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Federal R eserve Bank
OF DALLAS
T O N Y J . S A L V A G G IO
F IR S T V IC E P R E S ID E N T

DALLAS, TEXAS

November 4, 1994

75265-5906

Notice 94-109

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 revised Operating Circular 8
(Collection of Cash Items). The changes became effective June 6, 1994.
The revisions to Operating Circular 8 relate to same-day settlement services
offered by the Federal Reserve Banks. In general, the revisions address guidelines
related to Primary and Alternate Presentment Point services, along with ancillary Payor
Bank services, associated with same-day settlement.

ENCLOSURES
Operating Circular 8 and a revised index are enclosed. Please file them in
your Operating Circulars (Bulletins) binder and discard the old versions.

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,
(210) 978-1402, at the San Antonio Branch.

For additional copies, bankers and others are encouraged to use one o f the follow ing toll-free numbers in contacting the Federal
Reserve Bank o f Dallas: Dallas O ffice (800) 333 -4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; H ouston
Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San A ntonio 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-

For additional copies of this Bank’s notice, Operating Circular 8, or the
index, 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

o f

D a l l a s

Collection of
Cash Items

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
of cash items.

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

08-94

.

T
COLLECTION OF CASH ITEMS
Paragraphs
General...............................................................................................

1-4

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

5 -6

Items That We Do Not Handle as Cash Item s............................... 7-10
Noncash Item s................................................................................... 11-12
Preparation of Cash Letters and Return Letters............................ 13-18
Indorsements
Responsibility for back of check
Direct sending to other Federal Reserve offices
Time Schedules and Availability of C re d it...................................... 19-21
Immediate credit
Deferred credit
Items payable outside a state (foreign items)
Routing Numbers; Records.............................................................. 22-24
Delivery and Presentment................................................................. 25-28
Settlement for Cash Letters............................................................... 29-31
Adjustments.......................................................................................

32

General Time Limits for Claims and Actions................................. 33-35
Review of statement
Notice of warranty claim
Limitation of actions
Missent Cash Item s........................................................................... 36-37

08-94

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

V
COLLECTION OF CASH ITEMS

(continued)
Paragraphs
Returned Checks................................................................................ 38-50
Preparation of returned checks
Qualified returned checks; identification of depositary bank
Delivery of returned checks to depositary bank
Payment for returned checks
Missent returned checks
Notice of N onpaym ent..................................................................... 51-63
Content of notice of nonpayment
Acceptance of notice by depositary bank
Provision of notice by this Bank (physical item service)
Telephone notice to this Bank (telephone notice service)
Fedwire notice to depositary bank (Fedwire system service)
Other provisions
P rotest................................................................................................

64

C harges..............................................................................................

65

Adjustments for Warranty Claims................................................... 66-75
Claim of forged or missing indorsement or alteration
Sender’s claim of late return by the paying bank
Claim of amount encoding error or cash letter total error
Overencoded item
Underencoded item
Other encoding errors or cash letter total errors
Expenses

iv

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

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¥
COLLECTION OF CASH ITEMS

(continued)
Paragraphs
Missing or Destroyed Cash Items and Returned Checks.............. 76-89
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 e n d ................................................................................

90

Appendix 1: U.S. Government Checks
Appendix 2: Postal Money Orders
Appendix 3: Redeemed Savings Bonds and Savings Notes
Appendix 4: Presentment Point and Other Payor Bank Services
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

08-94

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

v

General
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 its appendices, 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 instructions 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 } and CC. It is
binding on each party interested in an item we
handle. The provisions of this Operating Circu­
lar vary by agreement any inconsistent provisions
of the Uniform Commercial Code or of
Regulation CC, but only to the extent of the
inconsistency.
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”).1For example, paragraphs 25 through 30
regarding off-premise presentment and payment
for cash letters, paragraph 32 regarding adjust­
ments with a paying bank, paragraph 38 regard­
ing return by a paying bank, and paragraph 43
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
rules on notice of nonpayment in paragraphs
51-63, the procedures for adjustments with a
paying bank in paragraphs 69-70 and 72-74,
and the handling of photocopies as cash items in
paragraphs 79-83 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
and time schedules. We give credit for the item
in accordance with our time schedules.
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
a s C a s h It e m s

H andle

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 I), including
postdated checks, except checks that
cannot be collected at par;

' Under Section 210.2 of Regulation J, “state” means a state of the United States, the District of Columbia, Puerto Rico, or a
territory, possession, or dependency of the United States.
08-94

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

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
routing num ber4 of the paying bank (or
nonbank payor) and (2) except as
provided in our time schedules, with the
dollar amount 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;

B. government checks, postal money
orders, redeemed savings bonds, and
food coupons;2
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;3 and
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
Ca s h it e m s

d o n o t handle

as

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 attached to the item;
B. if special instructions, including a
request for special advice of payment or
dishonor, accompany the item;
C. if the item consists of more than a single
thickness of paper, except as provided in
paragraphs 79-80 and 87-88 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;
D. if, except as provided in paragraphs
79-80 and 87-88 regarding photo­
copies, the item has not been preprinted

E. if the item, other than a foreign item,
does not set forth on its face the name of
the paying bank and a city and state
address of the bank that is located (1) in
the same Reserve Bank check processing
region as the address associated with the
routing number in magnetic ink on the
item and (2) in a Reserve Bank availabil­
ity zone that provides the same availabil­
ity as (or slower availability than) the
address associated with the magnetic ink
routing number; or
F.

if, except as provided in paragraphs
79-80 and 87-88 regarding photo­
copies, 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 American National Standard “Speci­
fications for Placement and Location of
MICR Printing, X9.13” (September
1983)—between 2% inches and 32
/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 circum­
stances justify such handling or when
the item is a foreign item.

8. A sender should not send to us as a cash
item an item th at has been d ish o n o re d
two or more times. We reserve the right to return
an item if it has been dishonored once or if we

“ The provisions that govern the collection of government checks, postal money orders, and redeemed savings bonds are in
Appendixes 1, 2, and 3 of this circular. Provisions governing the collection of food coupons are in Operating Circular 5.
3 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 “Routing number” means a number authorized by the routing number policy of the American Bankers Association.
F e d e ra l R e s e rv e B a n k of D a lla s

08-94

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.

Securities Department and execute an appropri­
ate agreement with us.
PREPARATION OF CASH LETTERS
R e t u r n Le t t e r s

and

9. Under Section 4-204(a) 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
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.
N O N C A SH ITEMS
11. 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.
12. This Bank does not generally collect noncash
items. Senders in this District may send bonds,
debentures, coupons, and similar securities to
the Federal Reserve Bank of Atlanta, Jacksonville
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 securi­
ties 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
08-94

13. 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.
14. 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.
15. 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
16. All cash items and returned checks sent to us
should be indorsed in accordance with the

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

Operating
Circular

8

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 J by presenting or sending
a cash item (and the warranties stated in Section
210.12 [d] ofRegulation J by sending a returned
check), whether or not the item bears our
indorsement.
Responsibility for Back o f Check
17. Guidelines concerning the back of checks are
the following:
A. A bank issuing a check drawn on this
Bank is responsible for ensuring that the
condition 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 ofRegulation
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
18. 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

4

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(g) ofRegulation 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 Sc h e d u l e s a n d
A v a il a b il it y o f C r e d it
19. 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 and our procedures on
intraday posting, as provided in paragraph 21.
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.
20. 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 addition, in
some instances, credit shown in an account
balance monitor during a day does not reflect
credit available for purposes of the Board’s policy
on daylight overdraft measurement. 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.
21. We enter credit at full face value, in the
reserve account or other appropriate account, for
a cash item or returned check, as follows:
Immediate Credit
Immediate credit qualifies as reserves for
purposes of Regulation D and is available for use
by the bank at one float-weighted posting time
per time zone for most cash items unless the
sender chooses a unique set of fractions for each
of four time zones. Credit for separate sorts of
government checks, postal money orders, items

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

08-94

ingly, except in the case of an item that is not
amount-encoded and is classified as a cash item
in our time schedules.

drawn on this Bank, and redeemed savings
bonds is available at 8:30 a.m. Eastern Time if
received by 12:01 a.m. or later (local time) or at
5:00 p.m. Eastern Time if received by 4:00 p.m.
Eastern Time. Credit for food coupons and
nonmachineable cash items is available after the
close of Fedwire.

Items Payable Outside a State (Foreign Items)
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
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.
RO UTING NUM BERS; RECORDS
22. We may present or send a cash item, under
Section 210.6(a)(2) ofRegulation 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.
23. 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 amount 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
08-94

8

24. In addition to the record-keeping provisions
of this Operating Circular (see paragraphs 14
and 86), U.S. Treasury regulations (Title 31 of
Code of 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.

Deferred Credit
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 day specified in our time schedules and the
posting time referred to in this paragraph.

Operating
Circular

D

e l iv e r y a n d

Presentm ent

25. 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.
26. 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
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.
27. A paying bank may request that delivery of
cash items be made at an off-premises location in
a different Federal Reserve office territoiy 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”).

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

5

Operating
Circular

8

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-of­
territory location, and the bank is
considered to receive the cash items
when we make the items available for
shipment as requested.
28. 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.
Se t t l e m e n t

for

C a s h Le t t e r s

29. A paying bank must settle in accordance
with Section 210.9(a) ofRegulation J for all cash
items that it has received from us and not
returned in accordance with Regulation J.5
Settlement shall be made at par and
A. by a debit to an account on our books;
B. by cash; or
C. in our discretion, by any other form of
payment.
Regulation J refers to the Reserve Banks’ Operat­
ing Circulars for the earliest settlement time,
which is 11:00 a.m. Eastern Time. Accordingly,
the proceeds of any settlement must be available
to us by the later of
D. the next clock hour that is at least one
hour after the paying bank receives the
item (but no later than 3:00 p.m. local
time); or
E.

11:00 a.m. Eastern Time.

If presentment to the paying bank is delayed
beyond the normal presentment time for any
reason and the paying bank desires that a charge
to its account be deferred, it should notify us
immediately. If the paying bank’s banking day of
receipt is not a banking day for us, settlement
shall be made on our next banking day in
accordance with Section 210.9(a)(4) ofRegula­
tion J. 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. The proceeds of
any settlement must be available to us on such
next banking day by the later of
F.

the next clock hour that is at least one
hour after the paying bank ordinarily
would receive the item (but no later than
3:00 p.m. local time); or

G. 11:00 a.m. Eastern Time.
We charge against a paying bank’s reserve or
clearing account the amounts of cash letters that
the paying bank receives directly or indirectly
from us, unless it makes other arrangements for
payment or issues instructions to the contrary
with respect to a specific cash letter. Our terms
for payment for cash items are contained in
Operating Circular 12 of this Bank.
30. As provided in Section 210.9(a)(3) 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 settle for the
amount of the item on that day or compensate
us for the value of the float associated with the
item and settle for the amount of the item on the
next day that is a banking day for both the paying
bank and us. The proceeds of any settlement
must be available to us on
A. either the day the cash item is made
available by the later of
(1) the next clock hour that is at least
one hour after the paying bank
ordinarily would have received the
item (but no later than 3:00 p.m.
local time); or

5A 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, but after a cutoff hour established by it in accordance with the Uniform Commercial Code.
6

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(2) 11:00 a.m. Eastern Time;
B. or the next day that is a banking day for
both the paying bank and us by the later
of

Debits and credits for errors in entries relating to
cash items, and other credit adjustments, in the
amount of $1 million or more are made at 11:00
a.m. Eastern Time and hourly thereafter as they
are determined. Debits and credits for other
adjustments are made after the close of Fedwire.
We request that banks not report adjustments of
$1 or less.

(1) the next clock hour that is at least
one hour after the paying bank
ordinarily would receive the item
(but no later than 3:00 p.m. local
time); or

8

GENERAL TIME LIMITS FOR
CLAIMS A N D ACTIONS

(2) 11:00 a.m. Eastern Time.

Operating
Circular

Review of Statement

A list of standard Reserve Bank holidays, as well
as other holidays not considered voluntary
(“mandatory nonstandard holidays”), is distrib­
uted 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 us 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 pre­
scribe 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.

33. 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, notwithstanding any longer period for
filing suit. Reserve Banks generally keep records
for only one year. This paragraph does not
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.
Notice of Warranty Claim

31. A subsequent collecting bank (other than a
Reserve Bank) that receives settlement 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.
ADJUSTM ENTS
32. A paying or depositary bank may request an
adjustment to its settlement for our cash letter or
return letter if (a) the paying or depositary bank
notifies us of an error in the letter, or (b) the
paying bank returns an item on the banking day
of receipt by the time set forth in Section
210.9(a) ofRegulation J and notifies us of the
return, in accordance with this Operating
Circular. Adjustments for warranty claims and
missing or destroyed items are governed by
paragraphs 66-89 of this Operating Circular.
08-94

34. A bank must give prom pt notice to us of a
claim for breach of warranty (see paragraph 66,
footnote 7). Unless a bank gives us notice of a
claim for breach of warranty within 30 calendar
days after the bank has reason to know of the
breach and of our status as a warrantor, our
liability to the bank is discharged to the extent of
any loss caused by the delay in giving notice of
the claim, notwithstanding any longer period for
requesting adjustments or filing suit.
Limitation of Actions
35. Section 229.38(g) ofRegulation CC requires
that any action for a violation ofRegulation CC,
including an action for breach of warranty under
Section 229.34, be brought within one year after
the date of the occurrence of the violation.
Section 210.6(c) ofRegulation J requires that

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Operating
Circular

8

action on a claim against a Reserve Bank for
failure to exercise ordinary care or act in good
faith under Regulation J, except as otherwise
provided in Section 229.38(g) ofRegulation CC,
be commenced within two years after the claim
accrues. As provided in Section 4-111 of the
Uniform Commercial Code (1990), any action
on a claim against a Reserve Bank for breach of
warranty, except as otherwise provided in
Section 229.38(g) ofRegulation CC, must be
commenced within three years after the claim
accrues.
M

is s e n t

Ca sh

it e m s

36. 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.
37. 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 number 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.
Re tu r n ed Checks
38. A paying bank may return a cash item
received from us and for which it has previously
made settlement only if it returns the item within
the deadline of Section 210.12(a) ofRegulation J,
Section 229.30(c) ofRegulation CC, and the
Uniform Commercial Code (see paragraph 70,
footnote 8 of this Operating Circular). A paying
bank may return to us a cash item received from
us without making settlement to us if it returns
the item before the time set forth in Section
210.9(a) ofRegulation J. If the paying bank
8

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 settlement
to us, it shall immediately 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.
39. 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 ofRegulation CC and the
Uniform Commercial Code (see paragraph 70,
footnote 8 of this Operating Circular). A bank
shall not intermingle returned checks with cash
items except as provided in paragraph 15.
40. 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 ofRegulation J and in
Section 229.34 ofRegulation CC.
41. 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.
42. 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) ofRegulation
CC. The check must not be sent as a qualified
returned check.
Preparation of Returned Checks
43. 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) ofRegulation CC. We

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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 13-21 apply to
the preparation and sending of, and the availabil­
ity of credit for, returned checks.

Delivery of Returned Checks to Depositary Bank

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,

8

45. 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) ofRegulation 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 depositaiy
bank. A depositary bank may also arrange to pick
up returned checks at offices of this Reserve
Bank.

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

Operating
Circular

46. 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 15.

Qualified Returned Checks;
Identification of Depositary Bank
44. We may rely on
A. the amount of a qualified returned check
encoded in magnetic ink,

D. the identification of the depositary bank
by nine-digit routing number on the
face of a returned check received in a
separate sort of items requiring such
identification,
whether or not the amount 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 amount 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.

Payment for Returned Checks
47. A depositary bank must pay in accordance
with Section 229.32(b) ofRegulation CC for a
returned check that it has received from us.6 If
the depositary bank’s banking day of receipt is
not a banking day for us, we may make appro­
priate adjustments as of the day of receipt (unless
that day is a Saturday or Sunday) for purposes of
computing reserves under the Board’s Regula­
tion 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 us for the float
as provided with respect to cash items in para­
graph 30 of this Operating Circular. The pro­
ceeds of payment must be available to us in
accordance with Sections 210.9(a) and 210.12(g)
of Regulation J by the times set forth in para­
graphs 29 and 30 of this Operating Circular, even
if the returned checks are received by the deposi­
tary bank at a location and time different from
the location and time of receipt of cash items for
forward collection.
48. A depositary bank shall settle for a returned
check in the same manner it settles for a cash

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 but after its regular banking hours.
08-94

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Operating
Circular

8

item received for payment. If we do not usually
send cash items to the depositary bank for
payment, the depositary bank shall settle
A. by a debit to an account on our books;
B. by cash;
C. by wire transfer; or
D. in our discretion, by any other form of
settlement.
Adjustments for returned checks are subject to
paragraphs 32 and 66-89 of this Operating
Circular.
49. A subsequent returning bank (other than a
Reserve Bank) that is 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 settle in the same manner as for cash
items received for payment.
Missent Returned Checks
50. 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 identity 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.

52. A paying bank may provide notice of
nonpayment by any reasonable means, including
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. amount of the item,
D. date of the depositary bank’s
indorsement,

NO TIC E OF NO NPAYM ENT
51. A paying bank that determines to return a
returned check in the amount of $2,500 or more
must provide notice of nonpayment to the
depositary bank under Section 229.33 ofRegula­
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 must be
received by the depositary bank on its next
10

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.
Additional nonbanking days may be observed by
the depositary bank.

E. account number of the customer(s) of
the depositary bank,
F.

branch name or number 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

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the check that may be useful in identifying the
check and the customer. A written notice must
include the name and routing number 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
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
number 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 number 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.

08-94

Provision of Notice by This Bank
(Physical Item Service)

Operating
Circular

8

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
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 ofRegulation 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 ofRegulation 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
hour, 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

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Operating
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8

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 ofRegulation CC, we must
receive the notice no later than our cutoff hour
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 ofRegulation 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 ofRegulation 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 ofRegulation 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

12

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.
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
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

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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.

undertake to handle an adjustment claim and
make entries within a reasonable time after
receipt but not within the time frames for
handling an item.

Operating
Circular

8

Claim of Forged or Missing Indorsement
or Alteration

Charges
65. Our schedule of charges shows the charges
imposed for handling cash items, returned
checks, and notices of nonpayment and for
related services. We may make the charge to the
account maintained or used by the bank re­
questing the service.
ADJUSTMENTS FOR
WARRANTY CLAIMS
66. A bank that has received a cash item or
returned check from us and that has settled for
the item may request an adjustment from us
based on a claim of breach of warranty in
accordance with paragraphs 66-75 of this
Operating Circular.7Where a request for adjust­
ment involves a warranty made to us by another
bank, we will handle the claim against the other
bank in accordance with those paragraphs. If the
claim against the other bank (other than a
Reserve Bank) is denied, the bank requesting the
adjustment from us may pursue the claim
directly with the other bank. A bank must not
attempt to recover on a warranty claim by
including the item in a cash letter or return letter
after the return deadline (see paragraph 70,
footnote 8). A bank that receives a credit adjust­
ment from us relating to a warranty claim must
pass the benefit of the adjustment through to its
customer if the customer is entitled to a similar
adjustment.
67. In handling an adjustment claim form under
paragraphs 68-75, we determine that the form is
submitted timely and is substantially complete,
but we assume no responsibility for determining
whether the statements made in the form are
correct or for arbitrating disputes between banks.
A bank may be 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 granting a credit. We

68. A bank that has received an item from us
may request, on a without-entry basis, an
adjustment based on a claim that the item bears a
forged or unauthorized indorsement or lacks a
necessary indorsement (a paying bank claim) or
is altered (a paying or depositary bank claim).
The bank should include all documentation
concerning the alleged breach of warranty,
including an affidavit of forged indorsement, if
appropriate. We credit the requesting bank and
charge the bank from which we received the cash
item or returned check only if the latter bank
specifically authorizes us to do so. A paying bank
may not claim breach of warranty, or return an
item with entry after the return deadline, because
of a forged or unauthorized drawer signature.
Sender’s Claim of Late Return by the Paying Bank
69. If a sender believes that the paying bank
returned late a check in the amount of $100 or
more, it may dispute the return by furnishing us
(or its Reserve Bank) with the returned check
and a signed statement that the bank believes
that the paying bank did not return the check
timely (within the paying bank’s deadline under
the Uniform Commercial Code, Regulation J, or
Section 229.30[c] ofRegulation CC). This
procedure may be used only once, only with
respect to the first time the check was returned
by the paying bank, and only if the check was
handled by a Reserve Bank for forward collection
or return. The statement must be on a form
provided by this Bank and must be sent by the
sender within two calendar months after it
received the returned check. When we receive
the statement, we provisionally credit the
amount of the returned check to the sender’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).

7The warranties that we make with respect to cash items and returned checks are set forth in Sections 210.6(b) and 210.12(d) of
Regulation J and Section 229.34 of Regulation CC, except as otherwise provided in our Operating Circulars. The principal
warranties that banks make to us are set forth in Sections 210.5(a) and 210.12(c) ofRegulation J and Section 229.34 of
Regulation CC.
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Operating
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8

70. We will revoke the credit given to the sender
and recredit the paying bank or other Reserve
Bank if
A. for any reason, we cannot obtain the
amount of the credit from the paying
bank or other Reserve Bank; or
B. we (or the paying bank’s Reserve Bank)
receive the returned check and a state­
ment as provided below from the paying
bank within 20 banking days of the
Reserve Bank after we (or the other
Reserve Bank) sent the check and the
sender’s statement to the paying bank.
The paying bank’s statement must be on
a form provided by us that is signed by
an officer of the paying bank and
(1) that states the paying bank returned
the check within its deadline under
the Uniform Commercial Code,
Regulation J, or Section 229.30(c) of
Regulation CC;8 and
(2) that shows the banking day of
receipt and the date of return of the
check by the paying bank.
Claim of Amount Encoding Error
or Cash Letter Total Error
Overencoded Item
71. A bank that has received a cash item or
returned check from us and settled for it in the
encoded amount may request an adjustment
based on a claim that the MICR encoding of the
amount is greater than the true amount of the
item. The request must be received by us (or the
requesting bank’s Reserve Bank) within six
calendar months after the item was charged to
the requesting bank and must provide informa­
tion required by us, including a photocopy of the
front and back of the item that clearly shows the
amount encoding error (words control over
figures in determining the true amount of the
item under Uniform Commercial Code [1990]
Section 3-114). When we receive the request, we
credit the requesting bank (or its Reserve Bank)
in the amount of the difference between the
encoded amount and the true amount of the

item and charge in that amount and send the
documentation to the bank from which we
received the encoded item.
Underencoded Item
72. A bank that has sent a cash item or returned
check to us and received settlement for it in the
encoded amount may request an adjustment
based on a claim that the MICR encoding of the
amount is less than the true amount of the item.
The request must be received by us (or the
requesting bank’s Reserve Bank) within six
calendar months after the item was credited to
the requesting bank, and it must provide infor­
mation required by us, including a photocopy of
the front and back of the item that clearly shows
the amount encoding error (words control over
figures in determining the true amount of the
item under Uniform Commercial Code [1990]
Section 3-114). When we receive the request, we
provisionally credit the requesting bank (or its
Reserve Bank) in the amount of the difference
between the encoded amount and the true
amount of the item and charge in that amount
and send the documentation to the paying or
depositaiy bank (or its Reserve Bank). We
reserve the right not to credit the requesting
bank (or its Reserve Bank) if we are unable to
charge the paying or depositary bank (or its
Reserve Bank).
73. We will revoke part or all of the credit given
to the requesting bank and recredit the paying or
depositary bank if we (or the paying or deposi­
tary bank’s Reserve Bank) receive a statement as
provided below from the paying or depositaiy
bank within 20 banking days of the Reserve Bank
after we (or the other Reserve Bank) sent the
documentation to the paying or depositary bank.
The statement must be on a form provided by us
that is signed by an officer of the paying or
depositaiy bank and
A. state that the paying or depositary bank
had charged its customer for the en­
coded amount of the item and is unable
to recover all or a specified portion of
the difference between the encoded
amount and the true amount of the item
by charging the account of the customer,
and

8This deadline is generally midnight of the banking day following the banking day of receipt of the check by the paying bank
(Uniform Commercial Code Section 4-302 and Regulation J Section 210.12[a]), except as the deadline may be extended under
Section 229.30(c) ofRegulation CC. This deadline applies to checks returned with entry for any reason, including forged
indorsement or forged drawer signature.
14

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B. request an adjustment in that specified
amount based on a claim of breach of
warranty with respect to the encoding
error.
Other Encoding Errors or
Cash Letter Total Errors
74. A. A claim of an error in a cash letter total
that results from an amount encoding
error should be made as a claim of an
amount encoding error under para­
graphs 71-73. A claim relating to any
other cash letter listing error should be
made as provided in paragraph 32.
B. A paying bank should handle an item
that contains the routing number of the
bank as provided in paragraph 37 of this
Operating Circular, whether or not the
routing number was encoded in error
after the issuance of the item.
C. Notwithstanding Section 229.34 of
Regulation CC or state law, we make no
warranties with respect to the encoding
of an account number or item number.
A paying bank is encouraged to validate
the accuracy of an encoded account
number or item number, particularly
when it was encoded after the issuance
of the item.

Cash Items Discovered Missing or Destroyed

Operating
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8

77. 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.
78. We charge back to the sender the amount 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 77.
Handling of Photocopies of Cash Items
79. 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.

Expenses
75. In handling adjustments under this Operat­
ing Circular, we do not have any responsibility or
liability with respect to interest cost or expenses
incurred by another bank as a result of breach of
warranty or negligence, nor do we charge
another bank a fee for our interest cost or
expenses in handling adjustments resulting from
breaches of warranty or negligence.
M is s in g o r D e s t r o y e d
a n d Retu r n ed Checks

C a s h It e m s

Mutilated Cash Letters and Return Letters
76. 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.

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80. 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
(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 number of the cash items in the
lost or destroyed cash letter remain unpaid.
81. 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 87-89. A paying bank has the right

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Operating
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8

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
ment 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
number of the original.
82. 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 indorsements and the validity of this
copy. Upon payment of this copy in lieu of
the original check, we agree to hold each
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.
83. 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 77. We undertake to handle reports
and photocopies and to make entries with

16

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
84. 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 8IB 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 8IB for both items.
Returned Checks Discovered Missing or Destroyed
85. 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.
86. A paying or returning bank (other than a
Reserve Bank) that sends a returned check to a
Reserve Bank shall retain a photocopy of the
returned check. We charge back to the paying or
returning bank the amount 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 85.
Handling of Photocopies of Returned Checks,
Notices in Lieu of Returns
87. 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

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the information specified in paragraph 53. If we
charged back the returned check to the paying or
returning bank under paragraph 86 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 82. 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 ofRegulation 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 depositaiy 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 8IB.
88. If a returned check letter is lost or destroyed
in transit to the first processing Reserve Bank, we
handle legible photocopies or notices of nonpay­
ment, identified as Notices in Lieu of Returns, in
a photocopy returned check letter qualified for
automated handling if (a) the photocopy re­
turned 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 bank should not send a
photocopy returned check letter to us unless the
bank has determined, after making good faith
inquiries, that a substantial number of the
returned checks in the lost or destroyed returned
check letter have not been returned to the
depositary bank.
89. 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

to

Am

end

90. We reserve the right to amend this Operat­
ing Circular and any appendix, exhibit, or
supplement to it at any time.

A P P E N D IX 1
U.S. GOVERNMENT CHECKS
We handle checks drawn on the U.S. Treasury ("governm ent 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 tim ely 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 w ithin 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.

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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, dom estic-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 tim e schedules apply.
We give immediate credit for postal money orders as provided in our tim e 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 w ill 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.

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A P P E N D IX 3
REDEEMED SAVINGS BONDS A N D 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 w ill be furnished upon request. As to
matters that circular does not cover. Regulation J, this Operating Circular, and our tim e 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
"A m o u n t" 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 "A m o u n t" field, and 000090007 must be MICR-encoded in the
"RAT" 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 "O n-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 tim e 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 m onthly 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.

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A P P E N D IX 4
PRESENTMENT POINT AND OTHER PAYOR BANK SERVICES
PRESENTMENT POINT SERVICES
A paying bank may request this Bank to act as a presentment point for receipt of sameday settlement checks (as agent of the paying bank) by subm itting a letter designating us as
either a primary or an alternate presentment point. The request is effective 10 banking days
after receipt of the letter or at a later date set forth in the letter. Same-day settlement checks are
checks (as defined in Regulation CC) presented in accordance with Section 229.36(f) and other
provisions of Regulation CC. A paying bank requesting a presentment point service agrees to
the terms of this Appendix.
P r i m a r y P r e s e n t m e n t P o i n t S e r v ic e

By designating an office of this Bank as a primary presentment point, the paying bank
designates that office as the presentment point for all collecting banks for same-day settlement
checks bearing an encoded routing number of the paying bank that is associated with the check
processing region of the designated office. If we receive checks identified as same-day settle­
ment checks or other items for a paying bank that has not requested a presentment point
service, we w ill handle the items as fine sorted cash items for collection by us under our Oper­
ating Circular. We will, upon request, provide a list of paying banks for which we act as primary
presentment point. The paying bank should notify collecting banks that are using this Bank as a
primary presentment point before terminating its designation of this Bank as a presentment
point.
A l t e r n a t e p r e s e n t m e n t p o i n t S e r v ic e

By designating an office of this Bank as an alternate presentment point with respect to a
designated collecting bank, the paying bank designates that office as a presentment point for
checks in accordance with a separate agreement between the paying bank and the designated
collecting bank. If we receive checks identified as same-day settlement checks or other items for
a paying bank that has not requested an alternate presentment point service with respect to the
collecting bank from which the items are received, or a primary presentment point service, we
will handle the items as fine sorted cash items for collection by us under our Operating Circular.
Gen er al

Collecting banks should directly contact a paying bank that has designated this Bank as a
presentment point, before presenting checks at this Bank, concerning any conditions or require­
ments for such presentment consistent with the provisions of this Appendix. All items delivered
to an office of this Bank as a presentment point for a paying bank must be separately packaged
from items delivered to us for collection; they must state "SAME-DAY SETTLEMENT" and
designate the name of the presenting bank and the name of the paying bank in accordance with
our requirements. Items w ill be considered presented to the paying bank only when the pack­
age is delivered to the location specified by us for delivery of same-day settlement checks.
This Bank will time-stamp the packages presented to a paying bank, provide verification
of receipt to the delivery agent, store the items for pickup by the paying bank, and provide
verification of the time of delivery to the paying bank. If requested by the paying bank, this Bank
will provide the enhanced service of notifying the paying bank concerning the identity of the
collecting bank, the time of delivery, and the dollar amount of each presentment of same-day
settlement checks.
This Bank does not act as a collecting bank in providing presentment point services to a
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A P P E N D IX 4 (continued)
paying bank. This Bank has no responsibility for determining whether the items received
com ply with delivery, sorting, timeliness, or other requirements of the paying bank or whether
the delivery complies w ith any separate agreement between the paying bank and the collecting
bank. This Bank has no responsibility for arranging for settlement or adjustment by the paying
bank for items presented or for arranging delivery of the items to the paying bank or for arrang­
ing for return of the items. Collecting banks should not include same-day settlement checks or
other items presented to paying banks in settlement sheets listing items deposited w ith us for
collection by us. If we receive checks identified as same-day settlement checks by means of
transportation arranged by a Reserve Bank, such as the Interdistrict Transportation System, we
will handle the items as fine sorted cash items for collection by us under our Operating Circular.
OTHER PAYOR BANK SERVICES
A paying bank may request this Bank to perform payor bank services with respect to
items delivered under a presentment point service and/or w ith respect to items to be presented
by this Bank and items otherwise presented to the paying bank by a collecting bank and subse­
quently delivered by the paying bank to us. These services include providing the paying bank
with information concerning the total dollar amount of items by customer account, w ith MICRline information from items, and w ith special sorts of items. A paying bank requesting payor
bank services agrees to the terms of this Appendix.
LIABILITY
In providing payor bank services to a paying bank, including a presentment point service
but excluding an electronic presentment service (which is governed by our Operating Circular
17, Electronic Check Presentment Services), this Bank shall have no responsibility or liability to
any person other than the paying bank and shall be liable only for our own lack of good faith or
failure to exercise ordinary care in providing the service. In providing customer account infor­
mation, MICR-line information, or special sorts to the paying bank, this Bank expressly dis­
claims any and all warranties—express, statutory, or implied—w ith respect to the information,
including but not limited to warranties of merchantability and fitness for a particular purpose.
The amount of our liability is limited to the amount of the item, reduced by an amount that
could not have been realized by the use of ordinary care, and shall not include any liability for
special, incidental, or consequential damages even if such damages were foreseeable at the
time of the failure to exercise ordinary care or act in good faith.
This Bank does not verify customer account information, MICR-line information, or special
sorts provided to a paying bank. It is the paying bank's responsibility to validate the accuracy of
such information or sorts, before relying on it or providing it to its customer, or to advise its
customer that the information has not been verified.
This Bank does not act as a collecting bank in providing payor bank services, regardless of
whether we may indorse items that have previously been presented to the paying bank. A
paying bank requesting payor bank services shall indemnify this Bank for any loss or expense
sustained (including attorneys' fees and expense of litigation) resulting from (1) a claim that this
Bank acts as collecting bank with respect to an item handled under a presentment point service,
or with respect to an item otherwise presented to a paying bank by a collecting bank and
subsequently delivered to this Bank by the paying bank for handling under a payor bank service
to the paying bank, regardless of whether this Bank has indorsed the item, or (2) any claim by a
person other than the paying bank with respect to an item delivered to us as agent of the
paying bank under a presentment point service.
If this Bank is delayed in acting beyond tim e limits applicable to a payor bank service
because of interruption of communication or computer facilities, suspension of payments by a
F e d e ra l R e s e rv e B a n k of D a lla s

08-94

A P P E N D IX 4 (continued)
bank, war, emergency conditions, failure of equipment, or other circumstances beyond our
control, our time for acting is extended for the time necessary to complete the action, if we
exercise such diligence as the circumstances require.
Rec o r d s
We w ill make available to the paying bank records of our processing of same-day settle­
ment checks in connection with other payor bank services. If we believe that we may be com­
pelled to provide such records or a same-day settlement check to other than the paying bank,
such as by legal process, we will notify the paying bank. It is the responsibility of the paying
bank to determine whether the record or check should be produced, to assert any defense to
such production, and to pay all associated costs.
T e r m in a t io n

and

A mendment

The provisions of this Appendix supersede any inconsistent provisions of any other
agreement regarding payor bank services. This Bank or the paying bank may terminate a payor
bank service by giving not less than 10 days' prior written notice to the other party. We reserve
the right to amend this Appendix at any time.

08-94

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

Operating
Circular

8

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

To:

Federal Reserve Bank of Dallas at
n

Dallas

O El Paso

Q

Houston

O

San Antonio

T h e __________________________________________________________________________________
(N a m e , Office, Routin g N u m b e r of th e D ep ository Institution)

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.
Check 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.

D

Please make our return letters available for pickup at the Federal Reserve office.

D

Please mail our return letters to us.

D

Other:________________________________________________________________________________.

This agreement w ill become effective on
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

City

TR -411 ( 8 - 9 0 )

(
)
Telephone Number

Authorized Signature

State

ZIP

Printed Name and Title

EXHIBIT 2
BANK'S CLAIM OF LATE RETURN

i

D a te_________________________
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 o u n t$ __________________________ (Must be $ 1 0 0 or more.)
D ated______________________________________
Paying b a n k ____________________________________________________________________
Paying bank routing/transit n u m b e r_______________________________________________
Paying bank lo ca tio n ____________________________________________________________
Drawn by (draw er)______________________________________________________________
Payable to (payee)_______________________________________________________________
Check number______________________________

We sent this item t o __________________________________________________________ , in a cash letter
d a te d ______________________________, totaling $____________________, tape total $___________________ ,
listed between items for $_____________________ and $______________________ .
This item was apparently returned by the paying bank o n ______________________________________ .
We received the item f r o m __________________________________________________________________ ,
□
o n -------------------------------------------------, in a (CHECK ONE)

Q

intermingled cash letter
return item letter

d a te d ____________________________________ , 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 (m eth od )_________________________ 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 S ignature_____
Routing/Transit Number.

1 This f o r m m a y be s u b m itte d o n ly w ith respect to th e first tim e th e ite m w a s se nt fo r collection and m u s t be sent in du plicate w ith in
tw o (2) m o n t h s after th e date y o u received the item as a retu rn ed check. In ad d itio n , th e ite m m u s t have been collecte d an d /o r
retu rn ed th ro u g h th e Federal R eserve ch eck collection system . Fa ilure to p ro v id e all in fo rm a tio n requ ested will result in rejection of
th e claim.

Knowingly making a false statement to influence the action of a Federal Reserve Bank
may subject the signing party to criminal penalties under federal and/or state law.
1 1 -9 3

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 d a te d _____________________________ , you forwarded to us a claim of late
return with respect to a returned check ("ite m ") 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 d a y ]________________________________________________________ ,
in a cash letter d a te d __________________________________________________________________ ,
in the amount of $____________________________ , tape total $_
listed between items for $__________________________ and $ _
and that the item was returned t o _______________________________
■
in our (CHECK ONE

□

intermingled cash letter
,
f.
l_l 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 (m eth od )_________________________ o n __________________________ . (Enter "N one" 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 S ignature__________________________________________________________
Routing/Transit N u m b e r_____________________________________________________

1

Pre pare and s u b m it in duplicate . If y o u fail to se nd all th e in fo rm a tio n requested to us w ith in t w e n t y (20) banking days (of the
Reserve Bank) after the date w e se nt this f o rm to y o u , th e pro v isional credit given the c la im a n t an d ou r de bit to y o u r ac count will
b e c o m e fin al. In th a t case, y o u m a y be able to recover the a m o u n t o f th e ite m fr o m th e c la im a n t if y o u r return o f the ite m w a s in fact
tim e ly , bu t yo u m ust deal directly w ith th e cla im ant.

Knowingly making a false statement to influence the action of a Federal Reserve Bank
may subject the signing party to criminal penalties under federal and/or state law.

11-93

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
B y :____________________________
Authorized Signature

Title

11-93

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