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Regulation
CC
Availability Of Funds And Collection Of Checks - Appendix E
XXII. Section 229.36 Presentment and Issuance of Checks
A. 229.36(a) Payable Through and Payable at Checks
1. For purposes of Subpart C, the regulation
defines a payable- through or payable-at bank (which could be
designated the collectible- through or collectible-at bank) as
a paying bank. The requirements of Sec. 229.30(a) and the notice
of nonpayment requirements of Sec. 229.33 are imposed on a payable-through
or payable-at bank and are based on the time of receipt of the
forward collection check by the payable-through or payable-at
bank. This provision is intended to speed the return of checks
that are payable through or at a bank to the depositary bank.
B. 229.36(b) Receipt at Bank Office or Processing Center
1. This paragraph seeks to facilitate
efficient presentment of checks to promote early return or notice
of nonpayment to the depositary bank and clarifies the law as
to the effect of presentment by routing number. This paragraph
differs from Sec. 229.32(a) because presentment of checks differs
from delivery of returned checks.
2. The paragraph specifies four locations
at which the paying bank must accept presentment of checks. Where
the check is payable through a bank and the check is sent to that
bank, the payable-through bank is the paying bank for purposes
of this subpart, regardless of whether the paying bank must present
the check to another bank or to a nonbank payor for payment.
a. Delivery of checks may be made, and
presentment is considered to occur, at a location (including a
processing center) requested by the paying bank. This is the way
most checks are presented by banks today. This provision adopts
the common law rule of a number of legal decisions that the processing
center acts as the agent of the paying bank to accept presentment
and to begin the time for processing of the check. (See also U.C.C.
4-204(c).) If a bank designates different locations for the presentment
of forward collection checks bearing different routing numbers,
for purposes of this paragraph it requests presentment of checks
bearing a particular routing number only at the location designated
for receipt of forward collection checks bearing that routing
number.
b. i. Delivery may be made at an office
of the bank associated with the routing number on the check. The
office associated with the routing number of a bank is found in
American Bankers Association Key to Routing Numbers, published
by Thomson Financial Publishing Inc., which lists a city and state
address for each routing number. Checks generally are handled
by collecting banks on the basis of the nine-digit routing number
encoded in magnetic ink (or on the basis of the fractional form
routing number if the magnetic ink characters are obliterated)
on the check, rather than the printed name or address. The definition
of a paying bank in Sec. 229.2(z) includes a bank designated by
routing number, whether or not there is a name on the check, and
whether or not any name is consistent with the routing number.
Where a check is payable by one bank, but payable through another,
the routing number is that of the payable-through bank, not that
of the payor bank. As the payor bank has selected the payable-through
bank as the point through which presentment is to be made, it
is proper to treat the payable-through bank as the paying bank
for purposes of this section.
ii. There is no requirement in the regulation
that the name and address on the check agree with the address
associated with the routing number on the check. A bank generally
may control the use of its routing number, just as it does the
use of its name. The address associated with the routing number
may be a processing center.
iii. In some cases, a paying bank may
have several offices in the city associated with the routing number.
In such case, it would not be reasonable or efficient to require
the presenting bank to sort the checks by more specific branch
addresses that might be printed on the checks, and to deliver
the checks to each branch. A collecting bank normally would deliver
all checks to one location. In cases where checks are delivered
to a branch other than the branch on which they may be drawn,
computer and courier communication among branches should permit
the paying bank to determine quickly whether to pay the check.
c. If the check specifies the name of
the paying bank but no address, the bank must accept delivery
at any office. Where delivery is made by a person other than a
bank, or where the routing number is not readable, delivery will
be made based on the name and address of the paying bank on the
check. If there is no address, delivery may be made at any office
of the paying bank. This provision is consistent with U.C.C. 3-111,
which states that presentment for payment may be made at the place
specified in the instrument, or, if there is none, at the place
of business of the party to pay. Thus, there is a trade-off for
a paying bank between specifying a particular address on a check
to limit locations of delivery, and simply stating the name of
the bank to encourage wider currency for the check.
d. If the check specifies the name and
address of a branch or head office, or other location (such as
a processing center), the check may be delivered by delivery to
that office or other location. If the address is too general to
identify a particular office, delivery may be made at any office
consistent with the address. For example, if the address is ``San
Francisco, California,'' each office in San Francisco must accept
presentment. The designation of an address on the check generally
is in the control of the paying bank.
3. This paragraph may affect U.C.C. 3-111
to the extent that the U.C.C. requires presentment to occur at
a place specified in the instrument.
D. 229.36(d) Liability of Bank During Forward Collection
1. This paragraph makes settlement between
banks during forward collection final when made, subject to any
deferment of credit, just as settlements between banks during
the return of checks are final. In addition, this paragraph clarifies
that this change does not affect the liability scheme under U.C.C.
4-201 during forward collection of a check. That U.C.C. section
provides that, unless a contrary intent clearly appears, a bank
is an agent or subagent of the owner of a check, but that Article
4 of the U.C.C. applies even though a bank may have purchased
an item and is the owner of it. This paragraph preserves the liability
of a collecting bank to prior collecting banks and the depositary
bank's customer for negligence during the forward collection of
a check under the U.C.C., even though this paragraph provides
that settlement between banks during forward collection is final
rather than provisional. Settlement by a paying bank is not considered
to be final payment for the purposes of U.C.C. 4-215(a)(2) or
(3), because a paying bank has the right to recover settlement
from a returning or depositary bank to which it returns a check
under this subpart. Other provisions of the U.C.C. not superseded
by this subpart, such as section 4-202, also continue to apply
to the forward collection of a check and may apply to the return
of a check. (See definition of returning bank in Sec. 229.2(cc).)
E. 229.36(e) Issuance of Payable Through Checks
1. If a bank arranges for checks payable
by it to be payable through another bank, it must require its
customers to use checks that contain conspicuously on their face
the name, location, and first four digits of the nine-digit routing
number of the bank by which the check is payable and the legend
``payable through'' followed by the name of the payable-through
bank. The first four digits of the nine-digit routing number and
the location of the bank by which the check is payable must be
associated with the same check processing region. (This section
does not affect Sec. 229.36(b).) The required information is deemed
conspicuous if it is printed in a type size not smaller than six-
point type and if it is contained in the title plate, which is
located in the lower left quadrant of the check. The required
information may be conspicuous if it is located elsewhere on the
check.
2. If a payable-through check does not
meet the requirements of this paragraph, the bank by which the
check is payable may be liable to the depositary bank or others
as provided in Sec. 229.38. For example, a bank by which a payable-through
check is payable could be liable to a depositary bank that suffers
a loss, such as lost interest or liability under Subpart B, that
would not have occurred had the check met the requirements of
this paragraph. Similarly, a bank may be liable under Sec. 229.38
if a check payable by it that is not payable through another bank
is labeled as provided in this section. For example, a bank that
holds checking accounts and processes checks at a central location
but has widely-dispersed branches may be liable under this section
if it labels all of its checks as ``payable through'' a single
branch and includes the name, address, and four-digit routing
symbol of another branch. These checks would not be payable through
another bank and should not be labeled as payable-through checks.
(All of a bank's offices within the United States are considered
part of the same bank; see Sec. 229.2(e).) In this example, the
bank by which the checks are payable could be liable to a depositary
bank that suffers a loss, such as lost interest or liability under
Subpart B, due to the mislabeled check. The bank by which the
check is payable may be liable for additional damages if it fails
to act in good faith.
F. 229.36(f) Same-Day Settlement
1. This paragraph provides that, under
certain conditions, a paying bank must settle with a presenting
bank for a check on the same day the check is presented in order
to avail itself of the ability to return the check on its next
banking day under U.C.C. 4-301 and 4-302. This paragraph does
not apply to checks presented for immediate payment over the counter.
Settling for a check under this paragraph does not constitute
final payment of the check under the U.C.C. This paragraph does
not supersede or limit the rules governing collection and return
of checks through Federal Reserve Banks that are contained in
Subpart A of Regulation J (12 CFR part 210).
2. Presentment requirements.
a. Location and time.
i. For presented checks to qualify for
mandatory same-day settlement, information accompanying the checks
must indicate that presentment is being made under this paragraph--e.g.
``these checks are being presented for same-day settlement''--and
must include a demand for payment of the total amount of the checks
together with appropriate payment instructions in order to enable
the paying bank to discharge its settlement responsibilities under
this paragraph. In addition, the check or checks must be presented
at a location designated by the paying bank for receipt of checks
for same-day settlement by 8:00 a.m. local time of that location.
The designated presentment location must be a location at which
the paying bank would be considered to have received a check under
Sec. 229.36(b). The paying bank may not designate a location solely
for presentment of checks subject to settlement under this paragraph;
by designating a location for the purposes of Sec. 229.36(f),
the paying bank agrees to accept checks at that location for the
purposes of Sec. 229.36(b).
ii. The designated presentment location
also must be within the check processing region consistent with
the nine-digit routing number encoded in magnetic ink on the check.
A paying bank that uses more than one routing number associated
with a single check processing region may designate, for purposes
of this paragraph, one or more locations in that check processing
region at which checks will be accepted, but the paying bank must
accept any checks with a routing number associated with that check
processing region at each designated location. A paying bank may
designate a presentment location for traveler's checks with an
8000- series routing number anywhere in the country because these
traveler's checks are not associated with any check processing
region. The paying bank, however, must accept at that presentment
location any other checks for which it is paying bank that have
a routing number consistent with the check processing region of
that location.
iii. If the paying bank does not designate
a presentment location, it must accept presentment for same-day
settlement at any location identified in Sec. 229.36(b), i.e.,
at an address of the bank associated with the routing number on
the check, at any branch or head office if the bank is identified
on the check by name without address, or at a branch, head office,
or other location consistent with the name and address of the
bank on the check if the bank is identified on the check by name
and address. A paying bank and a presenting bank may agree that
checks will be accepted for same-day settlement at an alternative
location (e.g., at an intercept processor located in a different
check processing region) or that the cut-off time for same-day
settlement be earlier or later than 8:00 a.m. local time.
iv. In the case of a check payable through
a bank but payable by another bank, this paragraph does not authorize
direct presentment to the bank by which the check is payable.
The requirements of same-day settlement under this paragraph would
apply to a payable-through or payable-at bank to which the check
is sent for payment or collection.
b. Reasonable delivery requirements.
A check is considered presented when it is delivered to and payment
is demanded at a location specified in paragraph (f)(1). Ordinarily,
a presenting bank will find it necessary to contact the paying
bank to determine the appropriate presentment location and any
delivery instructions. Further, because presentment might not
take place during the paying bank's banking day, a paying bank
may establish reasonable delivery requirements to safeguard the
checks presented, such as use of a night depository. If a presenting
bank fails to follow reasonable delivery requirements established
by the paying bank, it runs the risk that it will not have presented
the checks. However, if no reasonable delivery requirements are
established or if the paying bank does not make provisions for
accepting delivery of checks during its non-business hours, leaving
the checks at the presentment location constitutes effective presentment.
c. Sorting of checks. A paying bank may
require that checks presented to it for same-day settlement be
sorted separately from other forward collection checks it receives
as a collecting bank or returned checks it receives as a returning
or depositary bank. For example, if a bank provides correspondent
check collection services and receives unsorted checks from a
respondent bank that include checks for which it is the paying
bank and that would otherwise meet the requirements for same-day
settlement under this section, the collecting bank need not make
settlement in accordance with paragraph (f)(2). If the collecting
bank receives sorted checks from its respondent bank, consisting
only of checks for which the collecting bank is the paying bank
and that meet the requirements for same-day settlement under this
paragraph, the collecting bank may not charge a fee for handling
those checks and must make settlement in accordance with this
paragraph.
3. Settlement
a. If a bank presents a check in accordance
with the time and location requirements for presentment under
paragraph (f)(1), the paying bank either must settle for the check
on the business day it receives the check without charging a presentment
fee or return the check prior to the time for settlement. (This
return deadline is subject to extension under Sec. 229.30(c).)
The settlement must be in the form of a credit to an account designated
by the presenting bank at a Federal Reserve Bank (e.g., a Fedwire
transfer). The presenting bank may agree with the paying bank
to accept settlement in another form (e.g., credit to an account
of the presenting bank at the paying bank or debit to an account
of the paying bank at the presenting bank). The settlement must
occur by the close of Fedwire on the business day the check is
received by the paying bank. Under the provisions of Sec. 229.34(c),
a settlement owed to a presenting bank may be set off by adjustments
for previous settlements with the presenting bank. (See also Sec.
229.39(d).)
b. Checks that are presented after the
8 a.m. (local time) presentment deadline for same-day settlement
and before the paying bank's cut-off hour are treated as if they
were presented under other applicable law and settled for or returned
accordingly. However, for purposes of settlement only, the presenting
bank may require the paying bank to treat such checks as presented
for same-day settlement on the next business day in lieu of accepting
settlement by cash or other means on the business day the checks
are presented to the paying bank. Checks presented after the paying
bank's cut-off hour or on non-business days, but otherwise in
accordance with this paragraph, are considered presented for same-day
settlement on the next business day.
4. Closed Paying Bank
a. There may be certain business days
that are not banking days for the paying bank. Some paying banks
may continue to settle for checks presented on these days (e.g.,
by opening their back office operations or by using an intercept
processor). In other cases, a paying bank may be unable to settle
for checks presented on a day it is closed.
If the paying bank closes on a business
day and checks are presented to the paying bank in accordance
with paragraph (f)(1), the paying bank is accountable for the
checks unless it settles for or returns the checks by the close
of Fedwire on its next banking day. In addition, checks presented
on a business day on which the paying bank is closed are considered
received on the paying bank's next banking day for purposes of
the U.C.C. midnight deadline (U.C.C. 4-301 and 4-302) and this
regulation's expeditious return and notice of nonpayment provisions.
b. If the paying bank is closed on a
business day voluntarily, the paying bank must pay interest compensation,
as defined in Sec. 229.2(oo), to the presenting bank for the value
of the float associated with the check from the day of the voluntary
closing until the day of settlement. Interest compensation is
not required in the case of an involuntary closing on a business
day, such as a closing required by state law. In addition, if
the paying bank is closed on a business day due to emergency conditions,
settlement delays and interest compensation may be excused under
Sec. 229.38(e) or U.C.C. 4-109(b).
5. Good faith. Under Sec. 229.38(a),
both presenting banks and paying banks are held to a standard
of good faith, defined in Sec. 229.2(nn) to mean honesty in fact
and the observance of reasonable commercial standards of fair
dealing. For example, designating a presentment location or changing
presentment locations for the primary purpose of discouraging
banks from presenting checks for same-day settlement might not
be considered good faith on the part of the paying bank. Similarly,
presenting a large volume of checks without prior notice could
be viewed as not meeting reasonable commercial standards of fair
dealing and therefore may not constitute presentment in good faith.
In addition, if banks, in the general course of business, regularly
agree to certain practices related to same-day settlement, it
might not be considered consistent with reasonable commercial
standards of fair dealing, and therefore might not be considered
good faith, for a bank to refuse to agree to those practices if
agreeing would not cause it harm.
6. U.C.C. sections affected. This paragraph
directly affects the following provisions of the U.C.C. and may
affect other sections or provisions:
a. Section 4-204(b)(1), in that a presenting
bank may not send a check for same-day settlement directly to
the paying bank, if the paying bank designates a different location
in accordance with paragraph (f)(1).
b. Section 4-213(a), in that the medium
of settlement for checks presented under this paragraph is limited
to a credit to an account at a Federal Reserve Bank and that,
for checks presented after the deadline for same-day settlement
and before the paying bank's cut-off hour, the presenting bank
may require settlement on the next business day in accordance
with this paragraph rather than accept settlement on the business
day of presentment by cash.
c. Section 4-301(a), in that, to preserve
the ability to exercise deferred posting, the time limit specified
in that section for settlement or return by a paying bank on the
banking day a check is received is superseded by the requirement
to settle for checks presented under this paragraph by the close
of Fedwire.
d. Section 4-302(a), in that, to avoid
accountability, the time limit specified in that section for settlement
or return by a paying bank on the banking day a check is received
is superseded by the requirement to settle for checks presented
under this paragraph by the close of Fedwire.
Subpart A - General
Subpart B -
Availability of Funds and Disclosure of Funds Availability Policies
Subpart C -
Collection of Checks
Appendices A
& B
Appendices C
& D
Appendix F
Credit
And Banking Laws Menu
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