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FED E R AL R E S E R V E BANK OF N E W YORK [* Circular No. 7 8 0 6 1 L January 27, 1776 J COLLECTION OF CHECKS AND OTHER ITEMS AND TRANSFERS OF FUNDS Revised Proposed Amendments to Regulation J F^&roZ a?trZ 0(Z:cr^ Uo?;rcr;?C6Z.' Our Circular No. 7799, dated January 19, 1976, contained the text of a statement issued by the Board of Governors of the Federal Reserve System announcing revised proposals to amend its Regulation J to deal with clearing and settlement of wire transfers and payment instructions recorded on magnetic tape. Printed below is the text of the revised proposal, as published in the FfJgra/ of January 21. Comments thereon should be submitted by March 19 and may be sent to our Payment Systems Department. PAUL FEDERAL RESERVE SYSTEM [ 12 CFR Part 210 ] FEDERAL RESERVE BANKS CoHection of Checks and Other Hems Under Section 16 of the Federal R e serve Act (12 U.S.C. 2 48(o)), the Board of Governors of the Federal Reserve System Is authorized to promulgate reg ulations governing the transfer of funds through Federal Reserve Banks, their Branches, and regional facilities. On November 19, 1973, the Board of Gov ernors issued for comment a revision of Regulation J, incorporating two new subparts (see 39 FR 32952). After review and consideration of all comments re ceived. the Board has substantially re vised the Subparts and is republishing them for further com m ent The proposed rules, which delineate in regulatory form the rights and respon sibilities of financial institutions using existing Federal Reserve facilities for what have become known as "electronic fund transfers," are in the form of an amendment to Regulation J (12 CFR Part 210). Such transfers are already being handled by the Federal Reserve System and consist of (1) large dollar credit items which are transmitted over the Federal Reserve Communications System and are commonly known as "wire transfers," and (2) smaller dollar amount credit and debit items gener ally in recurring amounts that are con tained on magnetic tape and processed through Federal Reserve clearing and settlem ent facilities, commonly known as "ACH transactions." The rules re garding such transfers of funds through Federal Reserve facilities would be des ignated as Subpart B, Credit Items, and Subpart C. Debit Items. The present provisions of Regulation J relating to check collection would become Subpart A of the Regulation. The Regulation does not establish rules regulating commerclal/consumer elec tronic payment systems, such as pointof-sale systems or customer bank com munications terminals, nor does It gov ern liabilities of parties involved In the Department of Treasury's Federal Recur ring Payments Program (for a discussion of that program, see 40 FR 47492). The Regulation does not attempt to estab lish the rules by which consumers will transfer funds. Regulation J only gov erns the transfers of funds among finan cial institutions through existing Fed eral Reserve facilities. Currently, the rights and liabilities of parties using Federal Reserve System facilities are de fined by operating circulars, separate contracts, and other agreements, and this proposal would establish a common regulatory framework for all items re ceived by a Reserve Bank. A. SU BPA R T VoLCKER, B As provided in Subpart B, the origina tor initiates the action to transfer funds from the originator to the recipient. An originator is defined as a financial in stitution or government agency eligible to deposit items directly with a Federal Reserve Bank in accordance with Fed eral Reserve System operating circulars. The originator sends a credit item to the Federal Reserve ofRce with which it maintains or causes to maintain an ac count in the media specified in the regu lation. (But under special arrangements, an originator may directly send Items to another Federal Reserve Bank.) Also, under special arrangements, an origina tor may request by telephone its Reserve oE3ce to transfer funds. By sending or requesting a credit item, the originator warrants to the recipient th at it has the authority to perform this action. The originator also authorizes the Reserve office to debit its account and to act upon the item by forwarding it to the recipient: the originator indemnifies the Federal Reserve Bank for losses sustained for actions taken by the Reserve Bank within its scope of authority in handling the item. The recipient, defined as a party au thorized by Reserve Bank operating cir culars to receive items, authorizes the PKOPOSED RULES Reserve Bank to handle the Item and agrees that it will credit Its customer on the day of paym ent Final payment for items occurs when the credit item is sent by the Reserve Bank, but for credit item s deposited on m agnetic tape, final payment occurs ac cording to the date and time specified in the time schedules in Federal Reserve Bank operating circulars. TTie duties and liabilities of a Reserve Bank are outlined in several sections and tragically impart a duty of reasonable care to the Reserve Banks. The new proposal is different in a number of aspects from the earlier pro posal, as follows: Section 210.52—Amended to revise and Include additional definitions. Section 210.54— New paragraph to clarify the provisions for telephonic requests for credit items. Section 210.55—Amended to require the originator to warrant to the recipient that the originator is authorized to send or request the item. Section 210.56— Amended to provide different procedures should a member bank not be able to credit a customer for the amount of an item. Section 210.57—Amended to clarify the am ount of the balance which a member bank must hold with its Federal Reserve Bank. Section 210.60—Amended to provide that an originator may receive one advice for the net transfers for that day. Section 210.61—Amended to modify revocation provisions and clarify return of funds provisions. Section 210.62—Amended to include that final payment is final upon sending of an item or in the case of items depos ited on magnetic tape in accordance with the date of the item and the operating circular. SU BPA RT C As detailed in Subpart C. the originator initiates the action to transfer funds from the recipient to the originator. R e serve Bank operating circulars will outline which depository institutions will be authorized to be originators and recip ients. The originator warrants to the recipient that the originator is author ized to issue the debit item. The origi nator also indemnifies the Reserve Bank for losses sustained by the re ceiving Reserve Bank resulting from any action taken by such Reserve Bank within its scope of authority. The recipient is debited on the pay m ent date. The debit may be reversed if the item is returned to its Federal R eserye Bank by close of the recipient's business day next following the pay m ent date. The time of payment is e f fective in accordance with the time schedule spec ided in Reserve Bank op erating circulars. The Reserve Bank liability is basically one of due care. The new proposal materially changes certain provisions in the earlier proposal as follows: Section 210.72—Amended to revise and include additional definitions. Section 210.73—Amended to require 2 the originator to warrant to the recip S u c h i n s t i t u t i o n receiv es su B lc ie n t v o lu m e ient th at the originator is authorized o f s u c h ite m s to w a r r a n t s e p a ra te d eliv ery a n d is lo c a te d o n a n e x is tin g c h e c k c o u rie r to send the debit item. Section 210.77—Amended to clarify r o u te . (3) I te m s m ay b e d e liv e re d to a d a t a p ro c when final payment occurs. e s sin g se rv ice b u r e a u : P ro v id e d , T h e se rv ice The Reserve Banks will process debit b u r e a u receiv es su ffic ie n t v o lu m e o f s u c h items only if such items are in the form ite m s to w a r r a n t s e p a ra te d eliv ery a n d is lo of an ACH transaction. c a te d o n a n e x is tin g ch e c k c o u rie r ro u te . It should be noted that, as an addi (4) A ny f in a n c ia l o rg a n iz a tio n m a y p ic k tional provision in both Subparts, all u p ite m s a t t h e lo cal F e d e ra l R eserv e oBice banks shall m aintain adequate safe p ro v id e d t h a t its v o lu m e is su fficien t t o w a r guards to insure the privacy and con r a n t s u c h a c tio n s . (5) A ny R n a n c ia l o r g a n iz a tio n m a y h a v e fidentiality of all account information. ite m s d e liv e re d to a n e n d p o in t t h a t c u r r e n tly Operating circulars will be issued by receiv es c h e c k s d ir e c tly fro m t h e F e d e ra l Federal Reserve Banks governing the de R e serv e office (i.e. t h e p a s s - th r o u g h m e t h o d ) . tails of funds transfer operations and (6 ) I te m s m a y b e m a ile d to a n y R n a n c ia l will detail which institutions may deliver o rg a n iz a tio n by th e F e d e ra l R eserv e re g a r d less of its lo c a tio n . and receive items directly. In regard to access to Federal R e SETTLEM ENT serve facilities used in the above op S e ttle m e n t f o r ite m s cle a re d u n d e r th e erations, on June 10, 1975, the Board m e n t w ill b e m a d e b y c r e d it published for comment proposed ar aabn od v ed eabr rita n eg ne tr ie s t o re se rv e a c c o u n ts o f rangements for the deposit, delivery, and m e m b e r b a n k s o f t h e F e d e ra l R eserv e S y ste m settlem ent of ACH transactions— i.e., In providing clearing and settlem ent those payments contained on magnetic tape that would be cleared through Fed services for ACH associations, the Board anticipates that these services will be eral Reserve clearing and settlem ent facilities. The Board proposed on June 10 made reasonably available on a com that only financial organizations with parable basis to depositary institutions demand deposit powers could deposit having need for such services. The above provisions apply only for magnetic tapes with the Federal Reserve. the use of Federal Reserve facilities in The Board also proposed that payments would be delivered directly to financial clearing and settling payments ex changed on magnetic tape. Use of the organizations currently serviced by Fed Federal Reserve communications system eral Reserve courier services and to high volume endpoints located along existing for transm itting large dollar credit items courier routes (see 40 FR 25641). The will continue to be limited to Federal proposal did not apply to access to other Reserve member banks and Government System facilities, such as the wire trans agencies. Other financial institutions may utilize this system through facili fer facilities. ties of a member bank. The Board, by publication of these In view of the many changes occur proposed regulations, is not finally ring in the electronic payments area, adopting a policy in regard to ac Federal Reserve policy will be subject cess and pricing. In the near future the to periodic review. In particular, further Board intends to publish a pricing sched review would be undertaken as a result ule based on the fully allocated costs of of the study by the National Commission providing System check and ACH serv on Electronic Fund Transfers. These ices. In developing the pricing schedule, proposals, if adopted, will provide uni consideration would be given to the bur form standards for electronic transac den of required reserves maintained by tions handled by the System. In such an member banks. In the interim, pending environment, considerable cost savings the development of a final pricing sched to financial institutions, the U.S. Treas ule in respect to so-called ACH trans ury, and the Federal Reserve may be actions, the System wiil basically m ain realized and consumers can be afforded tain its current policy with regard to the greater convenience and security. processing and handling of such trans This notice is published pursuant to actions and will, in fact, broaden its section 553(b) of Title 5, United States services concerning delivery. Such in Code, and section 262.2(a) of the rules terim policies may be modified at the of procedure of the Board of Governors. tim e a pricing schedule is adopted. Dur These regulations are issued pursuant to ing the interim period, the Federal Re and under the authority of sections H serve Banks will handle and process ACH (i), 11 (j), 13, 16, and 19(f) of the Fed transactions for all member banks and eral Reserve Act (12 U.S.C, 248(1), 12 any nonmember financial organization U.S.C. 248(j), 12 U.S.C. 342, 12 U.S.C. th at is a member of an automated clear 248(o), and 12 U.S.C. 464, respectively) ing house association and that is send and related provisions of the law. ing ACH data pursuant to association To aid in the consideration of the rules. The Federal Reserve will deliver ACH Regulation J proposal by the Board, in Items under the following guidelines: terested persons are invited to submit relevant data, views, or arguments. Any (1) I te m s fo r b e n eR ciaries m a in ta in in g a c c o u n ts a t a R n a n c ia i i n s t i t u t i o n o fferin g such material should be submitted in d e m a n d d e p o s it a c c o u n ts m a y b e d e liv e re d writing to the Secretary. Board of Gov d ir e c tly to t h a t I n s t i t u t i o n in t h e sa m e m a n ernors of the Federal Reserve System, n e r t h a t c h e c k s a re p re s e n te d . Washington, D C. 20551 to be received (2) I te m s fo r b e n e fic ia rie s m a in ta in in g a c c o u n ts a t a fin a n c ia l o r g a n iz a tio n n o t not later than March 19, 1976. Such m a o ffern g d e m a n d d e p o s it a c c o u n ts m a y b e d e terial will be made available for inspec liv e re d d ir e c tly to t h a t i n s t i t u t i o n : P ro v id e d , tion and copying upon request except PROPOSED RULES as provided in § 261.6(a) of the Board's rules regarding availability of informa tion. To implement its proposal, the Board is considering amending Regulation J (12 CFR Part 210) as set forth below. 1. The title of Part 210 would be changed to read: "COLLECTION OF CHECKS AND OTHER ITEMS AND TRANSFERS OF FUNDS." 2. The table of contents of Part 210 would be changed to read as follows: Sec. 210.1 210.2 210.3 210.4 210.5 210.6 210.7 210.8 210.9 210.10 210.11 210.12 210.13 210.14 210.15 210.16 A u th o r ity a n d scope D e fin itio n s . G e n e ra l p ro v isio n s. S e n d in g o f ite m s to F e d e ra l R eserve B a n k s. S e n d e r's a g re e m e n t. S t a t u s a n d w a r ra n tie s of F e d e ra l R e se rv e B a n k . P r e s e n tm e n t fo r p a y m e n t. P r e s e n tm e n t o f n o n c a s h ite m s fo r a c c e p ta n c e . R e m itta n c e a n d p a y m e n t. T im e s c h e d u le a n d a v a ila b ility of c r e d its w ith r e s p e c t t o c a s h ite m s . A v a ila b ility o f p ro ceed s of n o n c a s h ite m s . R e tu r n o f c a s h ite m s. C h a rg e b a c k o f u n p a id cash ite m s a n d n o n c a s h ite m s. T im e lin e s s o f a c tio n . E ffect o f d ir e c t p r e s e n tm e n t of c e r t a i n w a r ra n ts . O p e r a tin g le tte r s . Subpart B— Transfers of Funds— Credit Items 210.50 A u th o r ity a n d sco pe 210.51 G e n e ra l p ro v isio n s. 210.52 D e fin itio n s . 210.53 A p p ro v ed m e d ia fo r issu a n c e , t r a n s m is s io n o r r e c o rd in g o f c r e d it ite m s. 210.54 R e q u e s t fo r c r e d it ite m s. 210.56 O r ig in a to r's a g re e m e n t. 210.56 R e c ip ie n t's a g re e m e n t. 210.57 I s s u a n c e o f c r e d it ite m s a n d re q u e s ts fo r c r e d it ite m s. 210.58 H a n d lin g o f c r e d it ite m s a n d r e q u e s ts 210.59 210.60 210 61 210.62 210.63 210.64 210.65 T im e sc h e d u le s. A dvices o f c r e d it a n d d e b it. H a n d lin g o f r e q u e s ts fo r re v o c a tio n o f c r e d it ite m s a n d r e q u e s ts fo r re tu rn of fu n d s. F in a l p a y m e n t, r i g h t to w ith d ra w or u se fu n d s. T im e lin e s s o f a c tio n . L ia b ility o f a F e d e ra l R eserve B a n k . O p e r a tin g c irc u la rs . Subpart C— Transfers of Funds— Debit items 210.70 A u th o r ity a n d scope. 210.71 G e n e ra l p ro v isio n s. 210.72 D e fin itio n s . 210.73 O r ig in a to r's a g re e m e n t. 210.74 R e c ip ie n t's a g re e m e n t. 210.75 Is s u a n c e o f d e b it Item s. 210.76 H a n d lin g o f d e b it Ite m s 210.77 P a y m e n t. 210.78 T im e s c h e d u le . 210.79 H a n d lin g o f r e q u e s ts fo r re v o c a tio n o f d e b it ite m s. 210.80 R e tu r n . 210.81 C h a rg e b a c k . 210.82 T im e lin e s s o f a c tio n . 210.83 L ia b ility o f a F e d e ra l R eserve B ank 210.84 O p e r a tin g c irc u la rs . AUTHORITY: Secs. 11 ( i ) , 11 ( J ) , 13, 16, a n d 1 9 ( f) , F e d e ra l R eserv e A ct (12 U.S.C. 248(1). 12 U.S.C. 2 4 8 (J). 12 UJS.C. 342, 12 U .S C . 248 ( a ) , a n d 1 2 U.S.C. 4 6 4 ). 3. P a rt 210 would be amended by in serting immediately before § 210.1 a item, (2) an item issued by a Federal heading reading: "Subpart A—Collection Reserve Bank to another Federal Re serve Bank for credit to such other Fed of Checks and Other Items." 4. Paragraph (a) of § 210.2 would be eral Reserve Bank or, directly or indi amended, but without change in foot rectly, to any other recipient, or (3) an item issued by a Federal Reserve Bank notes, to read as follow s: at the request of an originator for credit, § 210.2 Definitions. directly or Indirectly, to a recipient. (a) The term "item" means any in (c) The term "instrument for the pay strument for the payment of money, m ent of money" means any writing con whether negotiable or not, which is pay tained in or on any medium approved by able in a Federal Reserve district; ^ is § 210.53 for the issuance, transmission, or sent by a sender or a nonbank depositor recording of credit items, addressed by to a Federal Reserve Bank for handling one person to another and evidencing a under this Part; and is collectible in right to the payment of money. (d) The term "depositor" means a funds acceptable to the Federal Reserve Bank of the district in which the instru member bank, a corporation that m ain m ent is payable; except that the term tains an account with a Federal Reserve does not Include any check which cannot Bank in conformity with the require be collected at p a r ' nor does it include ments of § 211.7 of Part 211 of this chap ter (Regulation K ), a Federal Reserve any item as defined in § 210.51(a) Bank, an international organization, a * 6 * * * foreign correspondent, or other institu 5. Part 210 would be amended to tion maintaining an account with a Fed change the words "this part" wherever eral Reserve Bank. they occur in §§ 210.1-210.16 to read (e) The term "originator" means a "this subpart." depositor authorized by a Federal R e 6. Part 210 would be amended by add serve Bank, or any institution author ing after § 210.16 the following: ized by a Federal Reserve Bank in an operating circular issued pursuant to Subpart B— Transfer of Funds— Credrt items this subpart, to issue and send a credit Item to that Federal Reserve Bank or § 2 J0.50 Awd**rity and scope. to request that Federal Reserve Bank Pursuant to the provisions of p a ra to issue a credit item and that has graph 1 of section 13 of the Federal R e agreed that the amount of any such serve Act, as amended (12 U.S.C. 342*. credit item or request shall be debited paragraph (f) of section 19 of the Fed to the account maintained or used by eral Reserve Act, as amended (12 U.S.C such depositor or institution on the 464), paragraph 14 of section 16 of the books of that Federal Reserve Bank. Federal Reserve Act, as amended (12 (f) The term "recipient" means a de U.S.C. 2 48(o )), paragraphs (i) and (j) positor or any institution authorized by of section 11 of the Federal Reserve Act. a Federal Reserve Bank in an operating as amended (12 U.S.C. 248(1) and ( j)). circular issued pursuant to this subpart and other provisions of law, the Board of to receive, directly or indirectly, credit Governors of the Federal Reserve Sys Items from that Federal Reserve Bank tem has promulgated this subpart gov and that has agreed that the amount erning the handling by Federal Reserve of any such credit item shall be cred Banks of credit items and requests for ited to the account maintained or used credit items. by the recipient on the books of that Federal Reserve Bank. § 2 10 .5 1 Cctteral provisions. (g) The term "beneficiary" means a In order to afford a direct, expeditious, (other than the recipient) des and economical system for the transfer person ignated in a credit item to receive the of funds, each Federal Reserve Bank, in amount thereof by credit to an account accordance with the terms and condi maintained with the recipient or other tions set forth in this subpart, shall re wise from the recipient. ceive, process and act upon credit items (h) The term "international organiza and requests for credit items and, where appropriate, shall itself issue credit tion" means an international organiza items. The provisions of this Subpart tion for which the Federal Reserve Banks and the operating circulars of the Fed are empowered to act as depositaries or eral Reserve Bank? shall be binding upon fiscal agents subject to regulation by the Board of Governors of the Federal Re depositors, originators, and recipients. serve System and for which a Federal Reserve Bank has opened and is main § 210.52 Definitions. taining an account. As used in this subpart, unless the con (i) The term "foreign correspondent" text otherwise requires: means any of the following for which a (a) The term "item" means any in Federal Reserve Bank has opened and is strument for the payment of money is m aintaining an account: a foreign bank sued, transmitted, or received in accord or bankers; a foreign state as defined in ance with this Subpart. section 25(b) of the Federal Reserve Act, (b) The term "credit item" means as amended (12 U.S.C. 632); or a foreign either (1) an item issued by an originator correspondent or agency referred to in (other than a Federal Reserve Bank) to section 14(e) of that Act (12 U.S.C. 358). a Federal Reserve Bank for debit to an (j) The terms "Federal Government account of a depositor in such Federal originator" and "Federal Government Reserve Bank and for credit, directly or recipient," respectively, mean any de indirectly, to a recipient named in such partment, agency, Instrumentality, lnde- 3 PROPOSED RULES handle and act upon such credit item or serve Bank to credit the amount of such request, and (il) the Federal Reserve item to such account. (b) A recipient, other than a Federal Bank at which the recipient m aintains or uses an account to handle and act Reserve Bank, receiving directly or In upon a credit Item, in accordance with directly from a Federal Reserve Bank the the provisions of this Subpart and the amount of credit item designated for a operating circulars of such Federal Re beneficiary, shall be deemed to agree that serve Banks. Such originator shall be it will credit said beneficiary's account deemed to agree that the provisions of or otherwise make the amount of the this subpart and the Federal Reserve credit Item available to the beneficiary Bank operating circulars shall, insofar as for withdrawal or other use on the busi they are made applicable thereto, govern ness day the credit item is finally paid, the relationships between such origina or return the amount of such item to tor and such Federal Reserve Banks and the originator In accordance with the shall also be deemed to agree to m aintain provisions of this Subpart and the oper reasonable procedures designed to pro ating circulars Issued hereunder. Such a tect the confidentiality of information recipient shall be deemed to agree to related to such credit item or request. m aintain reasonable procedures designed (b) The originator shall be deemed to to protect the confidentiality of Infor agree to indemnify each Federal Reserve m ation related to such credit item. Bank handling a credit item for any loss Issuance of credit Items and or expense sustained (including but not § 210.57 requests for credit items. lim ited to attorneys' fees and expenses of (a) Any originator, other than a Fed litigation) resulting from any action taken by the Federal Reserve Bank with eral Reserve Bank, may, In accordance in the scope of its authority in handling with the provisions of this Subpart and the operating circulars of the Federal the credit item. (c) Whenever any action or proceed Reserve Bank with which it maintains or uses an account, issue and send credit § 210.53 Approved media for issuance, ing is brought in any court against a Items to that Federal Reserve Bank or transmission or recording of credit Federal Reserve Bank, based upon any act done by the Federal Reserve Bank request that Federal Reserve Bank by items. within the scope of its authority in telephone to Issue credit Items for the An originator may issue and send a handling such a credit item, the Federal transfer of funds to recipients for their credit item in any one of the following Reserve Bank may, upon the entry of a own use or the use of beneficiaries, or m edia: final judgment or decree In such action where the originator and recipient do not (a) A letter, memorandum, or other or proceeding, recover from the origina m aintain or use accounts at the same similar writing; tor the amount of attorneys' fees and office of a Federal Reserve Bank, and (b) A telegram (including TWX, other expenses of litigation actually in where permitted or required by the Fed TELEX, and any similar form of com curred, and, in addition, any amount re eral Reserve Bank with which the orig munications) ; and quired to be paid by the Federal Reserve inator maintains or uses an account, is (c) Any form of communication, other Bank under such judgment or decree, to sue and send any credit item direct to than voice, that is registered upon, or gether with Interest thereon, by charg the Federal Reserve office at which the is in form suitable for being registered ing the amount thereof to any account recipient m aintains or uses an account: upon magnetic tape, disc, or any other m aintained or used by the originator on Provided, That, at the end of a Federal medium designed to capture and con the books of the Federal Reserve Bank Reserve Bank's business day, an origina tain in durable form conventional signals (or if the originator is another Federal tor shall m aintain or cause to be m ain used for the electronic communication of Reserve Bank, by entering a charge tained a balance of actually and finally messages. therefor against such other Federal Re collected funds sufficient to cover the serve B ank): Provided only, (1) That amounts of credit items debited to such § 210.54 Request for credit items. the Federal Reserve Bank shall have account at the Federal Reserve Bank An originator that is a depositor may, made seasonable demand on the origina during that day and, if such balance under special arrangement and in ac tor In writing to assume the defense of is not sufficient to cover the amounts cordance with the provisions of the op the action or proceeding, and (2) that debited to such account during that erating circular of the Federal Reserve the originator shall not have made any day, that Federal Reserve Bank shall Bank with which It maintains an ac other provision acceptable to the Federal have a security Interest in any or all assets of the depositor maintaining count, request its Federal Reserve Bank Reserve Bank for the payment of such such account In the possession or held amount. A Federal Reserve Bank against by telephone to Issue a credit Item and which any such charge has been entered for the account of the Federal Reserve transfer funds to a recipient or to issue may recover the amount thereof by deb Bank's business day such depositor susand send a credit item to another Fed iting the account m aintained or used any time during that Federal Reserve eral Reserve Bank. Such telephone mes by such originator, in any case herein Bank's business day such depositor sus sages may be recorded by such Federal provided, even though the action or pro pends payment or is closed and does not ceeding had been brought against an Reserve Bank. other Federal Reserve Bank. The failure have a balance sufficient to cover the § 210.55 Originator's agreement. of any Federal Reserve Bank to avail amounts so debited to its account, such (a) An originator other than a Federal Itself of the remedy provided by this Federal Reserve Bank shall have a se Reserve Bank by Its actions of Issuing paragraph shall not prejudice the en curity interest in any or ail assets of and sending to the Federal Reserve Bank forcem ent by it in any other manner of such depositor in the possession or held with which it m aintains or uses an a c the Indemnity agreement referred to in for the account of such Federal Reserve Bank. Notwithstanding the foregoing, a count any credit item contained in any paragraph (b) of this section. Federal Reserve Bank, may. in ltc dis of the media specified in § 210.53, or re cretion. refuse to act upon a credit item questing by telephone the issuance of a § 210.56 Recipient s agreement. (a) A recipient, other than a Federalat any time when such Federal Reserve credit item as provided in 5 210.54, shall be deemed (1) to warrant to the recipient Reserve Bank, designated in a credit Bank has reason to believe that the bal designated in the item that such origina item to receive the amount thereof, by ance maintained or used by such orig tor is authorized to issue and send or re its action in m aintaining or using an inator Is not sufBcient to cover such item. (b) With respect to any credit item quest such credit item and (2) to author account at a Federal Reserve Bank, shall ize (1) said Federal Reserve Bank to be deemed to authorize that Federal Re sent direct by an originator (other than pendent establishment, or office of the United States that maintains or uses an account with a Federal Reserve Bank. The term "Federal Government deposi tor" means any department, agency, in strumentality, independent establish ment, or office of the United States that m aintains an account with a Federal Re serve Bank. Except as may otherwise be provided by any applicable statutes of the United States or regulations issued or arrangements made thereunder, the provisions of this Subpart and of the operating circulars of the Federal Re serve Banks applicable to an originator, a recipient, or a depositor, as the case may be, are applicable, respectively, to a Federal Government originator, a Fed eral Government recipient, and a Fed eral Government depositor. (k) The term "business day" means any day during which an institution is open to the public for carrying on sub stantially all its business functions. (l) The term "Federal Reserve Bank" includes any Head Office, Branch Office, or any other office of a Federal Reserve Bank. 4 PROPOSED RULES a Federal Reserve Bank) m aintaining or using an account at one Federal Reserve office to another Federal Reserve ofRce at which the recipient m aintains or uses an account, in accordance with paragraph (a) of this section, the relationships and the rights and liabilities existing between the originator, the Federal Reserve office with which it m aintains or uses an ac count and the Federal Reserve office to which the item is sent will be the same, and the provisions of this subpart will apply, as though the originator had sent such item to the Federal Reserve ofRce with which it maintains or uses an ac count and such Federal Reserve oface had issued a credit item to the other Federal Reserve office. (c) Any Federal Reserve Bank may, in accordance with the provisions of this Subpart, issue and send credit items to another Federal Reserve Bank or request that Federal Reserve Bank by telephone to issue credit items for its own use or the use of any other recipient or any beneficiary. (d) The Federal Reserve Banks may, from time to time, establish in their op erating circulars the minimum or m ax imum dollar amounts, or both, of items that will be transferred, may impose service charges for the handling of credit items, and may impose specific format requirements for the receipt and h an dling of credit items. (e) No Federal Reserve Bank shall be responsible to the originator of any credit item for any delay resulting from the action taken by the Federal Reserve Bank in handling the item on the basis of (1) any routing number of the re cipient appearing thereon or (2) any other form of designation of a recipient appearing thereon, whether or not con sistent with the routing number. § 210.58 Handling of credit items and (a) Where the originator and the re cipient m aintain or use accounts at the same ofEce of a Federal Reserve Bank, such office receiving a credit item shall execute a transfer of funds, or receiving a request for a credit item shall issue a credit item and execute a transfer of funds, by making corresponding debit and credit entries to those accounts. (b) Where the originator and the re cipient do not m aintain or use accounts at the same office of a Federal Reserve Bank, the office first receiving the credit Item or request for a credit item shall debit the account maintained or used by the originator in the amount to be trans ferred in accordance with the terms of the item and shall, as an originator, issue a credit item to the Federal Reserve office at which the recipient m aintains or uses an account; and the latter office shall execute a transfer of funds to the recipient by making corresponding debit and credit entries, respectively, to the account of such Federal Reserve Bank and to the account maintained or used by the recipient. (c) After receiving a credit item or request for a credit item, the Federal Reserve Bank with which the recipient m aintains or uses an account shall send or make available to the recipient the credit item in any of the media specified in $ 210.53. (d) With the concurrence of the office of the Federal Reserve Bank with which the recipient maintains or uses an ac count, another Federal Reserve office at which the originator maintains or uses an account may send a credit item or make it available to such recipient; the provisions of this subpart will apply as though such other Federal Reserve office had issued a credit item to the Federal Reserve office with which the recipient m aintains or uses an account and that Federal Reserve office had sent a credit item or made it available to such recipient. (e) When a Federal Reserve Bank has received a credit item, or request for a credit item, and subsequently obtains knowledge that, for whatever reason, it will be unable to effectuate a transfer of funds to the recipient in accordance with the originator's instructions, said Federal Reserve Bank shall, within a rea sonable time thereafter, notify the origi nator of the delay. § 210.59 Time schedules. (a) Each Federal Reserve Bank shall Include in its operating circulars a sched ule of the time limits showing, with re spect to Interdistrict, interoffice, and intraofBce transfer of funds, the hours of each business day during which it will receive and handle credit items and re quests for credit items. (b) Unless otherwise agreed, each Fed eral Reserve Bank taking proper action on the day of receipt of a credit item or request for a credit item acts seasonably; taking proper action within a reasonably longer time may be seasonable but the Federal Reserve Bank has the burden of so establishing. In order for action to be taken on the day of receipt, such item or request must reach the Federal Reserve Bank not later than the time shown in its schedule of time limits. No repre sentation shall be made by a Federal Reserve Bank to the effect that transfers of funds will be consummated on the day requested. (c) In emergency or other unusual circumstances, a Federal Reserve Bank may, in its discretion, receive credit items and requests for credit items after the hours shown in its schedule of time limits. The transfer of funds in the case of an interofRce or interdistrict transfer shall be discretionary with the office at which the recipient m aintains or uses an acoount. § 210.60 Advices of credit and debit. m aintains or uses an account shall send an advice of debit to the originator or to the depositor whose account is used by the originator in any of the media specified in § 210.53. Such advice may be given for each credit item or, if so pro vided in its operating circulars, for sev eral credit items. If. within 45 calendar days after the originator or depositor receives an advice of debit, the originator or depositor fails to send to said Federal Reserve Bank written objection to such debit, the originator or depositor shall be deemed to have approved the debit. § 210.61 Handling of requests for revo cation of credit items and requests for return of funds. (a) A Federal Reserve Bank, upon re ceipt from the originator of a request for the revocation of an item, may cancel such item provided that the request for revocation is received at such time and in such manner as to afford that Fed eral Reserve Bank a reasonable oppor tunity to act. If the item is not so can celled, a Federal Reserve Bank may, in its sole discretion, upon request from the originator (1) where the originator and recipient maintain or use accounts at the same Federal Reserve Bank, send a request to the recipient to return the funds previously transferred or (2) where the originator and recipient do not m ain tain or use accounts at the same Federal Reserve Bank, send a request to the Fed eral Reserve Bank with which the re cipient maintains or uses an account to request the recipient to return funds previously transferred. (b) In the case of an erroneous or otherwise irregular transfer of funds, a Federal Reserve Bank may. upon its own initiative or at the request of another Federal Reserve Bank, request the re cipient to return funds previously transferred. § 210.62 Final payment, right to with draw or use funds. A credit item is finally paid by a Fed eral Reserve Bank and funds transferred to the account maintained or used by the recipient become available for w ith drawal at the time the Federal Reserve sends the credit item or telephones the advice of credit to the recipient, which ever occurs first: Provided, That a Fed eral Reserve Bank may, with respect to items in a particular format, provide in its operating circular that a credit Item is finally paid, funds become available for withdrawal, and corresponding debits and credits to the accounts will be made on the date specified in the credit item, in accordance with the time specified In the Federal Reserve Bank's operating circular. (a) The Federal Reserve Bank with which the recipient maintains or uses an account shall, when the originator or re § 210.63 Timeliness of action. cipient has so requested and when such If, because of circumstances beyond Federal Reserve Bapk deems such action its contr ol, a Federal Reserve Bank shall appropriate, give to the recipient advice be delayed beyond applicable time lim of credit by telegraph, telephone, or any its provided in this subpart or iu the other means deemed appropriate by such operating circulars of the Federal R e Federal Reserve Bank. serve Banks or by law in taking any ac (b) After receiving a credit item or tion with respect to a credit item or re request for a credit item, the Federal quest for a credit item, the time within Reserve Bank with which the originator which such action shall be completed 5 PROPOSED RUtES Each Federal Reserve Bank shall issue shall be extended for such time after the cause of the delay ceases to operate as operating circulars (sometimes referred shall be necessary to take or complete to as operating letters or bulletins), not the action, provided the Bank exercises inconsistent with this Sub part, govern such diligence as the circumstances ing the details of its funds transfer op erations and containing such provisions require. as are required or permitted by this § 210.64 LlabHity of a Federal Reserve subpart. Bank. Subpart C — Transfers of Funds— Debit (a) A Federal Reserve Bank, in con items nection with matters specified in this subpart or its operating circulars, shall § 210.70 Authority and scope. not have, nor shall it assume, any re Pursuant to the provisions of section sponsibility to a recipient, a beneficiary, 13 of the Federal Reserve Act, as or any other person interested in the amended (12 U.S.C. 342), paragraph (f) credit item, except its immediate orig of section 19 of the Federal Reserve Act, inator, nor shall a Federal Reserve Bank as amended (12 U.S.C. 464), section 16 have or assume any liability except for of the Federal Reserve Act, as amended its own or another Federal Reserve (12 U.S.C. 2 4 8 (o )), paragraphs (i) and Bank's lack of good faith or failure to ( j ) of section 11 of the Federal Reserve exercise ordinary care, and, except as Act. as amended (12 U.S.C. 248 (i) and herein provided, a Federal Reserve Bank ( j ) ) , and other provisions of law, the shall not be liable for the insolvency, Board of Governors of the Federal R e neglect, misconduct, mistake, or default serve System has promulgated this subof another person, including an origina part governing the handling by Federal tor. No Federal Reserve Bank shall make Reserve Banks of debit items. or be deemed to make any warranty with respect to any credit item handled § 2 10 .71 General provisions. under this subpart. In order to provide for the efficient (b) Subject to the lim itations on li and economical transfer of bank bal ability stated above, where a Federal ances on the books of the Federal R e Reserve Bank's conduct, notw ithstand serve Banks and as a means of improving ing its exercise of good faith and ordi the nation's payments mechanism, the nary care, results in a failure to credit Board of Governors of the Federal R e the amount of a credit item to the serve System has promulgated this subaccount m aintained or used by a re part. Each Federal Reserve Bank, in ac cipient in accordance with the origi cordance with the terms and conditions nator's instructions, unless otherwise in set forth in this subpart, shall receive, structed at the tim e notice is gr'en pur process and act upon debit items and suant to § 210.58(e), the Federal Reserve the provisions of this subpart and ap Bank shall complete the transfer on the plicable operating circulars of the Fed next business day with debits and credits eral Reserve Banks shall be binding upon posted to the appropriate accounts as of depositors, originators and recipients. the day the transfer was to have been § 210.72 Definitions. consummated. As used in this subpart, unless the (c) Subject to the lim itations on li ability stated above, if the faiiure to context otherwise requires: (a) The term "item" means any in credit the amount of the credit item to the account maintained or used by the strument for the payment of money recipient resulted from a failure on the issued, transmitted, or received in ac part of any Federal Reserve Bank to cordance with this Subpart. (b) The term "debit item" means any exercise ordinary care or to act in good faith, the originator shall have the right item issued by an originator in accord to recover from the Federal Reserve ance with this subpart for payment by Bank with which it m aintains or uses the recip ien t. an account any damages proximately (c) The term "instrument for the pay caused by such failure: Provided, ftow- m ent of money" means any writing con ever. That whether any consequential tained in or on any medium approved damages are proximately caused by the by § 210.53 of Subpart B of this part Federal Reserve Bank's failure to exer for the issuance, transmission or record cise ordinary care or lack of good faith ing of debit items and that requests or is a question of fact to be determined orders the payment of money. in each case. (d) The term "depositor" means a (d) The Federal Reserve Bank at member bank, a corporation that m ain which the recipient m aintains or uses tains an account with a Federal Re an account shall be deemed to agree serve Bank in conformity with the re to indemnify the Federal Reserve Bank quirements of § 211.7 of Part 211 of this at which the originator m aintains or chapter (Regulation K ) , a Federal Re uses an account for any loss or expense serve Bank, an International organiza sustained (including but not limited to tion, a foreign correspondent, or other attorneys' fees and expenses of litiga institution m aintaining an account with tion) as a result of the failure of the a Federal Reserve Bank. recipient's Federal Reserve Bank to ex (e) The term "originator" means a ercise ordinary care or to act in good depositor authorized by a Federal Re faith with respect to a credit item issued serve Bank, or any institution author to it by the originator's Federal Reserve ized by a Federal Reserve Bank in an Bank at the request of the originator. operating circular issued pursuant to this subpart, to issue and send a debit § 210.65 Operating circulars. 6 item to that Federal Reserve Bank and which has agreed that the amount of any such debit item shall be credited to the account maintained or used by the originator on the books of that Federal Reserve Bank. (f) The term "recipient" means a de positor authorized by a Federal Reserve Bank, or any institution authorized by a Federal Reserve Bank In an operating circular Issued pursuant to this subpart, to receive, directly or Indirectly, debit items from that Federal Reserve Bank and that has agreed that the amount of any such debit item shall be debited to the account maintained or used by the recipient on the books of that Fed eral Reserve Bank. (g) The term "Federal Reserve Bank" Includes any Head Office, Branch Of fice, or any other office of a Federal Reserve Bank. (h) The term "business day" means any day during which an Institution is open to the public for carrying on sub stantially all Its business functions. (i) The term "foreign correspondent" means any of the following for which a Federal Reserve Bank has opened and Is m aintaining an account: a foreign bank or bankers: a foreign state as de fined In section 25(b) of the Federal Reserve Act, as amended (12 U.S.C. 632): or a foreign correspondent or agency referred to In section 14(e) of that Act (12 U.S.C. 358). (j) The term "international organi zation" means an International organi zation for which the Federal Reserve Banks are empowered to act as deposi taries or fiscal agents subject to regu lation by the Board of Governors of the Federal Reserve System and for which a Federal Reserve Bank has opened and is m aintaining an account. (k) The terms "Federal Government originator" and "Federal Government recipient," respectively, mean any de partment, agency, instrumentality, in dependent establishment, or office of the United States that maintains or uses an account with a Federal Reserve Bank. The term "Federal Government depositor" means any department, agency, instrumentality, Independent establishment, or ofBce of the United States that maintains an account with a Federal Reserve Bank. Except as may otherwise be provided by any applicable statutes of the United States or regu lations Issued or arrangements made thereunder, the provisions of this sub part and of the operating circulars of the Federal Reserve Banks applicable to an originator, a recipient, or a de positor, as the case may be. are appli cable, respectively, to a Federal Gov ernment originator, a Federal G ovem mena recipient, and a Federal Govern m ent depositor: § 210.73 Originators agreement. (a) An originator by its action of Issuing and sending to the Federal Re serve Bank with which It maintains or uses an account any debit item shall be deemed (1) to warrant to the recipient designated in the item that such origi nator is authorized to issue or send such PROPOSED RULES debit item and (2) to authorize (i) said Federal Reserve Bank to handle and act upon such debit item, and (li) the Federal Reserve Bank at which the re cipient maintains or uses an account to handle and act upon a debit item, in accordance with the provisions of this Subpart and the operating circulars of such Federal Reserve Bank. Such origi nator shall be deemed to agree that the provisions of this subpart and the Fed eral Reserve Bank operating circulars shall, insofar as they are made appli cable thereto, govern the relationships between such originator and such Fed eral Reserve Banks and shall also be deemed to m aintain reasonable proce dures designed to protect the confiden tiality of information related to such debit item. (b) The originator shall be deemed to agree to indemnify each Federal R e serve Bank handling a debit Item for any loss or expense sustained (includ ing but not limited to attorneys' fees and expenses of litigation) resulting from any action taken by the Federal Reserve Bank within the scope of its authority in handling the debit item. (c) Whenever any action or proceed ing is brought in any court against a Federal Reserve Bank, based upon any act done by the Federal Reserve Bank within the scope of its authority in han dling such a debit item, the Federal R e serve Bank may, upon the entry of a final judgment or decree in such action or proceeding, recover from the origina tor the amount of attorneys' fees and other expenses of litigation actually in curred, and, in addition, any amount re quired to be paid by the Federal Reserve Bank under such judgment or decree, to gether with interest thereon, by charg ing the amount thereof to any account m aintained or used by the originator on the books of the Federal Reserve Bank (or if the originator is another Federal Reserve Bank, by entering a charge therefor against such other Federal Re serve B a n k ): Provided only, (1) That the Federal Reserve Bank shall have made seasonable demand on the originator in writing to assume the defense of the ac tion or proceeding, and (2) that the originator shall not have made any other provision acceptable to the Federal R e serve Bank for the payment of such amount. A Federal Reserve Bank against which any such charge has been entered may recover the amount thereof by debit ing the account maintained or used by the originator. In any case herein pro vided. even though the action or proceed ing had been brought or entered against another Federal Reserve Bank. The fa il ure of any Federal Reserve Bank to avail Itself of the remedy provided by this paragraph shall not prejudice the en forcem ent by it in any other manner of the indemnity agreement referred to in paragraph (b) of this section. § 210.74 Recipient's agreement. A recipient, designated in a debit item, by its action in receiving any item from a Federal Reserve Bank, shall be deemed to agree to maintain reasonable procedures designed to protect the confidentiality of information related to such debit item. § 210.75 Issuance of debit items. (a) An originator may, in accordance with the provisions of this subpart and the applicable operating circulars of the Federal Reserve Bank with which it m aintains or uses an account, issue and send debit items to that Federal Reserve Bank, or, where the originator and re cipient do not m aintain or use accounts at the same office of a Federal Reserve Bank, and where permitted or required by the Federal Reserve Bank with which the originator m aintains or uses an ac count, issue and send any debit item direct to the Federal Reserve office at which the recipient m aintains or uses an account. (b) With respect to any debit item sent direct by an originator (other than a Federal Reserve Bank) m aintaining or using an account at one Federal Reserve office to another Federal Reserve office at which the recipient maintains or uses an account, in accordance with para graph (a) of this section, the relation ships and the rights and liabilities exist ing between the originator, the Federal Reserve office with which it maintains or uses an account and the Federal R e serve office to which the item is sent will be the same, and the provisions of this subpart will apply, as though the origina tor had sent such item to the Federal Reserve office with which it m aintains or uses an account and such Federal R e serve office had transferred the debit item to the other Federal Reserve office. (c) A debit item may be contained in any of the media approved by $ 210.53 of Subpart B of this part that is acceptable to the Federal Reserve Bank handling the debit item and shall be deemed to be the same debit item notwithstanding that the medium in which it is contained may change during its handling or return under this subpart. (d) The Federal Reserve Banks may, from time to time, establish in their op erating circulars the minimum or m axi mum dollar amounts, or both, of items which will be transferred, may impose service charges for debit items, and may impose specific format requirements for the receipt of debit items. (e) No Federal Reserve Bank shall be responsible to the originator of any debit item for any delay resulting from the action taken by the Federal Reserve Bank in handling the item on the basis of (1) any routing number of the recipi ent appearing thereon or (2) any other form of designation of a recipient ap pearing thereon, whether or not con sistent with the routing number. § 210.76 Handling of debit items. (a) Where the originator and recip ient m aintain or use accounts at the same office of a Federal Reserve Bank, the office receiving the debit item will send it or make it available to the recipient. (b) Where the originator and recipient do not m aintain or use accounts at the sam e office of a Federal Reserve Bank, the office first receiving the debit item will transfer it to the office at which the recipient maintains or uses an account and that office will send the debit item or make it available to the recipient. (c) With the concurrence of the office of the Federal Reserve Bank with which the recipient maintains or uses an ac count, another Federal Reserve office at which the originator maintains or uses an account may send a debit item or make it available to such recipient; the provisions of this subpart will apply as though- such other Federal Reserve office had transferred the debit item to the Federal Reserve office with which the recipient maintains or uses an account and that Federal Reserve office had sent the debit item or made it available to such recipient. (d) When a Federal Reserve Bank has received a debit item, and subsequently obtains knowledge that, for whatever rea son, it will be unable to effectuate a transfer of funds to the originator in accordance with the instructions in the item, the Federal Reserve Bank shall, within a reasonable time thereafter, no tify the originator of the delay. § 210.77 Payment. A recipient becomes a cco u n ta b le for the amount of each debit item received by it from a Federal Reserve Bank at the close of such recipient's business day on which the debit item was so received * if it retains such item after the close of such business day, unless prior to such time, it otherwise pays for the item: Provided, That, a Federal Reserve Bank may, with respect to items in a particular format, provide in its operating circu lars that a recipient receiving such a debit item from a Federal Reserve Bank becomes accountable for the amount of such debit item if the recip ient retains such item after the close of its business on the date specified for payment in the debit item and the Fed eral Reserve Bank's operating circular, unless prior to such close of business such recipient pays for the item. § 210.78 Time schedule. (a) Bach Federal Reserve Bank shall include In its operating circulars a sched ule of time limits showing, with respect to interdistrict, interoffice, and intraof fice transfers of funds, the hours on each business day during which it will receive and handle debit items. Such schedule shall also show when the amount of any debit item received by a Federal R e serve Bank may be counted as^*eserve for the purposes of Part 204 of this chapter (Regulation D) and become available for withdrawal or other use by a depositor. Either immediate or deferred credit will be given in the account maintained or used by the originator according to such time schedule. Notwithstanding the proA d e b it ite m receiv ed by a r e c ip ie n t s h a ll b e d e e m e d to h a v e b een receiv ed by i t o n i t s n e x t b u s in e s s d ay if th e ite m is receiv ed u n d e r o n e o f t h e fo llo w in g c irc u m s ta n c e s : (1 ) O n a d a y o t h e r t h a n a b u sin e ss d ay fo r i t , o r (2) o n a b u s in e s s d ay fo r it, b u t a f te r a " c u t- o ff h o u r " e s ta b lis h e d by t h e F e d e ra l R e serv e B a n k o f t h e d i s t r i c t i n w h ic h th e r e c ip ie n t is lo c a te d . 7 PROPOSED RUtES visions of its time schedule, a Federal Reserve Bank may, in its discretion, re fuse at any time to permit the w ith drawal or other use of credit given for any debit item for which the Federal R e serve Bank has not yet received payment in actually and finally collected funds. (b) Unless otherwise agreed, each Fed eral Reserve Bank taking proper action on the day of receipt of a debit item acts seasonably; taking proper action within a reasonably longer time may be season able but the Federal Reserve Bank has the burden of so establishing. In order for action to be taken on the day of re ceipt, such item must reach the Federal Reserve Bank not later than the time shown in its schedule of time limits. No representation shall be made by a Fed eral Reserve Bank to the effect that transfers of funds will be consummated on the day designated in the debit item. (c) In emergency or other unusual cir cumstances, a Federal Reserve Bank may, in its discretion, receive debit items after the hours shown in its schedule of time limits. In the case of an interofHce or interdistrict transfer, the transfer of funds shall be discretionary with the of fice at which the recipient maintains or uses an account. § 210.79 Handling of requests for revo cation of debit items. (a) A Federal Reserve Bank, upon re ceipt from the originator of a request for the revocation of an item, may can cel such item provided that the request for revocation is received at such time and in such manner as to afford that Federal Reserve Bank a reasonable op portunity to act. Where the originator and recipient do not m aintain or use accounts at the same Federal Reserve Bank and the originator requests revo cation, and the item is not so cancelled, a Federal Reserve Bank may, in its sole discretion, send a request for revocation to the Federal Reserve Bank with which the recipient maintains or uses an account. (b) In the case of an erroneous or otherwise Irregular debit item, a Federal Reserve Bank may, upon its own initia tive, request another Federal Reserve Bank to revoke the item. § 210.80 Return. (a) A recipient that receives a debit item from a Federal Reserve Bank and that pays for such debit item as provided in this Subpart shall have the right to recover any payment so made if, before it has finally paid the debit item, it re turns the debit item before m idnight of the business day next following the busi ness day of receipt. In accordance with the provisions of this subpart and the applicable operating circulars of the Federal Reserve Banks, debit items shall be returned to the Federal Reserve Bank from which they were received in a form acceptable to such Federal Reserve Bank, and in the same medium in which they 8 were received by the recipient unless the recipient obtains the written authority of such Federal Reserve Bank to return debit items in another medium specified in § 210.53 of Subpart B of this part. (b) Any recipient that receives a credit or obtains a refund for the amount of any payment made by it in respect of a debit item received by it from a Federal Reserve Bank shall be deemed (1) to warrant to such Federal Reserve Bank, to any other Federal Reserve Bank handling the item and to the originator that it took all action necessarv to en title it to recover such pavment withm the time or times limited therefor by the provisions of this subpart, in the operat ing circulars of the Federal Reserve Banks, and in any agreement between the recipient and the originator, and (2) to agree to indemnify any such Federal Reserve Bank for any loss or expense sustained (including but not limited to attorneys' fees and expenses of litiga tion) resulting from its action in giving such credit or making such refund, or in making any charge to, or obtaining any refund from, the originator. No Federal Reserve Bank shall have any responsibility for determining whether the action hereinabove referred to was timely. § 210.81 Fhargeback. If a Federal Reserve Bank does not re ceive payment in actually and finally col lected funds for any debit item for which It gave credit, the amount of such item shall be charged back to the account m aintained or used by the originator. If such a chargeback is made to the ac count maintained or used by the origi nator, such originator shall not have any right of recourse upon, Interest in, or right of pavment from, any reserve ac count or other funds or property of the recipient in the possession of a Federal Reserve Bank. No authorization to charge any reserve account or other funds or property in the possession of a Federal Reserve Bank, issued for the purpose of paying for any debit item handled under the terms of this subpart, will be acted upon after receipt by such Federal Reserve Bank of notice of sus pension or closing of the recipient or the member bank the account of which is used by the recipient for the payment of such item. § 210.82 Timeliness of action. If, because of circumstances beyond its control, a Federal Reserve Bank shall be delayed beyond the applicable time lim its provided in this subpart, or in the operating circulars of the Federal R e serve Banks or by law in taking any ac tion with respect to a debit item, the time within which such action shall be com pleted shall be extended for such time after the cause of the delay ceases to operate as shall be n&essary to take or complete the action, provided that the Federal Reserve Bank exercises such dil igence as the circumstances require. § 210.83 Liability of a Federal Reserve Bank. (a) A Federal Reserve Bank, in con nection with m atters specified in this subpart or its operating circulars, shall not have, nor shall it assume, any re sponsibility to any person interested in a debit item, except an orginator, nor shall a Federal Reserve Bank have or assume any liability except for its own lack of good faith or failure to exercise ordinary care, and, except as herein provided, a Federal Reserve Bank shall not be liable for the insolvency, neglect, misconduct, mistake, or default of another person, including an originator. No Federal R e serve Bank shall make or be deemed to make any warranty under this subpart. (b) A Federal Reserve Bank will act only as agent of its originator, or of a Federal Reserve Bank transmitting debit items to it, with respect to the handling of debit items under this subpart. A Fed eral Reserve Bank will not act as the agent or subagent of any other person. (c) Subject to the lim itations on lia bility stated above, if the failure to credit the amount of the debit item to the ac count of the originator resulted from a failure on the part of any Federal R e serve Bank to exercise ordinary care or to act in good faith, the originator shall have the right to recover from the Fed eral Reserve Bank with which it m ain tains or uses an account any damages proximately caused by such failure: Pro vided, hoiaeuer, That whether any con sequential damages are proximately caused by the Federal Reserve Bank's failure to exercise ordinary care or lack of good faith is a question of fact to be determined in each case. (d) The Federal Reserve Bank at which the recipient maintains or uses an account shall be deemed to agree to in demnify the Federal Reserve Bank at which the originator maintains or uses an account for any loss or expense sus tained (including but not limited to at torneys' fees and expenses of litigation) as a result of the failure of the recipient's Federal Reserve Bank to exercise ordi nary care or to act in good faith with respect to a debit item issued to it by the originator's Federal Reserve Bank. § 210.84 Operating circulars. Each Federal Reserve Bank shall issue operating circulars (sometimes referred to as operating letters or bulletins). not inconsistent with this subpart, govern ing the details of its debit item opera tion and containing such provisions as are required or permitted by this sub part. By order of the Board of Governors. January 12,1976. fSEALl THEODORE E . ALLISON, Secretary o/ the Board. [F R Doc.76-1811 F ile d 1 -2 0 -7 6 ;8 :4 5 am ]
@FedFRASER