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F
e d e r a l
R
e s e r v e
B
a n k
OF D A LLA S
WILLIAM
H. W A L L A C E
DALLAS, TEXAS 75222
FIRST V IC E PR ES ID E N T
AND C H IE F O P E R ATIN G O FFIC ER
TO:
The Chief Executive Officer of all
financial institutions in the
Eleventh Federal Reserve District
SUBJECT
Bulletins of the Federal Reserve Bank of Dallas
DETAILS
The Federal Reserve Bank of Dallas has published a new Bulletin 1 7 Check Truncation Services. The new pamphlet should be placed in Volume 1 of
your Regulations and Bulletins Binders.
ATTACHMENTS
The new Bulletin 17—Check Truncation Services is enclosed.
MORE INFORMATION
For additional copies of this bulletin, please contact the Public
Affairs Department at (214) 651-6289.
Sincerely yours,
For ad ditio nal copies o f any c irc u la r please co n ta ct the P ublic A ffa irs D epartm ent at (214) 651-6289. Banks and others are
encouraged to use the fo llo w in g incom ing WATS num bers in con ta ctin g th is Bank (800) 442-7140 (intrastate) and (800)
527-9200 (interstate).
This publication was digitized and made available by the Federal Reserve Bank o f Dallas' Historical U braiy (F edH istoy@ dalfrb.ofv)
BULLETIN 17
Check Truncation Services
FEDERAL RESERVE BANK OF DALLAS
SCOPE
This bulletin contains the terms and conditions by which this Bank provides
check truncation services to financial institutions in the Eleventh District. Any
institution using these services shall, by such action, agree to the terms and con
ditions set forth herein.
B U LLE TIN 17
FEDERAL RESERVE B A N K OF D ALLAS
BULLETIN 17
CHECK TR U N C AT IO N SERVICES
TABLE OF CONTENTS
Paragraphs
09-89
G eneral...................................................................................................
1-2
Definitions..............................................................................................
3
Description of service.............................................................................
4-6
Settlement and Payment........................................................................
Provisional settlement
Time critical requests for information
Return of eligible items and final payment
7-9
Retention of paid items..........................................................................
10
Reserve bank warranties and liablilities...............................................
Warranties
Limitations on Liability
11-12
Representations and warranties ofinstitution.......................................
13-14
Records...................................................................................................
15
Fees and reimbursements payable
by the institution..........................
16
Termination or suspension.....................................................................
17
Timeliness of action...............................................................................
Delays
Time
18-19
Truncation procedure manual...............................................................
20
N otices....................................................................................................
21
Telephone...............................................................................................
22
Right to amend.......................................................................................
23
i
BULLETIN 17
FEDERAL RESERVE BANK OF DALLAS
c. "Instruction to Return" means an instruc
tion by Institution to this Bank to return an
item in accordance with the Truncation Pro
cedure Manual;
GENERAL
1. This Bulletin sets forth the terms of the
agreement ("Agreem ent") between this Bank and
a depository institution ("Institution") where
such Institution has requested this Bank to pro
vide check truncation services. Unless otherwise
indicated, any reference in this Bulletin to this
Bank includes its offices in Dallas, Houston, San
Antonio and El Paso.
d. "M ICR-line information" means the infor
mation inscribed in the M ICR-line on an eli
gible item as specified in the Truncation
Procedure Manual;
e. "Over-the-counter item" means a cash
item drawn on or payable at or through In
stitution that has been deposited in Institu
tion for collection or cashed by Institution
over-the-counter that is an eligible item and
that is delivered to this Bank by Institution
in accordance with the Truncation Proce
dure Manual;
2. This Agreement constitutes a "special col
lection agreement" as authorized by Section
210.7(b)(3) of Regulation J of the Board of G ov
ernors of the Federal Reserve System ("Regu
lation J"; 12 CFR 210 et. seq.). This Agreement
shall be governed by, and interpreted consist
ently with, Regulation J, Regulation CC (12 CFR
229 et. seq.), and other applicable law. This
Bank's Bulletin 8 shall supplement the terms of
this Agreement to the extent consistent here
with, such as with respect to disputed return
items, and as referred to herein.
f. "Truncation Procedure Manual" means the
manual of procedures established by this
Bank, as reasonably amended from time to
time by notice to Institution;
g. "R eceive" or "receipt" means when infor
mation, notice or an eligible item comes to
the attention of Institution or this Bank, re
spectively, or when it is duly tendered at the
place of business held out by Institution or
this Bank, respectively as the place for re
ceipt;
DEFINITIONS
3. As used herein, unless the context otherwise
requires, terms not defined herein have the
meanings set forth in Regulation J and Regu
lation CC.
h. "Record" or "recording" as to an eligible
item means to reproduce the item's
M ICR-line information in accordance with
the Truncation Procedure Manual;
a. "D eliver" or "delivery" means to effect
receipt of the information, notice, or eligible
item, as relevant;
i. "Request for information" means a request
made in accordance with the Truncation
Procedure Manual by Institution that this
Bank; (i) provide additional information with
respect to an eligible item to Institution, (ii)
transmit a facsimile copy of an eligible item
to Institution, or (iii) make available a phys
ical eligible item or copy to Institution for
pick up;
b. "E ligible item" means either a cash item
drawn on or payable through Institution and
handled by this Bank for collection, or an
over-the-counter item that (i) contains the
symbol or account number designating it as
an eligible item specified in the Check
Truncation Service Request Form and (ii)
otherwise complies with the eligibility re
quirements set forth in the Truncation Pro
cedure Manual;
9-89
j. "Tim e critical request for information"
means a request for information necessary to
1
FEDERAL RESERVE BANK OF DALLAS
BULLETIN 17
Institution's determination of whether to pay
or dishonor an item.
for receipt, normally by 12:00 noon on each
banking day for this Bank. If Institution is closed
on a banking day for this Bank, this Bank shall
make available for delivery the eligible items
and the M ICR-line information on the next
banking day on which both this Bank and Insti
tution are open. Institution agrees to establish
its cut-off hour for receipt of MICR-line infor
mation no earlier than 2:00 p.m. under this
Agreement.
D elivery shall be in accordance
with the Truncation Procedure Manual. If Insti
tution elects to receive MICR-line information
through electronic transmission, it agrees to re
ceive information between the hours of 8:00 a.m.
and 2:00 p.m.
DESCRIPTION OF SERVICE
4. This Bank shall, for all eligible items, in its
capacity as a collecting bank: (a) record
MICR-line information and perform reject repair
or key entry as provided in the Truncation Pro
cedure Manual; (b) microfilm items; (c) deliver
M ICR-line information to Institution; and (d) re
turn physical items. This Bank shall also, in its
capacity as agent of Institution, with respect to
eligible items: (e) receive presentment of items
pursuant to Section 210.7(b) of Regulation J; (f)
respond to requests for additional information;
(g) retain physical items and microfilm copies; (h)
provide notification of nonpayment as required
under Section 229.33 of Regulation CC; (i) return
physical items; and (j) retrieve physical items,
microfilm copies, or related information. The
procedures with which the parties are to comply
in providing or receiving the services described
herein are defined in the Truncation Procedure
Manual.
This Bank may make reasonable
amendments to the Truncation Procedure Man
ual from time to time by notice to Institution.
For the purpose of Regulations J and CC and this
Bank's Bulletin 8, the delivery of an eligible item
(other than an over-the-counter item) to this
Bank's truncation unit constitutes presentment
of the item. The eligible item w ill be deemed
presented to this Bank's truncation unit at the
time of delivery of the MICR-line information
relating to the eligible item (other than overthe-counter item) to Institution by this Bank in
its capacity as collecting bank.
SETTLEMENT A N D PAYM ENT
5. As a collecting bank, this Bank shall automat
ically record M ICR-line information from and
make a microfilm copy of the front and back of
eligible items received by this Bank. This Bank
shall open fine sort packages and process eligi
ble items found therein. This Bank shall perform
reject repair or key entry as provided in the
Truncation Procedure Manual. This Bank shall
endorse all eligible items in accordance with the
Truncation Procedure Manual.
Provisional Settlement
7. Simultaneous with or subsequent to delivery
of the M ICR-line information constituting
presentment pursuant to paragraph 6 of this
Agreement, this Bank, in its capacity as collect
ing bank, shall debit Institution's account or the
account of its designated correspondent at this
Bank on that day in the aggregate amount stated
in that day's information pursuant to Institution's
cash item settlement agreement with this Bank.
A t the same time, this Bank shall credit the ac
count with the amount of over-the-counter items
included in that days information. In the event
Institution closes voluntarily on a day that is a
banking day for this Bank, Institution shall make
payment for the aggregate amount stated in the
6. This Bank shall deliver eligible items to the
truncation unit responsible for storage of the
items. This Bank shall make available for deliv
ery the M ICR-line information, together with the
total dollar amount of relevant items, to Institu
tion or to a person designated by it as its agent
9-89
2
BULLETIN 17
FEDERAL RESERVE BANK OF DALLAS
instruction to return an item, this Bank in its ca
pacity as agent of Institution, shall retrieve the
physical eligible item and return it or written
notice in lieu of return pursuant to Section
229.30(f) of Regulation CC to this Bank's return
item unit. Where an instruction to return an
item is delivered to this Bank by 11:00 a.m., the
physical item or written notice in lieu of return
shall be delivered to this Bank's next return item
deadline on the same day. Receipt of an in
struction to return an item of $2,500 or more w ill
also serve as a request to this Bank to give notice
of nonpayment to the depository bank under
Section 229.33 of Regulation CC.
information which is made available to the in
stitution on the day it is closed in accordance
with the provisions regarding payment for cash
items contained in this Bank's Bulletin 8.
Time Critical Requests for Information
8. Institution may, without dishonor, request this
Bank, by telephone or other means permitted by
the Truncation Procedure Manual at Institution's
expense to do the following: (a) provide addi
tional information with respect to the front and
back of an eligible item whose MICR-line infor
mation this Bank delivered under paragraph 6;
(b) transmit a facsimile copy of the front and
back of such an eligible item; or (c) make avail
able for pick up by Institution such a physical
eligible item or a copy thereof. Institution must
deliver a time critical request for information to
this Bank by 10:00 a.m. in accordance with the
Truncation Procedure Manual.
Institution
waives any right to exhibition or production of
the eligible item. Upon receipt of a time critical
request for information, this Bank, in its capacity
as agent of Institution, w ill use its best efforts to
respond to a request for information, in accord
ance with the Truncation Procedure Manual, by
12:00 noon that day. This Bank makes no repre
sentation or warranty that a time critical request
for information w ill be compiled with by such a
time, and failure to do so shall not affect
presentment of the item or the deadline for re
turn of the item under Regulation J, Regulation
CC, and the Uniform Commercial Code.
For purposes of Regulation CC, Regulation J,
and this Bank's Bulletin 8, the delivery of an eli
gible item or written notice in lieu of return of
the item by this Bank's return item unit consti
tutes return of the item by this Bank in its ca
pacity as agent of Institution. Upon return of the
physical item or written notice in lieu of return
to this Bank's return item unit, this Bank, in its
capacity as a collecting bank, shall return item
or written notice in lieu of return and credit the
account maintained or used by Institution with
the amount of the item in accordance with the
requirements of Regulation J, Regulation CC,
and Bulletin 8. In the event that the Institution
fails to give this Bank an instruction to return an
item by the 11:00 a.m. deadline, Institution shall
be deemed to have finally paid the item. Insti
tution may send on a without-entry basis re
quests for refund after the specified deadline.
This Bank shall assume no responsibility for de
termining whether institution returned an item
within its deadline, but this Bank is responsible
to Institution as principle for failing to retrieve
and return an eligible item to this Bank's return
item unit by Institution's deadline following re
ceipt of a tim ely instruction to return.
Return of Eligible Items and Final Payment
9. Institution shall have until 11:00 a.m. on its
banking day following the banking day on
which presentment of an eligible item was made
under paragraph 6 to deliver to this Bank an in
struction to return an item in an expeditious
manner pursuant to Section 229.30 of Regulation
CC. Such instruction shall be in the form and
contain the information required by the Trun
cation Procedure Manual. Upon receipt of an
9-89
RETENTION OF PAID ITEMS
10. In its capacity as agent of Institution, this
Bank shall retain the original of all eligible items
3
BULLETIN 17
FEDERAL RESERVE BANK OF DALLAS
cluding an over-the-counter item) delivered to
Institution under paragraph 6 of this Agreement,
this Bank, in its capacity as agent of Institution,
warrants to institution that:
for which final payment has been made ("Paid
items") for ninety (90) calendar days from the
date on which this Bank delivers the information
relating to such items, or for the time period set
forth in the Truncation Procedure Manual,
whichever is greater ("Retention Period"). Dur
ing the Retention Period, the original eligible
item shall be available to the Institution. Upon
Institution's request, this Bank shall use its best
efforts to send the original of any eligible item
to Institution in accordance with Truncation
Procedure Manual by the end of the second
banking day follow ing the banking day on
which such request was received during the first
ninety (90) calendar days of the Retention Period.
A ll original Paid Items shall be destroyed by this
Bank after the Retention Period. In its capacity
as agent of Institution, this Bank shall retain the
microfilm copies made in accordance with para
graph 5 of this Agreement for a period of seven
(7) years from the date on which this Bank de
livers the information relating to such items. At
any time prior to the expiration of such sevenyear period, this Bank shall make a reasonable
effort to send to Institution a microfilm copy of
an eligible item by the end of the second bank
ing day following the banking day on which In
stitution requests a copy in accordance with the
Truncation Procedure Manual. This Bank shall
destroy microfilm copies following the expira
tion of the seven-year period. Except as pro
vided in paragraph 15 of this Agreement, this
Bank w ill not honor request of, or release an eli
gible item or a copy thereof to, any party other
than Institution, including but not limited to
customers of Institution.
a. Except as provided in subparagraph b
which follows, the MICR-line information
delivered to Institution, other than the cus
tomer account number and check number,
represents the information printed on the
M ICR-line of the item as read and recorded
by this Bank's equipment;
b. If this Bank repairs or key enters
MICR-line information on an eligible item
because the M ICR-line does not clearly and
visibly indicate the amount of the item, the
routing number of the paying bank, or the
item number delivered to Institution accu
rately represents the amount, routing num
ber, or item number as it appears elsewhere
on the item;
c. The eligible items and a copy thereof have
been stored by this Bank and the eligible
item shall not be presented for payment, and
shall not be sent to Institution except as re
quested under paragraphs 8 and 10 hereof.
This Bank makes no warranty concerning and
assumes no responsibility for the accuracy of the
customer account number and check number.
Institution is encouraged to validate the accu
racy of the customer account number. Compli
ance with the warranties set forth above with
respect to the MICR-line information (including
delivery of M ICR-line information concerning
the customer account number and check num
ber) shall not constitute a breach of this Bank's
warranty of no material alteration of an item
under Regulation J. This Bank shall have no
responsibility for determining whether an eligi
ble item is properly payable under applicable
law, including but not limited to determining:
(1) The genuineness of any signature(s) of the
drawee(s) appearing on an eligible item; (2)
whether an eligible item is stale; (3) whether an
RESERVE BANK WARRANTIES A N D
LIABILITIES
Warranties
11. In addition to the warranties made by this
Bank under Regulation J, with respect to
M ICR-line information for an eligible item (in
9-89
4
BULLETIN 17
FEDERAL RESERVE BANK OF DALLAS
w ill be processed by this Bank pursuant to
this Agreement, including waiver of any
right to the physical item;
eligible item is postdated; (4) whether an eligible
item bears proper and/or genuine endorse
ments); and (5) whether a stop payment has been
issued for an eligible item.
b. That it has fully disclosed to each such
customer, and obtained its agreement to, the
basic terms of this Agreement, including
without limitation that customer may make
a claim only against Institution with respect
to matters covered by this Agreement, and
may obtain eligible items or copies thereof
or information relating thereto only from In
stitution;
Limitations on Liability
12. With respect to any claim arising out of this
Bank's performance of functions in its capacity
as agent of Institution, this Bank shall not have
or assume any liability to any person other than
Institution. With respect to any claim arising out
of a Reserve Bank's performance of functions in
its capacity as a collecting bank, liability is gov
erned by Regulation J, Section 210.6. When
performing in its capacity as agent of Institution,
this Bank shall have no liability to Institution
other than breach of warranties expressly set
forth herein, or for this Bank's own lack of good
faith or failure to exercise ordinary care in car
rying out its duties as agent. This Bank's liabil
ity hereunder in its capacity as agent of
Institution for breach of the warranties set forth
in paragraph 11 or for lack of good faith or fail
ure to exercise ordinary care shall be limited to
the actual amount of the eligible item or the
amount of the M ICR-line information delivered
by this Bank with respect to the item, whichever
is greater, reduced by an amount which could
not have been realized by use of ordinary care,
and where this Bank has failed to act in good
faith, such amount may include other damages,
if any, suffered by Institution as a proximate
conseguence.
c. That it has not attempted to disclaim its
liability to its customer for verifying the
drawer's signature on an eligible item; and
d. That it has received all necessary ap
provals of its Board of Directors or other ap
propriate governing body with respect to
participating under this Agreement.
14. Institution shall indemnify and hold this Bank
harmless from all claims, demands, losses, liabil
ities, or expenses, including attorneys' fees and
expenses of litigation, made against it by any
other person (including but not limited to any
other depository institution, other business en
tity, or clearing house or governmental author
ity), or suffered by it, in connection with this
Bank's performance of functions in its capacity
as agent under this Agreement, including but
not limited to claims, demands, losses, liabilities
or expenses, that result from this Bank's failure
to exercise ordinary care or act in good faith.
These indemnities shall survive the termination
of this Agreement.
REPRESENTATIONS A N D WARRANTIES OF
INSTITUTION
RECORDS
13. In requesting this Bank to provide check
truncation services pursuant to this Agreement,
Institution represents and warrants to this Bank:
15. This Bank, as Institution's agent, shall not
release or disclose any eligible item, copy or
other information retained under paragraph 10
of this Agreement to any person other than In
stitution, a person designated by Institution as its
agent for receipt, or another Reserve Bank sub
a. That it has obtained all necessary resol
utions, signature cards, and authorizations of
each customer of the Institution whose items
9-89
5
BULLETIN 17
FEDERAL RESERVE BANK OF DALLAS
tution because of Institution's failure to comply
with this Agreement, Regulation J, Regulation
CC, or Bulletin 8. In addition, if at any time this
Bank, in its sole discretion, determines the
amount of an eligible item(s) is/are excessive in
relation to the financial condition of Institution,
it may refuse to handle such item(s) or otherwise
comply with this Agreement as to such item(s).
ject to restrictions, except as provided in this
paragraph or paragraph 9 of this Agreement.
This Bank shall disclose such information in re
sponse to a grand jury subpoena or an order of
a court of competent jurisdiction, at Institution's
expense, or in response to an audit or examina
tion of this Bank authorized by law.
FEES A N D REIMBURSEMENTS PAYABLE
BY THE INSTITUTION
TIMELINESS OF A C TIO N
16. The Institution shall pay for the services de
scribed herein the fees specified in this Bank's
fee schedule, as that schedule may be amended
from time to time by this Bank. Said fees shall
be in addition to any other sums payable under
this Agreement, may be changed by this Bank
upon thirty (30) days' written notice to Institu
tion, and shall be charged to the account main
tained or used by Institution on this Bank's
books for settlement of service fees.
Delays
18. If, because of circumstances beyond its con
trol, either party is delayed beyond the time
limits provided in this Agreement, or by law, in
acting on an eligible item or reguest, the time for
acting is extended for the time period necessary
to complete the action if the party exercises such
diligence as the circumstances reguire.
Time
TERM INATIO N OR SUSPENSION
19. A ll times are Central time.
17. The services to be rendered by this Bank
pursuant to this Agreement shall commence on
the date agreed to by Institution and this Bank
and continue unless terminated by prior written
notice to one party by the other party specifying
a termination date at least thirty (30) calendar
days after the date of receipt of the notice.
Notwithstanding the foregoing, this Bank may
terminate this Agreement at any time upon no
tice to Institution if this Bank determines, in its
sole discretion, that the financial condition of the
institution poses a risk to this Bank in connection
with the services rendered hereunder. Upon
termination, this Bank, in its sole discretion, may
retain all items and microfilm copies of items
then being held by this Bank under this A gree
ment for the remainder of the applicable Re
tention Period or other period for each item or
copy as specified in paragraph 8 and 10 of this
Agreement, or this Bank may deliver to Institu
tion the items and copies then being held for
retention by it.
T R U N C A T IO N PROCEDURE M A N U A L
20. The Truncation Procedure Manual referred
to in paragraph 3 and throughout this A gree
ment, as it may be amended from time to time,
is hereby incorporated into and made an integral
part of this Agreement.
NOTICES
21. Except as otherwise specified herein, all no
tices shall be in writing and shall be delivered
to the parties at their respective addresses set
forth in the Check Truncation Service Reguest
Form submitted by Institution to this Bank.
TELEPHONE
22. This Bank and Institution may record tele
phone calls made under this Agreement.
Nothing herein shall affect this Bank's right to
refuse to accept items for presentment to Insti
9-89
6
BULLETIN 17
FEDERAL RESERVE BANK OF DALLAS
part of either party to exercise, and no delay in
exercising, any right hereunder shall preclude
any other or further exercise thereof or the ex
ercises of any other right. The right is reserved
by this Bank to withdraw, add to, or amend any
of the provisions of this Bulletin at any time.
RIGHT TO AM END
23. N o waiver of the provisions of this A gree
ment shall be effective unless in writing and
signed by the parties hereto. N o failure on the
9-89
7
FEDERAL RESERVE BANK OF DALLAS
STATION K
DALLAS. TEXAS 7 5 2 2 2
ADDRESS CORRECTION REQUESTED
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