The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
F ederal
reserve bank of
DALLAS, TEXAS
Dallas
7S222
Circular No. 80-202
October 29, 1980
FINAL REVISION TO REGULATION J
TO ALL BANKS AND
OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
The Federal Reserve Board has adopted a clarification and simpli
fication of its Regulation J, effective November 13, 1980, which deals with
Reserve Bank procedures for check collection and wire transfer of funds. There
is no substantive change in the regulation.
The modification was undertaken by the Board as part of its
Regulatory Improvement Project, under which all of the Board's regulations and
rules are being reviewed to determine whether they are in whole or in part
required by law, their costs and benefits, whether underlying statem ents need
revision, whether there are non-regulatory alternatives, and whether any
regulations can be eliminated. The Board's regulations are also being simplified
or put into better format where possible.
Printed on the following pages are the press release and Federal
Register document regarding the revision of Regulation J.
Questions concerning this revision should be directed to Larry J.
Reck, Vice President at this Bank, Ext. 6337; Robert W. Schultz, Assistant Vice
President at the El Paso Branch, (915) 544-4730; Vernon L. Bartee, Assistant Vice
President at the Houston Branch, (713) 659-4433; or Thomas H. Robertson,
Assistant Vice President at the San Antonio Branch, (512) 224-2141.
Sincerely yours,
Robert H. Boykin
First Vice President
Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank:
1-800-442-7140 (intrastate) and 1-800-527-9200 (interstate). For calls placed locally, please use 651 plus the
extension referred to above.
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
FEDERAL RESERVE pressrelease
For immediate release
October 9, 1980
The Federal Reserve Board today adopted a clarification and
simplification of its Regulation J, which deals with Reserve Bank
procedures for check collection (Subpart A of the Regulation) and wire
transfer of funds (Subpart B).
The modification, proposed for public comment on December 14,
1979, makes no substantive change in the Regulation.
It was undertaken
by the Board as part of its Regulatory Improvement Project, under which
all of the Board's regulations and rules are being reviewed to determine
whether they are in whole or in part required by law, their costs and
benefits, whether underlying statutes need revision, whether there are
non-regulatory alternatives, and whether any regulations can be eliminated.
As part of this project, the Board's regulations are also being simplified
or put into better format where possible.
A proposed new section of Regulation J (Subpart C), dealing with
electronic transfer of funds through automated clearing houses operated by
the Federal Reserve, was issued for comment in November 1979.
Copies of Subparts A and B of Regulation J will be distributed to
institutions that use the Federal Reserve for check clearing and wire
transfer of funds.
The text of the Regulation is available upon request at
the Federal Reserve Board and the Reserve Banks.
-0-
-1-
TITLE 12-BANKS AND BANKING
CHAPTER II—FEDERAL RESERVE SYSTEM
SUBCHAPTER A-BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
PART 210—COLLECTION OF CHECKS AND OTHER ITEMS
AND TRANSFER OF FUNDS
REGULATION J
Docket No. R-0266
AGENCY: Board of Governors of the Federal Reserve System.
ACTION:
Final Rule.
SUMMARY:
The Board is adopting in final form revisions that clarify and
simplify Subparts A and B of Regulation 3. No substantive changes are intended to
occur in these regulatory provisions.
EFFECTIVE DATE:
November 13, 1980.
FOR FURTHER INFORMATION CONTACT: Lee S. Adams, Senior Attorney
(202/452-3623), Legal Division, Board of Governors of the Federal Reserve System,
Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: As part of its Regulatory Improvement Pro
ject, the Board proposed on December 13, 1979 (44 FR 75174) revisions intended to
simplify and clarify the regulatory framework for the collection of checks and other
items and for wire transfers of funds. These regulatory provisions are found in
Subparts A and B of Regulation J. The Board's proposed contained no substantive
changes in the regulation, and the Board noted that care had been taken not to alter
legal concepts through stylistic change. The Board believed this to be important
since much of the terminology of the regulation is common and legally recognized
through its consistency with the Uniform Commercial Code.
The comments received on the proposed revisions were supportive of the
Board's effort to simplify and clarify Regulation 3 without making substantive
changes to it. Nearly all of the commentors stated they believed the proposal had
achieved its objective. Further, the commentors noted that the many bankers and
others who use this regulation would have a better understanding of it and would be
better able to apply it as a result of the changes.
The Board has made only minor changes in the regulation from its earlier
proposal. Unless otherwise noted, the changes that are discussed compare the
existing provisions of Regulation J with those contained in the revised version being
published in this notice. One new provision that does differ from the December 13
proposed is in section 210.2(j) of Subpart A, where the term "sender" has been
revised to include a branch or agency of a foreign bank maintaining reserves in
accordance with the provisions of Regulation D (12 CFR 204). Branches and
agencies of foreign banks that begin to maintain reserves on November 13 will at
that time be eligible to send checks and wire transfers of funds through Federal
-2Reserve Banks under authority granted in section 7 of the International Banking Act
of 1978. A similar change in Subpart B was not required, however, because section
210.26(g) already defines a "transferor" as including an institution maintaining or
using an account at a Reserve Bank and authorized by the Reserve Bank to initiate
wire transfers of funds. The terms under which branches and agencies of foreign
banks will be authorized to initiate wire transfers of funds will be detailed in a
separate release. The Board anticipates making additional definitional modifica
tions in the near future as needed to implement provisions of the Monetary Control
Act of 1980 (Title I of Public Law 96-221) which entitles all depository institutions
to access to Federal Reserve check collection and wire transfer services as these
services are priced. The Board also notes that the revised regulation adopted today
does not include the proposed Subpart C, which was published for comment on
November 26, 1979 (44 FR 67995), to govern the handling by Reserve Banks of
automated clearing house items.
The following is a brief discussion of certain of the changes made in
Subparts A and B that are embodied in the regulation published today.
Subpart A
Section 210.2 ("Definitions"). The definitions have been placed in alpha
betical order for easier reference. The definition of "actually and finally collected
funds" (new section 210.2(a)) comes from former section 210.1(b). The definition of
"check" (new section 2 1 0 . 2 (e)) combines the former definitions of "check" and
"draft" (former sections 2 1 0 .2 (b) and (c)), with the reference to "bill of exchange"
deleted since sill states have adopted Articles 3 and 4 of the Uniform Commercial
Code. The former definition of "nonbank depositor" (former section 210.2(m)) has
been deleted and its substance incorporated in section 210.3(d). Throughout the
subpart, the word "forwards" has been omitted, since the term "sends" is adequate,
and the words "remit" and "remittance" have been omitted since the terms "pay" and
"payment" are adequate.
Section 210.3(a) ("General") includes the authorization for Reserve Banks
to issue circulars, from section 210.16 of the former regulation. The words "or
other m atters deemed appropriate by the Reserve Banks" have been added to answer
the question raised in Colorado National Bank v. First National Bank and Trust Co.,
459 F. Supp. 1366 (WTd I Mich. 1978), whether Reserve Bank circular provisions
dealing with "wire notice of nonpayment" are authorized by Regulation 3. The
Federal Reserve Banks will issue operating circulars revised for the purpose of
clarification and simplification on the effective date of the regulation. The two
existing circulars governing cash items ("Collection of Cash Items" and "Instructions
to Collecting Banks and Paying Banks") have been consolidated into one circular, and
the circular governing noncash items ("Collection of Noncash Items") has been
shortened. Section 210.3(b) ("Binding effect") has been modified to clarify that the
subpart and the Reserve Banks' circulars are binding on all parties. Section 210.3(c)
("Government Issues") is derived from former section 210.1(b); section 210.3(d)
("Government Senders") is from former section 210.2(m).
Section 210.5 ("Sender's Agreement; Recovery by Reserve Bank"). The
sender's agreement that the subpart and the Reserve Banks' circulars will govern the
relationships between the sender and the Reserve Banks (last portion of former
section 210.5(a)) is deleted, since section 210.3(b) provides that the subpart and the
circulars are binding.
-3Section 210.12(a) ("Recovery of payment"). The last two sentences in
the proposal have been rewritten to eliminate any implication that the time limits
cannot be extended by circumstances beyond a party's control under section 210.14.
Subpart B
Section 210.26 ("Definitions"). The definitions have been placed in
alphabetical order for easier reference. The definition of "item" (now section
210.26(c)) derives from the former definitions of "item" and "instrument for the
payment of money" (former sections 210.51(a) and (c)). The definition of "transfer
request" or "request' (section 210.26(e)) is new and incorporates the sense of former
section 210.54. A transfer request is not an "item" because it is not a writing.
References to member banks, Reserve Banks, international organizations, and so
forth, have been deleted from the definitions of "transferor" and "transferee" in
former sections 210.52(d) and (e) because a transferor or transferee can be any
institution maintaining or using an account at a Reserve Bank (a transferor must be
authorized to transfer funds and may have conditions imposed on the privilege). The
definition of "transferor's account" and "transferee's account" in section 210.26(h) is
new; it clarifies th at an account can be a transferor's or transferee's account even if
it is in the name of another institution, so long as the transferor or transferee has
access to it. The former definitions of "international organization" and "foreign
correspondent" have been deleted, since the term s are never used in the. regulation.
Section 210.27 ("General Provisions") has been placed after the defintions, to parallel Subpart A. Section 210.27(a) ("General") incorporates former
section 210.57(c), former section 210.65, and part of former section 210.51(a). As
under Subpart A, the Reserve Banks' operating circulars under Subpart B will be
issued in clarified and simplified form on the effective date of the regulation.
Section 210.27(b) ("Binding effect") has been rewritten to clarify that the subpart
and the Reserve Banks' circulars are binding on all parties.
Section 210.28(b) ("Transfer requests") derives from former section
210.54 and incorporates the term now defined in section 210.26(e).
Section 210.29 derives from former section 210.55. The transferor's
agreement in former section 210.55(3) has been deleted, since Subpart B and the
Reserve Banks' circulars are binding on transferors by virtue of section 210.27(b).
Section 210.30(b) has been amended to refer to a transferee that
receives an advice of credit of a transfer item designating a beneficiary.
Section 210.31 ("Sending Transfer Items and Requests") derives from
former sections 210.57(a) and (b). (Former section 210.57(c) is covered by new
section 210.27(a).) Section 210.31(a) has been recast from the version proposed for
comment, without substantive change.
Section 210.33 ("Time Limits") derives from former section 210.59,
except that section 210.33(d) ("As of adjustments") derives from former section
210.64(b). The good faith/ordinary care language in former section 210.64(b) has
been eliminated, since the paragraph applies even when a Reserve Bank has been
negligent.
Section 210.34 O'Advices of Credit and Debit") derives from former
section 210.60, with various details eliminated as best left to the Reserve Banks!
circulars.
-4-
Section 210.38(b) ("Damages") has been rewritten to incorporate the
provision in section 210.38(a) ("Limitations on liability") that a Reserve Bank can be
liable only to its immediate transferor.
Effective
the Federal Reserve
248(o), 360), section
PART 210) is revised
November 13, 1980, pursuant to the Boards' authority under
Act, section 13 (12 U.S.C. i 342), section 16 (12 U.S.C. Si
11 (i)( 12 U.S.C.§ 248(i), and other laws, Regulation J (12 CFR
to read as follows:
REGULATION
J
(12 CFR 210)
Collection of Checks and Other Items and Wire Transfers of Funds
SUBPART A—Collection of Checks and Other Items
SECTION 210.1—Authority, Purpose, And Scope
The Board of Governors of the Federal Reserve System ("Board")
issued this subpart pursuant to the Federal Reserve Act, section 13
U.S.C. §342), section 16 (12 U.S.C.
l i 248(o), 360), section ll(i)
U.S.C. § 248(i)), and other laws. This subpart governs the collection of checks
other cash and noncash items by Federal Reserve Banks ("Reserve Banks").
purpose is to provide rules for collecting items and settling balances.
has
(12
(12
and
Its
SECTION 210.2-Definitions
As used in this subpart, unless the context otherwise requires:
(a)
"Actually and finally collected funds" means cash or any other form of
payment that is, or has become, final and irrevocable.
(b)
"Bank draft" means a check drawn by one bank on another bank.
(c)
"Banking day" means a day during which a bank is open to the public for
carrying on substantially all its banking functions.
(d)
"Cash item" means:
(1)
a check other than one classified as a noncash item under this
section; or
(2 )
any other item payable on demand and collectible at par that the
Reserve Bank of the District in which the item is payable is
willing to accept as a cash item.
(e)
"Check" means a draft, as defined in the Uniform Commercial Code,
that is drawn on a bank and payable on demand.
(f)
"Item" means an instrument for the payment
negotiable or not, that is:
of money, whether
- 5 -
(1)
payable in a Federal
Reserve District-^ ("District");
(2)
sent by a sender to a Reserve Bank for handling under this sub
part; and
(3)
collectible in funds acceptable to the Reserve Bank of the
District in which the instrument is payable.
Unless otherwise indicated, "item" includes both cash and noncash
item*. "Item" does not include a check that cannot be collected at
par , - 1 or an "item" as defined in section 210.26 that is handled under
subpart B.
(g)
"Nonbank payor" means a
(h)
"Noncash item" means an item that a receiving Reserve Bankclassifies
in its operating circulars as requiring special handling. The term also
means an item normally received as a cash item if a Reserve Bank
decides that special conditions require that it handle the item as a
noncash item.
(i)
"Paying bank" means:
(j)
payor of an item, other than a bank.
(1 )
the bank by which an item is payable, unless the item is payable
or collectible through another bank and is sent to the other bank
for payment or collection; or
(2 )
the bank through which an item is payable or collectible and to
which it is sent for payment or collection.
"Sender" means any of the following that sends an item to a Reserve
Bank: a member bank, a nonmember clearing bank, another Reserve
Bank, an international organization, a foreign correspondent, or a
branch or agency of a foreign bank maintaining reserves under section 7
of the International Banking Act of 1978.
(1)
"Nonmember clearing bank" means:
(i)
a bank that is not a member of the Federal Reserve System,
but maintains with a Reserve Bank the balance referred to
in the first paragraph of section 13 of the Federal Reserve
Act; or
(ii)
a corporation that maintains an account with a Reserve
Bank in conformity with section 211.4 of this chapter
(Regulation K).
1/ For purposes of this subpart, the Virgin Islands and Puerto Rico are deemed to
be in the Second District, and Guam and American Samoa in the Twelfth District.
2/ The Board publishes a "Memorandum on Exchange Charges," listing the banks
that would impose exchange charges on cash items and other checks forwarded by
Reserve Banks and therefore would not pay at par.
-6-
(k)
(2)
"International organization" means an international organization
for which a Reserve Bank is empowered to act as depositary or
fiscal agent and maintains an account.
(3)
"Foreign correspondent" means any of the following for which a
Reserve Bank maintains an account: a foreign bank or banker, a
foreign state as defined in section 25(b) of the Federal Reserve
Act (12 U.S.C.§632), or a foreign correspondent or agency
referred to in section 14(e) of that Act (12 U.S.C. § 358).
"State" means a State of the United States, the District of Columbia,
Puerto Rico, or a territory, possession, or dependency of the United
States.
SECTION 210.3~General Provisions
(a)General. Each Reserve
Bank shall receive and handle items in accor
dance with this subpart, and shall issue operating circulars governing the details of
its handling of items and other m atters deemed appropriate by the Reserve Bank.
The circulars may, among other things, classify cash items and noncash items,
require separate sorts and letters, and provide different closing times for the
receipt of different classes or types of items.
(b) Binding effect. This subpart and the operating circulars of the Reserve
Banks are binding on the sender of an item, on each collecting bank, paying bank,
and nonbank payor, to which a Reserve Bank (or a subsequent collecting bank)
presents or sends an item, and on other parties interested in the item, including the
owner.
(c) Government Items. As depositaries and fiscal agents of the United States,
Reserve Banks handle certain items payable by the United States or certain
Federal agencies as cash or noncash items. To the extent provided by regulations
issued by, and arrangements made with, the United States Treasury
Department
and other Government departments and agencies, the handling of such items is
governed by this subpart. The Reserve Banks shall include in their operating
circulars such information regarding these regulations and arrangements as the
Reserve Banks deem appropriate.
(d) Government Senders. Except as otherwise provided by statutes of the
United States, or regulations issued or arrangements made thereunder, this subpart
and the operating circulars of the Reserve Banks apply to the following when
acting as a sender: a department, agency, instrumentality, independent establish
ment, or office of the United States, or a wholly owned or controlled Government
corporation, that maintains or uses an account with a Reserve Bank.
SECTION 210.4—Sending Items to Reserve Banks
(a) A sender may send any item to the Reserve Bank with which it maintains
or uses an account, but that Reserve Bank may permit or require the sender to send
direct to another Reserve Bank an item payable within the other Reserve Bank's
District.
(b) With respect to an item sent direct, the relationships and the rights and
liabilities between the sender, the Reserve Bank of its District, and the Reserve
-7-
Bank to which the item is sent are the same as if the sender had sent the item to
the Reserve Bank of its District and that Reserve Bank had sent the item to the
other Reserve Bank.
(c) The Reserve Banks shall receive cash items and other checks at par.
SECTION 210.5—Sender's Agreement; Recovery By Reserve Bank
(a) Sender's agreement. By sending an item to a Reserve Bank, the sender:
(1)
authorizes the receiving Reserve Bank (and any other Reserve Bank or
collecting bank to which the item is sent) to handle the item subject to
this subpart and to the Reserve Banks' operating circulars, and warrants
its authority to give this authorization;
(2)
warrants to each Reserve Bank handling the item that: (i) the sender
has good title to the item or is authorized to obtain payment on behalf
of one who has good title (whether or not this warranty is evidenced by
the sender's express guaranty of prior indorsements on the item); and
(ii) to the extent prescribed by State law applicable to a Reserve Bank
or subsequent collecting bank handling the item, the item has not been
materially altered; but this subparagraph (2 ) does not limit any warr
anty by a sender arising under State law; and
(3)
agrees to indemnify each Reserve Bank for any loss or expense
sustained (including attorneys' fees and expenses of litigation) resulting
from (i) the sender's lack of authority to make the warranty in
paragraph (a)(1) of this section; (ii) any action taken by the Reserve
Bank within the scope of its authority in handling the item; or (iii) any
warranty made by the Reserve Bank under section 210.6(b) of this
subpart.
(b) Recovery by Reserve Bank. If an action or proceeding is brought against
a Reserve Bank that has handled an item, based on:
(1 )
the alleged failure of the sender to have the authority to make the
warranty and agreement in subparagraph (a)(1 ) of this section;
(2)
any action by the Reserve Bank within the scope of its authority in
handling the item; or
(3)
any warranty made by the Reserve Bank under section 210.6(b) of this
subpart,
the Reserve Bank may, upon the entry of a final judgment or decree, recover from
the sender the amount of attorneys' fees and other expenses of litigation incurred,
as well as any amount the Reserve Bank is required to pay under the judgment or
decree, together with interest thereon.
(c) Methods of recovery. The Reserve Bank may recover the amount stated
in paragraph (b) of this section by charging any account on its books that is
maintained or used by the sender (or if the sender is another Reserve Bank, by
entering a charge against the other Reserve Bank through the Interdistrict Set
tlement Fund), if:
-8-
(1)
the Reserve Bank made seasonable written demand on the sender to
assume defense of the action or proceeding; and
(2 )
the sender has not made any other arrangement for payment that is
acceptable to the Reserve Bank.
A Reserve Bank that has been charged through the Interdistrict Settlement Fund
may recover from its sender in the manner and under the circumstances set forth
in this paragraph. A Reserve Bank's failure to avail itself of the remedy provided
in this paragraph does not prejudice its enforcement in any other manner of the
indemnity agreement referred to in subparagraph (a)(3) of this section.
SECTION 210.6—Status, Warranties,
and Liability of Reserve Bank
(aXl) Status and liability. A Reserve Bank shall act only as the sender's
agent in respect of an item. This agency term inates not later than the time the
Reserve Bank receives payment for the item in actually and finally collected funds
and makes the proceeds available for use by the sender. A Reserve Bank shall not
act as agent or subagent of an owner or holder of an item other than the sender. A
Reserve Bank shall not have or assume any liability to the sender in respect of an
item or its proceeds except for the Reserve Bank's own lack of good faith or failure
to exercise ordinary care.
(2)
Reliance on routing designation appearing on item . A Reserve Bank
may present or send an item based on the routing number or other designation of a
paying bank or nonbank payer appearing in any form on the item when the Reserve
Bank receives it. A Reserve Bank shall not be responsible for any delay resulting
from its acting on any designation, whether inscribed by magnetic ink or by other
means, and whether or not the designation acted on is consistent with any other
designation appearing on the item.
(b) Warranties and liability. By presenting or sending an item, a Reserve
Bank warrants to a subsequent collecting bank and to the paying bank and any other
payor:
(1)
that the Reserve Bank has good title to the item (or is authorized to
obtain payment on behalf of one who either (i) has good title or (ii) is
authorized to obtain payment on behalf of one who has good title),
whether or not this warranty is evidenced by the Reserve Bank's express
guaranty of prior indorsements on the item; and
(2 )
that the item has not been materially altered to the extent prescribed
by State law applicable to a Reserve Bank or subsequent collecting bank
holding the item.
The Reserve Bank shall not have or assume any other liability to the paying bank or
other payor, except for the Reserve Bank's own lack of good faith or failure to
exercise ordinary care.
SECTION 210.7—Presenting Items for Payment
(a)
Presenting or sending. As provided under State law or as otherwise
permitted by this section: (1) a Reserve Bank or a subsequent collecting bank may
present an item for payment or send the item for presentment and payment; and
-9-
(2) a Reserve Bank may send an item to a subsequent collecting bank with
authority to present it for payment or to send it for presentment and payment.
(b) Place of presentment.
may present an item:
A Reserve Bank or subsequent collecting bank
(1 )
at a place requested by the paying bank;
(2 )
at a place requested by the nonbank payor, if the item is payable by a
nonbank payor other than through a paying bank;
(3)
under a special collection agreement consistent with this subpart; or
(4)
through a clearing house and subject to its rules and practices.
(c) Presenting or sending direct. A Reserve Bank or subsequent collecting
bank may, with respect to an item payable in the Reserve Bank's District:
(1 )
present or send the item direct to the paying bank, or to a place
requested by the paying bank; or
(2 )
if the item is payable by a nonbank payor other than through a paying
bank, present it direct to the nonbank payor. Documents, securities, or
other papers accompanying a noncash item shall not be delivered to the
nonbank payor before the item is paid unless the sender specifically
authorizes delivery.
(d) Item payable in another district. A Reserve Bank receiving an item
payable in another District ordinarily sends the item to the Reserve Bank of the
other District, but with the agreement of the other Reserve Bank, may present or
send the item as if it were payable in its own District.
SECTION 210.8—Presenting Noncash Items for Acceptance
A Reserve Bank or a subsequent collecting bank may, if instructed by the
sender, present a noncash item for acceptance in any manner authorized by law if:
( 1 ) the item provides that it must be presented for acceptance; (2 ) the item is
payable elsewhere than at the residence or place of business of the payor; or (3) the
date of payment of the item depends on presentment for acceptance. Documents
accompanying a noncash item shall not be delivered to the payor upon acceptance
of the item unless the sender specifically authorizes delivery. A Reserve Bank
shall not have or assume any other obligation to present or to send for presentment
for acceptance any noncash item.
SECTION 210.9-Payment
(a)
Cash items. A paying bank becomes accountable for the amount of a
cash item received directly or indirectly from a,^eserve Bank, at the close of the
paying bank's banking day on which it receives-' the item if it retains the item
after the close of that banking day, unless, prior to that time, it pays for the item
by:
(1)
debit to an account on the Reserve Bank's books;
-10(2)
cash; or
(3)
in the discretion of the Reserve Bank, any other form of payment.
The proceeds of any payment shall be available to the Reserve Bank by the close of
the Reserve Bank's banking day on the banking day of receipt of the item by the
paying bank. If the banking day of receipt is not a banking day for the Reserve
Bank, payment shall be made on the next day that is a banking day for both the
Reserve Bank and the paying bank.
(b) Noncash item s. A Reserve Bank may require the paying or collecting
bank to which it has presented or sent a noncash item to pay for the item in cash,
but the Reserve Bank may permit payment by a debit to an account on the Reserve
Bank's books or by any of the following that is in a form acceptable to the Reserve
Bank: bank draft, transfer of funds or bank credit, or any other form of payment
authorized by State law.
(c) Nonbank payor. A Reserve Bank may require a nonbank payor to which it
has presented an item to pay for it in cash, but the Reserve Bank may permit
payment in any of the following that is in a form acceptable to the Reserve
Bank: cashier's check, certified check, or other bank draft or obligation.
(d) Handling of payment. A Reserve Bank may handle a bank draft or other
form of payment it receives in payment of a cash item as a cash item. A Reserve
Bank may handle a bank draft or other form of payment it receives in payment of a
noncash item as either a cash item or a noncash item.
(e) Liability of Reserve Bank. A Reserve Bank shall not be liable for the
failure of a collecting bank, paying bank, or nonbank payor to pay for an item , or
for any loss resulting from the Reserve Bank's acceptance of any form of payment
other than cash authorized in paragraphs (a), (b), and (c) of this section. A
Reserve Bank that acts in good faith and exercises ordinary care shall not be liable
for the nonpayment of, or failure to realize upon, a bank draft or other form of
payment th at it accepts under paragraphs (a), (b), and (c).
SECTION 210.10—Time Schedule and
Availability of Credits for Cash Items
(a)
Each Reserve Bank shall include in its operating circulars a time schedule
for each of its offices indicating when the amount of any cash item received by it
(or sent direct to another Reserve office for the account of that Reserve Bank) is
counted as reserve for purposes of Part 204 of this chapter (Regulation D) and
becomes available for use by the sender. The Reserve Bank shall give either
immediate or deferred credit in accordance with its time schedule to a sender
3/ A paying bank is deemed to receive a cash item on its next banking day if it
receives the item:
(1 ) on a day other than a banking day for it;
or
(2 ) on
a banking day for it, but
(i) after its regular banking hours;
(ii) after a "cut-off hour" established by it in accordance with State
law; or
(iii) during afternoon or evening periods when it is open for limited
functions only.
-11other than a foreign correspondent. A Reserve Bank ordinarily gives credit to a
foreign correspondent only when the Reserve Bank receives payment for the item
in actually and finally collected funds, but, in its discretion, a Reserve Bank may
give immediate or deferred credit in accordance with its time schedule.
(b)
Notwithstanding its time schedule, a Reserve Bank may refuse at any
tim e to permit the use of credit given for any cash item for which the Reserve
Bank has not yet received payment in actually and finally collected funds.
SECTION 210.11-Availability of
Proceeds of Noncash Items; Time Schedule
(a) Availability of credit. A Reserve Bank shall give credit to the sender for
the proceeds of a noncash item when it receives payment in actually and finally
collected funds (or advice from another Reserve Bank of such payment to it). The
amount of the item is counted as reserve for purposes of Part 204 of this chapter
(Regulation D) and becomes available for use by the sender when the Reserve Bank
receives the payment or advice, except as provided in paragraph (b) of this section.
(b) Time schedule. A Reserve Bank may give credit for the proceeds of a
noncash item subject to payment in actually and finally collected funds in
accordance with a time schedule included in its operating circulars. The time
schedule shall indicate when the proceeds of the noncash item will be counted as
reserve for purposes of Part 204 of this chapter (Regulation D) and become
available for use by the sender. A Reserve Bank may, however, refuse at any time
to permit the use of credit given for a noncash item for which the Reserve Bank
has not yet received payment in actually and finally collected funds.
(c) Handling of payment. If a Reserve Bank receives, in payment for a
noncash item, a bank draft or other form of payment that it elects to handle as a
noncash item, the Reserve Bank shall neither count the proceeds as reserve for
purposes of Part 204 of this chapter (Regulation D) nor make the proceeds
available for use until it receives payment in actually and finally collected funds.
SECTION 210.12—Return of Cash Items
(a) Recovery of payment. A paying bank that receives a cash item directly
or indirectly from a Reserve Bank, other than for immediate payment over the
counter, and that pays for the item as provided in section 210.9(a) of this
subpart, may recover the payment if, before it has finally paid the item, it:
(1 )
returns the item before midnight of its next banking day following the
banking day of receipt; or
(2 )
takes any other action to recover the payment within the times and by
the means provided by State law.
The rules or practices of a clearinghouse through which the item was presented, or
a special collection agreement under which the item was presented, may not
extend these return times, but may provide for a shorter return time.
(b) Paying bank's warranties and agreement. A paying bank that obtains a
credit or refund for the amount of a payment it has made for a cash item:
-12(1)
warrants to the Reserve Bank (and to a subsequent collecting bank, and
to the sender and all prior parties) that it took all action necessary to
entitle it to recover its payment within the time limits of: (i) this
subpart; (ii) State law, unless a longer time is afforded by this subpart;
(iii) the rules or practices of any clearing house through which the item
was presented; and (iv) any special collection agreement under which
the item was presented; and
(2)
agrees to indemnify the Reserve Bank for any loss or expense sustained
(including attorneys' fees and expenses of litigation) resulting from the
Reserve Bank's giving the credit or refund to the paying bank, or
charging, or obtaining a refund from, the sender.
A Reserve Bank shall not have or assume any responsibility for determining
whether the action taken by a paying bank was timely.
SECTION 210.13—Chargeback of Unpaid Items
(a) Right of chargeback. If a Reserve Bank does not receive payment in
actually and finally collected funds for an item for which the Reserve Bank gave
credit subject to payment in actually and finally collected funds, the Reserve Bank
shall charge back the amount of the item to the sender, whether or not the item
itself can be returned. In the event of chargeback, neither the owner or holder of
the item nor the sender shall have any interest in any reserve balance or other
funds of the paying bank or a collecting bank in the Reserve Bank's possession.
(b) Suspension or closing of bank. A Reserve Bank shall not pay or act on a
draft, authorization to charge, or other order on a reserve balance or other funds in
its possession after it receives notice of suspension or closing of the bank making
the payment for that bank's own or another's account.
SECTION 210.14—Extension of Time Limits
If, because of interruption of communication facilities, suspension of pay
ments by a bank or nonbank payor, war, emergency conditions or other circum
stances beyond its control, a bank (including a Reserve Bank) or nonbank payor is
delayed in acting on an item beyond applicable time limits, its time for acting is
extended for the time necessary to complete the action, if it exercises such
diligence as the circumstances require.
SECTION 210.15—Direct Presentment of
Certain Warrants
If a Reserve Bank elects to present direct to the payor a bill, note, or war
rant th at is issued and payable by a State or a political subdivision and that is a
cash item not payable or collectible through a bank: (a)
sections 210.9, 210.12,
and 210.13 and the operating circulars of the Reserve Banks apply to the payor as
if it were a paying bank; (b) section 210.14 applies to the payor as if it were a
bank; and (c) under section 210.9 each day on which the payor is open for the
regular conduct of its affairs or the accommodation of the public is considered a
banking day.
-13SUBPART B—Wire Transfers of Funds
SECTION 210.25—Authority, Purpose, and Scope
The Board of Governors of the Federal Reserve System ("Board") has issued
this subpart pursuant to the Federal Reserve Act, section 13 (12 U.S.C. § 342),
paragraph (f) of section 19 (12 U.S.C. § 464), paragraph 14 of section 16 (12
U.S.C. § 248(o)), paragraphs (i) and (j) of section 11 (12 U.S.C.§§ 248(i) and (j)), and
other laws. This subpart governs the handling by Federal Reserve Banks ("Reserve
Banks") of transfer items and transfer requests. Its purpose is to provide rules for
the wire transfer of funds.
SECTION 210.26-Definitions
As used in this subpart, unless the context otherwise requires:
(a) "Beneficiary" means a person or organization, other than the trans
feree, designated in a transfer item or request to receive the amount of the item
or request from the transferee.
(b) "Interoffice transaction" means a transfer between a transferor and
transferee that do not maintain or use accounts at the same office of a Reserve
Bank.
(c) "Item" means a writing evidencing a request for the payment of money,
that is handled under this subpart. "Item" does not include a "item" as defined in
section 210.2 that is handled under subpart A.
(d) "Transfer item" means an item: (1) sent by a transferor (other than a
Reserve Bank) to a Reserve Bank for debit to the transferor's account at the
Reserve Bank and for credit to a transferee; (2) sent by a Reserve Bank to another
Reserve Bank for credit to the latter or to any other transferee; or (3) issued by a
Reserve Bank at the request of a transferor for credit to a transferee.
(e) "Transfer request" or "request" means a request by telephone that a
Reserve Bank issue a transfer item.
(f)
"Transferee" means a member bank, a Reserve Bank, or other
in
stitution that (1) maintains or, if authorized by the Reserve Bank, uses
an account
at a Reserve Bank and (2) is designated in a transfer item or request to
receive the
amount of the item or request.
(g) "Transferor" means a member bank, a Reserve Bank, or other
in
stitution that maintains or uses an account at a Reserve Bank and that is
authorized by th at Reserve Bank to send a transfer item or request to it.
(h) "Transferor's account" or "transferee's account" means the account at
its Reserve Bank maintained or used by the transferor or transferee, respectively.
(i)
"Transferor's Reserve Bank" or "transferee's Reserve Bank" means the
Reserve office at which the transferor or transferee, respectively, maintains or
uses an account.
-14SECTION 210.27—General Provisions
(a) General. Each Reserve Bank shall receive and handle transfer items,
and shall itself issue transfer items, in accordance with this subpart. Each Reserve
Bank shall issue an operating circular governing the details of its funds transfer
operations and other m atters deemed appropriate by the Reserve Bank. The
circulars may, among other things: set minimum and maximum dollar amounts;
specify form at and authentication requirements for transfer items and requests;
and impose reasonable funds transfer charges.
(b)
Binding effec t. This subpart and the operating circulars of the Reserve
Banks are binding on transferors, transferees, beneficiaries, and other parties
interested in an item.
(c) Government transferors and transferees. Except as otherwise provided
by statutes of the United States, or regulations issued or arrangements made
thereunder, this subpart and the operating circulars of the Reserve Banks apply to
the following when acting as a transferor or transferee: a department, agency,
instrumentality, independent establishment, or office of the United States, or a
wholly owned or controlled Government corporation, that maintains or uses an
account with a Reserve Bank.
SECTION 210.28—Media for Transfer Items and Requests
(a)
Transfer item s. A transferor may issue and send a transfer item in any
of the following media, if specified in the operating circular of the transferor's
Reserve Bank:
(1 )
a letter, memorandum, or similar writing;
(2 )
a telegram (including TWX, TELEX, or similar form of communication);
and
(3)
any form of communication, other than voice, registered on (or in form
suitable for being registered on) magnetic tape, disc, or other medium
designed to contain in durable form conventional signals used for
electronic communication of messages.
(b) Transfer requests. A transferor may make transfer requests only under
special arrangements with its Reserve Bank. The Reserve Bank may record these
telephone messages.
SECTION 210.29—Transferor's Agreement
A transferor, by sending a transfer item or making a transfer request to its
Reserve Bank, authorizes:
(a) its Reserve Bank to debit the amount to the transferor's account, and to
handle the transfer item or request in accordance with this subpart and the
operating circulars of the Reserve Banks; and
(b) the transferee's Reserve Bank to handle a matching transfer item
(matching as to amount, transferee, and beneficiary, if any) in accordance with this
subpart and the operating circulars of the transferee's Reserve Bank.
-15SECTION 210.30—Transferee's Agreement
(a) A transferee (other than a Reserve Bank), by maintaining or using an
account at a Reserve Bank, authorizes its Reserve Bank to credit the amount of
the transfer item to its account.
(b) A transferee (other than a Reserve Bank) that receives a transfer item,
or advice of credit of a transfer item, designating a beneficiary, agrees:
(1)
to credit promptly the beneficiary's account or otherwise make
the amount available to the beneficiary; or
(2)
to notify promptly its Reserve Bank if it is unable to do so
because of circumstances beyond its control.
SECTION 210.31—Sending Transfer Items and Requests
(a) A transferor (other than a Reserve Bank) may send a transfer item to,
or make a transfer request of, its Reserve Bank. A Reserve Bank may refuse to
act on, or may impose conditions to its acting on, a transfer item or request if it
has reason to believe that the balance in the transferor's account is not sufficient
to cover the item or request. The transferor shall arrange to have in its account,
at the end of its Reserve Bank's banking day, a balance of actually and finally
collected funds sufficient to cover the amounts of transfer items debited to the
account during that day. In addition to other remedies, the Reserve Bank has a
security interest in the transferor's assets in the possession of, or held for the
account of, the Reserve Bank if:
(1)
the balance in the transferor's account at the end of the Reserve Bank's
banking day is not sufficient to cover the amounts debited to the
account during that day; or
(2 )
the transferor suspends payment or is closed at any time during the
Reserve Bank's banking day, and does not have a balance sufficient to
cover the amounts debited to its account.
(b) A Reserve Bank may send a transfer item to,
request of, another Reserve Bank.
or make a transfer
SECTION 210.32—Handling Transfer Items and Requests
(a) Intraoffice transactions. If the transferor and transferee maintain or
use accounts at the same Reserve office, that office shall act on a transfer item by
debiting and crediting their accounts. The Reserve office shall act on a transfer
request by issuing a transfer item , and debiting and crediting the accounts.
(b) Interoffice transactions. The transferor's Reserve Bank shall handle an
interoffice transaction by debiting the transferor's account and, acting as a
transferor, issuing and sending to the transferee's Reserve Bank a matching
transfer item (matching as to amount, transferee, and beneficiary, if any). The
transferee's Reserve Bank shall transfer funds to the transferee by debiting the
account of the transferor's Reserve Bank, and crediting the transferee's account.
-16(c)
Notice of delay. If a Reserve Bank learns that it is unable to effectu
ate a transfer of funds on a timely basis for any reason, it shall notify the trans
feror of the delay within a reasonable time.
SECTION 210.33-Time Limits
(a) Time schedule. Each Reserve Bank shall include in its operating
circular a schedule showing the hours during which it handles transfer items and
requests.
(b) Acting seasonably. A Reserve Bank acts seasonably if it takes proper
action on the day it receives a transfer item or request. Taking proper action
within a reasonably longer time may be seasonable but the Reserve Bank has the
burden of so establishing. No Reserve Bank shall represent that it will complete a
transfer of funds on the day requested.
(c) Transfers after closing hour. A Reserve Bank is not required to act on
the day it receives an item or request if it receives the item or request after the
time shown in its schedule. In emergency or other unusual circumstances, a
Reserve Bank may handle a transfer item or request after the time shown in its
schedule. The completion of an interoffice transaction in these circumstances is
also discretionary with the transferee's Reserve Bank.
(d) As of adjustments. If a Reserve Bank fails to credit to the transferee's
account on the day requested the amount of a transfer item or request received by
the Reserve Bank before the time shown in its schedule, the Reserve Bank shall,
unless otherwise instructed, complete the transfer on its next banking day and
make adjustments for reserve accounting purposes as of the day the transfer was to
have been made.
SECTION 210.34—Advices of Credit and Debit
(a) Advice of credit. The transferee's Reserve Bank shall give advice of
credit to the transferee for an executed transfer of funds.
(b) Advice of debit. After receiving a transfer
transferor's Reserve Bank shall send an advice of debit
transferor is deemed to approve the accuracy of an advice
to its Reserve Bank written objection within 10 calendar
advice of debit.
item or request, the
to the transferor. A
of debit unless it sends
days of receiving the
SECTION 210.35—Revocation of Transfer Items and Requests
(a) Request for revocation. A Reserve Bank may cease acting on a
transfer item or request if it receives from the transferor a request for revocation
in time to give the Reserve Bank a reasonable opportunity to comply. If the
request is received too late, the Reserve Bank may, on request from the transferor,
ask the transferee to return the funds. In an interoffice transaction, the Reserve
Bank may ask the transferee's Reserve Bank to ask the transferee to return the
funds.
(b) Erroneous transfer. In an erroneous or irregular transfer of funds, a
Reserve Bank may, on its own initiative or at the request of another Reserve Bank,
ask the transferee to return funds previously transferred.
-17SECTION 210.36—Final Payment; Use of Funds
(a) Final payment. A transfer item is finally paid when the transferee's
Reserve Bank sends the transfer item or sends or telephones the advice of credit
for the item to the transferee, whichever occurs first.
(b) Right to use funds. Credit given by a Reserve Bank for a transfer of
funds becomes available for use when the transfer item is finally paid, subject to
the Reserve Bank's right to apply the transferred funds to an obligation owed to it
by the transferee.
SECTION 210.37—Timeliness of Action
If, because of circumstances beyond its control, a Reserve Bank is delayed
beyond the time limits provided in this subpart, in its operating circular, or by law
in acting on a transfer item or request, the time for acting is extended for the time
necessary to complete the action, if the Reserve Bank exercises such diligence as
the circumstances require.
SECTION 210.38—Reserve Bank Liability
(a) Limitations on liability. A Reserve Bank shall not have or assume any
responsibility to a transferee, beneficiary, or other party, except its immediate
transferor. A Reserve Bank shall not be liable for the insolvency, neglect,
misconduct, mistake, or default of another bank or person, including a transferor,
except as provided in this section. A Reserve Bank shall not have or assume any
liability except for its own or another Reserve Bank's lack of good faith or failure
to exercise ordinary care.
(b) Damages. A Reserve Bank is liable to its immediate transferor for
damages proximately caused by a failure to credit the amount of a transfer item or
request to the transferee's account caused by a Reserve Bank's failure to exercise
ordinary care or to act in good faith. Whether damages are proximately caused by
a Reserve Bank's failure to exercise ordinary care or to act in good faith is a
question of fact to be determined in each case.
(c) Right to indemnity. The transferee's Reserve Bank shall indemnify the
transferor's Reserve Bank for any loss or expense sustained (including attorneys'
fees and expenses of litigation) as a result of the failure of the transferee's
Reserve Bank to exercise ordinary care or to act in good faith in an interoffice
transaction.
*
*
*
*
#
By order of the Board of Governors of the Federal Reserve System, October
9,1980.
Theodore E. Allison
Secretary of the Board
@FedFRASER