View original document

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

Federal R eserve bank

OF DALLAS
W IL L IA M

H. WALLACE

f i r s t v ic e

DALLAS, TEXAS 75222

p r e s id e n t

A N D C H IE F O P E R A T IN G O F F IC E R

September 1, 1988
Circular 88-60
TO:

The Chief Operations Officer at
all financial institutions in the
Eleventh Federal Reserve District
SUBJECT
B u l l e t i n 8 r e v i s i o n s regarding R egu lation CC and J
DETAILS

The Federal Reserve Bank of Dallas' Bulletin 8, "Collection of
Cash Items and Returned Checks" has been revised to conform to
Regulation CC and amendments to Regulation J effective September 1,
1988. These regulations require substantial changes in the handling of
returned checks, as well as introduce changes in definitions and other
provisions. Substantial revisions to Bulletin 8 were required to
incorporate these changes.
Highlights of the changes include provisions that are
applicable to both cash items and returned checks because Reserve Banks
are now handling returned checks that they did not handle for forward
collection.
In addition, the new disputed return procedure applies to
any item handled by a Reserve Bank for either forward collection or
return.
In order to control abuse of the disputed return procedure, for
which no charge is to be made, its use has been limited to items in an
amount of $100 or more, to the first nonpayment of an item, and
to
within two months from the date of receipt of the item.
Finally, new qualifications require a cash item to conform to
the dimension standards of the American National Standards Institute.
ANSI Standard X9.13 sets forth the required guidelines.
For a copy,
please phone (212) 354-3300. Cash items must also bear the routing
number of the paying bank in fractional form in the upperright
corner
of the check in at least 8-point Gothic type.

For additional copies of any c ircu lar please c ontact the Public Affairs D ep artm en t at (214) 6 5 1 -6 2 89 . Banks and others are
encouraged to use th e follow ing incom ing W A TS numbers in contacting this Bank (800) 4 4 2 -7 1 4 0 (intrastate) and (800)
5 2 7 -9 2 0 0 (interstate).

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

- 2 -

ENCLOSURES

Enclosed is the revised Bulletin 8. Please insert it in your
Regulations Binders and remove the old version.

MORE INFORMATION
For additional information, please contact Robert L. Whitman
(214) 698-4357 or Sharon A. Sweeney (214) 651-6228 at the Dallas Office,
Robert W. Schultz (915) 544-4730 at the El Paso Branch, Luke E. Richards
(713) 652-1544 at the Houston Branch, or John A. Bullock (512) 224-2141
at the San Antonio Branch.
Sincerely yours,

BULLETIN 8

Collection of
Cash Items

FEDERAL RESERVE BANK OF DALLAS

SCOPE

This bulletin contains the terms and conditions under which we will handle
cash items for collection and other instructions regarding the handling, return, and
adjustment of cash items.

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8

BULLETIN 8
COLLECTION OF CASH ITEMS
TABLE OF CONTENTS

Paragraphs
G eneral............................................................................................................
Items that we handle as cash items............................................................

5-6

Items that we do not handle as cash item s...............................................

7-10

Preparation of cash letters............................................................................
Indorsements
Responsibilty for back of check
Direct sending to other Reserve offices

11-16

Time schedules and availability of cred it.................................................
Immediate credit
Deferred credit
Items payable outside of a State

17-19

Routing Numbers; records............................................................................

20-22

Delivery and Presentm ent............................................................................

23-26

Payment for cash letters...............................................................................
Differences and adjustments
Missent Items

27-33

Return checks.................................................................................................
Preparation of returned checks
Qualified returned checks; identification of depositary bank
Delivery to depositary bank
Payment for returned checks

34-45

Breach of warranty; cash items and returned check.................................

46

Bank's liability for judgment and expenses..............................................

47

Disputed return procedure...........................................................................

48-50

Notice of nonpayment...................................................................................
Content of notice of nonpayment
Acceptance of notice of nonpayment
Provision of notice from the return check by this Bank
Telephone notice to this Bank
Fedwire notice to depositary bank
Other provisions

51-63

Protest..............................................................................................................

08-88

1-4

64

i

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8
COLLECTION OF CASH ITEMS
TABLE OF CONTENTS (continued)

Paragraphs
Charges...................................................................................

65

Missing or destroyed cash items and returned checks...
Mutilated cash letters and returned letters
Cash items discovered missing or destroyed
Handling of photocopies of cash items
Notice in lieu of return
Returned checks discovered missing or destroyed
Photocopies of returned checks

66-77

Right to am end...............................................................................................
Appendix A Government Checks
Appendix B Postal Money Orders
Appendix C Redeemed Savings Bonds
Exhibit I / Sender's Late Return Item Claim
Exhibit II / Paying Bank's Response to Late Return Item Claim
Exhibit III / Paying Bank's Notification Agreement

08-88

78

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8

fined in Section 19 of the Federal Reserve Act.
The term "item" includes a cash item and a re­
turned check. The term "cash item" excludes a
returned check, and the term "returned check"
includes a cash item, and a check as defined in
Regulation CC, that is returned by a paying
bank. The terms "prior" or "subsequent" with
respect to a bank are used in relation to our
handling of an item. For example, a subsequent
collecting bank is one that handles a cash item
after we handle it. Many terms used in this
bulletin have specialized meanings that have
developed through law, custom and commercial
usage. Unless otherwise stated, all references to
this Bank include our Head Office and our San
Antonio, Houston, and El Paso Branches.

GENERAL

1. Subpart A of Regulation J ("Regulation J") of
the Board of Governors of the Federal Reserve
System ("Board"), Subpart C of Regulation CC
("Regulation CC") of the Board, this bulletin, 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 bulletin also contains in­
structions 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. Additional provisions for the
collection of cash items through our Regional
Check Processing Centerffls" are included in
Bulletin 13. This bulletin is issued pursuant to
Sections 4, 13, 14(e), and 16 of the Federal Re­
serve Act, the Expedited Funds Availability Act,
and relating statutes and in conformity with
Regulations J and CC. It is binding on each
party interested in an item we handle.

4. This bulletin applies to any State or political
subdivision of a State to which we present direct,
as cash items, bills, notes, and 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 ac­
commodation of the public is treated as a
"banking day" for the issuer.

2. Each Reserve Bank has issued a bulletin sub­
stantially similar to this one, When we send a
cash item or a returned check to another Reserve
Bank, that Reserve Bank handles the item sub­
ject to its bulletin and time schedules. We give
credit for the item in accordance with our time
schedules.

ITEMS THAT WE HANDLE AS CASH ITEMS

5. A sender may send the following items to us
for handling as cash items, unless otherwise
provided in this bulletin:

3. The definitions of terms set forth or incorpo­
rated in Regulation J, including terms defined in
Regulation CC, apply in this bulletin, except as
otherwise provided in this bulletin. The term
"bank" includes a depository institution as de­

1.

(a) Checks payable in a State,1 including
postdated checks, except checks that cannot
be collected at par;

Under Section 210.2 of Regulation J, "State" means a State of the U nited States, the District of Columbia, Puerto Rico, or a
territory, possession or dependency of the United States.

08-88

1

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

for handling by high-speed check processing
equipment;

(b) Government checks, postal money or­
ders, redeemed savings bonds,* and food
coupons2; and

(d) except as provided in paragraphs 69 - 70
and 76 regarding photocopies, the item has
not been preprinted or postencoded, in ac­
cordance with the American National
Standard Specifications for Placement and
Location of MICR Printing, X9.13 (Septem­
ber, 1983), before we receive it with: (i) the
routing number4 of the paying bank (or non­
bank payor), and (ii) except as provided in
our time schedule, the dollar amount of the
item. We handle such an item as a cash item,
however, when we judge that special cir­
cumstances justify such handling;

(c) Other demand items, collectible at par in
funds acceptable to the Reserve Bank of the
Federal Reserve District ("District")3 in
which the items are payable, 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 one
other than a "sender," as defined in Section 210.2
of Regulation J.

(e) the item does not state on its face the
name and city and state address of the pay­
ing bank associated with the routing number
on the item-, or

ITEMS THAT WE DO NOT HANDLE AS
CASH ITEMS

(f) except as provided in paragraphs 69 - 70
and 76 regarding photocopies, the item does
not bear (i) the routing number of the paying
bank in fractional form in the upper right
corner in at least 8-point Gothic type, or (ii)
conform to the dimension standards of the
American National Standard Specifications
for Placement and Location of MICR Print­
ing, X9.13 (September, 1983) (between 2 3/4
and 3 2/3 inches in width, and 6 and 8 3/4
inches in length). We handle such an item
as a cash item, however, when we judge that
special circumstances justify such handling.

7. A sender should not send to us an item eligi­
ble for handling as a cash item under paragraph
5 if:
(a) a passbook, certificate, or other document
is attached to the item;
(b) special instructions, including a request
for special advice of payment or dishonor,
accompany the item;
(c) the item consists of more than a single
thickness of paper, except as provided in
paragraphs 69 - 70 and 76 regarding photo­
copies, but we do handle as a cash item a
mutilated, erroneously-encoded, or other
cash item contained in a carrier that qualifies

These items should be sent to us for collection
only as noncash items under our Bulletin 9,
"Collection of Noncash Items."

..... -pjje references to redeem ed savings bonds and Appendix C are planned to be effective in October, 1988, w ith the effectiveness
of amendments to 31 CFR 321 and the System w ide handling of such items.
2. The provisions that govern the collection of Government checks, postal m oney orders and redeem ed savings bonds are con­
tained in Appendices A, B and C of this bulletin. Provisions governing the collection of food coupons are contained in Bul­
letin 5.
3. The Virgin Islands and Puerto Rico are deem ed to be in the Second District, and Guam, American Samoa and the Northern
Mariana Islands are deem ed to be in the Tw elfth District. Regulation J, note 1.
4. The term "routing number" means a number authorized by the Routing Number Policy of the Am erican Bankers Association.

08-88

2

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8

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

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 end-pointsorted cash letters or return letters that we han­
dle without our indorsement.
We have no
responsibility for describing a lost or destroyed
item that we charge back to a bank, or for
maintaining insurance coverage or obtaining
from another person reimbursement for a send­
er's (or paying or returning bank's) costs or other
loss, except as provided in Appendix A concern­
ing Government checks.

9. Under Section 4-204(1) of the Uniform Com­
mercial Code, a collecting bank must send items
by reasonably prompt methods. Accordingly,
we discourage indirect routing of cash items. A
sender should not send to us, or to another Re­
serve Bank for our account, an item that is pay­
able 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 in­
directly. Senders should not send to us an item
payable by, at, or through an office of the sender.

13. We require that cash items be separately
sorted from returned checks, except as otherwise
provided by written agreement. We reserve the
right to require separate sorts of cash items and
returned checks, and separate sorts of Govern­
ment checks, postal money orders, redeemed
savings bonds and food coupons. We reserve the
right to require banks located in the same city,
town, metropolitan 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. Our time schedules con­
tain other instructions for sorting and listing
items.

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 it back and re­
turn it to the sender. We do not have any re­
sponsibility 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
bulletin and our time schedules.

Indorsements

14. All cash items and returned checks sent to
us should be endorsed in accordance with the
requirements of Section 229.35 and Appendix D
of Regulation CC. If we receive a cash item
without the sender's indorsement, or a returned
check without a returning bank's indorsement,
we may (a) present or send the item as if it bore
the indorsement, (b) place on the item the miss­
ing indorsement and the date we received it, or
(c) return the item for proper indorsement. We
handle an end-point-sorted cash letter and re­
turn 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

PREPARATION OF CASH LETTERS AND
RETURN LETTERS

11. All cash items and returned checks sent to
us may be listed by amount without further de­
scription in tape listings accompanying cash let­
ters 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.
12. Each sender (or paying or returning bank)
should keep records that permit it to identify its

08-88

3

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

210.12(f) of Regulation J, items sent direct are
deemed to have been handled by us. A
sender or bank that by arrangement 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.

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

15. (a) A bank issuing checks drawn on us is re­
sponsible 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 of Regulation
CC. The issuing bank agrees to indemnify
us for any loss or expense incurred by us
(including attorneys' fees and expenses of
litigation) as a result of the condition of the
back of the check when issued.

TIME SCHEDULES AND AVAILABILITY
OF CREDIT

17. We give immediate or deferred credit for
all items that we accept as cash items or re­
turned checks in accordance with our pub­
lished time schedules. For letters containing
items unsorted as to credit availability, we
may defer credit for the longest period pre­
scribed in our time schedules for any item
enclosed.

(b) We reserve the right to refuse to accept
a deposit of a check if in our judgment the
back of the check at the time of the deposit
adversely affects our or another bank's abil­
ity to indorse the check legibly in accord­
ance 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 expense
incurred by us (including attorneys' fees and
expenses of litigation) as a result of the con­
dition of the back of the check at the time
of deposit.

18. Because in many instances our time
schedules do not show the actual time re­
quired for collection or return, our advices
cannot be considered advices of actual pay­
ment on the dates we make credit available.
Credit is in all instances 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 per­
mit a bank to withdraw or otherwise use any
credit (immediate or deferred) for a period
of time that is reasonable under the circum­
stances, 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.

DIRECT SENDING TO OTHER RESERVE
OFFICES

19. We enter credit at full face value in the
reserve account or other appropriate account
on the day we receive a cash item or re­
turned check as follows:

16. A sender (or a paying or returning bank)
that maintains or uses an account with us
and that has cash items (or returned checks)
payable in another District, or in the territory
of another office of this Bank, may send the
items directly to the Reserve office of that
District or territory under procedures we
prescribe.
Under Sections 210.4(b) and

08-88

Immediate Credit

Immediate credit at once qualifies as reserve
for purposes of Regulation D and is available
for use by the bank.

4

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8

cash item earlier than is required by the
Uniform Commercial Code. We have no re­
sponsibility 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 ten paying banks and to last
at least three banking days.

Deferred Credit

The amount entered as deferred credit does
not qualify as reserve for purposes of Regu­
lation D and is not available for use by the
bank until the time specified in our time
schedule.

24. A paying bank may request delivery of
cash items to be made at an off-premise lo­
cation in the same Reserve office territory as
that where the paying bank is located. For
arrangements involving delivery of cash let­
ters to a processing organization, execution
of special presentment agreement Form
TR-411 is required. A paying bank may also
pick up cash items at this Bank by arrange­
ment with us. The paying bank is consid­
ered to receive a cash item when it is
delivered as requested or made available for
pickup as arranged.

ROUTING NUMBERS; RECORDS

20. We may present or send a cash item, un­
der Section 210.6(a)(2) of Regulation J, on the
basis of any routing number or other desig­
nation of a paying bank appearing on the
item when we receive it. We are not re­
sponsible for any delay resulting from our
acting on a designation of a paying bank,
whether inscribed by magnetic ink or other
means, even if the designation is inconsistent
with another designation of the paying bank
on the item.

25. A paying bank may request delivery of
cash items to be made at an off-premise lo­
cation in a different Reserve office territory
from that where the paying bank is located,
as provided in this paragraph. For arrange­
ments involving delivery of cash letters to a
processing organization, execution of special
presentment agreement Form TR-411 is re­
quired.

21. If in our judgment processing of an
unencoded or misencoded cash item requires
it, we may inscribe on the item, in magnetic
ink or otherwise, (a) the 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 accordingly, except in the case of
an item that is not amount encoded and is
classified as a cash item in our time schedule.

(a) In appropriate cases, we will attempt to
arrange public transportation, at the paying
bank's expense, to the out-of-territory lo­
cation that ensures delivery in the ordinary
course on the same banking day that deliv­
ery would have been made within the terri­
tory where the paying bank is located
("same-day delivery").

22. In addition to the recordkeeping pro­
visions of this bulletin (see paragraphs 12
and 75), Treasury regulations (31 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.

(b) If we arrange same-day delivery, the
paying bank is considered to receive the
cash items when the items are delivered to
the out-of-territory location as requested, or
when the items are shipped if the scheduled
transportation is cancelled or rescheduled

DELIVERY AND PRESENTMENT

23. We do not by this bulletin, or otherwise,
agree to present, or cause presentment of, a

08-88

5

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

terms for payment for cash items are contained
in Bulletin 12 and Bulletin 13 of this Bank.

and we do not arrange alternate same-day
delivery.
(c) If we do not arrange same-day delivery,
the paying bank may arrange for transporta­
tion of the items to the out-of-territory lo­
cation, and is considered to receive the cash
items when we make the items available for
shipment as requested.

28. As provided in .210.9(a)(2) of Regulation J, a
paying bank that closes voluntarily on a day that
is a banking day for us shall, with respect to a
cash item made available to the paying bank on
that day, either (a) pay the amount of the item
by the close of our banking day on that day, or
(b) compensate for the value of the float associ­
ated with the item and pay the amount of the
item on the banking day of receipt of the item
by the paying bank. A list of standard Reserve
Bank holidays, and of other holidays not consid­
ered voluntary ("mandatory nonstandard holi­
days"), is set forth in our time schedule. We may
charge the account on our books maintained or
used by the paying bank for the amount of the
item on the day we make the item available,
unless the paying bank elects to compensate for
the float associated with the item. The paying
bank may elect to eliminate float by "as of" ad­
justment or pay for the float by explicit charge,
as we prescribe with respect to interterritory
float. An item is available to the paying bank if
we deliver it or are prepared to deliver it as if
the paying bank were open. A paying bank that
pays for an item made available to it, or com­
pensates for the float associated with the item,
is not considered to receive the item until its
next banking day, such as for purposes of deter­
mining 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.

26. We may commingle cash items delivered to
or picked up by the paying bank's agent with
other cash items delivered to or picked up by
that agent. A cash item is considered presented
when received by the paying bank or its agent
(other than a payable-through bank).

PAYMENT FOR CASH LETTERS

27. A paying bank must pay for all cash items
that it has received from us and not returned
prior to the close of its banking day of receipt.5
Payment shall be made at par and by:
(a) a debit to an account on our books;
(b) cash; or
(c) in our discretion, any other form of
payment.
The proceeds of any payment shall be made
available to us by the close of our banking day
on the banking day on which the paying bank
receives the items. If the paying bank's banking
day of receipt is not a banking day for us, pay­
ment shall be made by the close of our next
banking day; we may make appropriate adjust­
ments as of the day of receipt (unless that day is
a Saturday or Sunday) for purposes of computing
reserves under the Board's Regulation D. Our
5.

29. A subsequent collecting bank (other than a
Reserve Bank) that is paid for a cash item shall
make the proceeds available to us not later than

A paying bank is deem ed 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
(a) after its regular banking hours;
(b) after a cut-off hour established by it in accordance with the Uniform Commercial Code; or
(c) during afternoon or evening periods w hen it is open for lim ited functions only.

08-88

6

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8

M issent Items

the close of our banking day on the day the
subsequent collecting bank receives the pro­
ceeds.

32. If we send to a bank, on the understanding
that it is the paying bank, a cash item that does
not contain either the routing number or the
name of the bank as paying bank, and the bank
determines not to pay the item, the bank shall
send the item back to us promptly on a without
entry 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.

DIFFERENCES AND ADJUSTMENTS

30. Unless a paying or depositary bank has oth­
erwise agreed with us, a paying or depositary
bank may pay for our cash letter or return letter
in an amount different from the total of the letter
if the accompanying items do not prove to the
amount of the letter. The bank should furnish
at the time of payment a complete explanation
of the difference on the form we provide. We
request that banks not report adjustments of
$1.00 or less. We adjust for an amount encoding
error on a cash item or a qualified returned
check (a) upon receipt from a sender or a bank,
within six (6) calendar months from the date of
the entry relating to the item, of a request and a
photocopy of the front and back of the item
showing the error, and (b) subject to receipt from
the bank or the sender of the item, as the case
may be, of the amount of the requested credit or
refund.

33. A check, as defined in Section 229.2(k) of
Regulation CC, that contains the routing number
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 an­
other bank. Therefore, a paying bank shall han­
dle 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 er­
roneous use of its MICR routing number on the
face of the item prior to return by obliterating
only the start and stop symbols of the routing
number (and by cancelling any erroneous frac­
tional routing number) to prevent redelivery to
the paying bank.

31. We provide a statement of account to each
bank maintaining an account on our books. An
account holder must promptly advise us in writ­
ing of an objection to an entry in our statement
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 re­
lates) is deemed to have approved the entry, and
the statement of account is deemed finally ad­
justed. This paragraph does not relieve an ac­
count holder from the duty of using due
diligence in examining statements of account
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.

08-88

RETURNED CHECKS

34. A paying bank may return a cash item re­
ceived from us and for which it has previously
made payment only if it returns the item within
the deadline of Section 210.12(a) of Regulation J,
Section 229.30(c) of Regulation CC and the Uni­
form Commercial Code. A paying bank may re­
turn to us a cash item received from us without
making payment to us if it returns the item prior
to the close of its banking day of receipt. If the
paying bank receives a settlement from a re­
turning bank for a cash item received from us
and returned by it, but for which it has not pre­

7

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

agraphs 11-19 and 30- 31 apply to the prepara­
tion and sending of, and the availability of credit
and adjustments for, returned checks.

viously made payment to us, it shall immediately
remit the settlement to us.
35. A paying or returning bank may send to us
a returned check not handled by us for forward
collection only if it sends the returned check
within the deadline of Regulation CC and the
Uniform Commercial Code. A bank shall not
commingle returned checks with cash items.

QUALIFIED RETURNED CHECKS;
IDENTIFICATION OF DEPOSITARY BANK

39. We may rely on:
(a) the amount of a qualified returned check
encoded in magnetic ink;

36. A paying or returning bank that sends a re­
turned check to us and receives settlement for
the returned check (a) warrants to us and subse­
quent 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 expense incurred by
us (including attorneys' fees and expenses of lit­
igation) as a result of its breach of this warranty.
The paying or returning bank also makes the
other warranties and agreements set forth in
Section 210.12 of Regulation J and in Section
229.34 of Regulation CC.

(b) the presence or absence of a "2" in mag­
netic ink in position 44 of the MICR line as
to whether the returned check is a qualified
returned check;
(c) the identification of the depositary bank
by nine-digit routing number in magnetic
ink on a qualified returned check; and
(d) the identification of the depositary bank
by routing number on the face of a returned
check received in a separate sort of items
requiring such identification;

37. We do not by this bulletin, or otherwise,
agree to handle a returned check more expe­
ditiously than is required by Section 229.31 of
Regulation CC, or to convert a returned check
into a qualified returned check. We have no re­
sponsibility for giving notice of anticipated de­
lays in return of returned checks unless the
delay is expected to involve at least ten
depositary banks and to last at least three bank­
ing days.

whether or not the amount or identification is
consistent with any other information on the re­
turned check. The paying or returning bank
from which we receive the check agrees to
indemnify us for any loss or expense incurred by
us (including attorneys' fees and expenses of lit­
igation) as a result of our reliance on such
amount or identification.
D elivery to Depositary Bank

Preparation of Returned Checks

40. We deliver returned checks to a depositary
bank at the same location and subject to the
same terms under which we deliver cash items
payable by the bank, except as follows. If we do
not usually deliver cash items to the bank for
payment, we deliver returned checks to the
depositary bank in accordance with Section
229.32(a) of Regulation CC, which may include
delivery by mail. If a depositary bank requests
delivery of returned checks at a location other

38. A paying bank shall clearly write or stamp
on the face of a returned check that it is a re­
turned check and the reason for nonpayment as
provided in Section 229.30(d) of Regulation CC.
We 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. Par­

08-88

8

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

subsequent returning bank receives the pro­
ceeds, and shall pay in the same manner as for
cash items received for payment.

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 ar­
range delivery as otherwise agreed with the
depositary bank. A depositary bank may also
arrange to pick up returned checks at this Bank.

45. If we send a returned check or notice of
nonpayment to a bank on the understanding that
it is the depositary bank, and the bank deter­
mines that it is not the depositary bank, but the
bank is able to identify the depositary bank, we
encourage the bank to send the returned check
or notice promptly to the depositary bank. If the
bank is unable to identify the depositary bank,
the bank shall promptly send the check or notice
back to us on a without entry basis with a re­
quest 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.

41. We deliver returned checks to a depositary
bank separately sorted from cash items, unless
we and the depositary bank agree otherwise.
Payment for Returned Checks

42. A depositary bank must pay for a returned
check in full so that the proceeds are available
to us by the close of our banking day on the
banking day the depositary bank receives6 the
returned check. If the depositary bank's banking
day of receipt is not a banking day for us, pay­
ment shall be made by the close of our next
banking day; we may make appropriate adjust­
ments as of the day of receipt (unless that day is
a Saturday or Sunday) for purposes of computing
reserves under the Board's Regulation D.

BREACH OF WARRANTY; CASH ITEMS AND
RETURNED CHECKS

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

43. A depositary bank shall pay us for a returned
check in the same manner it pays us for a cash
item received for payment. If we do not usually
send cash items to the depositary bank for pay­
ment, the depositary bank shall pay by;
(a) debit to an account on our books;
(b) cash;
(c) wire transfer; or
(d) in our discretion, any other form of pay­
ment.

BANK'S LIABILITY FOR JUDGMENT AND
EXPENSES

44. A subsequent returning bank (other than a
Reserve Bank) that 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
6.

47. Under Sections 210.5 and 210.12 of Regu­
lation J, we may charge the account maintained

A depositary bank is deem ed to receive a returned check on it 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.

08-88

9

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8

or used by the bank from which we have re­
ceived a cash item or returned check for the
amount of any judgment and attorneys' fees and
expenses incurred by us in certain actions
against us or another Reserve Bank (or in certain
actions where defense is tendered to us or an­
other Reserve Bank), including actions alleging
breach of warranty, if we have tendered defense
of the action to the bank. We assume no re­
sponsibility for defending the action if the bank
does not accept tender of the defense.

49. We will revoke the credit given to the dis­
puting bank 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 another Reserve Bank) receive
from the paying bank, within fifteen (15)
calendar days after we (or the other Reserve
Bank) sent the check and the bank's state­
ment to the paying bank, the returned check
and a statement, on a form provided by us,
that is signed by an officer of the paying
bank and that:

DISPUTED RETURN PROCEDURE

(i) states that the paying bank returned
the check within its deadline under the
U.C.C., Regulation J, or Section 229.30(c)
of Regulation CC, and

48. If a depositary bank that settles for a re­
turned check in an amount of $100.00 or more
believes that the paying bank has returned the
check late and breached its warranty under
Section 229.34(a)(1) of Regulation CC, the bank
may dispute the return by furnishing us (or its
Reserve Bank) with the returned check and a
signed statement that the bank believes that the
paying bank did not return the check within the
paying bank's deadline under the U.C.C., Regu­
lation J, or Section 229.30(c) of Regulation CC.
This procedure may not be used unless the item
was handled by this Bank or another Reserve
Bank either for forward collection as a cash item
or for return as a returned check. The procedure
may be used only once and only with respect to
the first time the check was returned by the
paying bank. The statement must be on a form
provided by this Bank and must be sent by the
bank within two (2) calendar months after the
date the returned check was received by the
depositary bank. Upon receipt of the statement,
we credit the amount of the returned check to
the bank's account (or to the account of the for­
warding Reserve Bank). We also charge that
amount to the account of, and send the returned
check and statement to, the paying bank or the
paying bank's Reserve Bank.

08-88

(ii) shows the banking day of receipt and
the date of return of the check by the
paying bank, and explains any difference
in dates exceeding one banking day.
50. In handling disputed return forms, we as­
sume no responsibility for determining whether
the paying bank returned a check within its
deadline under the U.C.C., Regulation J, or Sec­
tion 229.30(c) of Regulation CC. 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 undertake to
handle forms and make entries under the dispute
procedure within a reasonable time after receipt,
but not within the timeframes for handling an
item.

NOTICE OF NONPAYMENT

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 of Regu­

10

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8

ment,

lation 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 the paying bank is re­
quired to provide notice is not a banking day for
the depositary bank, the notice must be received
by the depositary bank on its next banking day.
The following days are not considered 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 November; 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 depositary
bank from its indorsement,
(g) trace number associated with the in­
dorsement of the depositary bank, and
(h) reason for nonpayment.
The notice may include other information from
the check that may be useful in identifying the
check and the customer. A written notice must
also 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 au­
thorized 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.

52. A paying bank may provide notice of non­
payment by any reasonable means, including:
(a) return of the returned check to the
depositary bank,

Acceptance of N otice by Depositary Bank

(b) telephone call, or telex or other form of
telegraph to the depositary bank, or

54. The depositary bank shall accept notices
during its banking day:

(c) return of the returned check to us, tele­
phone call to us, or Fedwire to the depositary
bank, with a request that we forward notice
of nonpayment, as provided below,

(a) at the telephone or telegraph number
indicated in its indorsement, or if the number
is not present or legible, at the general pur­
pose telephone or telegraph number of its
head office or branch indicated in the
indorsement;

Content of N otice of Nonpayment

(b) at any other telephone or telegraph
number held out by the bank for receipt of
notice of nonpayment; and

53. Notice of nonpayment must include the:
(a) name and routing number of the paying
bank,

(c) in the case of written notice:

(b) name of the payee(s),

(i) at a location at which presentment of
checks for forward collection is re­
quested; and

(c) amount of the item,
(d) date of the depositary bank's indorse­

08-88

11

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

provide notice of nonpayment for applicable re­
turned checks received by our cut-off hour on
behalf of the paying bank under the standard of
care and measure of damages set forth in Section
210.38 of Regulation CC. We will otherwise
handle applicable returned checks as provided
elsewhere in Regulations CC and J and this
bulletin. We will provide notice of nonpayment
for applicable returned checks received after our
cut-off hour for notice of nonpayment as if the
checks had been received prior to our cut-off
hour on our next banking day, and shall have no
responsibility for loss caused by the failure of the
paying bank to meet our cut-off hour. The pay­
ing bank should itself provide notice of nonpay­
ment to the depositary bank if the paying bank
learns that we have not received applicable re­
turned checks by our cut-off hours, and should
indicate to the depositary bank that the notice
may be duplicated by us.

(A) at a branch, 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 head of­
fice 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 head office of the bank.
The depositary bank may transfer a telephone
call and may use a recording device.
Provision of N otice from the Returned Check
by This Bank
(Physical Item Service)

55. A paying bank may request us to provide
notice of nonpayment on its behalf by signing
and delivering to us a letter in the form attached
as Exhibit III. The request shall apply to all re­
turned 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 cut-off hour for physical item no­
tice, as set forth in our time schedule, on a
banking day for us, we will provide notice of
nonpayment to the depositary bank by 4:00 p.m.
(local time for the depositary bank) that day, or
on the next banking day if that day is not a
banking day for the depositary bank. For the
paying bank to comply with its obligation under
Section 229.33 of Regulation CC, we must re­
ceive the returned check no later than our cut­
off hour on our second banking day following
the banking day of receipt of the check by the
paying bank.

Telephone N otice to this bank
(Telephone N otice 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 attached as Exhibit III.
The request shall apply to all returned checks for
which notice of nonpayment is telephoned to us.
If we receive telephone notice by our cut-off
hour for telephone notice, as set forth in our time
schedule, on a banking day for us, we will for­
ward 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 obli­
gations under Section 229.33 of Regulation CC,
we must receive the notice no later than our
cut-off hour on our second banking day follow­
ing the banking day of receipt of the check by
the paying bank.
58. Upon our acceptance of such a request, be­
ginning on an agreed effective date, we will for­

56. Upon our acceptance of such a request, be­
ginning on an agreed effective date, we will

08-88

12

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8

ward notice of nonpayment received by our
cut-off hour on behalf of the paying bank under
the standard of care and measure of damages set
forth in Section 229.38 of Regulation CC. We
will forward notice of nonpayment received after
our cut-off hour as if the telephone notice had
been received prior to our cut-off hour on our
next banking day, and shall have no responsi­
bility for loss caused by the failure of the paying
bank to meet our cut-off hour. The paying bank
should itself provide notice of nonpayment to the
depositary bank if the paying bank is unable to
meet our cut-off hour.

depositary bank if the paying bank is unable to
meet our cut-off hour.

Fedwire N otice to Depositary Bank
(Fedwire System Service)

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 cancelling a
previous notice and should contain all the infor­
mation in the original notice to enable the
depositary bank to match the second notice with
the original notice.

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, and need not be given for a check depos­
ited in a depositary bank that does not maintain
transaction accounts.

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 de­
livering to us a letter in the form attached as
Exhibit III. If we receive Fedwire notice by our
cut-off hour for Fedwire notice, as set forth in our
time schedule, 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 obli­
gations under Section 229.33 of Regulation CC,
we must receive the notice no later than our
cut-off hour on our second banking day follow­
ing the banking day of receipt of the check by
the paying bank. We handle Fedwire notice
under the standard of care and measure of dam­
ages set forth in Section 229.38 of Regulation CC.
We will forward notice of nonpayment received
after our cut-off hour as if the Fedwire notice had
been received prior to our cut-off hour on our
next banking day, and shall have no responsi­
bility for loss caused by failure of the paying
bank to meet our cut-off hour. The paying bank
should itself provide notice of nonpayment to the
7.

62. A depositary bank that uses an electronic
link with us for purposes of wire transfers of
funds under Subpart B of 12 CFR Part 210 is
deemed to authorize us to provide notice to it
by means of that link or another electronic link
agreed to by us7. 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 cor­
recting notice of nonpayment if notice is not
properly given by the paying bank except to the
extent provided above with respect to notice we
provide or forward on behalf of the paying bank.

The provision is effective January 1, 1989.

08-88

13

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

to a subsequent collecting bank or the paying
bank. We credit or refund the amount only if
we (or a subsequent collecting bank that
promptly sends the report to us) receive the re­
port within five (5) banking days (of the report­
ing bank) from the date of receipt of the cash
letter that listed the item.

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 let­
ters or otherwise transmitted with a cash item.
A sender may instruct a Reserve Bank to provide
for protest of a cash item (other than a Govern­
ment check, postal money order, redeemed
savings bond or food coupon) only if the sender
sends the item to us for collection and credit as
an individual noncash item with the instructions
noted in the letter of transmittal.

68. 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 pay­
ing bank reports to be missing or destroyed as
provided in paragraph 67.
Handling of Photocopies of Cash Items

69. We handle a correctly prepared photocopy
as a cash item through our adjustment depart­
ment if we (or a prior collecting Reserve Bank)
receive the photocopy and a copy of the advice
of charge-back within thirty (30) banking days
(of the Reserve Bank) from the day we (or the
prior Reserve Bank) charged back the original
item. The prior Reserve Bank should send the
photocopy and advice to us when received.

CHARGES

65. Our schedule of charges shows the charges
imposed for handling cash items, returned
checks, notices of nonpayment, and for related
services. We may make the charge to the ac­
count maintained or used by the bank request­
ing the service.

70. If a shipment of cash items is lost or de­
stroyed in transit to the first collecting Reserve
Bank, we handle correctly prepared photocopies
of the items as cash items through our cash item
department in a cash letter if (a) the sender de­
termines that at least several items in the ori­
ginal shipment remain unpaid, and (b) the
photocopy cash letter is identified as containing
nonmachineable photocopies of items from a lost
or destroyed shipment.

MISSING OR DESTROYED CASH ITEMS
AND RETURNED CHECKS
M utilated Cash Letters and Return Letters

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

71. We present or send a photocopy as a cash
item subject to all the rules as to payment and
return of cash items, except for the requirement
of notice of nonpayment and as otherwise pro­
vided in this paragraph, and except as provided
for photocopies of returned checks in paragraphs
76-77. A paying bank has the right to return a
photocopy through our adjustment department

Cash Items Discovered M issing or Destroyed

67. We credit or refund the amount paid for a
cash item if a subsequent collecting bank or the
paying bank reports that it discovered during
initial proving that the item is missing, or knows
that the item was missing or destroyed in transit

08-88

14

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

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 without
entry basis, the return of a photocopy of a cash
item received by us or a subsequent collecting
Reserve Bank within nine (9) months of the
banking day of receipt of the photocopy by the
paying bank. We also handle without entry a
late report of a missing or destroyed cash item.
We undertake to handle reports and photocopies
and make entries with respect to missing or de­
stroyed cash items within a reasonable time after
receipt, but not within the timeframes for han­
dling an item.

within twenty (20) banking days from its banking
day of receipt if:
(a) the drawer has refused to authorize pay­
ment 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) 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 statement 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 or­
iginal.

Returned Checks Discovered M issing or De­
stroyed

74. We credit or refund the amount charged to
a subsequent returning or depositary bank for a
returned check if that bank reports that it dis­
covered 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 (5) banking days (of the reporting bank) from
the date of receipt of the return letter that listed
the check.

72. A correctly prepared photocopy must be a
legible copy of the front and back of the cash
item and must bear the sender's current
indorsement and the following or equivalent
signed legend:
This is a photocopy of the original check
which we indorsed and which was reported
missing or destroyed in the regular course
of bank collection. We guarantee all prior
and any missing indorsements and the va­
lidity 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 pay­
ment is stopped on the original check and
the original check remains unpaid.

75. 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 re­
turned 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 para­
graph 74.
Handling of Photocopies of Returned Checks,
Notices In Lieu of Return

73. We assume no responsibility for determining
whether a return of a photocopy is timely. Nor
do we assume any responsibility for determining
whether a report by another bank of a missing

08-88

76. We handle as a returned check through our
adjustment department a legible photocopy of a
returned check (front and back), or, if a photo­

15

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

gether with the information required in para­
graph 71(b).

copy is not available to the paying or returning
bank, a written notice of nonpayment containing
the information specified in paragraph 53. If we
charged back the returned check to the paying
or returning bank under paragraph 75, we (or a
prior returning Reserve Bank) must receive the
photocopy or notice and a copy of the advice of
charge-back within thirty (30) banking days (of
the Reserve Bank) from the day we (or the prior
Reserve Bank) charged back the returned check.
The prior Reserve Bank should send the photo­
copy and advice to us when received. The copy
or notice shall clearly state that it is a notice in
lieu of return. By sending a notice in lieu of re­
turn to us for credit, a paying or returning bank
warrants that it has not received credit for the
returned check, and makes the warranties set
forth in Section 229.34 of Regulation CC. The
depositary bank may return a photocopy through
our adjustment department within twenty (20)
banking days from its banking day of receipt if
the original returned check was paid and the
depositary bank returns a copy of the front and
back of the paid original returned check and a
signed statement that the original was paid, to­

08-88

77. We assume no responsibility for determining
whether a report by another bank of a missing
or destroyed returned check, a statement re­
garding 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
timeframes for handling an item.

RIGHT TO AMEND

78. We reserve the right to amend this bulletin,
and any appendix or supplement to it, at any
time.

16

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

APPENDIX A
GOVERNMENT CHECKS

1. We handle checks drawn on the United States
Treasury ("Government checks") as cash items
under Treasury Department Circular No. 21 (31
Code of Federal Regulations, Part 240). Copies
of that Circular will be furnished on request. As
to matters that circular does not cover, Regu­
lation J, this bulletin, and our times schedules
apply.
2. We give immediate credit, subject to payment
in actually and finally collected funds, for Gov­
ernment checks as provided in our time sched­
ules. After we handle Government checks as
fiscal agent of the United States under Treasury
requirements, the checks are subject to exam­
ination and payment by the United States
Treasury. We may reimburse a sender for its
reasonable costs of reconstructing a Government
check cash letter lost or destroyed in transit be­
tween Federal Reserve offices.
3. Section 210.12 of Regulation J, relating to the
return of cash items by paying banks, does not
apply to Government checks. If the United
States Treasury refuses payment of a Govern­

08-88

ment check upon first examination and returns
the check, or a photocopy, to us as outlined in
Treasury Department Circular No. 21, we charge
back the amount of the check to the sender and
credit that amount to the United States Treasury.
We have no responsibility to the sender or an­
other owner or holder for the nonpayment and
return by the United States Treasury of a Gov­
ernment check or photocopy.
4. Under Federal statute, 31 U.S.C. ..3702 and
3712: (a) a claim on a Government check that
appears of record to have been paid must be
made to the Government within six years after
the date of issuance of the check and (b) an
action by the Government to enforce liability on
a forged or unauthorized signature or
indorsement or alteration of a Government
check must be commenced within six years after
presentment of the check, or written notice of
such a claim must be given within that period,
but if a claim is made on an apparently paid
check, the six-year period is extended an addi­
tional 180 days.

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

APPENDIX B
POSTAL MONEY ORDERS

1. We handle postal money orders (United States
postal money orders; United States international
postal money orders; domestic-international
postal money orders) as cash items under an
agreement between the United States 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 bulletin, and our time sched­
ules apply.
2. We give immediate credit for postal money
orders as provided in our time schedules. The
credit becomes final as between us and the
sender when we debit the amount of the money
orders against the general account of the United
States Treasury under symbol numbers assigned
by it.

08-88

3. The agreement between the United States
Postal Service and the Reserve Banks provides
that; (a) the United States 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 United States Treasury (other
than a claim based on the negligence of a Re­
serve Bank); (b) the United States Postal Service
will deal directly with the bank or the party
against which the claim is made; and (c) the Re­
serve Banks will assist the United States Postal
Service in asserting the claim, including making
any relevant evidence in their possession avail­
able to the United States 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.

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

E X H IB IT

S e n d e r ’s L a t e

R e tu rn

I

Ite m

C la im

D a t e ____________________
TO: FEDERAL RESERVE BANK OF DALLAS [____________________ BRANCH]
The retu rn ed cash item described below an d a tta c h e d is being delivered to you because of LATE RETURN.
1. A m o u n t_______________________________
2. D a t e d _______________________________
3. Payor R/T # _______________________________
4. Payor Location (City)_______________________________

(S ta te )--------------- . _____ ___

5. Draw n by (D ra w e r)__________________________________________
6. Payable to (Payee) _________________________________________
7. Check N o . ____________________
8. Our institution sent this ca sh item t o ____________________ in a cash letter d a t e d _____________________
totaling $____________________ _ tape total $_____________________ listed b etw een items for
$_____________________________and $__________________________________
9. This item w as apparently re tu rn e d by the paying institution o n _________________________
IDate l

10. We received the return item o n ___________________________from your bank in a retu rn item
(I)nte]

letter d a t e d _______________________________totaling $__________________________ tape total
$_______, listed between items f o r ________________________________________________________ and
$______________________________ .

We claim that, according to our records an d the endorsements and stamps on the item, the paying bank did not take all
action necessary to recover its payment within the time limits of Regulation J an d w e certify that, as to notice of non­
payment, we received:
[CHECK ONE]
□

wire or telephone advice o n _______________________________ □

no advice other than the r e tu rn ed item.

[D iitii)

This late retu rn c aused us to incur financial loss, because of lack of authority to charge the item back to our customer,
or for other reasons.
Please credit our account provisionally and advise.
Sending Institution
By ___________________________________________________
Officer's Signature
P re p are and submit in duplicate. Failure to provide all information requested will result in claim being returned
without entry.
Reserve Banks will, in no case, examine the items in question or the statem ents of alleged facts to ascertain the validity
of the claims in carrying out this procedure.
Knowingly making a false statement on this form to influence the action of a Federal Reserve Bank in granting a credit may subject the signing party
to criminal penalties under Federal or State law.

FEDERAL RESERVE BANK OF DALLAS

BULLETIN 8

EXHIBIT II
Paying Bank’s R esponse to Late Return Item Claim
Date

TO: FEDERAL RESERVE BANK OF DALLAS [____________________ BRANCH]
Your advice of debit d a t e d _______________________________ forw arded to us a claim of late re tu rn of
an item in the amount of $________________________ .
We certify th at our records indicate that this item w as received by us or our processor as a cash
item o n _______________________________in your cash letter d a t e d _______________________________ _
(Banking Day)
in the amount of $____________________ , tape total $_________________________, listed betw een items for
$________________________ and $_____________________ . Our institution sent this re tu rn item to
_____________________________________________ , in a return item letter d a t e d __________________________
totaling $________________________ , tape total $_________________________, listed between items for
$________________________ and $ _ _____________ __________ Notice of nonpayment w as given to
_______________________________________________________ by telephone (date) * _______________ or wire
(date) * ______________ for this item.
If the num ber of banking days from the banking day of receipt to the date of re tu rn exceeds one bank­
ing day, the explanation for the delay is as follows:___________________________________________

W e took all action n ec essary to entitle us to recover our payment within the time limits of
Regulation J. Please credit our account and advise.
_____________________________________________

B y ___________________________________________

P aying Institution

O fficer's Signature

*Enter “ none” if no wire or telephone notification w as given.
P r e p a r e a n d s u b m i t in d u p l i c a t e . F a i l u r e to p r o v i d e all i n f o r m a t i o n r e q u e s t e d a n d / o r f a i l u r e to r e t u r n to
y o u r lo c a l F e d e r a l R e s e r v e O ffic e c o m p l e t e d fo rm s w ith th e r e t u r n ite m w ith i n 15 b u s i n e s s d a y s from
d a t e of c h a r g e w ill r e s u l t in c l a im b e i n g r e t u r n e d w i t h o u t e n t ry .

Reserve Banks will, in no case, examine the items in question or the statem ents of alleged facts to a s c er­
tain the validity of the claims in carrying out this procedure.
K n o w i n g ly m a k i n g a f a l s e s t a t e m e n t o n t h i s f o r m to i n f l u e n c e t h e a c t i o n o f a F e d e r a l R e s e r v e Bun k in g r a n t i n g a c r e d i t m a y s u b j e c t t h e si g n in g
p a r t y t o c r i m i n a l p e n a l t i e s u n d e r F e d e r a l o r S t a t e la w.

8-87

BULLETIN 8

FEDERAL RESERVE BANK OF DALLAS

EXHIBIT III
Paying Bank’s N otification Agreement
(to be typed on paying bank's letterhead)

(Date)
Federal Reserve Bank
of

_____________

Attention: Payments Mechanism Departm ent
[
[

] Head Office
] Houston B ranch

[
[

] El Paso Branch
] San Antonio Branch

Gentlemen:
We request that, in acco rd a n ce with your Bulletin 8, you provide notice of nonpayment for large
dollar ca sh items that we decide not to pay. We elect to provide the information required by:
□

returning the physical item to you

□

telephone notification to you

□

Fedwire System (RESPONSE Network)

We authorize you to charge our billing account m aintained or used by us on your books and to make
other a p p ro p riate adjustm ents with this service.

(Name of Paying Bank)

(Nine Digit ABA Number)
B y : _______________________________________
(Authorized Signature)

(Title)

10-85