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F ederal
reserve bank of
DALLAS, TEXAS
Dallas
75222
Circular No. 80-3
January 10, 1980
PROPOSED AMENDMENTS TO REGULATION J
TO ALL BANKS, OTHER CREDITORS,
AND OTHERS CONCERNED IN THE
ELEVENTH FEDERAL RESERVE DISTRICT:
The Board of Governors is proposing to rewrite Subpart A, covering
check collection, and Subpart B, covering wire transfer, of Regulation J .
The proposed changes a re intended to simplify and clarify this regulation.
Please review the Federal Register document printed on the following
pages and submit your comments or suggestions to the Board of Governors by
February 15, 1980.
Sincerely y o u rs,
Robert H. Boykin
First Vice President
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
FEDERAL RESERVE press release
For lamediate release
December 14, 1979
The Federal Reserve Board today proposed for comment a
clarification and simplification of the portions of its Regulation J
dealing with check collection and wire transfers (Subparts A and B of
the Regulation).
The Board asked for coument by February 15, 1980.
There were no substantive changes.
The modification of the
Regulation is being undertaken by the Board as part of a program for
review of all of its regulations' and rules to determine if they are in
whole or in part required by law, their costs and benefits, whether the
underlying statutes need revision, whether there are non-regulatory
alternatives, whether any regulations can be cancelled and to what extent
the Board's regulations can be simplified, put in better format or
better related to current policy goals.
The Board recently published for consent a new section of
Regulation J (Subpart C) that deals with the electronic transfer of
funds through automated clearing houses operated by the Federal Reserve.
The Board's proposed simplification and clarification of
Subparts A and B of Regulation J is attached.
TITLE 12-B A N K S AND BANKING
CHAPTER II-FEDERAL RESERVE SYSTEM
SUBCHAPTER A -B O A R D OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
PART 210—COLLECTION OF CHECKS AND OTHER ITEMS
AND TRANSFER OF FUNDS
REGULATION J
[D ocket No. R-0266]
AGENCY: Board of Governors of the Federal R eserve System.
ACTION:
Proposed rules.
SUMMARY:
By this action the Board proposes to clarify and sim plify Subparts
A and B of Regulation J. It is not intended that any substantive changes be made in
the duties and responsibilities that are se t forth in these regulatory provisions.
DATE:
Comments must be received on or before February 15, 1980.
ADDRESS: Com ments, which should refer to Docket No. R-0266, may be mailed to
Theodore E. Allison, Secretary, Board of Governors of the Federal R eserve System,
20th Street and Constitution Avenue, N.W., Washington, D.C. 20551, or delivered to
Room B-2223 betw een 8:45 a.m. and 5:15 p.m. Comments received may also be
inspected at Room B-1122 betw een 8:45 a.m . and 5:15 p.m., excep t as provided in
section 261.6(a) of the Board's Rules Regarding Availability of Information (12
CFR § 261.6(a)).
FOR FURTHER INFORMATION CONTACT: Lee S. Adams, Senior Attorney
(202/452-3594), Legal Division, Board of Governors of the Federal R eserve System,
Washington, D.C. 20551.
SUPPLEMENTARY INFORMATION: As part of its Regulatory Improvement Pro
ject, the Board has reviewed the regulatory framework for the collection of checks
and other item s and for wire transfers of funds that are set forth in Subparts A and
B of Regulation 3. The Board has determined that, while substantive changes in the
regulation were not required, it was desirable to redraft the regulation to clarify
and sim plify the language. In redrafting Regualtion J, the Board was aware that
much of the term inology of the regulation is common and legally recognized through
its consistency with the Uniform Commercial Code. Although language improve
ments were made to achieve brevity and clarity, care was taken not to alter legal
concepts through stylistic change.
The Board notes that the revised material was drafted to conform
generally with the new part of Regulation J, Subpart C (Automated Clearing House
Items) which the Board recently approved for public comment (44 FR 67995). Only
minor editorial changes will be required to conform a final version of Subpart C with
the revised Subparts A and B.
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This notice is published pursuant to § 553(b) of Title 5, United States
Codes, and S 262.2(a) of the Rules of Procedure of the Board of Governors. The
proposal is made under the authority of sections 11 and 16 of the Federal R eserve
A ct (12 U.S.C. 24S(j), (o)), which authorize the Board to promulgate rules governing
the transfers of funds through Federal R eserve Banks. To aid in the consideration of
this m aterial by the Board, interested persons are invited to submit relevant data,
views, com m ents, or arguments.
To implement its proposal, the Board is considering amending Regulation
3 (12 CFR 210) as set forth below:
REGULATION J
(12 CFR 210)
C ollection of Checks and Other Items and Wire Transfers of Funds
SUBPART A—C ollection of Checks and Other Items
SECTION 210.1—Authority, Purpose, And Scope
The Board of Governors of the Federal R eserve System ("Board") has
issued this subpart pursuant to the Federal R eserve A ct, section 13, as amended (12
U.S.C. §342), section 16 (12 U.S.C. i 248(o), 360), section ll(i) (12 U.S.C. §248(i)),
and other laws. This subpart governs the collection of checks and other cash and
noncash item s by Federal R eserve Banks ("Reserve Banks"). Its purpose is to
provide rules for collecting item s and settling balances.
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 becom e, 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)
(2)
(e)
a check other than one classified as a noncash item under this
section; or
any other item payable on demand and collectib le at par that the
R eserve Bank of the D istrict in which the item is payable is
willing to accept as a cash item .
"Check" means a draft, as defined in the Uniform Commercial Code,
that is drawn on a bank and payable on demand.
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(f)
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"Item" means an instrument for the payment of money, whether
negotiable or not, that is:
(1)
payabie in a Federal R eserve District-^ ("District");
(2)
sent by a sender to a R eserve Bank for handling under this sub
part; and
(3)
co llectib le in funds acceptable to the R eserve Bank of the
D istrict in which the instrument is payable.
Unless otherwise indicated, "item" includes both cash and noncash
itern^ "Item" does not include a check that cannot be collected at
p a r,- or an "item" as defined in section 210.26 that is handled in
accordance with subpart B.
(g)
"Nonbank payor" means a payor of an item , other than a bank.
(h)
"Noncash item" means an item that a receiving R eserve Bank classifies
in its operating circulars as requiring special handling. The term also
means an item normally received as a cash item if a R eserve Bank
decides that special conditions require that it handle the item as a
noncash item .
(i)
"Paying bank" means:
(1)
(2)
(j)
the bank by which an item is payable, unless the item is payable
or collectib le through another bank and is sent to the other bank
for payment or collection; or
the bank through which an item is payable or co llectib le and to
which it is sent for payment or collection.
"Sender" means a member bank, a nonmember clearing bank, a Reserve
Bank, an international organization, or a foreign correspondent that
sends an item .
(1)
"Nonmember clearing bank" means:
(i)
a bank that is not a member of the Federal R eserve System,
but maintains with a R eserve Bank the balance referred to
in the first paragraph of section 13 of the Federal R eserve
Act; or
(ii)
a corporation that maintains an account with a Reserve
Bank in conform ity with section 211.4 of this chapter
(Regulation K).
17 For purposes of this subpart, the Virgin Islands and Puerto Rico are deemed to
be in the Second D istrict, and Guam and American Samoa in the Twelfth D istrict.
2 / The Board publishes a "Memorandum on Exchange Charges," listing the banks
that would impose exchange charges on cash item s and other checks forwarded by
R eserve Banks and therefore would not pay at par.
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(2)
(3)
(k)
"International organization" means an international organization
for which the R eserve Banks are empowered to act as depositaries
or fiscal agents and for which a R eserve Bank maintains an
account.
"Foreign correspondent" means any of the following for which a
R eserve Bank maintains an account: a foreign bank or banker, a
foreign sta te as defined in section 25(b) of the Federal R eserve
A ct (12 U.S.C. §632), or a foreign correspondent or agency
referred to in section 14(e) of that A ct (12 U.S.C J 358).
"State" means a State of the United States, the D istrict of Columbia,
Puerto Rico, or a territory, possession, or dependency of the United
States.
SECTION 210.3—General Provisions
(a) General. Each R eserve Bank shall receive and handle item s in accor
dance with this subpart, and shall issue operating circulars governing the details of
its handling of item s and other m atters deemed appropriate by the R eserve Bank.
The circulars may, among other things, classify cash item s and noncash item s,
require separate sorts and letters, and provide different closing tim es for the
receipt of different classes or types of item s.
(b) Binding e ffe c t. This subpart and the operating circulars of the R eserve
Banks are binding on the sender o f an item and on each collecting bank, paying
bank, and nonbank payor, to which a R eserve Bank (or a subsequent collectin g bank)
presents or sends an item .
(c) Government Items. As depositaries and fiscal agents of the United States,
R eserve Banks handle certain item s as cash or noncash item s. To the exten t
provided by regulations issued by, and arrangements made with, the United States
Treasury Department and other Government departments and agencies, the
handling of such item s by the R eserve Banks is governed by this subpart. The
R eserve Banks shall include in their operating circulars such information regarding
these regulations and arrangements as the R eserve 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 R eserve Banks apply to the following when
acting as a sender: a department, agency, instrum entality, independent establish
ment, or o ffic e of the United States, or a wholly owned or controlled Government
corporation, that maintains or uses an account with a R eserve Bank.
SECTION 210.4—Sending Items to R eserve Banks
(a) A sender may send any item to the R eserve Bank with which it maintains
or uses an account, but that R eserve Bank may permit or require the sender to send
direct to another R eserve Bank an item payable within the other Reserve Bank's
D istrict.
(b) With respect to an item sent direct, the relationships and the rights and
liabilities between the sender, the R eserve Bank of its D istrict, and the R eserve
Bank to which the item is sent are the same as if the sender had sent the item to
the R eserve Bank of its D istrict and that R eserve Bank had sent the item to the
other Reserve Bank.
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(c)
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The R eserve Banks shall receive cash item s and other checks at par.
SECTION 210.5—Sender's Agreement; R ecovery By R eserve Bank
(a) Sender's agreem ent. By sending an item to a R eserve Bank, the sender:
(1)
authorizes the receiving R eserve Bank (and any other R eserve 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 R eserve 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 exten t prescribed by State law applicable to a R eserve Bank
or subsequent collecting bank handling the item , the item has not been
materially altered; but this subparagraph (2) does not lim it any
warranty by a sender arising under State law; and
(3)
agrees to indemnify each R eserve Bank for any loss or expense
sustained (including attorneys' fe e s 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 R eserve
Bank within the scope of its authority in handling the item; or (iii) any
warranty made by the R eserve Bank under section 210.6(b) of this
subpart.
(b) R ecovery by R eserve Bank. If an action or proceeding is brought against
a R eserve Bank that has handled an item , based on:
(1)
the alleged failure of the sender to have the authority to make the
warranty and agreem ent in subparagraph (a)(1) of this section;
(2)
any action by the R eserve Bank within the scope of its authority in
handling the item; or
(3)
any warranty made by the R eserve Bank under section 210.6(b) of this
subpart,
the R eserve Bank may, upon the entry of a final judgment or decree, recover from
the sender the amount of attorneys' fe e s and other expenses of litigation incurred,
as well as any amount the R eserve Bank is required to pay under the judgment or
decree, together with in terest thereon.
(c) Methods of recovery. The R eserve 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 R eserve Bank, by
entering a charge against the other R eserve Bank through the Interdistrict Set
tlem ent Fund), if:
(1)
the R eserve 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 R eserve Bank.
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A R eserve Bank that has been charged through the Interdistrict S ettlem ent Fund
may recover from its sender in the manner and under the circum stances set forth
in this paragraph. A R eserve Bank's failure to avail itself of the remedy provided
in this paragraph does not prejudice its enforcem ent in any other manner of the
indemnity agreem ent referred to in subparagraph (a)(3) of this section.
SECTION 210.6—Status, Warranties,
and Liability of R eserve Bank
(a)(1) Status and liability. A R eserve Bank shall a ct only as the sender's
agent in respect of an item . This agency term inates not later than the tim e the
R eserve Bank receives payment for the item in actually and finally collected funds
and makes the proceeds available for use by the sender. A R eserve Bank shall not
a c t as agent or subagent of an owner or holder of an item other than the sender. A
R eserve Bank shall not have or assume any liability to the sender in respect of an
item or its proceeds excep t for the R eserve Bank's own lack of good faith or failure
to exercise ordinary care.
(2)
R eliance on routing designation appearing on item . A R eserve Bank
may present or send an item based on the routing number or other designation of a
paying bank or nonbank payor appearing in any form on the item when the R eserve
Bank receives it. A R eserve Bank shall not be responsible for any delay resulting
from its acting on any designation, whether inscribed by m agnetic 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 R eserve
Bank warrants to a subsequent collecting bank and to the paying bank and any other
payor:
(1)
that the R eserve 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 R eserve Bank's express
guaranty of prior indorsements on the item; and
(2)
that the item has not been m aterially altered to the exten t prescribed
by State law applicable to a R eserve Bank or subsequent collecting bank
holding the item .
The R eserve Bank shall not have or assume any other liability to the paying bank or
other payor, ex cep t for the R eserve Bank's own lack of good faith or failure to
ex ercise ordinary care.
SECTION 210.7—Presenting Items for Payment
(a) Presenting or sending. As provided under State law or as otherwise
perm itted by this section: (1) a R eserve Bank or a subsequent collectin g bank may
present an item for payment or send the item for presentm ent and payment; and
(2) aR eserve Bank may send an item to a subsequent collecting bank with
authority to present it for payment or to send it for presentm ent and payment.
(b) Place of presentm ent.
may present an item:
A R eserve Bank or subsequent collecting bank
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(1)
a t 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 agreem ent consistent with this subpart; or
(4)
through a clearing house and subject to its rules and practices.
(c) Presenting or sending direct. A R eserve Bank or subsequent collecting
bank may, with respect to an item payable in the R eserve Bank's D istrict:
(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 R eserve Bank receiving an item
payable in another D istrict ordinarily sends the item to the R eserve Bank of the
other D istrict, but with the agreem ent of the other R eserve Bank, may present or
send the item as if it were payable in its own D istrict.
SECTION 210.8—Presenting Noncash Items for Acceptance
A R eserve Bank or a subsequent collectin g 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 presentm ent 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 R eserve Bank
shall not have or assume any other obligation to present or to send for presentm ent
for acceptance any noncash item .
SECTION 210.9—Payment
(a)
Cash item s. A paying bank becom es accountable for the amount of a
cash item received directly or indirectly from a-R eserve Bank, at the close of the
paying bank's banking day on which it r e c e iv e s- the item if it retains the item
a fter the close of that banking day, unless, prior to that tim e, it pays for the item
by:
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.
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(1)
debit to an account on the R eserve Bank's books;
(2)
cash; or
(3)
in the discretion of the R eserve Bank, any other form of payment.
The proceeds of any payment shall be available to the R eserve Bank by the clo se of
the R eserve 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 R eserve
Bank, payment shall be made on the next day that is a banking day for both the
R eserve Bank and the paying bank.
(b) Noncash item s. A R eserve 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 R eserve
Bank: bank draft, transfer of funds or bank credit, or any other form of payment
authorized by State law.
(c) Nonbank payor. A R eserve Bank may require a nonbank payor to which it
has presented an item to pay for it in cash, but the R eserve Bank may permit
payment in any of the following that is in a form acceptable to the R eserve
Bank: cashier's check* certified check, or other bank draft or obligation.
(d) Handling of paym ent. A R eserve Bank may handle a bank draft or other
form of payment it receives in payment of a cash item as a cash item . A R eserve
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 R eserve Bank. A R eserve Bank shall not be liable for the
failure of a collectin g bank, paying bank, or nonbank payor to pay for an item , or
for any loss resulting from the R eserve Bank's acceptance of any form of payment
other than cash authorized in paragraphs (a), (b), and (c) of this section. A
R eserve 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 that it accepts under paragraphs (a), (b), and (c).
SECTION 210.10—Time Schedule and
Availability of Credits for Cash Items
(a) Each R eserve Bank shall include in its operating circulars a tim e schedule
for each of its offices indicating when the amount of any cash item received by it
(or sent direct to another R eserve o ffic e for the account of that R eserve Bank) is
counted as reserve for purposes of Part 204 of this chapter (Regulation D) and
becom es available for use by the sender. The R eserve Bank shall give either
im m ediate or deferred credit in accordance with its tim e schedule to a sender
other than a foreign correspondent. A R eserve Bank ordinarily gives credit to a
foreign correspondent only when the R eserve Bank receives payment for the item
in actually and finally collected funds, but, in its discretion, a R eserve Bank may
give im m ediate or deferred credit in accordance with its tim e schedule.
(b) Notwithstanding its tim e schedule, a R eserve 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.
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SECTION 210.11-A v a ila b ility of
Proceeds of Noncash Items; Time Schedule
(a) Availability o f credit. A R eserve 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 R eserve 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 becom es available for use by the sender when the R eserve Bank
receives the payment or advice, excep t as provided in paragraph (b) of this section.
(b) Time schedule. A R eserve Bank may give credit for the proceeds of a
noncash item subject to payment in actually and finally collected funds in
accordance with a tim e schedule included in its operating circulars. The tim e
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 becom e
available for use by the sender. A R eserve Bank may, however, refuse at any time
to permit the use of credit given for a noncash item for which the R eserve Bank
has not yet received payment in actually and finally collected funds.
(c) Handling of payment. If a R eserve 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 R eserve 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 R eserve Bank, other than for im m ediate 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 tim es and by
the means provided by State law.
These return tim es may not be extended. If the rules or practices of a clearing
house through which the item was presented, or a special collection agreem ent
under which the item was presented, provides for a shorter return tim e, the shorter
tim e governs.
(b) Paying bank's warranties and agreem ent. A paying bank that obtains a
credit or refund for the amount of a payment it has made for a cash item:
(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
en title it to recover its payment within the tim e lim its of: (i) this
subpart; (ii) State law, unless a longer tim e 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 agreem ent under which
the item was presented; and
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(2)
10-
agrees to indemnify the R eserve Bank for any loss or expense sustained
(including attorneys' fe e s and expenses of litigation) resulting from the
R eserve Bank's giving the credit or refund to the paying bank, or
charging, or obtaining a refund from , the sender.
A R eserve Bank shall not have or assume any responsibility for determining
whether the action taken by a paying bank was tim ely.
SECTION 210.13—Chargeback of Unpaid Items
(a) Right o f chargeback. II a R eserve Bank does not receive payment in
actually and finally co llected funds for an item for which the R eserve Bank gave
credit subject to payment in actually and finally collected funds, the R eserve 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 o f the paying bank or a collecting bank in the R eserve Bank's possession.
(b) Suspension or closing of bank. A R eserve 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 n otice 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 fa cilities, suspension of pay
m ents by a bank or nonbank payor, war, em ergency conditions or other circum
stances beyond its control, a bank (including a R eserve Bank) or nonbank payor is
delayed in acting on an item beyond applicable tim e lim its, its tim e for acting is
extended for the tim e necessary to com plete the action, if it exercises such
diligence as the circum stances require.
SECTION 210.15—D irect Presentm ent of
Certain Warrants
If a R eserve Bank e le c ts to present direct to the payor a bill, note, or war
rant that is issued and payable by a State or a political subdivision and that is a
cash item not payable or collectib le through a bank: (a)
sections 210.9, 210.12,
and 210.13 and the operating circulars of the R eserve 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.
SUBPART B—Wire Transfers of Funds
SECTION 210.25—Authority, Purpose, and Scope
The Board of Governors
this subpart pursuant to the
U.S.C. 8 342), paragraph (f) of
14 of section 16 (12 U.S.C.
of the Federal R eserve System ("Board") has issued
Federal R eserve A ct, section 13, as amended (12
section 19, as amended (12 U.S.C. § 464), paragraph
S248(o)), paragraphs (i) and (j) of section 1 (12
1
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U.S.C. 248(i) and (j)), and other laws. This subpart governs the handling by
Federal R eserve Banks ("Reserve Banks") of transfer item s 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 con text otherwise requires:
(a)
"Beneficiary*1 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 o ffice of a R eserve
Bank.
(c)
"Item" means a writing evidencing a right to the payment of money,
that is handled in accordance with this subpart.
(d)
"Transfer item" means am item in a format provided for in a R eserve
Bank operating circular: (1) sent by a transferor (other than a R eserve Bank) to a
R eserve Bank for debit to the transferor's account at the Reserve Bank and for
credit to a transferee named in the item; or (2) sent by a R eserve Bank to another
R eserve Bank for credit to the latter or to any other transferee; or (3) issued by a
R eserve Bank at the request of a transferor for credit to a transferee.
(e)
"Transfer request" or "request" means a request by telephone that a
R eserve Bank issue a transfer item .
(f)
"Transferee" means a member bank, a R eserve Bank, or other in
stitution that maintains or uses an account at a R eserve Bank and that is
designated in a transfer item or request to receive the amount of the item or
request.
(g)
"Transferor" means a member bank, a R eserve Bank, or other in
stitution that maintains or uses an account at a R eserve Bank and that is
authorized by that Reserve Bank to send a transfer item or request to it.
(h)
"Transferor's account" or "transferee's account" means the account at
its R eserve Bank maintained or used by the transferor or transferee, respectively.
(i)
"Transferor’s R eserve Bank" or "transferee's R eserve Bank" means the
R eserve o ffic e at which the transferor or transferee, respectively, maintains or
uses an account.
SECTION 210.27—General Provisions
(a)
General. Each Reserve Bank shall receive and handle transfer item s,
and shall itself issue transfer item s, in accordance with this subpart. Each R eserve
Bank shall issue an operating circular governing the details of its funds transfer
operations and other m atters deemed appropriate by the R eserve Bank.
The
circulars may, among other things: set minimum and maximum dollar amounts;
specify format requirements for transfer item s and requests; and impose reason
able funds transfer charges.
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(b)
Binding e f f e c t . This subpart and the operating circulars of the R eserve
Banks are binding on transferors and transferees.
(c)
Government transferors and transferees. Except as otherwise provided
by statu tes of the United States, or regulations issued or arrangements made
thereunder, this subpart and the operating circulars of the R eserve Banks apply to
th e following when acting as a transferor or transferee: a department, agency,
instrum entality, independent establishm ent, or o ffic e of the United States, or a
wholly owned or controlled Government corporation, that maintains or uses an
account with a R eserve 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
R eserve 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) m agnetic tape, disc, or other medium
designed to contain in durable form conventional signals used for
electron ic communication of m essages.
(b)
Transfer requests. A transferor may make transfer requests only under
special arrangements with its R eserve Bank. The R eserve Bank may record these
telephone m essages.
SECTION 210.29—Transferor's Agreement
A transferor, by sending a transfer item or making a transfer request to its
R eserve Bank authorizes:
(a)
its R eserve 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 R eserve 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 R eserve Bank.
SECTION 210.30—Transferee's Agreement
(a)
A transferee (other than a R eserve Bank), by
account at a R eserve Bank, authorizes its R eserve Bank
the transfer item to its account.
maintaining or using an
to credit the amount of
(b)
A transferee (other than a R eserve Bank) that
transfer item designating a beneficiary, agrees:
receives the amount of a
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(1)
to credit promptly the beneficiary's account or otherwise make
the amount available to the beneficiary; or
(2)
to notify promptly its R eserve Bank if it is unable to do so
because of circum stances beyond its control.
SECTION 210.31—Sending Transfer Items and Requests
(a)
A transferor (other than a R eserve Bank) may send a transfer item to,
or make a transfer request of, its R eserve Bank only if it arranges to have in its
account, at the end of its R eserve Bank's banking day, a balance of actually and
finally collected funds sufficient to cover the amounts of transfer item s debited to
the account during that day. The R eserve Bank has a security interest in the
transferor's assets in the possession of, or held for the account of, the R eserve
Bank if:
(1)
the balance in the transferor's account at the end of the R eserve Bank's
banking day is not su fficien t to cover the amounts debited to the
account during that day; or
(2)
the transferor suspends payment or is closed at any tim e during the
R eserve Bank's banking day, and does not have a balance sufficient to
cover the amounts debited to its account.
A R eserve Bank may, in its discretion, refuse to act on a transfer item or request
if it has reason to believe that the balance in the transferor's account is not
su fficien t to cover the item or request.
(b)
A R eserve Bank may send a transfer item to,
request of, another R eserve 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 R eserve o ffice , that o ffic e shall act on a transfer item by
debiting and crediting their accounts. The R eserve o ffic e shall act on a transfer
request by issuing a transfer item , and debiting and crediting the accounts.
(b)
Interoffice transactions. The transferor's R eserve Bank shall handle an
in tero ffice 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 R eserve Bank shall transfer funds to the transferee by debiting the
account of the transferor's R eserve Bank, and crediting the transferee's account.
(c)
N otice of delay. If a R eserve Bank learns that it is unable to e ffe c tu
ate a transfer of funds on a tim ely basis for any reason, it shall notify the trans
feror of the delay within a reasonable tim e.
SECTION 2 1 0 .3 3 -T im e Limits
(a)
Time schedule.
Each R eserve Bank shall include in its operating
circular a schedule showing the hours during which it handles transfer item s and
requests.
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(b)
Acting seasonably. A R eserve 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 tim e may be seasonable but the R eserve Bank has the
burden of so establishing. No R eserve Bank shall represent that it will com plete a
transfer of funds on the day requested.
(c)
Transfers after closing hour. A R eserve Bank is not required to a c t on
the day it receives an item or request if it receives the item or request after the
tim e shown in its schedule.
In em ergency or other unusual circum stances, a
R eserve Bank may handle a transfer item or request after the tim e shown in its
schedule. The com pletion of an in teroffice transaction in these circum stances is
also discretionary with the transferee's R eserve Bank.
(d)
As of adjustments. If a R eserve Bank fails to credit the amount o f a
transfer item or request to the transferee's account on the day requested, the
R eserve Bank shall, unless otherwise instructed, com plete 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 R eserve Bank shall give advice of
credit to the transferee for an executed transfer of funds.
(b)
Advice o f debit.
After receiving a transfer item or request, the
transferor's R eserve Bank shall send an advice of debit to the transferor.
A
transferor is deem ed to approve the accuracy of an advice of debit unless it sends
to its R eserve Bank written objection within 10 calendar days of receiving the
advice of debit.
SECTION 210.35—R evocation of Transfer Items and Requests
(a)
Request for revocation.
A R eserve Bank may cease acting on a
transfer item or request if it receives from the transferor a request for revocation
in tim e to give the R eserve Bank a reasonable opportunity to comply. If funds have
been transferred, the R eserve Bank may, on request from the transferor, ask the
transferee to return the funds. In an in teroffice transaction, the Reserve Bank
may ask the transferee's R eserve Bank to ask the transferee to return the funds.
(b)
Erroneous transfer. In an erroneous or irregular transfer of funds, a
R eserve Bank may, on its own initiative or at the request of another R eserve Bank,
ask the transferee to return funds previously transferred.
SECTION 210.36—Final Payment; Use of Funds
(a)
Final payment. A transfer item is finally paid when the transferee's
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 R eserve Bank for a transfer of
funds becom es available for use when the transfer item is finally paid, subject to
the R eserve Bank's right to apply the transferred funds to an obligation owed to it
by the transferee.
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SECTION 210.37—Timeliness of Action
If, because o f circum stances beyond its control, a R eserve Bank is delayed
beyond the tim e lim its provided in this subpart, in its operating circular, or by law
in acting on a transfer item or request, the tim e for acting is extended for the tim e
necessary to com plete the action, if the R eserve Bank exercises such diligence as
the circum stances require.
SECTION 210.38—R eserve Bank Liability
(a)
Limitations on liability. A R eserve Bank shall not have or assume any
responsibility to a transferee, beneficiary, or other party, excep t its immediate
transferor.
A R eserve Bank shall not be liable for the insolvency, neglect,
misconduct, mistake, or default of another bank or person, including a transferor,
ex cep t as provided in this section. A R eserve Bank shall not have or assume any
liability ex cep t for its own or another R eserve Bank's lack of good faith or failure
to exercise ordinary care.
(b)
Damages. A Reserve Bank is liable for damages proxim ately 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 R eserve Bank's failure
to exercise ordinary care or to act in good faith is a question of fa ct to be
determined in each case.
(c)
Right to indemnity. The transferee's R eserve Bank shall indemnify the
transferor's R eserve Bank for any loss or expense sustained (including attorneys'
fees and expenses of litigation) as a result of the failure of the transferee's
R eserve Bank to exercise ordinary care or to act in good faith in an in teroffice
transaction.
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Board of Governors of the Federal R eserve System, Decem ber 13, 1979.
Theodore E. Allison
Secretary of the Board
@FedFRASER