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F ederal Reser ve Bank DALLAS, TEXAS of Dallas 75222 C irc u la r No. 78-176 December 20, 1978 REVISIONS TO BULLETIN 8 AND BULLETIN 11 TO A LL BANKS AND OTHERS CONCERNED IN THE ELEVENTH FEDERAL RESERVE D IS T R IC T : Enclosed a re copies of re vise d pages to B u lletin 8, "Collection of Cash Item s," and B ulletin 11, "In struction s to C ollecting and Paying B an k s." Also enclosed is a r e v is e d c o p y of R eg u la tio n J , effective September 1, 1977, containing the latest amend ments . T h e revisio n s to B u lletin 8 and B u lletin 11 re fle c t the follow ing changes in System procedures for handling certain re tu rn items. 1. T h is Bank w ill re tu rn to the sender all items that cannot be handled as cash item s. T h e p ractice of c h arg in g back and en te rin g for collection items of $1,000 or more received from a sender located outside the c ity of the re ceivin g Federal Reserve office w ill be discontinued. In a d d itio n , an e n tire cash letter which does not conform to p res crib ed sorting requirem ents may be retu rn ed and charged back to the s e n d e r. 2. When a sender alleges late re tu rn of a cash item by a paying b an k, the statement of the paying bank to obtain a re ve rs al of the charges for the item must be signed by an officer of the paying bank ra th e r than by any authorized re p re sen ta tive. Member banks and others who m aintain a Regulations B in d er should file the revised pages of B u lletins 8 and 11 and the copy of Regulation J in th e ir b in d e r and the corresponding pages of the b u lletin s and the regulation and subsequent amendments should be removed and destro yed. Questions concerning these revisions should be d irected to L a r r y J . Reck, As sistant V ic e President a t the Head O ffice, E xt. 6337; Robert W. S ch u ltz, Assistant V ice President at the El Paso B ra n c h , (915) 544-4730; V ernon L . B artee, Assistant V ic e Pres ident a t the Houston B ran c h , (713) 659-4433; o r Thomas H . Robertson, A ssistant V ice President at the San Antonio B ra n c h , (512) 224-2141. S in c e re ly y o u rs , Robert H . Boykin F irs t V ic e President Enclosures Banks and others are encouraged to use the following incoming WATS numbers in contacting this Bank: 1-800-492-4403 (intrastate) and 1-800-527-4970 (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.Jrb.org) FEDERAL RESERVE BANK OF DALLAS Section 1, GENERAL This bulletin is directed to the member banks of the Eleventh Federal Reserve District and others concerned:1 1.00 Collection contract Regulation J, this bulletin, and our time sched ules prescribe the terms and conditions upon which we will handle cash items for collection. 1.05 Authority This bulletin, our Bulletin 11, and our time sched ules Bulletin 10 are issued pursuant to the pro visions of sections 4, 13, 14(e), and 16 of the Federal Reserve Act and the provisions of re lated statutes and in conformity with the pro visions of Regulation J. Section 2, DEFINITIONS AND REFERENCES 2.00 Definitions, reference to Regulation J All terms defined in Regulation J and used herein have the meanings stated in that regulation. 2.05 Reference to Bulletin 1 Several definitions, rules of construction, and other provisions applicable to this bulletin are found in our Bulletin 1, General Provisions, and are incorporated herein by reference. Section 3, CASH ITEMS 3.00 Items which will be handled as cash items Except as otherwise provided by this bulletin, the following items may be sent to this bank for handling as cash items in accordance with and subject to the provisions of Regulation J, of this bulletin, and of our time schedules: (a) Checks drawn upon any bank included in the current “Federal Reserve Par List”, which indicates the banks upon which checks are col lectible at par through the Federal Reserve banks and is furnished from time to time and supple mented each month to show changes subsequent to the last complete list. ‘Instructions pertaining to the handling of cash items by collecting and paying banks are contained in our Bul letin 11, entitled "Instructions to Collecting Banks and Paying Banks.” BULLETIN 8 (b) Government checks, postal money orders, and food coupons.2 (c) Such other demand items, collectible at par in funds acceptable to the Federal Reserve bank of the district3 in which such items are payable, as we may be willing to accept as cash items. 3.05 Items not received from sender Whenever any instrument is accepted by us for credit to our own account, the account of another Federal Reserve bank, or any account on our books, we will handle the instrument as a cash item if it would have been a cash item but for the fact that it was not sent to us by a sender. 3.10Items which will not be handled as cash items This bank will not handle any item as a cash item if (a) A passbook, certificate, or any other docu ment is attached to the item; or (b) Special instructions, including requests for special advice of payment or dishonor, accom pany the item; or (c) The item consists of more than a single thickness of paper, except as provided in sec tion 12 of this bulletin; provided, however, that any mutilated, erroneously-encoded or other cash item contained in a carrier qualifying under existing standards for handling by high-speed check-processing equipment will be handled by us as a cash item; or (d) Except as provided in Section 12 of this bul letin, the item has not been preprinted, or post encoded before its receipt by us, with (1) the routing symbol and the suffix of the transit num ber of the paying bank (or nonbank payor), and (2) the dollar amount of the item, in magnetic ink in E-13B type in the manner prescribed, and at the location assigned, by the A.B.A.; pro vided, however, that this Bank will handle such items as cash items when, in our judgment, spe cial circumstances justify such handling. ’Provisions governing the collection of the foregoing cash items are contained in Supplem ents A, B, and C, respec tively, of this bulletin. 'For the purposes of this bulletin, the Virgin Islands and Puerto Rico shall be deemed to be in or of the Second Federal Reserve District; Guam and American Samoa shall be deemed to be in or of the T w elfth Federal Re serve District. S ee Regulation J, note 1. BULLETIN 8 FEDERAL RESERVE BANK OF DALLAS Such items, if sent to this Bank for collection, should be sent only as noncash items and, if so sent, will be received by us for collection subject to all the terms and conditions of Regulation J and of our bulletin relating to the collection of noncash items. 3.15 Handling of nonconforming items In the event that an item which will not be handled as a cash item by virtue of this bulletin is sent to any Federal Reserve Bank in a cash letter, the Federal Reserve Bank will charge it back and return it to the sender. In addition, we reserve the right to return and charge back an entire cash letter which does not conform to the sorting requirements of this bulltin and of our time schedules. 3.20 Discretion to return or handle as noncash items This Bank will not handle any item if the item has been dishonored two or more times. We re serve the right, in our discretion, to return or handle as a noncash item any item which has been dishonored or if special conditions require that it be handled as a noncash item, and this Bank shall decide whether such special condi tions exist. 3.25 Items received from, payable by same bank A cash item payable by or through one office of a bank will not be received from another office of the same bank for collection as either a cash or a noncash item by us or by any other Federal Reserve Bank. Section 4, TERMS AND CONDITIONS OF COLLECTION 4.00 Regulation J Regulation J prescribes terms and conditions under which all Federal Reserve Banks will col lect checks and other cash items for the senders thereof. Such terms and conditions and the terms and conditions of this bulletin, our Bulle tin 11, and of our time schedules will apply to the handling of all cash items which we accept for collection thereunder and to the handling of all bank drafts and other forms of payment or remittance which we receive for such items. 4.05 Bulletins Section 210.3 of Regulation J provides that the provisions of that regulation and of the operat ing bulletins of the Federal Reserve Banks shall be binding upon the sender of a cash item and shall be binding upon each collecting bank, pay ing bank, and nonbank payor to which the Fed eral Reserve Bank, or any subsequent collecting bank, presents, sends, or forwards a cash item received by the Federal Reserve Bank. Section 210.16 of Regulation J provides that each Fed eral Reserve Bank shall issue operating bulletins not inconsistent with the provisions of that regu lation governing the details of its operations in the handling of cash items and containing such other matters as are required by the provisions of that regulation. 4.10 Items payable outside this district A cash item payable in any other Federal Re serve district and forwarded for collection to the Federal Reserve Bank of such other district by us or sent direct to such Federal Reserve Bank for our account by a sender which maintains or uses an account with us will be handled by such Federal Reserve Bank subject to the terms and conditions of Regulation J and of the applicable bulletins and time schedules of such Federal Reserve Bank; but we will give credit to the sender for such item in accordance with our time schedules. 4.15 Indirect routing discouraged Under Section 4-204(1) of the Uniform Commer cial Code, a collecting bank must send items by reasonable prompt methods, taking into consid eration any relevant instruction, the nature of the items, the number of such items on hand, the cost of collection involved, and the methods generally used by it or others to present such items. In furtherance of the purpose of this re quirement, and in the interests of good banking, the indirect routing of cash items is discouraged, and member banks should not send to us or to other Federal Reserve Banks for our account any items payable in other Federal Reserve districts which bear the endorsements of banks located in other Federal Reserve districts, in cases where it is evident that such items have been routed indirectly. Section 5, CASH LETTERS 5.00 Preparation of cash letters by senders FEDERAL RESERVE BANK OF DALLAS senders after receipt by us. For all items ac cepted as cash items, the senders will be given immediate credit or deferred credit, in accor dance with such time schedules and as provided in Regulation J. Credit for cash letters containing items unsorted as to availability may be deferred for the longest period of availability prescribed by the current time schedules of this Bank with respect to any item enclosed. 7.05 Availability not actual payment Time schedules do not in many instances show the actual time required for collection, and ad vices from us showing the availability of items cannot be considered as advices of actual pay ment on the dates of availability. Credit will in all instances be subject to receipt of payment by us in actually and finally collected funds. 7.10 Immediate credit For all such cash items as are accepted for im mediate credit in accordance with our current time schedules, immediate credit will be given upon our books at full face value in the reserve account or other appropriate account upon the day of receipt, and the proceeds will at once be counted as reserves for the purposes of Regula tion D and become available for withdrawal and other use by the sender; provided, however, that we may in our discretion refuse at any time to permit the withdrawal or other use of credit given for any item for which we have not yet received payment in actually and finally col lected funds. 7.15 Deferred credit For all such cash items as are accepted for de ferred credit in accordance with our current time schedules, deferred credit will be entered upon our books at full face value, but the pro ceeds will not be counted as reserves for the purposes of Regulation D nor become available for withdrawal or other use by the sender until the expiration of the time specified in our time schedules, at which time credit will be transfer red from the deferred account to the reserve ac count or other appropriate account and will then be counted as reserve for the purposes of Regu lation D and become available for withdrawal and other use by the sender; provided, however, that we may in our discretion refuse at any time BULLETIN 8 to permit the withdrawal or other use of credit given for any item for which we have not yet received payment in actually and finally col lected funds. 7.20 Mixed cash letters Mixed cash letters will be accepted for one-day credit when presented in accordance with the following provisions: Any member bank that has for collection a daily average of not more than 2,000 immediatecredit and deferred-credit items excluding food coupons payable outside of the city or town in which such bank is located may, upon applica tion, be permitted to send such items to us un sorted with one cash letter: Provided, That the dollar amount is encoded on each item in ac cordance with the ABA Magnetic Ink Charac ter Recognition Program: Provided further, That the items sent to the Federal Reserve Bank by such bank on any one day shall include all such items processed by it on that day. Credit for items so sent, when received by us in time for presentment on the day of receipt of all immediate-credit items included with such cash letter, will be given one business day after receipt. 7.25 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 pro visions of Regulation J and our operating bulle tins. 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 ac count maintained by the depositor which has handled the item to which the entry relates, nhall be deemed to have approved the entry and the statement of account shall be deemed finally adjusted. The foregoing shall not relieve such n depositor from the duty of exercising due diligence to examine statements of account sent to it and of notifying us immediately upon dis covery 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. BULLETIN 8 FEDERAL RESERVE BANK OF DALLAS on our books of the sender (or Federal Reserve Bank furnishing such item and statement) with that amount; provided, however, that such credit shall be revoked if for any reason this Bank cannot obtain the amount of such credit from the paying bank, and such credit to the sender shall be revoked if this Bank subse quently receives not later than fifteen (15) banking days after this Bank 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 necessary to entitle it to recover its pay ment or remittance 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 accord ingly. No Federal Reserve Bank shall have any responsibility for determining whether the pay ing 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. 9.10 Returns without entry If a cash item is returned without entry, we will make refund to the returning bank and charge the sender only if the latter specifically autho rizes us to do so. Section 8, COLLECTING AND PAYING BANKS Instructions pertaining to the handling of cash items by collecting banks and paying banks are set forth in our Bulletin 11. Section 9, RETURN ITEMS 9.00 Information to senders regarding return items The attention of senders is called to our “In structions to Collecting Banks and Paying Banks” to the effect that (1) each paying bank which takes or receives a credit or obtains a refund in respect of a cash item received by it from or through a Federal Reserve Bank war rants to such Federal Reserve Bank, to a subse quent collecting bank, and to the sender and all prior parties that it took all action necessary to entitle it to recover such payment within the times limited therefor; (2) a collecting bank which returns an unpaid item to a Federal Reserve Bank warrants to such Federal Reserve Bank and to the sender and all prior parties that its return of the item was timely; and (3) if a paying or collecting bank, in accordance with applicable State law, makes 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 provisional credit for the item between such paying or col lecting bank and this Bank or any other Federal Reserve Bank, between this Bank or any other Federal Reserve Bank and the sender, and be tween this Bank and any other Federal Reserve Bank shall become and remain final. 9.05 Untimely return of unpaid items If we are once furnished with a cash item ac companied by a statement, signed by an author ized representative of a sender [other than a Federal Reserve Bank), that, upon the informa tion 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 pro visions of Regulation J, thereby causing loss to the sender, we shall, on the basis of such state ment, charge the amount of the item to the ac count maintained or used by, and forward the item to, the collecting bank or paying bank to which the item was originally presented, sent or forwarded by this Bank and credit the account Section 10, DIRECT SENDING 10.00 Direct sending of cash items to other Federal Reserve Banks Member banks and other senders maintaining or using accounts with us which have a substan tial volume or dollar amount of cash items pay able in any other Federal Reserve district which they wish to collect through the Federal Reserve Banks are required to apply to us for authority to send such items direct to the Federal Reserve Bank of the district in which such items are pay able for collection and credit to us; provided, however, that we may, in our discretion, with draw such authority at any time. Appropriate instructions will be transmitted to the member and nonmember clearing banks and other send ers which are authorized to send direct. 10.05 Right to refuse interdistrict items autho rized for direct sending In the event that any sender maintaining or using an account with us has, in our judgment, a sufficient volume or dollar amount of cash 6 12-15-78_ BULLETIN 11 FEDERAL RESERVE BANK OF DALLAS 5.15 Warranty 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 took all action necessary to entitle it to recover such payment within the times limited therefor. 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 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. 5.20 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. Section 5, RETURN ITEMS 5.25 First and second returns 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 Warranty 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) Warrants 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. 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. 5.30 Reason for nonpayment on item Each cash item returned unpaid should bear a notation clearly indicating the reason for non payment. 5.35 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, ‘Section 210.12 of Regulation J is set forth in Supplem ent A to this bulletin. 3 4^17-78 BULLETIN 11 FEDERAL RESERVE BANK OF DALLAS 6.00 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. 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,6 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. 5.40 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. 5.45 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. (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). Section 6, UNIFORM INSTRUCTIONS REGARDING PROTEST AND ADVICE OF NONPAYMENT 6.05 United States obligations DO NOT PROTEST AND DO NOT WIRE AD VICE of nonpayment of any cash item, regard- "The term “state" is defined in section 210.2(n) of Regulation J to mean any state of the United States, the District of Columbia, or Puerto Rico, or any territory, p ossession , or dependency of the United States. 4 12-15-78
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