us, we will
forward notice of nonpayment to the depositary
bank by 4:00 p.m. (local time for the depositary
bank) that day or on the next banking day if that
day is not a banking day for the depositary bank.
For the paying bank to comply with its obliga­
tions under Section 229.33 of Regulation CC, we
must receive the notice no later than our cutoff
hour on our second banking day following the
banking day of receipt of the check by the paying
bank. We handle Fedwire notice under the
standard of care and measure of damages set
forth in Section 229.38 of Regulation CC. We
will forward notice of nonpayment received after
our cutoff hour as if the Fedwire notice had been
received before our cutoff hour on our next
banking day, and we shall have no responsibility
for loss caused by the failure of the paying bank
to meet our cutoff hour. The paying bank itself
should provide notice of nonpayment to the
depositary bank if the paying bank is unable to
meet our cutoff hour.

check drawn on a state or a unit of general local
government that is not payable through or at a
bank. Also, notice need not be given for a check
deposited in a depositary bank that does not
maintain transaction accounts.
61. If a paying bank provides, or requests us to
forward, a notice and subsequently determines to
pay an item, the paying bank should provide to
the depositary bank a second notice as soon as
reasonably possible. The second notice should
indicate that it is a second notice canceling a
previous notice and should contain all the
information in the original notice to enable the
depositary bank to match the second notice with
the original notice.
62. A depositary bank that uses an electronic
link with us for purposes of wire transfers of
funds under Subpart B of 12 C.F.R. Part 210 is
deemed to authorize us to provide notice to it by
means of that link or another electronic link
agreed to by us. We are not responsible for a
delay in sending a notice if the delay results from
the depositary bank’s failure to manage its link so
as to permit us to send notices to it through the
close of Fedwire. We may record telephone calls
in connection with a notice of nonpayment.
63. We have no responsibility for giving or
correcting a notice of nonpayment if the notice is
not properly given by the paying bank except to
the extent provided above with respect to a
notice we provide or forward on behalf of the
paying bank.

PROTEST
64. Reserve Banks shall not protest any returned
check, whether or not drawn or payable at a
place not within a state. Each Reserve Bank and
collecting and paying bank shall disregard any
special instructions on protest noted on cash
letters or otherwise transmitted with a cash item.
A sender may instruct a Reserve Bank to provide
for protest of a cash item (other than a govern­
ment check, postal money order, redeemed
savings bond, or food coupon) only if the sender
sends the item to us for collection and credit as
an individual noncash item, with the instructions
noted in the letter of transmittal.

Charges

Other Provisions
60. Notice of nonpayment should not be given
for a returned check drawn on the U.S. Treasury,
for a U.S. Postal Service money order, or for a

65. Our schedule of charges shows the charges
imposed for handling cash items, returned
checks, and notices of nonpayment and for

F e d e ra l R e s e rv e B a n k of D a lla s

06-93

related services. We may make the charge to the
account maintained or used by the bank re­
questing the service.

M is s in g o r D e s t r o y e d
a n d Re t u r n e d Ch e c k s

C a s h it e m s

Mutilated Cash Letters and Return Letters
66. A bank that receives from us a cash letter or
return letter in a mutilated condition should
telephone us before attempting to process any
part of it. Sometimes, tracing and identification
of mutilated or destroyed items can be expedited
when the letter is returned to us intact.

Cash Items Discovered Missing or Destroyed
67. We credit or refund the amount paid for a
cash item if a subsequent collecting bank or the
paying bank reports that it discovered during
initial proving that the item was missing or
knows that the item was missing or destroyed in
transit to a subsequent collecting bank or the
paying bank. We will credit or refund the
amount only if we (or a subsequent collecting
bank that promptly sends the report to us)
receive the report within five banking days (of
the reporting bank) from the date of receipt of
the cash letter that listed the item.
68. We charge back to the sender the am ount of
a cash item (a) that we discover to be missing or
(b) that a subsequent collecting bank or paying
bank reports to be missing or destroyed, as
provided in paragraph 67.

Handling of Photocopies of Cash Items
69. We handle a correctly prepared photocopy
as a cash item through our Adjustments Division
if we (or a prior collecting Reserve Bank) receive
the photocopy and a copy of the advice of
charge-back or request within 20 banking days
(of the Reserve Bank) from the day we (or the
prior Reserve Bank) charged back the original
item or requested the photocopy. The prior
Reserve Bank should send the photocopy and
advice to us when received.
70. If a cash letter is lost or destroyed in transit
to the first processing Reserve Bank, we handle
correctly prepared photocopies of the items as
cash items in a photocopy cash letter qualified
for automated handling if (a) the photocopy cash
letter is identified as containing photocopies of
items from a lost or destroyed shipment and
06-93

(b) we (or a prior collecting Reserve Bank)
receive the photocopy cash letter within six
calendar months after the date of the lost or
destroyed cash letter. A sender should not send a
photocopy cash letter to us unless the sender has
determined, after making good faith inquiries,
that a substantial num ber of the cash items in the
lost or destroyed cash letter remain unpaid.
71. We present or send a photocopy as a cash
item subject to all the rules as to payment and
return of cash items, except for the requirement
of notice of nonpayment and as otherwise
provided in this paragraph and except as pro­
vided for photocopies of returned checks in
paragraphs 76-77. A paying bank has the right to
return a photocopy through our Adjustments
Division within 20 banking days from its bank­
ing day of receipt
A. if the drawer has refused to authorize
payment of the photocopy or the paying
bank has been unable to contact the
drawer, and the paying bank returns the
photocopy and a signed statement to
that effect; or
B. if the original cash item was paid and the
paying bank returns the photocopy, a
copy of the front and back of the paid
original cash item, and a signed state­
m ent that the original was paid, together
with the name and routing number, if
any, of the bank or person from which,
and the date on which, the original was
received. If the original was received
from us, the paying bank should include
the date of the cash letter and the
amounts of the items listed before and
after the original item, the total of the
cash letter and the batch or package that
contained the original, and the sequence
num ber of the original.
72. A correctly prepared photocopy must be a
legible copy of the front and back of the cash
item and must bear the sender’s current
indorsement and the following or an equivalent
signed legend:
This is a photocopy of the original check that
we indorsed and that was reported missing
or destroyed in the regular course of bank
collection. We guarantee all prior and any
missing indorsement and the validity of this
copy. Upon payment of this copy in lieu of
the original check, we agree to hold each

F e d e ra l R ese rve B a n k of D allas

Operating
Circular

8

collecting bank and the payor bank harmless
from any loss suffered if payment is stopped
on the original check and the original check
remains unpaid.
73. We assume no responsibility for determining
whether the return of a photocopy is timely; nor
do we assume any responsibility for determining
whether a report by another bank of a missing or
destroyed cash item, a statement regarding the
handling of a photocopy, or a photocopy of a
cash item is correct. We handle, on a withoutentry basis, a report of a missing or destroyed
cash item received after the time set forth in
paragraph 67. We undertake to handle reports
and photocopies and to make entries with
respect to missing or destroyed cash items within
a reasonable time after receipt but not within the
time frames for handling an item.

Receipt of Both Photocopy and Original
of Cash Item or Returned Check
73A. If a paying or depositary bank has paid an
original item and subsequently receives from us
and pays a photocopy of the item or has paid a
photocopy and subsequently receives from us
and pays the original item, that bank may send to
us, within six months of the date of our charge
and on a without-entry basis, the photocopy or
the original item, whichever was paid later. The
photocopy must be sent with a photocopy of the
front and back of the original item, and the
source of receipt information specified in
paragraph 71B for both items. The original item
must be sent with a photocopy of the paid
photocopy, and the source of receipt informa­
tion specified in paragraph 71B for both items.

Returned Checks Discovered Missing or Destroyed
74. We credit or refund the amount charged to a
subsequent returning or depositary bank for a
returned check if that bank reports that it
discovered during initial proving that the check
was missing or destroyed or knows that the
check was missing or destroyed in transit to a
subsequent returning bank or depositary bank.
We will credit or refund the amount only if we
(or a subsequent returning bank that promptly
sends the report to us) receive the report within
five banking days (of the reporting bank) from
the date of receipt of the return letter that listed
the check.
75. A paying or returning bank (other than a
Reserve Bank) that sends a returned check to a
14

Reserve Bank shall retain a photocopy of the
returned check. We charge back to the paying or
returning bank the am ount of a returned check
(a) that we discover to be missing or (b) that a
subsequent returning or depositary bank reports
to be missing or destroyed, as provided in
paragraph 74.

Handling of Photocopies of Returned Checks,
Notices in Lieu of Returns
76. We handle as a returned check through our
Adjustments Division a legible photocopy of a
returned check (front and back) or, if a photo­
copy is not available to the paying or returning
bank, a written notice of nonpayment containing
the information specified in paragraph 53. If we
charged back the returned check to the paying or
returning bank under paragraph 75 or requested
the photocopy, we (or a prior returning Reserve
Bank) must receive the photocopy or notice and
a copy of the advice of charge-back or request
within 20 banking days (of the Reserve Bank)
from the day we (or the prior Reserve Bank)
charged back the returned check or requested the
photocopy. The prior Reserve Bank should send
the photocopy and advice to us when received.
The copy or notice shall clearly state that it is a
“Notice in Lieu of Return” and should not
contain the legend set forth in paragraph 72. By
sending a Notice in Lieu of Return to us for
credit, a paying or returning bank warrants that
it has not received credit for the returned check
and makes the warranties set forth in Section
229.34 of Regulation CC. The depositary bank
may return a photocopy through our Adjust­
ments Division within 20 banking days from its
banking day of receipt if the original returned
check was paid and the depositary bank returns a
copy of the front and back of the paid original
returned check and a signed statement that the
original was paid, together with the information
required in paragraph 71B.
76A. If a returned check letter is lost or de­
stroyed in transit to the first processing Reserve
Bank, we handle legible photocopies or notices
of nonpayment, identified as Notices in Lieu of
Returns, in a photocopy returned check letter
qualified for automated handling if (a) the
photocopy returned check letter is identified as
containing photocopies or notices of items from
a lost or destroyed shipment and (b) we (or a
prior returning Reserve Bank) receive the
photocopy returned check letter within six
calendar months after the date of the lost or
destroyed returned check letter. A returning

F e d e ra l R e s e rv e B a n k of D allas

06-93

Operating
bank should not send a photocopy returned
check letter to us unless the bank has deter­
mined, after making good faith inquiries, that a
substantial num ber of the returned checks in the
lost or destroyed returned check letter have not
been returned to the depositary bank.

Circular

8

77. We assume no responsibility for determin­
ing whether a report by another bank of a
missing or destroyed returned check, a statement
regarding payment of the original returned
check, or a photocopy of a returned check is
correct. A photocopy of a returned check shall
not be sent to a Reserve Bank for collection as a
cash item. We handle, on a without-entry basis, a
late report of a missing or destroyed returned
check. We undertake to handle reports with
respect to missing or destroyed returned checks
within a reasonable time after receipt but not
within the time frames for handling an item.

Rig h t t o A m e n d
78. We reserve the right to amend this Operat­
ing Circular and any appendix, exhibit, or
supplement to it at any time.

06-93

F e d e ra l R e s e rve B a n k of D a lla s

15

A P P E N D IX 1
U.S. GOVERNMENT CHECKS
We handle checks drawn on the U.S. Treasury ("government checks") as cash items
under Treasury Department Circular No. 21 (Title 31 of Code o f Federal Regulations, Part 240).
Copies of that circular will be furnished upon request. As to matters that circular does not
cover, Regulation J, this Operating Circular, and our time schedules apply.
We give immediate credit, subject to payment in actually and finally collected funds, for
government checks as provided in our time schedules. After we handle government checks as
fiscal agent of the United States under Treasury requirements, the checks are subject to exami­
nation and payment by the Treasury. We may reimburse a sender for its reasonable costs of
reconstructing a government check cash letter lost or destroyed in transit between Federal
Reserve offices.
Section 210.12 of Regulation J, relating to the return of cash items by paying banks, does
not apply to government checks. If the Treasury refuses payment of a government check upon
first examination and returns the check, or a photocopy, to us as outlined in Treasury Circular
No. 21, we charge back the amount of the check to the sender and credit that amount to the
Treasury. We have no responsibility to the sender or another owner or holder for the nonpay­
ment and return by the Treasury of a government check or photocopy. The expeditious return
and notice of nonpayment requirements of Regulation CC do not apply to government checks,
and the U.S. government is not a paying bank under Regulation CC.
The Treasury Department is generally not required to pay a government check (a) issued
on or after October 1, 1989, unless it is negotiated to a financial institution within one year after
the date of issue or (b) issued before October 1, 1989, unless it was negotiated to a financial
institution no later than October 1, 1990, as provided in Treasury Circular No. 21.
If the Treasury determines that a government check has been paid over a forged or
unauthorized indorsement, the Treasury may reclaim the amount of the check from the pre­
senting bank or prior indorser within one year after the date of credit by this Bank, as provided
in Treasury Circular No. 21. This period is extended by 180 days if a timely claim is made
against the government under 31 U.S.C. 3702. Under 31 U.S.C. 3702, a claim on a government
check must be made to the issuing agency within one year after the date of issuance or within
one year after October 1, 1989, whichever is later. Under 31 U.S.C. 3712, an action by the
government to enforce liability on a forged or unauthorized signature or indorsement on, or a
change in, a government check generally must be commenced within one year after present­
ment of the check. This period is extended by three years if the government gives written
notice of a claim one year after presentment of the check.

06-93

F e d e ra l R e se rv e B a n k of D a lla s

Operating
Circular

8

A P P E N D IX 2
POSTAL MONEY ORDERS
We handle postal money orders (U.S. postal money orders, U.S. international postal
money orders, domestic-international postal money orders) as cash items under an agreement
between the U.S. Postal Service and the Reserve Banks as depositaries and fiscal agents of the
United States pursuant to authorization of the Secretary of the Treasury. As to matters that
agreement does not cover, Regulation J, this Operating Circular, and our time schedules apply.
We give immediate credit for postal money orders as provided in our time schedules. The
credit becomes final between us and the sender when we debit the amount of the money
orders against the general account of the U.S. Treasury under symbol numbers assigned by it.
The agreement between the Postal Service and the Reserve Banks provides that (1) the
Postal Service may make no claim against or through a Reserve Bank for refund or otherwise
with respect to a postal money order debited against the general account of the Treasury (other
than a claim based on the negligence of a Reserve Bank); (2) the Postal Service will deal di­
rectly with the bank or the party against which the claim is made; and (3) the Reserve Bank will
assist the Postal Service in asserting the claim, including making any relevant evidence in its
possession available to the Postal Service.
Section 210.12 of Regulation J, relating to the return of cash items by paying banks, does
not apply to postal money orders.

06-93

F e d e ra l R e se rv e B a n k of D a lla s

Operating
Circular

8

A P P E N D IX 3
REDEEMED SAVINGS BONDS AND SAVINGS NOTES
We handle redeemed Series A, B, C, D, E, and EE savings bonds and savings notes
("savings bonds") as cash items under Treasury Department Circular No. 750 (Title 31 of Code
o f Federal Regulations, Part 321). Copies of that circular will be furnished upon request. As to
matters that circular does not cover, Regulation J, this Operating Circular, and our time sched­
ules apply.
Savings bonds sent to us as cash items may be sent in mixed cash letters containing
checks and other cash items or in separately sorted cash letters containing only redeemed
savings bonds. Each cash letter must show the name, address, and nine-digit routing/transit
number (ABA number) of the sender, the date of delivery to the Reserve Bank, the total number
of pieces transmitted, the value of each bundle in the cash letter, and the total value of the cash
letter. The cash letter should be accompanied by a detailed listing of all items.
Each savings bond sent to us must have the redemption value MICR-encoded in the
"Am ount" field on the face of the savings bond. If savings bonds are sent to us in a mixed cash
letter, the routing/transit number 000090007 must be MICR-encoded in the "R/T" field on all
pre-1985 savings bonds, which do not contain a preprinted MICR-encoded routing/transit
number. If a document carrier or MICR strip is used, the redemption value of the savings bond
must be MICR-encoded in the "Am ount" field, and 000090007 must be MICR-encoded in the
"R/T" field. A savings bond must not be MICR-encoded with any other data in any field other
than the auxiliary "On-Us" field and must not be MICR-encoded in the "On-Us" field for any
reason.
We give immediate credit, subject to payment and adjustment upon audit by the U.S.
Treasury, for savings bonds as provided in our time schedules. After we handle savings bonds,
as fiscal agent of the United States, the savings bonds are subject to audit by the Treasury
Department. We make an adjustment required by the Treasury Department by notifying the
sender and charging back or crediting the amount of the adjustment to the sender. Section
210.12 of Regulation J, relating to the return of cash items by paying banks, does not apply to
savings bonds.
Savings bonds submitted in separately sorted cash letters are not subject to cash item
deposit and processing charges. We forward paying agent fees received from the Treasury
Department to the sender, on a monthly basis, for savings bonds that are submitted in sepa­
rately sorted cash letters. Payment of these fees is made only by the automated clearinghouse
methods under Title 31 of the Code o f Federal Regulations, Part 210. Inquiries regarding sav­
ings bonds submitted in separately sorted cash letters should be directed to Pittsburgh Branch,
Federal Reserve Bank of Cleveland, P.O. Box 867, Pittsburgh, Pennsylvania 15230-0867.
Savings bonds submitted in mixed cash letters are subject to cash item deposit and
processing charges. No paying agent fees will be paid for savings bonds submitted in mixed
cash letters. Inquiries concerning savings bonds submitted in mixed cash letters should be
directed to the sender's local Reserve Bank office.
A record of the serial number and amount paid for each savings bond must be retained
by the sender. Film records of the front and back of a savings bond must be kept confidential,
and prints therefrom may be made only with the permission of the U.S. Bureau of the Public
Debt or a Federal Reserve Bank.

06-93

F e d e ra l R ese rve B a n k of D allas

Operating
Circular

8

EXHIBIT 1
LETTER OF AUTHORITY TO DELIVER CASH LETTERS AND/OR RETURN LETTERS

To: Federal Reserve Bank of Dallas at
D Dallas

Q El Paso

0

Houston

O

San Antonio

T h e ______________________________________________________________________________
(N am e, Office, R o u tin g N u m b e r o f th e D e p o s ito ry In stitu tio n )

hereby requests you to make presentment of all drafts, checks, and other cash items drawn on us and being
presented by or through your Bank to our agent (processor), listed below, by the delivery of said items to
processor or to its messenger. By making this request, this institution agrees to the terms and conditions set
forth in Regulation J and Regulation CC of the Federal Reserve Board of Governors, Federal Reserve Bank of
Dallas' Operating Circulars 8 and 12 pertaining to the collection and return of cash items, and any amendments
and changes to the regulations and operating circulars that may be made hereafter.
_________________________________________________________ (
)
_____________________
Name of Processor (Agent)
Telephone Number

Delivery Location

City

State

ZIP

Routing Number

We also request and authorize the delivery of our return letters as indicated below.
^^ C h e c k One:
D

Please deliver our return letters with our cash letters to our processor. Processor has agreed to accept
our return letters and other settlement documents from the Federal Reserve.

E! Please make our return letters available for pickup at the Federal Reserve office.
D Please mail our return letters to us.
□

Other:___________________________________________________________________________ .

This agreement will become effective o n ______________________ and should be received at the
Federal Reserve no later than five (5) business days before the stated effective date.

Name of Respondent Bank

Location

Routing Number(s)

City

Mailing Address

•c

ity

T R -411 (8-90)

(
)
Telephone Number

Authorized Signature

State

ZIP

Printed Name and Title

EXHIBIT 2
BANK'S CLAIM OF LATE RETURN1
Date.
To:

Return Items Division
Federal Reserve Bank of Dallas
___________________ Branch
[Local Reserve Bank address]
The returned check ("item") described below and attached hereto is being delivered to you:
1.
2.
3.
4.
5.
6.
7.
8.

A m ount$_________________________ (Must be $10 0 or more.)
Dated___________________________________ _
Paying bank___________________
Paying bank routing/transit num ber.
Paying bank location____________
Drawn by (drawer)______________
Payable to (payee)______________
Check number__________________

We sent this item t o _______________________________________________________ , in a cash letter
dated____________________________ , totaling $___________________, tape total $__________________ ,
listed between items for $____________________ and $_____________________ ■
This item was apparently returned by the paying bank o n ____________________________________ ■
We received the item fro m ____________________________________________________________ _ /
O
o n ___________________________ , in a (CHECK ONE)

Q

return item letter

dated__________________________________ , totaling $__________________ :______________ , tape total
$_______________________________ , listed between items for $._______________________________ and

$_______________________________

■

We claim that, according to our records and the data on the item, the paying bank did not take all
action necessary to recover its payment within the deadline in Regulations J and CC; and we certify that, as
to notice of nonpayment of the item, we received
(CHECK ONE) □
□

advice by (method)________________________o n ________________________ ,
no advice other than the returned check.

This late return caused us to incur financial loss. Please provisionally credit our account and advise.
Bank________________
Officer's Signature____
Routing/Transit Number.

1 T h is fo rm m a y be s u b m itte d o n ly w ith respect to th e firs t tim e th e ite m w a s sent fo r co lle c tio n and m u s t be s e n t in d u p lic a te w ith in
t w o (2) m o n th s a fte r th e date y o u received th e ite m as a re tu rn e d check. In a d d itio n , th e ite m m u s t have been co lle cte d a n d /o r
retu rn e d th ro u g h the Federal Reserve check co lle c tio n syste m . Failure to p ro v id e all in fo rm a tio n requested w ill result in rejectio n o f
th e cla im .

K n o w in g ly m a k in g a fa ls e s ta te m e n t to in flu e n c e th e a c tio n o f a F ed eral R eserve B an k
m a y s u b je c t th e s ig n in g p a rty to c rim in a l p e n a ltie s u n d e r fe d e ra l a n d /o r s ta te la w .

06-93

E X H IB IT 3
PAYING BANK'S RESPONSE TO CLAIM OF LATE RETURN1
Date__________________________________
To:

Return Items Division
Federal Reserve Bank of Dallas
___________________ Branch
[Local Reserve Bank address]

With your advice of debit dated___________________________ , you forwarded to us a claim of late
return with respect to a returned check ("item") in the amount of $__________________________ .
We certify that our records indicate that this item was received by us or our processor from
as a cash item on [banking day]
in a cash letter dated________
in the amount of $___________
listed between items for $_____
and that the item was returned t o _
_

., tape total $.
____ and $_

_____ „ __
_ □
intermingled cash letter
in our (CHECK ONE)
i—i
.
...
LJ return item letter

dated_ ,
_

in the amount of $___________________________ , tape total $__________________________ ,
listed between items for $__________________________and $___________________________ .
Notice of nonpayment of this item was given to _____________________________________________
by (method)________________________ o n ________________________ . (Enter "None" if no notice was
given.)
If the number of banking days between the banking day of receipt and the date of the return exceeds
one banking day, the explanation for the delay is as follows:

We took all action necessary to entitle us to recover our payment within the deadline in Regulations J
and CC. Please credit our account and advise.
Paying Bank____________________________________________________________
Officer's Signature__________________ ____________________________________
Routing/Transit Num ber_______ __________________________________________

1 Prepare and s u b m it in duplicate. If y o u fail to send all th e in fo rm a tio n requested to us w ith in tw e n ty (20) ban king days (of the
Reserve Bank) a fter th e date w e sent th is fo rm to y o u , th e p ro v is io n a l c re d it g ive n th e c la im a n t and o u r d e b it to y o u r acco u nt w ill
be co m e fin a l. In th a t case, yo u m ay be able to recover th e a m o u n t o f th e item fr o m th e c la im a n t if y o u r return o f th e item w a s in fact
tim e ly , b u t yo u m u s t deal d ire c tly w ith th e claim ant.

•

K n o w in g ly m a k in g a fa ls e s ta te m e n t t o in flu e n c e th e a c tio n o f a F ederal R eserve B an k
m a y s u b je c t th e s ig n in g p a rty t o c rim in a l p e n a ltie s u n d e r fe d e ra l an d /o r s ta te la w .

0 6 -93

EXHIBIT 4
PAYING BANK'S NOTIFICATION AGREEMENT
[To be typed on paying bank's letterhead]

Date______________

To: Federal Reserve Bank of Dallas at
□

Dallas

□

El Paso

□

Houston

□

San Antonio

Attention: Return Items Division
We request that, in accordance with your Operating Circular 8, you provide notice of nonpayment for
large dollar cash items that we decide not to pay. We elect to provide the information required
I I by returning the physical item to you,
I I by telephone notification to you, or
I I by Fedwire System (RESPONSE network).
We authorize you to charge our billing account maintained or used by us on your books and to make
other appropriate adjustments with this service.

Name of Paying Bank

Nine-Digit Routing/Transit Number
By:.
Authorized Signature

Title

06-93

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