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Federal R eserve Bank
OF DALLAS
T O N Y J . SA L V A G G IO

DALLAS, TEXAS
75265-5906

F IR S T V IC E P R E S ID E N T

December 1, 1993
Notice 93-124

TO:

The Chief Operating Officer of
each financial institution in the
Eleventh Federal Reserve District
SUBJECT
O p e r a t i n g C i r c u l a r 11
(Automated Clearinghouse Operations)
DETAILS

The Federal Reserve regularly reviews the language in its uniform
Automated Clearinghouse Operating (ACH) Circular and makes amendments to
reflect changes in ACH rules or Federal Reserve operating practices.
The
following changes reflect the Board of Governors’ adoption of new posting
procedures for purposes of measuring daylight overdrafts and establishment of
an all-electronic ACH.
•

Paragraph 4(i) has been revised to change the terminology
excluding settlement wires from coverage of Article 4A.

•

A provision has been added to paragraph 12 to state what a
Reserve Bank will do if it suspects that a file is a duplicate.

•

Paragraphs 15,
17, and 38 and Appendix 1 reflect the fact
the ACH is all-electronic as of July 1, 1993.

•

Paragraphs 23,
25, and 39 have been revised to reflect the
B o a r d ’s intraday posting policy.

•

Appendix 2 has
been amended to reflect the new
schedule.

that

processing

ENCLOSURE

Enclosed is Operating Circular 11. Please file it in your Operating
Circulars (Bulletins) binder and discard the old version.

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)

MORE INFORMATION

For more information, please contact Jonnie Miller at (214) 922-6433
or (800) 333-4460, extension 6433.
For additional copies of this B a n k ’s
notice or Operating Circular 11, please contact the Public Affairs Department
at (214) 922-5254.
Sincerely,

O
peratingCircular
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

Automated
Clearinghouse
Operations

Scope
Operating Circular 11 governs the clearing and settlement of automated clearinghouse (ACH)
credit and debit items— including credit items subject to Article 4A of the Uniform Commer­
cial Code—by this Bank, sending institutions, and receiving institutions. Government ACH
items are governed by Fiscal Agency Operating Circular 3, titled Federal Payments by the Auto­
mated Clearinghouse Method, instead of by this Operating Circular.
Operating Circular 11 is issued pursuant to Sections 4, 11A, 13, 16, and 19 of the Federal
Reserve Act and related statutes. With respect to items other than credit items subject to Article
4A, this Operating Circular is binding on sending institutions that send items to this Bank,
receiving institutions that receive items from this Bank, account holders agreeing to settle for
items under this Operating Circular, and other parties interested in an item that agree to this
Operating Circular or that are otherwise bound by it. The provisions of Article 4A of the
Uniform Commercial Code are incorporated in this Operating Circular with respect to credit
items subject to Article 4A. In the event of inconsistency between the provisions of this Operat­
ing Circular and Article 4A with respect to a credit item subject to Article 4A, the provisions of
this Operating Circular shall control. As regards credit items subject to Article 4A, this Operat­
ing Circular is an operating circular as referred to in Section 4A-107 and is not a funds transfer
system rule as defined in Article 4A. Nevertheless, this Operating Circular governs the rights
and obligations of parties to a funds transfer subject to Article 4A to the same extent as if this
Operating Circular were a funds transfer system rule. Under Article 4A, this Operating Circu­
lar is binding on parties to an item besides the sending and receiving institutions if the parties
have notice that the Federal Reserve Banks’ funds transfer system might be used for the trans­
action and that this Operating Circular will apply, unless those other parties have agreed
otherwise.

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

12-93

.lable of Cmtents^f
AUTOMATED CLEARINGHOUSE OPERATIONS
Paragraphs
G eneral..................................................................................................

1-3

Definitions....................................................................................................... 4
Sending Credit and Debit Ite m s.........................................................

5 -6

Security Procedures..............................................................................

7-8

Sending Institution’s Agreements....................................................... 9-11
Processing of Ite m s............................................................................ 12-14
Delivery of Item s................................................................................ 15-19
Time Schedules, Settlement Dates, and Extensions of
Time Limits..................................................................................... 20-22
Settlement..............................................................................................23-29
Overdrafts
Security agreement
Revocation of settlement
Availability of C redit.......................................................................... 30-32
Debit items
Credit items
Settlement Agreements...................................................................................33
Receiving Institution’s Agreements.................................................... 34-35
Revocation of Ite m s............................................................................. 36-37
Return of Items and F unds................................................................. 38-40
Disputed R eturns............................................................................................ 41

12-93

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

M

i i W
AUTOMATED CLEARINGHOUSE OPERATIONS
(continued)
Paragraphs
Advices of Credit and Debit; Reporting of Errors.......................... 42-43
Records...............................................................................................

44

Fees......................................................................................................

45

Non-Value Messages........................................................................

46

Reserve Bank Liability: Item Other Than Credit Item
Subject to Article 4A .................................................................... 47-48
Limitations on liability
Measure of damages
Reserve Bank Liability: Credit Item Subject to Article 4 A ..............49-52
Recovery by Reserve B an k ................................................................ 53-54
Right to A m end..................................................................................

55

Appendix 1: ACH Security Procedures
Appendix 1-A: ACH Security Procedures Agreement
Appendix 2: Time Schedule for Automated Clearinghouse Items
Appendix 3: Agreement Concerning ACH Credit Originations
by Certain Sending Institutions
Appendix 3-A: Sending Institution Agreement
Appendix 3-B: Sending Institution Agreement and
Correspondent Agreement

iv

F e d e ra l R e se rve B a n k of D a llas

12-93

.M g ifCamenAs¥
AUTOMATED CLEARINGHOUSE OPERATIONS
(continued)

Appendix 4: Automated Clearinghouse Items Settlement Agreement
Appendix 4-A: Settlement Agreement

12-93

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

v

General

payment that is, or has become, final
and irrevocable.

1. The following rules and agreements, as
amended from time to time, are incorporated
in this Operating Circular as the applicable
automated clearinghouse (ACH) rules with
respect to items, regardless of whether the
sending institution or receiving institution is a
member of an ACH association:
A. the Operating Rules of the National
Automated Clearing House Associa­
tion, unless other rules apply under
subparagraph B, and
B. the Operating Rules of the SouthWestern Automated Clearing House
Association (SWACHA) to the extent
such rules (1) bind both the sending
institution and the receiving institu­
tion or (2) in the case of a transaction
involving a nonmember of an ACH
association, generally apply to transac­
tions within the region where the
sending institution and the receiving
institution are domiciled.
2. This Operating Circular preempts or
supersedes the applicable ACH rules or other
arrangements among parties to ACH items
only to the extent that the provisions of those
arrangements are inconsistent with this
Operating Circular.
3. Each Federal Reserve Bank issues an
operating circular substantially similar to this
one with the exception of the Federal Reserve
Bank of New York, which issues a circular
providing for limited processing of items.
When we send an item to another Reserve
Bank, that Reserve Bank handles the item
subject to its circular.

A. “Account holder” means an institution
that maintains at a Federal Reserve
Bank an account used for the settle­
ment of items either on its own behalf
or on behalf of a sending institution or
a receiving institution.
B. “Actually and finally collected funds”
means cash or any other form of
12-93

11

C. “Applicable ACH rules” means the rules
and agreements that are designated by a
Federal Reserve Bank in its operating
circular as applicable to designated
ACH transactions. “Applicable ACH
rules” does not include provisions in
ACH rules that (1) are in conflict with
applicable law; (2) with respect to credit
items subject to Article 4A, are in
conflict with provisions of Article 4A
that may not be varied; (3) limit the
applicability of the ACH rules to mem ­
bers of an ACH association; (4) require
dues or fees (other than a reasonable fee
for copies of the ACH rules); (5) require
execution of agreements by participat­
ing institutions, such as settlement or
indemnity agreements; (6) govern
arbitration of disputes among partici­
pants; or (7) provide for payment of
legal expenses to an ACH association in
suits against the association. This
Operating Circular does not affect the
applicability of these provisions to
members of the ACH association.
D. “Article 4A” means Article 4A of the
Uniform Commercial Code as set forth
in Appendix B to Subpart B of Regula­
tion J, 12 C.F.R. Part 210. It includes
provisions of Article 1 referred to in
Article 4A, as approved from time to
time by the National Conference of
Commissioners on Uniform State Laws
and the American Law Institute.
E.

“As-of adjustment” means a debit or a
credit, for reserve- or clearing-balance
maintenance purposes only, applied to
the reserve or clearing balance of a
sending or receiving institution in lieu
of an interest charge or payment.

F.

“Automated clearinghouse” or “ACH”
means a facility that clears debit and
credit items for institutions.

DEFINITIONS
4. In this Operating Circular, the following
definitions apply:

Operating
Circular

G. “Banking day” means the part of a day
during which a Federal Reserve Bank,
account holder, sending institution, or
receiving institution is open for the
receipt, processing, or transmittal of
items. W ith respect to a credit item

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

1

Operating
Circular

11

subject to Article 4A, “banking day”
means a funds transfer business day.
H. “Credit item” means an item sent to a
Federal Reserve Bank by a sending
institution for debit to the sending
institution’s account and for credit to a
receiving institution’s account. Unless
otherwise expressly stated, the term
includes a credit item subject to Article
4A.
I. “Credit item subject to Article 4A”
means a credit item that is a payment
order as defined in Article 4A. The term
does not include an ACH credit transac­
tion any part of which is governed by the
Electronic Fund Transfer Act, as
amended, a Reserve Bank settlement
wire, or a non-dollar message, including
a zero dollar return or a message desig­
nated as Transaction Code 23 or 33
(prenotification) or as standard entry
Class COR (notification of change).
J. “Debit item” means an item sent to a
Federal Reserve Bank by a sending
institution for credit to the sending
institution’s account and for debit to a
receiving institution’s account.
K. “Effective date” means the date for
settlement specified in an item by the
sending institution (paragraph 21).
L. “Effective date window” means the
number of days after the processing date
of the sending institution’s Federal
Reserve Bank within which the effective
date must fall (paragraph 21).
M. “Institution” means (1) a depository
institution as defined in Section 19(b) of
the Federal Reserve Act (12 U.S.C.
461(b)); (2) a branch or agency of a
foreign bank maintaining reserves under
Section 7 of the International Banking
Act of 1978 (12 U.S.C. 347d, 3105); (3) a
department, agency, instrumentality,
independent establishment, or office of
the United States or a wholly owned or
controlled government corporation; or
(4) another entity for which a Federal
Reserve Bank provides ACH services.
N. “Item” means an instruction for the
payment of money that is handled by a

2

Federal Reserve Bank for processing or
settlement under its ACH operating
circular. “Item” does not include (1) an
“item” as defined in Section 210.2 of
Regulation I that is handled under
Subpart A, governing the collection of
checks and other items; (2) a “payment
order” as defined in Section 210.26 of
Regulation I that is handled under
Subpart B, governing funds transfers
through Fedwire; (3) a payment instruc­
tion subject to 31 C.F.R. Part 210 or Part
370 or to other Treasury Department
regulations governing federal payments
by the ACH method; or (4) a wire
transfer of securities by this Bank.
Unless the context requires otherwise,
the term covers a credit item and a debit
item.
O. “Receiving institution” means an
institution designated in an item to
receive the item from a Federal Reserve
Bank. With respect to a credit item
subject to Article 4A, “receiving institu­
tion” may include a beneficiary as
defined in Article 4A.
P. “Receiving institution’s local Reserve
Bank” means the Federal Reserve Bank
in whose District the address associated
with the routing number of the receiving
institution is located.
Q. “Sending institution” means an institu­
tion designated in an item as originating
the item.
R. “Sending institution’s account” or
“receiving institution’s account” means
the account at a Federal Reserve Bank
that the sending institution or receiving
institution, respectively, maintains (or
uses under an arrangement between the
Reserve Bank and another institution)
for settlement of items.
S. “Sending institution’s local Reserve
Bank” means the Federal Reserve Bank
in whose District the address associated
with the routing number of the sending
institution is located. The sending
institution’s local Reserve Bank is the
same as the sending institution’s Reserve
Bank except with respect to an item sent
remotely (that is, sent by a sending
institution in one Federal Reserve

F e d e ra l R e s e rv e B ank of D allas

12-93

Bank’s District to another Federal
Reserve Bank).
T. “Sending institution’s Reserve Bank”
means the Federal Reserve Bank to
which a sending institution sends an
item pursuant to the Reserve Bank’s
operating circular.
U. “Settlement date” means the date for
settlement of an item as provided in this
Operating Circular.

S e n d i n g C r e d i t a n d D e b it I t e m s
5. A sending institution that maintains or uses
an account at a Reserve Bank for settlement of
items may send an item to this Bank, provided
(a) the sending institution has been authorized
to do so by the sending institution’s local Reserve
Bank and (b) the receiving institution maintains
or uses an account at a Reserve Bank for settle­
ment of items and has been authorized to receive
items by the receiving institution’s local Reserve
Bank. A sending institution may designate
another entity to deliver its items to a Reserve
Bank, but that entity is the sending institution’s
agent and is not a sender or receiving bank, as
defined in Article 4A, or a party to the item. The
action of the sending institution’s agent in
sending items is the action of the sending
institution itself, including but not limited to
action of the agent with respect to security
procedures. With respect to an item that is sent
remotely by the sending institution to another
Reserve Bank, the sending institution’s local
Reserve Bank is not a sender or receiving bank,
as defined in Article 4A, or a party to the item.
6. An item must be in the media prescribed by
this Bank and in the format prescribed by the
applicable ACH rules.

Se c u r i t y P r o c e d u r e s
7. The security procedures we offer to verify the
authenticity of the source of an item are de­
scribed in Appendix 1 to this Operating Circular.
Before issuing an item to a Reserve Bank, an
institution must execute an agreement with its
local Reserve Bank in the form shown in Appen­
dix 1-A of that Reserve Bank’s operating circular.
If a sending institution issues an item through an
agent, the agent must also execute an agreement
in the same form with the sending institution’s
local Reserve Bank. A sending institution is

12-93

deemed to agree to a security procedure used in
issuing an item to this Bank.

Operating
Circular

11

8. Each sending and receiving institution shall
prevent any disclosure, except on a “need to
know” basis, of any aspects of the security
procedures it agrees to with this Bank. The
sending or receiving institution shall notify us
immediately if the confidentiality of these
security procedures is compromised and shall act
to prevent the security procedures from being
further compromised.

S e n d i n g I n s t i t u t i o n ’s
AGREEMENTS
9. By sending an item to a Reserve Bank, the
sending institution
A. agrees to comply with the applicable
ACH rules and agrees that those rules
shall govern the relationships among the
sending institution, the receiving
institution, and other parties interested
in the item and covered by those rules;
B. authorizes the Reserve Banks to process
the item in accordance with their ACH
operating circulars;
C. authorizes the Reserve Bank holding the
sending institution’s account to debit
the amount of a credit item, or credit the
amount of a debit item, to the sending
institution’s account on the settlement
date; and
D. agrees to indemnify each Reserve Bank
processing or settling for the item for
any loss or expense (including attorneys’
fees and expenses of litigation) incurred
by the Reserve Bank as a result of any
action taken with respect to the item by
the Reserve Bank in accordance with the
Reserve Bank’s operating circular.
10. The agreements, authorizations, and in­
demnity in paragraph 9 do not limit any other
agreement, authorization, or indemnity, not
inconsistent with paragraph 9, made by a
sending institution with a receiving institution, a
Reserve Bank, or another entity.
11. A sending institution’s local Reserve Bank
may require a sending institution to execute the
agreement in Appendix 3-A or Appendix 3-B
and to give the Reserve Bank prior notice and

F e d e ra l R e se rve B ank of D allas

3

Operating
Circular

11

separate sorts by settlement date of credit and
debit items to be sent to any Reserve Bank. The
sending institution’s local Reserve Bank also may
require the sending institution to provide prefunding for, and may substitute itself for the
sending institution with respect to, a credit item
in accordance with the agreement if the Reserve
Bank judges that there may not be sufficient
funds in the sending institution’s account on the
settlement date to cover the sending institution’s
obligations.

P r o c e s s in g o f it e m s
12. We process items in accordance with the
applicable ACH rules and this Operating Circu­
lar. We may reject, or may impose conditions to
our processing of, any item for any reason. We
are not bound by instructions to us in an item
other than information required by our format
specifications. If we notify a sending institution
or its agent of the receipt of a suspected duplicate
file or any other problem, we will not process the
file without approval by the sending institution
or its agent. Except as expressly provided in this
Operating Circular, we do not have or assume
any responsibility for compliance by a sending or
receiving institution with the applicable ACH
rules. We may record by audio recording device
any telephone call relating to an item.

supplied from a publication, list, or automated
file issued or maintained by a Reserve Bank if the
routing number becomes inaccurate after the
effective date of the publication, list, or automated file. A Reserve Bank may process an item
on the basis of a routing number of a receiving
institution appearing in any form on the item
when received and is not responsible for any loss
or delay resulting from acting on the number,
whether or not the number is consistent with
any other designation of the receiving institution
on the item, if the Reserve Bank does not know
of the inconsistency in designation.

DELIVERY OF ITEMS
15. By prior arrangement with a receiving
institution, we send items by electronic means to
the receiving institution or to a location desig­
nated by the receiving institution. In emergency
circumstances, we deliver items by the same
means and to the same location to which we
send cash items for the receiving institution or
by other means, as arranged with the receiving
institution. A Reserve Bank (other than the
sending institution’s Reserve Bank) that assists
the receiving institution’s local Reserve Bank in
sending items to the receiving institution is not a
sender or receiving bank, as defined in Article
4A, or a party to the items.

12A. We send an acknowledgment to the
sending institution or its agent that we have
received ACH files by electronic transmission
and have performed limited processing of the
files, as provided in applicable ACH rules. An
acknowledgment does not mean that we have
accepted, and will not reject, the items contained
in the files. The sending institution is responsible
for verifying the information in the acknowledg­
ment and notifying us immediately of any
discrepancy and for notifying us promptly of
nonreceipt of an acknowledgment. See para­
graph 43.

16. An entity other than the receiving institution
to which the receiving institution requests that
items be sent or be made available for pickup is
the receiving institution’s agent and is not a
sender or receiving bank, as defined in Article
4A, or a party to the items. The action of the
receiving institution’s agent in receiving items is
the action of the receiving institution itself,
including but not limited to any action with
respect to security procedures. A receiving
institution should advise us promptly by tele­
phone if it does not receive a delivery of items by
the expected delivery date.

13. As a sending institution’s Reserve Bank, we
process an item we receive and then send it or
make it available to the receiving institution or, if
applicable, to the receiving institution’s local
Reserve Bank. The receiving institution’s local
Reserve Bank processes the item and sends or
makes it available to the receiving institution.

17. A receiving institution that receives delivery
of items by courier or by mail in emergency
circumstances is considered to receive items, for
purposes of settlement, by the date the items are
available for pickup by, or for electronic trans­
mission or telephone advice to, the receiving
institution. The receiving institution may
request, for a fee, that we provide it by telephone
on the settlement date with sufficient information about an item for which it is designated the
receiving institution to enable it to post the item
to its customer’s account.

14. A sending institution must designate the
receiving institution by routing number. This
Bank is not responsible for the accuracy of a
routing number contained in and/or verbally
4

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

12-93

18. A receiving institution must manage its
communications connection so as to permit it to
receive, on a timely basis, items sent to it during
its banking day.
19. A receiving institution agrees to indemnify
us for any loss we incur as a result of its delay in
receiving an item if the delay results from the
institution’s failure to be able to receive delivery
of items from us as provided in this Operating
Circular.

T im e S c h e d u l e s , S e t t l e m e n t
D a t e s , a n d Ex t e n s i o n s o f
T i m e Lim it s
20. Our time schedule (Appendix 2) shows our
banking days and the cutoff hours for this Bank’s
receipt of credit and debit items of various
classes. If we receive an item after a cutoff hour,
we process it as if received by our next applicable
cutoff hour except that we may, in our discre­
tion, process it as if received by the earlier cutoff
hour.
21. An item should specify an effective date that
is within the effective date window shown for
that class of item. If the specified effective date is
later than the effective date window, we will
reject and return the item. Our time schedule
also shows the settlement date for an item that
specifies
A. no effective date;
B. a settlement date that is not a banking
day for the sending institution or the
receiving institution or for a Reserve
Bank involved in the transaction; or
C. an effective date the same as or earlier
than the processing date of the sending
institution’s Reserve Bank.
22. We process an item in accordance with our
processing schedules and send it to the receiving
bank on or before the settlement date. If, because
of circumstances beyond our control, we are
delayed beyond the applicable time limit in
acting on the item (other than a credit item
subject to Article 4A), the time for acting is
extended to the time necessary to complete the
action, provided we exercise such diligence as the
circumstances require.

12-93

Se t t l e m e n t
23. On the settlement date, the Reserve Bank
that maintains the sending institution’s account
debits or credits the sending institution’s account
in the amount of a debit or credit item, and the
Reserve Bank that maintains the receiving
institution’s account credits or debits the receiv­
ing institution’s account in the amount of the
credit or debit item. Settlement for credit items
must be made by the sending institution at 8:30
a.m. Eastern Time, and credit for credit items is
available for withdrawal or other use by the
receiving institution at that time, subject to the
provisions of this Operating Circular. Settlement
for debit items must be made by the receiving
institution at 11:00 a.m. Eastern Time, and credit
for debit items is available for withdrawal or
other use by the sending institution at that time,
subject to the provisions of this Operating
Circular. Settlement for immediate settlement
items (including return items as provided in our
time schedule) must be made at 5:00 p.m.
Eastern Time, and credit for immediate settle­
ment items is available for withdrawal or other
use at that time, subject to the provisions of this
Operating Circular.
Overdrafts
24. An account holder does not have a right to
an overdraft in its account. In the event an
overdraft is created, the overdraft shall be due
and payable immediately, without the need for a
demand by the Reserve Bank, at the earliest of
the following times:
A. at the end of the Reserve Bank’s funds
transfer business day for purposes of
Fedwire (Regulation J, 12 C.F.R. 210,
Subpart B);
B. at the time the Reserve Bank, in its
discretion, deems itself insecure and
gives notice thereof to the account
holder; or
C. at the time the account holder suspends
payments or is closed.
25. An account holder shall have in its account,
at the time an overdraft is due and payable, a
balance of actually and finally collected funds
sufficient to cover the aggregate amount of all its
obligations to the Reserve Bank, whether the
obligations result from an item for which the
account holder is obliged to settle or otherwise. If

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

an account holder incurs an overdraft in its
account, the account will be subject to any
applicable overdraft charges, regardless of
whether the overdraft has become due and
payable.

will notify the sending institution and the
receiving institution) of nonpayment of the item.

AVAILABILITY OF CREDIT
Debit Items

Security Agreement
26. To secure any overdraft, as well as any other
obligation due or to become due to its Reserve
Bank, an account holder grants to the Reserve
Bank a security interest in all the account
holder’s assets in the possession of, or held for
the account of, the Reserve Bank. The security
interest attaches when an overdraft or other
obligation becomes due and payable.
27. A Reserve Bank may take any action autho­
rized by law to recover the amount of an over­
draft that is due and payable, including but not
limited to the exercise of rights of setoff, the
realization on any available collateral, and any
other rights it may have as a creditor under
applicable law. If a sending or receiving institu­
tion uses another institution’s account for
settlement, the Reserve Bank may also, in its
discretion, recover the unpaid balance of the
sending or receiving institution’s obligation with
respect to an item from the sending institution
or receiving institution, respectively, without
prior notice or demand.
Revocation of Settlement
28. We may cease processing or settling for a
credit item if the Reserve Bank at which the
sending institution’s account is maintained
judges, in its discretion, that there may not be
sufficient funds in the account on the settlement
date to cover the item.
29. We may, in our discretion, cease processing
or settling for an item after we receive notice of
the suspension or closing of the sending or
receiving institution. In the event of the suspen­
sion or closing of an account holder whose
account the sending or receiving institution uses
for settlement or in the event of the termination
of the account holder’s Settlement Agreement,
the sending or receiving institution must desig­
nate another account for settlement. If we cease
processing or settling for a credit or debit item as
provided in paragraph 28 or in this paragraph,
we will notify the sending institution and the
receiving institution to which we have sent the
item (or the appropriate Reserve Bank(s), which

30. A Reserve Bank may refuse to permit credit
to be given for a debit item if it judges that there
may not be sufficient funds in the sending
institution’s account to cover charge-back or
return of the item. If a Reserve Bank does not
receive actually and finally collected funds in
settlement of a debit item at or before the
opening of business on the banking day follow­
ing the settlement date, the Reserve Bank may
reverse the debit and credit previously made in
settlement of the item and will notify the sending
institution and the receiving institution (and the
account holder(s) whose account the institu­
tion^) uses for settlement) or the appropriate
Reserve Bank(s), which will notify the sending
institution and the receiving institution (and
account holder, if any) of the reversal.
Credit Items
31. Credit given by a Reserve Bank to a receiving
institution for a credit item is available for use on
the settlement date, subject to paragraphs 28 and
29 and subject to the Reserve Bank’s right to
apply the funds to any obligation the receiving
institution owes it.
32. Subject to paragraphs 28 through 31, credit
given by us qualifies as reserves for purposes of
Regulation D (12 C.F.R. Part 204).

Se t t l e m e n t A g r e e m e n t s
33. Before sending an item to or receiving an
item from a Reserve Bank, a sending or receiving
institution (and an account holder, if the sending
or receiving institution desires to use that other
institution’s account for settlement of items)
must execute a Settlement Agreement, as pro­
vided in Appendix 4.

R e c e i v i n g I n s t i t u t i o n ’s
AGREEMENTS
34. A receiving institution, by maintaining or
using an account with a Reserve Bank for
settlement of items or by accepting an item from
this Bank,

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

12-93

A. agrees to comply with the applicable
ACH rules and agrees that those rules
shall govern the relationships among the
sending institution, the receiving
institution, and other parties interested
in the item and covered by those rules;
B. agrees to process the item in accordance
with this Operating Circular;
C. authorizes the Reserve Bank holding the
receiving institution’s account to credit
the amount of a credit item, or debit the
amount of a debit item, to the receiving
institution’s account on the settlement
date; and
D. agrees to indemnify each Reserve Bank
processing or settling for the item for
any loss or expense (including attorneys’
fees and expenses of litigation) incurred
as a result of a breach of the foregoing
agreements or of any action taken by the
Reserve Bank holding the receiving
institution’s account in accordance with
the foregoing authorization.
35. The agreements, authorization, and indem ­
nity in paragraph 34 do not limit any other
agreement, authorization, or indemnity, not in­
consistent with paragraph 34, made by a receiv­
ing institution to a sending institution, a Reserve
Bank, or another entity.

REVOCATION OF ITEMS
36. A sending institution or prior party may not
amend or revoke an item after it has been
received by a Reserve Bank, except as provided in
the applicable ACH rules.
37. We may cancel items by initiating a revers­
ing batch of items, in accordance with the
applicable ACH rules, if we discover that we sent
a duplicate or erroneous batch of items. We will
notify the sending institution (or the sending
institution’s local Reserve Bank, which will notify
the sending institution) accordingly. Nothing in
this Operating Circular constitutes a waiver by us
of a right of recovery under the applicable law of
mistake and restitution.

R e t u r n o f it e m s a n d Fu n d s
38. A receiving institution may return a debit or
credit item to the receiving institution’s local
Reserve Bank in accordance with the applicable
12-93

ACH rules. A receiving institution may also send
a return to any other Reserve Bank to which it is
authorized to send items. A receiving institution
must return a credit or debit item received from
this Bank by returning the item, in the manner
provided in the applicable ACH rules, by the
cutoff hour set forth in the Reserve Bank’s time
schedule. The receiving institution is accountable
for the amount of a debit item if the Reserve
Bank does not receive the item by that cutoff
hour. The receiving institution’s Reserve Bank
will convert a paper return item to automated
form. The receiving institution’s local Reserve
Bank will accept a return debit item in an
amount of $2,500 or more by telephone and
convert it to automated form.
39. A Reserve Bank that receives a return item
will send it to the sending institution (or to the
sending institution’s local Reserve Bank, which
will send it to the sending institution). The
Reserve Bank that maintains the sending
institution’s account will debit or credit the
sending institution’s account in the amount of a
return debit or credit item, and the Reserve Bank
that maintains the receiving institution’s account
will credit or debit the receiving institution’s
account in the amount of the return credit or
debit item at 5:00 p.m. Eastern Time, subject to
the provisions of this Operating Circular.
40. A receiving institution should keep records
that permit it to identify the source of items it re­
ceives. By sending a return item to us, a receiving
institution (a) warrants to us, to the sending
institution’s Reserve Bank, and to the sending
institution that we sent the item to the receiving
institution; (b) agrees, on request, to provide us
with records showing that we sent the item to it;
and (c) agrees to indemnify us and the sending
institution’s Reserve Bank for loss resulting from
a breach of the foregoing warranty or agreement.

D is p u t e d Re t u r n s
41. If a sending institution disputes the propri­
ety of a return item one time in accordance with
the applicable ACH rules, the Reserve Bank(s)
maintaining the sending institution’s and the
receiving institution’s accounts will provisionally
settle for the disputed return. If the receiving
institution disputes the sending institution’s
claim in accordance with the applicable ACH
rules, the Reserve Bank(s) maintaining the
receiving institution’s and the sending institu­
tion’s accounts will reverse the provisional
settlement for the disputed return.

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

Operating
Circular

11

Operating
Circular

11

A d v ic e s o f C r e d it a n d D e b it ;
R e p o r t in g o f e r r o r s
42. We provide, in a statement, advices of credit
and debit to an account holder for items for
which it has agreed to settle. An advice of credit
indicates that credit has been given, subject to
the provisions of this Operating Circular. By
prior arrangement with a sending or receiving
institution, we also provide advices to a party
other than that institution or an account holder,
as the sending or receiving institution’s agent, in
accordance with paragraph 15 of this Operating
Circular. An account holder and a sending or
receiving institution using an account holder’s
account for settlement agree that a reasonable
time to notify a Reserve Bank concerning an
unauthorized or erroneously executed item is
within 30 calendar days after the account holder
receives an advice of debit. Notice after that time
may constitute the failure to exercise ordinary
care, precluding the recovery by the institution
of interest (with respect to credit items subject to
Article 4A) and other damages (with respect to
other items).
43. In addition to the requirement for prompt
notice under paragraph 42 and Sections 4A-204
and 4A-304 of Article 4A, a sending institution,
receiving institution, or account holder shall
notify us immediately if it learns of or discovers,
from any source other than an advice of debit
from this Bank, the possibility of error or lack of
authority in the transmission or processing of an
item. See also paragraph 8.

Re c o r d s
44. Each sending and receiving institution
should keep records that permit it to resolve
questions that arise concerning the handling of
items and to resend items if we notify it that the
items have been lost because of a computer
outage or other reason. We keep records of
items processed by us only for one year after the
settlement date.

Fees
45. This Bank’s fee schedule shows the charges
imposed for processing and settlement of items.
We may make the charge to the sending insti­
tution’s account or the receiving institution’s
account, as shown in the schedule, or as other­
wise agreed.

8

N O N -V A LU E MESSAGES
46. We handle a message that does not result in
an accounting entry, such as a prenotification or
notification of change, as an item under this
Operating Circular except that no funds are
transferred. A Reserve Bank’s liability for damage
caused by its failure to exercise ordinary care, or
by its own or its employees’ willful misconduct,
in processing a non-value message may not
exceed the amount of any fee paid to a Reserve
Bank for the message.

R e s e r v e B a n k Li a b i l i t y : It e m
O t h e r T h a n C r e d i t It e m
S u b j e c t t o A r t ic l e 4A
Limitations on Liability
47. With respect to an item other than a credit
item subject to Article 4A,
A. this Bank is responsible or liable only to
a sending institution, a receiving institu­
tion, or another Reserve Bank and only
for our own failure to exercise ordinary
care or for our own or our employees’
willful misconduct;
B. this Bank does not act as the agent or
subagent of another institution or entity
and is not liable for the insolvency,
neglect, misconduct, mistake, or default
of another institution or entity;
C. this Bank does not make any warranty
with respect to an item it processes or
settles for under this Operating Circular;
and
D. no person may make a claim against this
Bank for loss resulting from this Bank’s
processing of or settling for an item after
one year from the settlement date of the
item. If an account holder does not send
us written objection to an advice of debit
within one year after receipt of the
advice, it is deemed to approve the debit
on its own behalf and on behalf of a
sending or receiving institution using
the account for settlement.
Measure of Damages
48. The measure of damages for this Bank’s
failure to exercise ordinary care, or for our own

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

12-93

or our employees’ willful misconduct, is as
follows:
A. For a credit item (including a return
credit item but excluding a credit item
subject to Article 4A), our liability is
limited to damages that are attributable
directly and immediately to the failure to
exercise ordinary care or to the willful
misconduct and does not include
damages that are attributable to the
consequences of such conduct, even if
such consequences were foreseeable at
the time of the conduct.
B. For a debit item (including a return
debit item), our liability for our failure
to exercise ordinary care is limited to the
amount of the item reduced by an
amount that could not have been
realized by the use of ordinary care.
When there is willful misconduct with
respect to a debit item, the measure of
damages includes other damages that are
attributable directly and immediately to
the willful misconduct but does not
include damages that are attributable to
the consequences of such misconduct,
even if such consequences were foresee­
able at the time of the misconduct.

R e s e r v e Ba n k Li a b i l i t y : C r e d i t
i t e m S u b j e c t t o A r t ic l e 4 A
49. Except as otherwise provided in this Operat­
ing Circular, a Reserve Bank’s liability with
respect to a credit item subject to Article 4A is
governed by Article 4A. A Reserve Bank shall not
be liable with respect to a credit item subject to
Article 4A for any damages other than those
payable under Article 4A. A Reserve Bank shall
not agree to be liable for consequential damages
with respect to a credit item subject to Article 4A
under Section 4A-305(d) of Article 4A.
50. This Bank may, in its discretion, satisfy its or
another Reserve Bank’s obligation to pay com­
pensation in the form of interest under Article
4A
A. by providing an as-of adjustment to a
sending or receiving institution in an
amount equal to the amount on which
interest is to be calculated, multiplied by
the number of days for which interest is
to be calculated; or

12-93

B. by paying compensation in the form of
interest to a sending institution, receiv­
ing institution, or another party to the
item that is entitled to such payment, in
an amount calculated in accordance
with Section 4A-506 of Article 4A.

Operating
Circular

11

51. If a sending or receiving institution that
receives an as-of adjustment in the form of a
credit, or an interest payment, is not the party
entitled to compensation under Article 4A, the
institution shall pass through the benefit of the
as-of adjustment or interest payment by making
an interest payment, as of the day the as-of
adjustment or interest payment is made, to the
party entitled to compensation. The interest
payment that is made to the party entitled to
compensation shall not be less than the value of
the as-of adjustment or interest payment that the
Reserve Bank provided to the sending or receiv­
ing institution. The party entitled to compensa­
tion may agree to accept compensation in a form
other than a direct interest payment, if the
alternative form of compensation is not less than
the value of the interest payment that otherwise
would be made.
52. We may make an as-of adjustment pursuant
to paragraph 50 as follows:
A. We will normally process and apply an
as-of adjustment to the reserve mainte­
nance period during which the transac­
tion giving rise to the obligation to pay
interest occurred, so that there will be
no impact on aggregate reserves. If we
determine that action is not feasible, in
our sole discretion, we will process and
apply the as-of adjustment to the
current reserve period.
B.

If an as-of adjustment would be applied
to one of the last three days of a reserve
maintenance period, we may apply it to
either the current reserve period or
future reserve maintenance periods.

C. If we delay execution of a credit item
subject to Article 4A (see Section
4A-305(a) of Article 4A), we may make
an as-of credit adjustment to the
receiving institution’s account. If the
sending institution was not debited at
the appropriate time, we will make an
offsetting as-of debit adjustment to the
sending institution’s account.

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

9

Operating
Circular

11

D. If we misdirect a credit item subject to
Article 4A (see Sections 4A-303(c) and
4A-305(b) of Article 4A), we may make
an as-of credit adjustment to the ac­
count of the institution that should have
received the order. If agreed by the
institution that received the misdirected
order, we will make an offsetting as-of
debit adjustment to the receiving institu­
tion’s account.
E.

F.

If we send a credit item subject to Article
4A in an amount less than the amount
that was intended (see Sections 4A303(b) and 4A-305(b) of Article 4A), we
may make an as-of credit adjustment to
the receiving institution’s account. If the
sending institution was not debited in
the appropriate amount, we will make
an as-of debit adjustment to the sending
institution’s account.
If we issue a duplicate credit item subject
to Article 4A or a credit item subject to
Article 4A that amounts to more than
was intended (see Sections 4A-303(a)
and 4A-305(b) of Article 4A), we may, if
the sending institution’s account was
not debited in the appropriate amount,
make an as-of credit adjustment to the
sending institution’s account. If agreed
by the institution that received the order,
we will make an as-of debit adjustment
to the receiving institution’s account.

G. If we delay rejection of a credit item
subject to Article 4A (see Sections
4A-209(b) and 4A-210(b) of Article 4A),
we may make an as-of credit adjustment
to the sending institution’s account.
H. We will apply offsetting as-of adjust­
ments to the same reserve maintenance
period to the extent feasible.

ceiving institution, or another Reserve
Bank, or
B. based on any action by the Reserve Bank
in accordance with its operating circular,
the Reserve Bank may recover from the sending
institution, the receiving institution, or the other
Reserve Bank, as the case may be, any amount
the Reserve Bank is required to pay under a final
judgment or decree, together with interest, as
well as the amount of attorneys’ fees and other
expenses of litigation incurred.
54. The Reserve Bank may recover the amount
specified in paragraph 53 by charging the send­
ing or receiving institution’s account (or if the
item was received from, sent to, or settled
through another Reserve Bank, by charging the
other Reserve Bank)
A. if the Reserve Bank has made timely
written demand on the sending institu­
tion, the receiving institution, or the
other Reserve Bank to assume defense of
the action or proceeding; and
B. if no other arrangement for payment
acceptable to the Reserve Bank has been
made.
A Reserve Bank that has been charged under this
paragraph may recover from the sending or
receiving institution in the manner and under
the circumstances set forth in this paragraph.
A Reserve Bank’s failure to avail itself of the
remedy provided in this paragraph does not
prejudice its enforcement, in any other manner,
of the indemnity agreements referred to in
paragraphs 9 and 34.

RIGHT TO AMEND
55. We reserve the right to amend this Operat­
ing Circular at any time.

Re c o v e r y b y Re se r v e b a n k
53. If an action or proceeding is brought against
a Reserve Bank,
A. based on an alleged breach of, or an
alleged failure to have the authority to
make, any of the authorizations and
agreements referred to in paragraphs 9
and 34 of this Operating Circular, or an
alleged breach of the applicable ACH
rules by the sending institution, the re­
10

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

12-93

A P P E N D IX 1
ACH SECURITY PROCEDURES

GENERAL

The follow ing security procedures are offered by the Federal Reserve Banks to each
sending institution that is authorized to send ACH items to a Reserve Bank for the purpose of
verifying the authenticity of the source of the ACH items. The security procedures are not used
to detect errors in the transmission or the content of ACH items.
LEVEL ONE SECURITY PROCEDURE

The Level One Security Procedure is available to any institution that issues or receives
ACH items by means of an encrypted leased or dial-up communications line between its com­
puter and a Reserve Bank's computer, utilizing a hardware-software system certified by the
Reserve Bank.
The Level One Security Procedure is incorporated in the hardware and software associ­
ated with the computer. In general, the procedure includes access controls, such as the identifi­
cation code and the confidential password that allow a customer to access a Reserve Bank's
system, and also includes encryption of ACH items during the transmission process. The
procedure is described more specifically in the Computer Interface Protocol Specification (CIPS)
and the Fedline User's Guide, which are available from each Reserve Bank.
LEVEL TWO SECURITY PROCEDURE

The Level Two Security Procedure is available to any institution that issues ACH items to
a Reserve Bank by electronic transmission that does not include both encryption and access
controls. It is also used when an institution that normally issues ACH items under the Level One
Security Procedure defined above is unable to do so because of an equipment or com m unica­
tions failure or other circumstances.
In the case of electronic transmission of ACH items, the Level Two Security Procedure is
incorporated in the transmission process and, in general, includes either access controls or
encryption. When ACH items are sent by magnetic tape, diskette, or electronic transmission that
does not include either encryption or access controls, the Level Two Security Procedure in­
cludes a procedure whereby the sending institution or its agent provides file control informa­
tion—for example, file identification, debit and credit dollar amounts, and entry-addenda
count—to a Reserve Bank and the Reserve Bank then compares that information with the file(s)
it actually receives. The control information may be provided by
1. Voice-Response if the Voice-Response system contains an access security
feature; or
2. a telephone call using a code word; or
3. a transmittal register or a telephone call. When the control information is
provided by this means, it will be verified by a callback from the Reserve Bank.

12-93

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

A P P E N D IX 1-A
ACH SECURITY PROCEDURES AGREEMENT
(Date)

Federal Reserve Bank of Dallas
P.O. Box 655906
Dallas, Texas 75265-5906
Attention: Manager
ACH Operations

We agree to the provisions of the Reserve Bank's Operating Circular 11, titled Autom ated Clearing­
house Operations, and its appendixes, as amended from time to time.
If we use an encrypted communications line with access controls for the transmission of ACH items to
a Reserve Bank, we choose the Level One Security Procedure offered by the Reserve Banks as generally
described in Appendix 1 to the circular, as such security procedure may be modified from tim e to time by
the Reserve Banks. We also agree that this procedure w ill be used if we receive ACH items by means of an
encrypted electronic communications line with access controls. This security procedure will be used for the
purpose of verifying that we issued or received ACH items.
If we use a method other than an encrypted communications line with access controls for the trans­
mission of ACH items, we reject the Level One Security Procedure and choose the Level Two Security
Procedure generally described in Appendix 1 to the circular, as such security procedure may be modified
from time to time by the Reserve Bank. This security procedure w ill be used for the purpose of verifying that
we issued ACH items. We understand that the Level Two Security Procedure may be deemed commercially
reasonable pursuant to Section 4A-202(c) of Article 4A of the Uniform Commercial Code.
Whenever we use a Reserve Bank's Level Two Security Procedure, we agree to be bound by any ACH
item, whether or not authorized, issued in our name and accepted by the Reserve Bank in compliance with
such procedure.
We understand that the Level One and Level Two Security Procedures will not be used to detect errors
in the transmission or content of ACH items.
We also understand and agree that the security procedures established by this agreement may be
changed only by an amendment to Appendix 1 or other written agreement. This agreement may not be
changed by an oral agreement or by a course of dealing or custom.

Name of Institution/Agent

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

Title

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Operating
Circular

A P P E N D IX 2
TIME SCHEDULE FOR AUTOM ATED CLEARINGHOUSE ITEMS

CUTOFF HOURS

This tim e schedule shows the closing hours fo r this Bank's receipt of ACH formatted files
containing debit and/or credit items of various classes, including paper returns and notifications
of change (NOCs), as well as return debit items of $2,500 or more.
CLOSING TIM ES (EASTERN T IM E )1
Exchange 1

Interregional items
Mixed
Presort
Intraregional items

Exchange 2

Exchange 3

Exchange 4

9:30 a.m.
10:00 a.m.
11:00 a.m.

12 30 p.m.
1 00 p.m.
2 00 p.m.

6:30 p.m.
7:00 p.m.
8:00 p.m.

1:30 a.m
2:00 a.m
3:00 a.m

Paper returns
(other than debit
items of $2,500
or more) and NOCs

8:00 a.m.

Contested returns

8:00 a.m.

6:00 p.m.

Automated return
debit items of
$2,500 or more

Applicable Exchange 4 closing time
corresponding to the receiving
institution's banking day follow ing
the settlement date or follow ing
receipt of the item, whichever is later

Paper return
debit items of
$2,500 or more

8:00 p.m. on the receiving institution's
banking day follow ing the settlement
date or follow ing receipt of the item,
whichever is later

Submitted
By paper
By telephone

8:00 a.m.
Noon

1C lo sin g tim e s re p re se nt th e end o f th e d e p o s it w in d o w . Files m u s t be c o m p le te ly received (tha t is, data tra n s m is s io n
m u s t be f u lly c o n c lu d e d ) by th e clo s in g tim e . S e n d in g in s titu tio n s using data tra n s m is s io n , e sp e cia lly th o se h aving
large a n d /o r v a ria b le v o lu m e s o f d e p osits, sh o u ld c o o rd in a te th e b e g in n in g o f th e ir tra n s m is s io n w ith in th e w in d o w to
en su re file c o m p le tio n b y th e c lo sin g tim e . Presort d e p o s its o f 500,000 ite m s o r m o re pe r exch a ng e m u s t be received
o n e -h a lf h o u r e a rlie r th a n th e in d ic a te d d e a dline.

(Appendix 2 continued on the next page)
12-93

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

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Operating
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11

A P P E N D IX 2 (c o n tin u e d )

EFFECTIVE DATE W INDOW S

Items— other than returns, NOCs, and NACS (National Association for Check Safekeeping)
items—should specify an effective date within the follow ing effective date windows, computed
from our processing date.

Class

Effective Date Window

Credit items

One (1) or tw o (2) banking days

Debit items

One (1) banking day only

Items with an effective date later than the effective date w in d o w will be returned to the
sender.
SETTLEMENT DATES

If an effective date is not specified or if an item specifies an effective date the same as or
earlier than this Bank's processing date, the settlement date is the banking day follow ing our
processing date. The settlement date fo r immediate settlement items (returns and NACS items)
is the banking day of processing if received by the applicable Exchange 2 closing time or the
next banking day if received by the third or fourth exchange. In the event of Reserve Bank
operating problems, some other items may also be included as immediate settlement items.
If an item specifies a settlement date that is a standard Reserve Bank holiday, the settle­
ment date is the next banking day for this Bank.
If an item specifies a settlement date that is not a banking day for the sending institution
or the receiving institution, settlement is effected, w ith respect to that party, as follows:
ACH DEBIT ITEMS

Sending institution closed: Credit sending institution's account on settlement date.
Receiving institution closed: Debit receiving institution's account on settlement date, or
receiving institution may choose next-day debit with as-of adjustment or explicit charge for
float.
ACH CREDIT ITEMS

Sending institution closed: Debit sending institution's account on settlement date.
Receiving institution closed: Credit receiving institution's account on settlement date.
The receiving institution is not considered to receive an item made available to it on a day
it is closed until its next banking day for purposes of determining the deadline for return.

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

12-93

A P P E N D IX 2 (continued)
BANKING DAYS

Our banking days are all days except the follow ing standard holidays that are observed
by Reserve Banks:2
All Saturdays
All Sundays
New Year's Day (January 1)
Martin Luther King, Jr. Day (third Monday in January)
Presidents Day (third Monday in February)
Memorial Day (last Monday in May)
Independence Day (July 4)
Labor Day (first Monday in September)
Columbus Day (second Monday in October)
Veterans Day (November 11)
Thanksgiving Day (fourth Thursday in November)
Christmas Day (December 25)
If January 1, July 4, November 11, or December 25 falls on a Sunday, the next follow ing
Monday is a standard Reserve Bank holiday.

2 The N e w O rleans Branch o f th e Federal Reserve Bank o f A tla n ta closes on M a rd i Gras.

12-93

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

Operating
Circular

11

A P P E N D IX 3
AGREEMENT CONCERNING ACH CREDIT
ORIGINATIONS BY CERTAIN SENDING INSTITUTIONS

GENERAL

Certain sending institutions that send ACH items to the Federal Reserve Bank of Dallas
("this Bank") may experience financial difficulties.
If a sending institution fails to settle for ACH items sent previously, there is a significant
risk of loss to other participants in the ACH system and a significant risk of disruption of the
ACH system.
To reduce the risk of loss or disruption, a sending institution that has been identified as
presenting a high risk of disruption to the payments system agrees to take steps to permit its
ACH credit items to be monitored and to be settled at the time of receipt by the Reserve Bank.
Accordingly, this Bank and the sending institution agree to the follow ing.
DEFINITIONS

For all purposes of this agreement,
"Sending institution" means a sending institution that has been identified by this Bank as
having financial difficulties and that has agreed to the terms of this agreement by executing the
letter in Appendix 3-A or Appendix 3-B.
"Notice of O rigination" means a written or electronic statement showing, by settlement
date, the total amount of all credit items to be originated and the total amount of all debit items
to be originated by the sending institution for a given ACH cycle.
"Prefund" means to pay, in actually and finally collected funds, to this Bank the total
amount of all ACH credit originations shown on a Notice of Origination before sending the
items to this Bank for processing.
NOTIFICATION OF ORIGINATION

The sending institution shall deliver to this Bank a Notice of Origination before sending
the files to this Bank and no later th a n ____________________before the end of the w in d o w for
the cycle in which the sending institution intends to originate the items. A Notice of Origination
for ACH items to be originated in the night cycle shall be delivered b y _____________ .
If a sending institution submits a Notice of Origination and subsequently discovers the
notice is in error, the sending institution shall subm it a revised notice to this Bank as soon as
possible.
The Notice of Origination shall cover all credit items originated through another Reserve
Bank (remote origination), all credit items sorted directly to the receiving institution's Reserve
Bank (presort origination), and all credit items originated using a private service bureau, ACH
service provider, or correspondent.
This Bank from time to time may verify the accuracy of the Notice of Origination by
comparing the notice with the credit and debit items actually originated. We may point out
discrepancies and require explanations. If the sending institution submits inaccurate Notices of

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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

Operating
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11

Operating
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11

A P P E N D IX 3 (continued)
Origination, we may elect to refuse to process ACH credit originations of the sending institu­
tion, or we may elect to refuse to provide ACH or net settlement services to the institution.
PREFUNDING OF ACH CREDITS

From tim e to time, this Bank may, in its discretion, by notice to the sending institution, re­
quire that the sending institution irrevocably make available to this Bank, in actually and finally
collected funds, the total amount of all ACH credit originations shown on the Notice of Origina­
tion before this Bank processes the items ("prefunding"). The sending institution may prefund
its credit originations by Fedwire, by transfer from another depository institution, by obtaining
an advance from this Bank, or by maintaining a sufficient balance of actually and finally col­
lected funds in its (or its correspondent's) reserve or clearing account. Unless the sending
institution indicates that it w ill prefund in another way and actually does so, the sending institu­
tion authorizes this Bank, before the Bank processes the items, to deduct from the sending
institution's (or its correspondent's) reserve or clearing account the amount needed to prefund
the ACH credits.
If the sending institution fails or refuses to prefund the full amount of its ACH credits in a
cycle, this Bank may, in its discretion, refuse to process items that have not been prefunded or
may process the items but reserve the right to cease settling for the items on the settlement
date. If the sending institution only partially prefunds the amount of its ACH credits and does
not indicate which items have been prefunded, this Bank may, in its sole discretion, determine
which items shall be considered to have been prefunded or may refuse to settle for all the
items.
If the sending institution prefunds the ACH credits, its obligation to settle with regard to
the prefunded ACH credit items up to the amount of the prefunding shall be automatically
satisfied and discharged and shall be replaced by an irrevocable obligation of this Bank to settle
for the prefunded items on the settlement date.
MISCELLANEOUS

This Bank reserves the right to defer the availability of some or all of the credit arising
from debit ACH items originated by the sending institution.
If the amount of prefunding exceeds the total amount of credits actually originated by the
sending institution, this Bank shall return the excess to the sending institution.
To the extent of any inconsistency between this agreement and the rest of the Operating
Circular, the provisions of this agreement shall govern.
The sending institution indicates its agreement to the terms of this agreement by execut­
ing a letter in the form of Appendix 3-A. If the sending institution elects to prefund by using the
account of a correspondent on this Bank's books, the sending institution and the correspondent
both must execute a letter in the form of Appendix 3-B.
The correspondent may terminate its authorization to this Bank to charge its account by
notice in w riting to the Manager, ACH Operations. The notice shall not be effective for any
items originated or debits made before the Manager receives the notice and has a reasonable
time to act on it, notwithstanding any Settlement Agreement permitting earlier termination.
This Bank reserves the right to amend this agreement from time to tim e by publishing an
amendment to Appendix 3.

F e d e ra l R e s e rv e B ank of D allas

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A P P E N D IX 3-A
SENDING INSTITUTION AGREEMENT
(Date)

Federal Reserve Bank of Dallas
P.O. Box 655906
Dallas, Texas 75265-5906
Attention: Manager
ACH Operations

We agree to the terms of Appendix 3 to the Reserve Bank's Operating Circular 11, Autom ated Clear­
inghouse Operations, as amended from time to time. We agree to prefund ACH credit originations, as
required by you from time to time, and authorize you to deduct the amount of the required prefunding from
our reserve or clearing account before we originate ACH credit items.

Name of Sending Institution

Nine-Digit Routing/Transit ABA Number
By: ________________________________
Authorized Signature

A P P E N D IX 3-B
SENDING INSTITUTION AGREEMENT AND
CORRESPONDENT AGREEMENT
(Date)

Federal Reserve Bank of Dallas
P.O. Box 655906
Dallas, Texas 75265-5906
Attention: Manager
ACH Operations

Sending Institution Agreement
We (the sending institution) agree to the terms of Appendix 3 to the Reserve Bank's Operating Circular
11, A utom ated Clearinghouse Operations, as amended from time to time. We agree to prefund our ACH
credit originations, as required by you from tim e to time, and designate________________________________
_____________________________________as our correspondent for the purpose of providing you an account
from which you may deduct the amount of the required prefunding.

Name of Sending Institution

Nine-Digit Routing/Transit ABA Number
By: ________________________________
Authorized Signature

Title

Correspondent Agreement
We agree to act as correspondent for the sending institution named above. We authorize you to
deduct from our reserve or clearing account on your books, from tim e to time, the amount of any required
prefunding before the sending institution originates ACH credit items.

Name of Correspondent

Nine-Digit Routing/Transit ABA Number
By: ___________________
Authorized Signature

A P P E N D IX 4
AUTOMATED CLEARINGHOUSE ITEMS
SETTLEMENT AGREEMENT
Before sending ACH items to, or receiving ACH items from , this or another Reserve Bank,
a sending or receiving institution must execute an agreement with a Reserve Bank to provide
for settlement of ACH items by debit or credit to an account on the Reserve Bank's books. If the
institution desires to use its own account on this Bank's books for settlement of items, it should
execute an agreement substantially in the form set forth in the ACH Participation Agreement or
in Appendix 4-A of this Operating Circular. If the institution desires to use a correspondent's
account on this Bank's books for settlement of items, it should execute, and have the corre­
spondent execute, an agreement substantially in the form set forth in the ACH Participation
Agreement or in Appendix 4-A.
By executing this Settlement Agreement, the institution (or a correspondent account
holder, if any) authorizes this Reserve Bank (1) to debit to the institution's account on the
settlement date the amount of credit items sent by the institution to a Reserve Bank, the
amount of debit items sent to the institution by a Reserve Bank, and the amount of government
ACH debit items sent to the institution by a Reserve Bank; (2) to credit to its account on the
settlement date the amount of debit items sent by the institution to a Reserve Bank, the amount
of credit items sent to the institution by a Reserve Bank, and the amount of government ACH
credit items sent to the institution by a Reserve Bank; and (3) to debit and credit to its account
the amount of other transactions (including fees, unless otherwise agreed) with respect to ACH
items and government ACH items, as provided in the Reserve Bank's Operating Circular 11 and
Fiscal Agency Operating Circular 3. An account holder whose account is used by a sending or
receiving institution for settlement of ACH items does not thereby become a sender or receiv­
ing bank, as defined in Article 4A, or a party to an item.
By executing this Settlement Agreement, and in consideration of the processing and
settlement by Reserve Banks of ACH items sent to and/or received by the institution and other
sending and receiving institutions, the institution (and the correspondent account holder, if
any) also agrees to the applicable Reserve Bank operating circulars governing ACH items and
to the applicable ACH rules, each as amended from time to time, for the benefit of all parties
interested in the items.
This Settlement Agreement supersedes all prior inconsistent settlement agreements with
respect to ACH items. The sending or receiving institution (or its correspondent account holder,
if any) may terminate this Settlement Agreement by written notice to this Bank. The term ina­
tion notice is effective only for ACH items to be settled by this Bank on and after the banking
day follow ing the banking day of receipt of the notice by this Bank or on and after a later date
specified in the notice. This Bank may terminate a Settlement Agreement by w ritten notice to
the institution (or the correspondent account holder, if any). This termination notice is effective
for ACH items to be settled by this Bank on and after the banking day follow ing the banking day
of receipt by the institution of the notice or on and after a later date specified in the notice.

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Operating
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A P P E N D IX 4-A
SETTLEMENT AGREEMENT
(Date)

Federal Reserve Bank of Dallas
P.O. Box 655906
Dallas, Texas 75265-5906
Attention: Manager
ACH Operations

The participating institution and any correspondent named below authorize the Federal Reserve
Bank to debit and/or credit the designated account at the Reserve Bank for (a) all ACH items sent to and/or
received from the automated clearinghouse; (b) all return items and adjustments related to ACH items; and
(c) unless otherwise agreed, all fees or charges for services rendered by the Reserve Bank under the terms
of this agreement.
The participating institution and any correspondent named below agree to the terms of the Settle­
ment Agreement set forth in Appendix 4 to the Reserve Bank's Operating Circular 11 (Automated Clearing­
house Operations) and agree to that Operating Circular and Fiscal Agency Operating Circular 3 (Federal
Payments by the Autom ated Clearinghouse Method), each as amended from time to time. The participat­
ing institution or correspondent agrees to maintain in its account at the Reserve Bank a balance of actually
and finally collected funds sufficient to cover all obligations.

Settlement for ACH items is to be functioned to the account of
] Participating institution (self)
] Correspondent institution (settlement institution)

N a m e :______________________________
Address:____________________________
City/State/ZIP Code:__________________
Nine-Digit Routing/Transit ABA Number:

The information specified below must be completed by the settlement institution.
Contact N a m e :________________________________

Phone Number: (

)

Officer's N a m e :_______________________________

Signature:__________

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