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FE D E R A L R E S E R V E B A N K OF D A L L A S Station K, Dallas, Texas 7 5 2 2 2 C i r c u l a r No. 84-116 December 5, 1984 TO: All d e p o s i t o r y i n s t i t u t i o n s Reserve D i s t r i c t ATTENTION: Chief Ope rat ion s O f f i c e r SUBJECT: Revised fee schedule for transfer automated clearinghouse (ACH) services DETAILS: The Board o f Governors o f t he Federal Reserve System has approved a r e d u c t i o n in t he f ee t h a t Federal Reserve Banks charge d e p o s i t o r y i n s t i t u t i o n s f o r o r i g i n a t i n g o r r e c e i v i n g a t r a n s f e r o f funds over the Fed' s network. In a d d i t i o n , t he Board i s s ue d a r e v i s e d s che dule o f f e es f o r ACH s e r v i c e s . ATTACHMENTS: Federal Reserve p r e s s r e l e a s e and two Federal R e g i s t e r documents MORE INFORMATION: J onni e M iller, Extension 6118 ADDITIONAL COPIES: Publi c A f f a i r s Department, Extension 6289 Extension in t he Eleventh Federal 6290; or of Larry funds and R ipl ey, 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) FEDERALRESERVEpressrelease For immediate r e l e a s e The November 16, 1984 Federal Reserve Board has approved a r e d u c t i o n in t h e f e e t h e Federal Reserve Banks charge d e p o s i t o r y i n s t i t u t i o n s f o r o r i g i n a t i n g or r e c e i v i n g a t r a n s f e r of funds over t h e Federal Reserve System' s wire t r a n s f e r of funds network and a r e v i s e d s che du le of f ee s f o r automated c l e a r i n g h o u s e s e r v i c e s . The changes f o r wire t r a n s f e r a r e e f f e c t i v e December 27 as a r e most of t h e r e v i s i o n s in automated c l e a r i n g h o u s e s e r v i c e s . The Board a c t e d under t h e d i r e c t i v e s of t h e Monetary Control Act of 1980, which r e q u i r e t h e Federal Reserve t o charge f o r i t s The Board approved t h e f o l l o w i n g s ch edul e services to depositories. of f e e s f o r wire t r a n s f e r s and f o r net s e t t l e m e n t s e r v i c e , reducing t h e f e e f o r b a s i c w i r e t r a n s f e r s from 60 c e n t s t o 55 c e n t s p er t r a n s f e r : Wire T r a n s f e r of Funds Basic T r a n s f e r O r i g i n a t e d Basic T r a n s f e r Received Of f- Li ne O r i g i n a t i o n Telephone Advice Net S e t t l e m e n t V $0.55 $0.55 $5.50 $3.00 S e t t l e m e n t Entry Off- Line S e t t l e m e n t Telephone Advice $1.30 $8.00 $3.00 The r e v i s e d s ch edul e of f e es f o r automated c l e a r i n g h o u s e s e r v i c e s i s i n t e n d e d t o r e c o v er 80 p e r c e n t of c o s t s , compared t o 60 p e r c e n t in 1984. In s e t t i n g i t s r e v i s e d f e e s f o r ACH s e r v i c e s , t h e Board r e - e v a l u a t e d a number of a s p e c t s of ACH f e e s . These i n c l u d e t h e use of b e n e f i t based f e e s , t h e l e v e l of t r a n s a c t i o n f e e s , f e e s f o r d e l i v e r y by o t h e r t ha n e l e c t r o n i c means and f e e r e c ov er y of t h e c o s t s of h a n dl in g of ACH r e t u r n items and n o t i f i c a t i o n of change. 27 In" c as es where net s e t t l e m e n t arrangements r e s u l t in h i g h e r o p e r a t i n g c o s t s t h a n t h o s e i n c u r r e d f o r s t a n d a r d a r ra n ge me nt s , t h e Reserve Banks may e s t a b l i s h higher fe e s. - 3 - Current f e e s f o r c o r p o r a t e t r a d e payments w i l l remain in e f f e c t . The a t t a c h e d documents give f u r t h e r d e t a i l s c on ce rn ing t h e r e v i s i o n of wi re t r a n s f e r f e e s and t h e ACH f e e s ch edul e approved by t h e Board. The r e v i s e d ACH f e e s chedule f o r 1985 f o l l o w s : Fixed Fees T r a n s a c t i o n Fees Ori gi n a t i o n : Intra-ACH Deposit Fees: 1. 0 cent Tape Handling F i l e P r o ce s s i n g Inter-ACH Unsorted Presorted $3.00 per t a p e $1.00 per f i l e 1.8 cent s 1.2 c e nt s R ec ei ve r Handling Fees: Night Time Su rcharges: C ou r i e r 6. 0 c e n t s 3. 0 c en ts $3.00 per d e l i v e r y Messenger Pick-Up Debits Next-Day C r e d i t s $1.25 per d e l i v e r y Re c e i p t : Intra-ACH 1.0 cent Inter-ACH 1.8 c en ts I n c l u d i n g Ten Pieces of I n f o r ma t io n $2.50 New York 1. 2 c e nt s Each A dd i t i o n a l Piece $0.05 of I nf o rma t io n Paper Return Items and N o t i f i c a t i o n s of Change Telephone Advice: $2.50 - Attachments 0 - FEDERAL RESERVE SYSTEM FEE SCHEDULES FOR FEDERAL RESERVE BANK SERVICES AGENCY: Board of Governors of the Federal Reserve System. ACTION: Fee Schedule for Wire Transfers of Funds and Net Settlement Service. SUMMARY: The Board of Governors of the Federal ("Board") has approved a reduction in the Reserve System basic originating or receiving a wire transfer of funds fee for from $0.60 to $0.55. EFFECTIVE DATE: December 27, 1984. FOR FURTHER INFORMATION CONTACT: Director (202/452-2231) or Florence Electronic Payments Section, Reserve Bank Operations; Counsel (202/452-3625) (202/452-2418), Legal Elliott C. McEntee, Associate M. Young, (202/452-3955) Division of Federal Gilbert T. Schwartz, or Elaine Division, M. Associate General Boutilier, Board Federal Reserve System, Washington, SUPPLEMENTARY INFORMATION: Manager, of Attorney Governors of the D. C. 20551. Effective September 27, 1984, the fee for originating or receiving a wire transfer of funds was reduced $0.05 to a new basic F e d . R e g . 35866. assessing having At the fixed monthly an electronic same fees time, to all connection with one or more priced services, R e g . 36689. fee of $0.60 per the transfer. Board depository the Federal 49 approved institutions Reserve beginning January 1985. for 49 F e d . - When was stated the reduction that if the 5 - in the basic Reserve Banks' show a net surplus for this service, fee was approved, estimates continued it to the Board would consider a further reduction in the basic fee for originating or receiving a wire transfer of funds. Based on the Reserve Banks' full year 1984, adjustment total factor costs, ("PSAF"), including are expected and revenues are anticipated to be a net revenue funds transfers million. $5.3 originated Accordingly, the basic fee funds. surplus of current estimates the $62.4 million, The expected to the Board has sector to be $5 7.1 million, million. is private for the resulting in volume of basic amount to 41.1 approved a reduction for originating or receiving a wire in transfer of All other elements of the current fee schedule remain unchanged. The total costs, Reserve Banks' 1985 projections including the PSAF, will amount Based on the transaction fee of $0.55 and on be allocated to the funds from are to amount to to that $62.8 million. income that will transfer and net settlement service fixed monthly electronic expected indicate connection $63.0 million, fees, 1985 resulting revenues in a net revenue surplus of $200,000. Accordingly, schedule service: for the wire the Board has approved the following transfer of funds and net fee settlement -6Net Settlement. Wire Transfer of Funds Basic Transfer Originated t0.55 Settlement Entry .3 0 Basic Transfer Received $0.55 Off-Line Settlement .00 Off-Line Origination $5.50 Telephone Advice .00 Telephone Advice $3.00 By order Reserve System, of the November Board of Governors of the Federal 15, 1984. (signed) James McAfee James McAfee Associate Secretary of the Board 1/ In cases where net settlement arrangements result in higher operating costs than those incurred for standard arrangements, the Reserve Banks may establish higher fees. 7 - - FEDERAL RESERVE SYSTEM F EE SCHEDULES FOR FEDERAL RESERVE BANK SERVICES AGENCY: Board of Governors of the Federal Reserve System. ACTION: Fee Schedule for the Automated Clearing House Service. SUMMARY: The Board of Governors of the Federal ("Board"), has approved a revised fee schedule Bank automated clearing house EFFECTIVE DATES: All Reserve System for the Reserve ("ACH") service. transaction fees will be implemented on December 2 7, 1984, except the fee for handling paper AC H return items and notifications of change, on January 31, December 27, 1985. All fixed which will become effective fees will (202/452-22 31) or Electronic Payments Section Reserve Bank Operations; Counsel (2 02/452-3625) (202/452-2418), Legal Elliott C. McEntee, Florence M. Young, (2 02/452-3955), or Elaine Division, INFORMATION: On M. Manager, Associate General Boutilier, Board of D. C. March 2 9, Associate Division of Federal Gilbert T. Schwartz, Federal Reserve System, Washington, SUPPLEMENTARY implemented on 1984. FOR FURTHER INFORMATION CONTACT: Director be Attorney Governors of the 20551. 1984, the Reserve Banks implemented new fees for the ACH service that were set to recover 60 percent of the total costs incentive pricing p olicy adopted by 49 Fed. AC H R e g . 6564. fees providing are set in accordance with the Board in April In accordance with this policy, to commercial recover ACH 80 percent services. This of the 1982. the revised costs incentive the of pricing policy was established in order to encourage growth in the ACH service, generally. incentive pricing It is believed appropriate to continue the policy through 1985 in order to avoid disruption among users of Federal Reserve ACH services. same time, several aspects of re-evaluated. These aspects benefits-based fees; level of fees practice of return for the A C H At the fee schedule have been include: (1) the use of (2) the level of transaction fees; non-e lectronic recovering deliveries; and (3) the (4) the the costs associated with handling A CH items and notifications of change through transaction fee s . Benefits-Based process debit that two types of transactions. is, debits, the Fees the Because fees ACH service of funds credits earlier and the through is used transactions the institutions would if a paper check were used, assessed higher The transactions--credit receivers receive — receiving originators the ACH than to and funds, of they the previous A C H fee schedule to these ACH participants. This pricing policy was intended to encourage use of the ACH. Because of the trend towards the use of private sector ACH processing, under the benefits-based fee structure, cross-subsidies would occur among depository institutions using Federal example, Reserve if originates a a operated ACH, services user credit of and the privately operated Federal transaction Reserve's destined for ACHs. ACH a Fd t service privately the originator would be charged 1.0 cent and the - 9 - privately operated ACH would be charged current fee schedule. For this reason, 3.0 cents under the Board believes that continued use of benefits-based fees is inappropriate, determined that the same transaction the and has fees will be assessed to originators and receivers of A C H transactions. Level schedule of ACH includes Transaction a reduction approximately 0.2 cent Fees in — The inter-ACH revised fees fee of for the originator and the receiver to reflect more accurately the cost of providing this elemenjt of the ACH service. Non-Electronic delivery fees are magnetic tapes, transactions, diskettes or via necessary to generate delivery addition, t0.75 is a Fee intended to recover preparing to messengers Delivery time and paper -- The non-electronic the costs of generating listings containing ACH them for delivery and delivering ground transportation. physical output and consuming, labor The to ground transportation is costly. for messenger pick-up and tl.75 processing prepare intensive them it for activity. In The current fees of for ground delivery are not recovering the costs that the Reserve Banks incur in making non-electronic deliveries. delivery fees will be pick-up and to $3.00 Therefore, increased to $1.25 the for non-electronic each messenger for each delivery to institutions using Federal Reserve transportation. ACH costs of Return processing Items and Notifications of Change return items and notifications -- The of - changei^ fees. are currently change are deposited with labor through return items the Federal basic and disproportionately the institutions costly Reserve high full share costs returning operation of of in paper constitutes operating item transactions would form. to be an extremely and ACH return transaction and notifications of return item processing tends intensive Assessing - recovered About 96 percent of As a result, 10 a costs. processing result in to the costs of the ACH service being assessed to users more equitably. addition, by the efficiency of assessing a fee for the ACH mechanism can be improved return item Therefore, the Board has approved a fee of $2.50 paper return Reserve Banks plan and to begin automated to institutions items deposit processing depository ACH to notifications converting ACH of encourage return items. for handling change. return The items notifications of change to automated form on January 31, and the fee for handling In these items will be and 198 5, implemented on that date. While it may be desirable to assess a fee automated return items and notifications of change, now possible because of operating considerations. Banks will be implementing new discontinued making modifications AC H software for it is not The Reserve and have to the current A C H software. The current software does not provide the capability to assess 1/ Notifications of change are used by receiving institutions to advise originators of recurring transactions about changes in such elements as customers' names and account numbers. - 11 - a fee for automated return items and notifications of change. However, will when the new ACH software is implemented review the possibility of assessing a fee the Board for automated return items and notifications of change. Cost, percent recovery including million Volume, and rate, Revenue Reserve the PSAF and float, for 1985. Revenues Projections Bank -- commercial At AC H estimated at $18.4 80 costs, are projected to amount are the to $18.0 million, resulting in a net revenue surplus of approximately $400,0^)0. Accordingly, the Board has approved the following schedule for the Federal Reserve's ACH service: Transaction Fees Origination: Intra-ACH 1.0^ Inter-ACH Unsorted Presorted 1.8^ 1.2^ Night Time Surcharges: Debits Ne xt-Day Credits 6.0^ 3.0^ Receipt: Intra-ACH l.O^f Inter-ACH 1.8^ New York 1.2<t Paper Return Items and Notifications of Change $2.50 fee - 12 - Fixed Fees Deposit Fees: Tape Handling $3.00 per tape File Processing $1.00 per file Receiver Handling Fees: Courier $3.00 per delivery Messenger Pick-Up $1.25 per delivery Telephone Advice: Including Ten Pieces of Information $2.50 Each Additional Piece of Information $0.05 The remain in connection current effect. with fees Also, for corporate institutions the Federal By order of the Reserve System, November having Reserve will fees as approved earlier by the Board. Board of trade payments an will electronic be assessed monthly 49 F e d . R e g . 3668 9. Governors of the Federal 15, 1984. (signed)James McAfee James McAfee Associate Secretary of the Board