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Federal Reserve Bank
of Dallas

l l★K

HELEN E. HOLCOMB
FIRST VICE PRESIDENT AND
CHIEF OPERATING OFFICER

January 14, 2000

DALLAS, TEXAS
75265-5906

Notice 2000-03

TO: The Chief Operating Officer of each
financial institution and others concerned
in the Eleventh Federal Reserve District
SUBJECT
Uniform Endorsement Standard
DETAILS
The Federal Reserve is reviewing bank of first deposit (BOFD) endorsement quality
to determine the extent to which depository institutions meet the uniform endorsement standard
established in Regulation CC, which became effective September 1, 1988. Appendix D (Endorsement Standards) of Regulation CC and an illustration of a correct BOFD endorsement are
attached for your convenience.
To improve endorsement quality and reduce the risks associated with return item
processing, we request that each depository institution review its endorsement practices to ensure
compliance with the established standard (see attachments). Although the Federal Reserve is
responsible for improving the efficiency of the payments system, the return item process can be
improved without intervention if all depository institutions consistently follow the mandatory
endorsement standard.
Poor endorsement quality by a BOFD decreases the efficiency of the return item
process. All depository institutions pay for this inefficiency through additional risk of loss and
higher costs. Subsequent endorsers who fail to follow the endorsement standard also increase the
risk associated with return item processing. The following examples illustrate common endorsement practices that do not meet the endorsement standard established in Regulation CC, Appendix D.

• Missing or illegible endorsements from the BOFD;
• The BOFD not using dark purple or black ink for its endorsement;

For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal
Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012;
Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810.

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• The BOFD not placing its endorsement in the appropriate location
(see attachments);

• The BOFD not including its nine-digit routing number in the BOFD
endorsement;

• Subsequent endorsers placing their endorsement stamps over the
BOFD endorsement;

• Subsequent endorsers using their BOFD endorsement stamp; and
• Subsequent endorsers using dark purple ink.
A clear, legible, and undisturbed BOFD endorsement is key to an efficient return item
process. A legible BOFD endorsement allows the paying bank and returning bank(s) to return an
item qualified for automated processing, which is cleared more quickly through the return item
processing chain than an unqualified or “raw” return. Raw return items require the Federal
Reserve and the paying bank to research the source of receipt prior to processing. This research,
unnecessary for properly qualified return items, delays the return and increases the risk to the
depository bank that funds will be withdrawn from an account before the item is returned.
To prepare a return item for automated processing, the paying or returning bank must
strip or sleeve the item and encode the strip or sleeve with the routing number of the BOFD, the
amount of the check, and the return identifier. Certain practices are not appropriate when qualifying return items and may result in a qualified item being handled as a raw return item by the
Federal Reserve. Several examples of inappropriate practices are outlined below.

• The paying bank depositing an item as a qualified return item and
incorrectly encoding a Federal Reserve routing number as the BOFD;

• Returning an item as qualified that bears no BOFD endorsement;
• Encoding account numbers on the qualified return item;
• Failing to include the return item identifier “2” in position 44 on the
MICR line;

• Encoding a routing number that is not the BOFD; and

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• Using strips that fall off the return item.
The efficiency of the return item process, and ultimately the payments system, can be
improved by increasing the percentage of checks that are appropriately endorsed. Please review
the endorsement practices at your institution to ensure continued adherence to the endorsement
standard established in Regulation CC. We appreciate your continued support of an efficient
return item process.
ATTACHMENTS
Attached are Appendix D (Endorsement Standards) of Regulation CC and an illustration of a correct BOFD endorsement.
MORE INFORMATION
If you have any questions about endorsement requirements, or if you would like
assistance from Federal Reserve staff in addressing return item processing issues, please contact
Don Jackson, (214) 922-5431, at the Dallas Office; Jane Pyke, (915) 521-8244, at the El Paso
Branch; Louis Moore, (713) 652-1581, at the Houston Branch; or Barbara Lynch, (210)
978-1670, at the San Antonio Branch.
For additional copies of this Bank’s notice, contact the Public Affairs Department at
(214) 922-5254 or access our web site at http://www.dallasfed.org/banking/notices/index.html.
Sincerely,

Attachment I

REGULATION CC
APPENDIX D—Endorsement Standards
1. The depositary bank shall endorse a check according to the following specifications:
•

The endorsement shall contain
 the bank’s nine-digit routing number, set off by arrows at each end of the number and pointing toward
the number;



•

the bank’s name/location; and
the endorsement date.

The endorsement may also contain




an optional branch identification;
an optional trace/sequence number;
an optional telephone number for receipt of notification of large-dollar returned
checks; and
 other optional information provided that the inclusion of such information does not
interfere with the readability of the endorsement.
•

The endorsement shall be written in dark purple or black ink.

•

The endorsement shall be placed on the back of the check so that the routing number is
wholly contained in the area 3.0 inches from the leading edge of the check to 1.5 inches
from the trailing edge of the check.1

2. Each subsequent collecting bank endorser shall protect the identifiability and legibility of the
depositary bank endorsement by:
•

•
•

including only its nine-digit routing number (without arrows), the endorsement date, and
an optional trace/sequence number;
using an ink color other than purple; and
endorsing in the area on the back of the check from 0.0 inches to 3.0 inches from the
leading edge of the check.

3. Each returning bank endorser shall protect the identifiability and legibility of the depositary
bank endorsement by:
•
•

1

using an ink color other than purple;
staying clear of the area on the back of the check from 3.0 inches from the leading edge of
the check to the trailing edge of the check.

The leading edge is defined as the right side of the check looking at it from the front. The trailing edge is defined as the left side of the check
looking at it from the front. See American National Standards Committee on Financial Services Specification for the Placement and Location
of MICR Printing, X 9.13.

Attachment II

Check Front
Trailing Edge

Leading Edge

456

John Doe
123 Doe Run
Hometown, State

DATE ____________________19_____

PAY TO THE
ORDER OF _________________________________________________ $ _______________
________________________________________________________________________
Dollars

ABC Bank

(over)

Check Back
Leading Edge

Trailing Edge

(SUBSEQUENT COLLECTING BANK)

(DEPOSITORY BANK)

(PAYEE)

1234-5678-0
YOUR BANK
456 Doe Run
Hometown, State
September 28, 1999
NOTE: The Depositary
Bank must endorse using
dark purple or black ink.

3"

The use of dark purple ink
is encouraged.

1_"