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F e d e r a l R e s e r v e Ba n k DALLAS, TEXA S of Dallas 75222 C ircular No. 79-147 August 29, 1979 REVISION TO BULLETIN 11 TO ALL BANKS IN THE ELEVENTH FEDERAL RESERVE DISTRICT: Reference is made to our C ircu lar No. 79-130, dated August 7, 1979, announcing the implementation of a Nationwide Fine Sort Program on August 15, 1979. In this connection, enclosed are revised pages to Bulletin 11, "Instructions to Collecting and Paying Banks," which indicate that Re serve Banks handle endpoint-sorted cash letters without endorsing the items and that banks returning items not bearing our endorsement w ar rant those items as being received from this Bank. Paragraph 3.05 has been revised to include the handling of endpoint-sorted cash letters. Section 5 has been revised by the addition of a paragraph entitled "Items Without our Endorsement" and numbered 5.20 with subsequent paragraphs being renumbered. Member banks and others that maintain Regulations Binders should file the revised pages of Bulletin 11 in their binders. The cor responding pages of the bulletin should be removed and destroyed. Questions concerning these revisions should be directed to L a rry J. Reck, Assistant Vice President at the Head Office, 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 Enclosures 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) BULLETIN 11 Instructions to Collecting and Paying Banks FEDERAL RESERVE BANK OF DALLAS SCOPE This bulletin sets forth the instructions to be followed in the handling of, and payment or remittance for, checks and other cash items contained in cash letters received from this Bank. TABLE OF CONTENTS Section 1, DEFINITIONS AND GENERAL PROVISIONS 1.00 Collection contract 1.05 Authority 1.10 Definitions, reference to Regulation J 1.15 Reference to Bulletin 1 1.20 Use of term “wire” 1.25 Applicability of this bulletin Section 2, PRESENTMENT FOR PAYMENT Section 3, ENDORSEMENTS 3.00 Cash item without endorsement 3.05 Warranties Section 4, PAYMENT FOR CASH LETTERS 4.00 4.05 4.10 4.15 4.20 4.25 Time of payment Form of payment Adjustment for reserve computation Collecting banks Differences and adjustments Late claims for error adjustments Section 5, RETURN ITEMS 5.00 Recovery 5.05 Time for return by collecting 5.10 5.15 5.20 5.25 banks Warranty of collecting banks Warranty of paying banks Items without our endorsement Return without entry 5.30 5.35 5.40 5.45 5.50 First and second returns Reason for nonpayment on item Federal Reserve responsibility Maintenance of records Provisional credits Section 6, UNIFORM INSTRUCTIONS REGARDING PROTEST AND ADVICE OF NONPAYMENT 6.00 6.05 6.10 6.15 General United States obligations Responsibility of paying bank Responsibility of this Bank Section 7, PROCEDURES 7.00 Standardization, sorting, routing, and mechanized processing 7.05 Reference to Bulletin 8 7.10 Cash letters received in mutilated condition Section 8, MISSING OR DESTROYED CASH ITEMS: PHOTOGRAPHIC COPIES 8.00 Credit for missing or destroyed cash items 8.05 Handling of photographic copies 8.10 Time limits 8.15 Federal Reserve Bank responsibility 8.20 Photographic copy legend 8.25 Photographic copies handled without entry SUPPLEMENT A, Return of Cash Items FEDERAL RESERVE BANK OF DALLAS Section 1, DEFINITIONS AND GENERAL PROVISIONS This bulletin is directed to the member banks of the Eleventh Federal Reserve District and others concerned: 1.00 Collection contract Attention of collecting banks, paying banks, and nonbank payors is directed to section 210.3 of Regulation J which provides that the provisions of that regulation and of the operating bulletins of this Bank are binding upon each collecting bank, paying bank, and nonbank payor to which this Bank or any subsequent collecting bank, presents, sends, or forwards a cash item received by us. 1.05 Authority This bulletin, our Bulletin 8, and our time sched ules (Bulletin 10) are issued pursuant to the provisions of sections 4, 13, 14(e), and 16 of the Act and the provisions of related statutes and in conformity with the provisions of Regulation J. 1.10 Definitions, reference to Regulation J All terms defined in Regulation J and used herein shall have the meanings stated in that regulation.1 1.15 Reference to Bulletin 1 Definitions and rules of construction applicable to this bulletin are found in our Bulletin 1, Gen eral Provisions, and are incorporated herein by reference. 1.20 Use of term “wire” For the purposes of this bulletin, the term “wire” includes telephone, telegraph, cable, or other form of electronic telecommunications. 1.25 Applicability of this bulletin The provisions of this bulletin are applicable to any state, or any county, district, political sub division, or municipality thereof to which we present direct, as cash items, any bills, notes, and warrants issued by such state, county, politi cal subdivision, or municipality and payable in this district. Each such issuer to which cash items are presented is treated as a paying bank for all purposes of Regulation J and operating bulletins issued in conformity therewith. Section 2, PRESENTMENT FOR PAYMENT As contemplated by section 210.7 of Regulation BULLETIN 11 J, any cash item: (1) May be presented for payment by us or a subsequent collecting bank; (2) May be sent by us or subsequent collecting bank for presentment and payment; or (3) May be forwarded by us to a subsequent col lecting bank with authority to present it for payment or to send it for presentment and payment. Section 3, ENDORSEMENTS 3.00 Cash item without endorsement If a cash item is received by a Federal Reserve Bank from a sender without the endorsement thereon of such sender, we may: (1) Present, send, or forward the item as if it bore such endorsement; (2) Place on the item the name of such sender and the date of its receipt by us; or (3) Return the item to the sender for proper en dorsement by the sender. 3.05 Warranties This Bank makes the warranties set out in sec tion 210.6(b) of Regulation J by presenting, send ing, or forwarding a cash item pursuant to sec tion 3 of our Bulletin 8. These warranties arise whether or not such item bears the endorsement of this Bank. Reserve Banks handle end-pointsorted cash letters received from senders with out endorsing the items in the cash letters. Collecting banks and paying banks should main tain records to enable them to identify the source of receipt of such items. In addition, Treasury Regulations (31 Code of Federal Regu lations, Part 103) require that banks maintain legible records of many items. These regulations apply whether or not the item is capable of being photocopied. Section 4, PAYMENT FOR CASH LETTERS 4.00 Time of payment Payment or remittance for our cash letter must be made by a paying bank for all accompanying cash items which shall not have been returned by said bank prior to the close of its banking day ’F o r the pu rposes of th is b u lletin as w ell as fo r the pu rposes of R egu lation J, the V irgin Island s and P uerto R ico shall be deem ed to be in or of the S econ d F ed eral R eserv e D istric t; Guam and A m erican Sam o a sh all b e deem ed to b e in or of the T w e lfth F ed eral R eserv e D istrict. BULLETIN 11 FEDERAL RESERVE BANK OF DALLAS on which such cash items are received.2 Such payment or remittance8 shall be made at par and in the manner hereafter provided: (1) Debit to an account on our books; (2) Cash; or (3) In our discretion, any other form of payment or remittance. The proceeds of any such payment or remittance in any form herein stated shall be available to us not later than the close of the banking day for us on which such items were so received by the paying bank. If the banking day on which such items are received by a paying bank is not a banking day for us, any payment or remittance made hereunder shall be effected on the next banking day of both this Bank and such paying bank next following the day of receipt of such item. 4.05 Form of payment This Bank may require the paying bank to which it has presented or sent any cash item to pay or remit therefor in cash, but payment may be made, in our discretion by any of the following methods which is in a form acceptable to u s: (1) Authorization to charge the account on our books of a member or nonmember clearing bank; (2) Cash letter agreement plan (automatic charge; see our Bulletin 12); or (3) Other forms where special arrangements have been made. 4.10 Adjustment for reserve computation If payment or remittance for an item is effected by means of a debit to an account on the books of this or another Federal Reserve Bank on a banking day for such Federal Reserve Bank fol lowing the banking day of receipt of the item by the paying bank because such day of receipt was not a banking day for such Federal Reserve Bank, this or such other Federal Reserve Bank may make appropriate adjustments as of such day of receipt (unless such day is a Saturday) for purposes of computation of reserves under Regulation D of the Board of Governors of the Federal Reserve System. 4.15 Collecting banks A subsequent collecting bank (other than a Fed eral Reserve Bank) to which the paying bank has paid or remitted for a cash item as herein pro vided shall pay or remit the proceeds to the Fed eral Reserve Bank which forwarded the item to it in such fashion that the proceeds thereof will be available to such Federal Reserve Bank not later than the close of the banking day, for such Federal Reserve Bank, on which the proceeds were received by such subsequent collecting bank. 4.20 Differences and adjustments Unless a paying bank has otherwise agreed with this Bank, when a paying bank pays or remits for our cash letter in an amount not in agreement with the total of the cash letter because the ac companying cash items do not prove to the amount of the cash letter, a complete explana tion of the difference should be furnished on our appropriate form. Paying banks are re quested to refrain from reporting adjustments of $1.00 or less. 4.25 Late claims for error adjustments We will send to member banks and other de positors maintaining an account on our books statements of account, which may be supported by advices, with respect to entries in such an account made by us in accordance with the provisions of Regulation J and our operating bulletins. If, within one calendar year from the date of an entry in such an account, such a depositor fails to advise us in writing of its objection to such an entry, the depositor, and any sender, collecting bank, or paying bank using the account maintained by the depositor which has handled the item to which the entry relates, shall 2A c a sh item receiv ed by a paying b an k sh all b e deem ed to have been receiv ed by the b an k on its n ex t bank in g day if the item is receiv ed under one o f the follow ing circu m stan ces: (1) O n a day o th er th an a bank in g day fo r it, or (2) O n a bank in g day fo r it, but (a) A fte r its reg u lar bank in g hou rs, or (b) A fte r a "cu t-o ff hou r” e sta b lish ed by it in acco rd an ce w ith ap p licable state law , or (c) D uring aftern o o n or evening periods w hen it is open fo r lim ited fu n ctions only. “T h is B an k w ill charge again st a m em ber paying b an k ’s re se rv e accou n t the am ounts o f cash le tte rs receiv ed from or through th is B an k b y such paying bank, in the ab sen ce o f any arrangem en t to provide fo r paym ents and rem ittan ces in som e other m anner and in the absen ce o f in stru ctio n s to the co n trary w ith re sp e ct to any sp ecific cash le tte r. FEDERAL RESERVE BANK OF DALLAS be deemed to have approved the entry and the statement of account shall be deemed finally ad justed. The foregoing shall not relieve such a depositor from the duty of exercising due dili gence to examine statements of account sent to it and of notifying us immediately upon discovery of any error, nor shall it apply to claims based upon the breach of a warranty in respect of an item to which an entry relates by a Federal Reserve Bank. Section 5, RETURN ITEMS 5.00 Recovery If a paying bank returns to us an unpaid cash item in accordance with the provisions of sec tion 210.12 of Regulation J,4 it may recover any payment or remittance theretofore made by it for such item by requesting a credit therefor to an account on our books; and paying banks are urged to follow this procedure to the extent practicable. However, any such paying bank may return any such unpaid item to us for refund. 5.05 Time for return by collecting banks Any collecting bank which receives an unpaid cash item from a paying bank for return to us is hereby directed to forward the return item to us before midnight of its next banking day following the banking day of its receipt of the return item, or as such time may be extended by operation of section 210.14 of Regulation J. 5.10 W arranty of collecting banks A collecting bank which takes or receives a credit or obtains a refund for the amount of any remittance made by it in respect of a cash item forwarded to it by us and returned to us by it thereby: (1) W arrants to us and to the sender of the item and all prior parties thereon that its return of the unpaid item to us was timely; and (2) Agrees to indemnify us for any loss or ex pense sustained (including but not limited to attorneys’ fees and expense of litigation] result ing from its breach of such warranty. 5.15 W arranty of paying banks In accordance with section 210.12(b) of Regula tion J, each paying bank which takes or receives credit or obtains a refund in respect of a cash item received by it from or through us, war rants to us, to any subsequent collecting bank, and to the sender and all prior parties that it BULLETIN 11 took all action necessary to entitle it to recover such payment within the times limited therefor. 5.20 Items without our endorsement A collecting bank or paying bank sending to this Bank a return item that does not bear our endorsement thereby warrants to us and to the sender of the item and all prior parties that the item was presented, sent or forwarded by us to the collecting or paying bank and that the col lecting or paying bank will provide source of receipt information on request. 5:25 Return without entry A paying bank or a collecting bank may return to us without entry a cash item which the paying bank or collecting bank did not return on time, with the request that we ask our sender to make refund therefor, in which event we shall make refund to the paying bank or collecting bank and charge our sender only if the latter spe cifically authorizes us to do so. 5.30 First and second returns If the cash item is being dishonored and returned for the first time, the paying bank is urged to stamp the following symbol on the upper right hand area of the face of the item: ★. If the cash item is being dishonored and returned for the second time, the paying bank shall invalidate the MICR routing number on the face of the item in such a manner that the item will no longer qualify for handling by high-speed automated check processing equipment. No Federal Reserve Bank shall have any responsibility for handling as a cash item an item whose MICR routing num ber has not been invalidated as required. 5.35 Reason for nonpayment on item Each cash item returned unpaid should bear a notation clearly indicating the reason for non payment. 5.40 Federal Reserve responsibility If we are once furnished with a cash item accom panied by a statement, signed by an authorized representative of a sender (other than a Federal Reserve Bank), that, upon the information and belief of such sender, the paying bank did not take all action necessary to entitle it to recover its payment or remittance for such cash item within the times limited therefor by the provi sions of Regulation J, thereby causing loss to the sender, we shall, on the basis of such statement, charge the amount of the item to the account maintained or used by, and forward the item to, ‘ S e ctio n 210.12 of R egu lation J is se t fo rth in Supp lem ent A to th is bulletin . BULLETIN 11 FEDERAL RESERVE BANK OF DALLAS the collecting bank or paying bank to which the item was originally presented, sent or forwarded by us and credit the account on our books of the sender (or Federal Reserve Bank furnishing such item and statement) with that amount; provided, however, that such credit to the sender shall be revoked if for any reason we cannot obtain the amount of such credit from the paying bank, and such credit to the sender shall be revoked if we subsequently receive not later than fifteen (15) banking days after we forwarded the item to the collecting bank or paying bank as provided in this paragraph, the same cash item accompanied by a statement, signed by an officer of the paying bank, that the paying bank took all action neces sary to entitle it to recover its payment or remit tance within the times limited therefor by the provisions of Regulation J, and the paying bank (or collecting bank furnishing such item and statement) will be credited accordingly. No Fed eral Reserve Bank shall have any responsibility for determining whether the paying bank took all action necessary to entitle it to recover such payment or remittance or whether the return of the item to it by a collecting bank was timely. 5.45 Maintenance of records For its own protection each paying and collect ing bank returning cash items to us for any reason should maintain adequate records to per mit the reproduction or tracing of any items lost or destroyed in transit. 5.50 Provisional credits If a paying bank or a collecting bank makes, in accordance with applicable state law, a direct return to the depositary bank of an unpaid cash item which it has received from or through us or any other Federal Reserve Bank, any provi sional credit for the item: (1) Between such paying bank or collecting bank and this Bank or any other Federal Reserve Bank; (2) Between this Bank or any other Federal Re serve Bank and the sender; and (3) Between this Bank and any other Federal Reserve Bank shall become and remain final. Section 6, UNIFORM INSTRUCTIONS REGARDING PROTEST AND ADVICE OF NONPAYMENT 6.00 General Except as provided in section 6.05 hereof, all paying banks and collecting banks must receive, handle, and forward cash items in accordance with the following uniform instructions regard ing protest and wire advice of nonpayment; and any contrary or special instructions noted on cash letters or otherwise transmitted with cash items are to be disregarded: (1) PROTEST any dishonored item of $2,500 or over: (a) Which appears on its face to have been drawn at a place which is not within any state,5 unless it bears on its face the ABA no-protest symbol of a Federal Reserve Bank or of a pre ceding bank endorser, or (b) Which bears on its face the legend, "PRO TEST REQUIRED," of a Federal Reserve Bank or of a preceding bank endorser. (2) DO NOT PROTEST: (a) Any item of less than $2,500, or (b) Any item of $2,500 or over unless it is protestable under subparagraph (1). (3) WIRE ADVICE of nonpayment of any item of $2,500 or over, unless it has not been paid because of a missing, irregular, or unsatisfactory endorsement or unless it bears on its face the legend, "DO NOT WIRE NONPAYMENT," of a Federal Reserve Bank or a preceding bank en dorser. Include in the advice of nonpayment, the amount of the item, the reason for nonpay ment, the date of our cash letter, the name of the drawer or maker, and the names of all en dorsers preceding the Federal Reserve Bank or their ABA transit numbers, if any. Wire ad vices of nonpayment should be furnished in a form similar to that which is used in the follow ing specimen: Returning $2,513.24 insufficient funds yours 18th maker John Doe endorsed 37-2 17th 88-4185 16th and Richard Roe. (4) DO NOT WIRE ADVICE of nonpayment of: (a) Any item less than $2,500; or (b) Any item of $2,500 or over unless such ad vice is required by subparagraph (3). 6.05 United States obligations DO NOT PROTEST AND DO NOT WIRE AD VICE of nonpayment of any cash item, regard- 5T he term “s ta te ” is defined in s ectio n 210.2(n) o f R egu lation J to m ean any state o f the U nited S ta tes, the D istrict of Colum bia, or P uerto R ico , or any territo ry , p o ssessio n , or d ependency of the U nited S tates.
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