Regulation J PDF: Federal Reserve System Regulations

Federal Reserve System § 210.2 Bank, more than one) notation on the 210.31 Payment by a Federal Reserve Bank...

Federal Reserve System § 210.2 Bank, more than one) notation on the 210.31 Payment by a Federal Reserve Bank Reserve Bank’s books. Such books may to a receiving bank or beneficiary. be electronic or in writing. Upon any 210.32 Federal Reserve Bank liability; pay- ment of compensation. issue or cancellation of Reserve Bank capital stock, the Reserve Bank shall APPENDIX A TO SUBPART B OF PART 210—COM- MENTARY record the member bank’s new share position in its books (or eliminate the Subpart C—Funds Transfers Through the bank’s share position from its books, FedNow Service as the case may be). (b) Certification. A Reserve Bank may 210.40 Authority, purpose, and scope. certify on request as to the number of 210.41 Definitions. shares held by a member bank and pur- 210.42 Reliance on identifying number. chased before March 28, 1942, or as to 210.43 Agreement of sender. the purchase and cancellation dates 210.44 Agreement of receiving bank. and prices of shares cancelled, as the 210.45 Payment orders. case may be. 210.46 Payment by a Federal Reserve Bank to a receiving bank or beneficiary. 210.47 Federal Reserve Bank liability; pay- PART 210—COLLECTION OF ment of compensation. CHECKS AND OTHER ITEMS BY APPENDIX A TO SUBPART C OF PART 210—COM- FEDERAL RESERVE BANKS AND MENTARY FUNDS TRANSFERS THROUGH THE APPENDIX A TO PART 210—ARTICLE 4A, FUNDS TRANSFERS FEDWIRE FUNDS SERVICE AND THE FEDNOW SERVICE (REGULA- AUTHORITY: 12 U.S.C. 248(i), (j), and 248–1, TION J) 342, 360, 464, 4001–4010, and 5001–5018. SOURCE: 45 FR 68634, Oct. 16, 1980, unless Subpart A—Collection of Checks and otherwise noted. Other Items By Federal Reserve Banks Sec. Subpart A—Collection of Checks 210.1 Authority, purpose, and scope. and Other Items By Federal 210.2 Definitions. Reserve Banks 210.3 General provisions. 210.4 Sending items to Reserve Banks. § 210.1 Authority, purpose, and scope. 210.5 Sender’s agreement; recovery by Re- serve Bank. The Board of Governors of the Fed- 210.6 Status, warranties, and liability of Re- eral Reserve System (Board) has issued serve Bank. this subpart pursuant to the Federal 210.7 Presenting items for payment. Reserve Act, sections 11 (i) and (j) (12 210.8 Presenting noncash items for accept- U.S.C. 248 (i) and (j)), section 13 (12 ance. U.S.C. 342), section 16 (12 U.S.C. 248(o) 210.9 Settlement and payment. and 360), and section 19(f) (12 U.S.C. 210.10 Time schedule and availability of 464); the Expedited Funds Availability credits for cash items and returned checks. Act (12 U.S.C. 4001 et seq.); the Check 210.11 Availability of proceeds of noncash Clearing for the 21st Century Act (12 items; time schedule U.S.C. 5001–5018) and other laws. This 210.12 Return of cash items and handling of subpart governs the collection of returned checks. checks and other cash and noncash 210.13 Unpaid items. items and the handling of returned 210.14 Extension of time limits. checks by Federal Reserve Banks. Its 210.15 Direct presentment of certain war- purpose is to provide rules for col- rants. lecting and returning items and set- Subpart B—Funds Transfers Through the tling balances. Fedwire Funds Service [53 FR 21984, June 13, 1988, as amended at Reg. J, 59 FR 22965, May 4, 1994; Reg. J, 69 FR 210.25 Authority, purpose, and scope. 62557, Oct. 27, 2004] 210.26 Definitions. 210.27 Reliance on identifying number. § 210.2 Definitions. aworley on LAPBH6H6L3 with DISTILLER 210.28 Agreement of sender. 210.29 Agreement of receiving bank. As used in this subpart, unless the 210.30 Payment orders. context otherwise requires: 265 VerDate Sep2014 15:34 Mar 13, 2024 Jkt 262036 PO 00000 Frm 00275 Fmt 8010 Sfmt 8010 Q:\12\12V2.TXT PC31  § 210.2 12 CFR Ch. II (1–1–24 Edition) Account means an account on the (B) Sent by a sender to a Reserve books of a Federal Reserve Bank. A Bank for handling under this subpart; subaccount is an informational record and of a subset of transactions that affect (C) Collectible in funds acceptable to an account and is not a separate ac- the Reserve Bank of the District in count. which the instrument is payable; or Actually and finally collected funds (ii) A check. means cash or any other form of pay- (2) Unless otherwise indicated, item ment that is, or has become, final and includes both a cash and a noncash irrevocable. item, and includes a returned check Administrative Reserve Bank with re- sent by a paying or returning bank. spect to an entity means the Reserve Item does not include a check that can- Bank in whose District the entity is lo- not be collected at par, or a payment cated, as determined under the proce- order as defined in § 210.26(i) and han- dure described in § 204.3(g) of this chap- dled under subpart B of this part. The ter (Regulation D), even if the entity is term also does not include an elec- not otherwise subject to that section. tronically-created item as defined in Bank means any person engaged in § 229.2 of this chapter (Regulation CC). the business of banking. A branch or Nonbank payor means a payor of an separate office of a bank is a separate item, other than a bank. bank to the extent provided in the Uni- Noncash item means an item that a form Commercial Code. receiving Reserve Bank classifies in its Bank draft means a check drawn by operating circulars as requiring special one bank on another bank. handling. The term also means an item Banking day means the part of a day normally received as a cash item if a on which a bank is open to the public Reserve Bank decides that special con- for carrying on substantially all of its ditions require that it handle the item banking functions. as a noncash item. Cash item means— Paying bank means— (1) A check other than one classified (1) The bank by which an item is pay- as a noncash item under this section; able unless the item is payable or col- or lectible at or through another bank (2) Any other item payable on de- and is sent to the other bank for pay- mand and collectible at par that the ment or collection; Reserve Bank that receives the item is (2) The bank at or through which an willing to accept as a cash item. Cash item is payable or collectible and to item does not include a returned check. which it sent for payment or collec- Check means a check or an electronic tion; or check, as those terms are defined in (3) The bank whose routing number § 229.2 of this chapter (Regulation CC). appears on a check in the MICR line or Clock hour and clock half-hour. (1) in fractional form (or in the MICR-line Clock hour means a time that is on the information that accompanies an elec- hour, such as 1:00, 2:00, etc. tronic item) and to which the check is (2) Clock half-hour means a time that sent for payment or collection. is on the half-hour, such as 1:30, 2:30, etc. Returned check means a cash item re- Fedwire Funds Service and Fedwire turned by a paying bank, including an have the same meaning as that set electronic returned check as defined in forth in § 210.26. § 229.2 of this chapter (Regulation CC) Item. (1) Means— and a notice of nonpayment in lieu of a (i) An instrument or a promise or returned check, whether or not a Re- order to pay money, whether nego- serve Bank handled the check for col- tiable or not, that is— lection. (A) Payable in a Federal Reserve Dis- Sender means any of the following en- trict 1 (District); tities that sends an item to a Reserve Bank for forward collection— aworley on LAPBH6H6L3 with DISTILLER 1 For purposes of this subpart, the Virgin Islands and Puerto Rico are deemed to be in Samoa, and the Northern Mariana Islands in the Second District, and Guam, American the Twelfth District. 266 VerDate Sep2014 15:34 Mar 13, 2024 Jkt 262036 PO 00000 Frm 00276 Fmt 8010 Sfmt 8010 Q:\12\12V2.TXT PC31  Federal Reserve System § 210.3 (1) A depository institution, as de- § 210.3 General provisions. fined in section 19(b) of the Federal Re- (a) General. Each Reserve Bank shall serve Act (12 U.S.C. 461(b)); receive and handle items in accordance (2) A member bank, as defined in sec- with this subpart, and shall issue oper- tion 1 of the Federal Reserve Act (12 ating circulars governing the details of U.S.C. 221); its handling of items and other matters (3) A clearing institution, defined deemed appropriate by the Reserve as— Bank. The circulars may, among other (i) An institution that is not a depos- things, classify cash items and noncash itory institution but that maintains items, require separate sorts and let- with a Reserve Bank the balance re- ters, provide different closing times for ferred to in the first paragraph of sec- the receipt of different classes or types tion 13 of the Federal Reserve Act (12 of items, provide for instructions by an U.S.C. 342); or Administrative Reserve Bank to other (ii) An Edge corporation or agree- Reserve Banks, set forth terms of serv- ment corporation that maintains an ices, and establish procedures for ad- account with a Reserve Bank in con- justments on a Reserve Bank’s books, formity with part 211 of this chapter including amounts, waiver of expenses, (Regulation K); and payment of compensation. As (4) Another Reserve Bank; deemed appropriate by the Reserve (5) An international organization for Bank, the circulars may also require which a Reserve Bank is empowered to the sender to provide warranties and act as depositary or fiscal agent and indemnities that only items and any maintains an account; noncash items the Reserve Banks have agreed to handle will be sent to the Re- (6) A foreign correspondent, defined serve Banks. The Reserve Banks may as any of the following entities for provide to a subsequent collecting which a Reserve Bank maintains an ac- bank and to the paying bank any war- count: A foreign bank or banker, a for- ranties and indemnities provided by eign state as defined in section 25(b) of the sender pursuant to this paragraph the Federal Reserve Act (12 U.S.C. 632), (a). or a foreign correspondent or agency (b) Binding effect. This subpart, to- referred to in section 14(e) of that act gether with subparts C and D of part (12 U.S.C. 358); or 229 and the operating circulars of the (7) A branch or agency of a foreign Reserve Banks, are binding on all par- bank maintaining reserves under sec- ties interested in an item handled by tion 7 of the International Banking Act any Reserve Bank. of 1978 (12 U.S.C. 347d, 3105). (c) Government items. As depositaries State means a State of the United and fiscal agents of the United States, States, the District of Columbia, Puer- Reserve Banks handle certain items to Rico, or a territory, possession, or payable by the United States or certain dependency of the United States. Federal agencies as cash or noncash Uniform Commercial Code and U.C.C. items. To the extent provided by regu- mean the Uniform Commercial Code as lations issued by, and arrangements adopted in a state made with, the United States Treasury Terms not defined in this section. Un- Department and other Government de- less the context otherwise requires— partments and agencies, the handling (1) The terms not defined herein have of such items is governed by this sub- the meanings set forth in § 229.2 of this part. The Reserve Banks shall include chapter applicable to subpart C or D of in their operating circulars such infor- part 229 of this chapter (Regulation mation regarding these regulations and CC), as appropriate; and arrangements as the Reserve Banks deem appropriate. (2) The terms not defined herein or in § 229.2 of this chapter have the mean- (d) Government senders. Except as oth- erwise provided by statutes of the ings set forth in the Uniform Commer- aworley on LAPBH6H6L3 with DISTILLER United States, or regulations issued or cial Code. arrangements made thereunder, this [Reg. J, 87 FR 34357, June 6, 2022] subpart and the operating circulars of 267 VerDate Sep2014 15:34 Mar 13, 2024 Jkt 262036 PO 00000 Frm 00277 Fmt 8010 Sfmt 8010 Q:\12\12V2.TXT PC31  § 210.4 12 CFR Ch. II (1–1–24 Edition) the Reserve Banks apply to the fol- (3) The identity and order of the par- lowing when acting as a sender: a de- ties under paragraph (b)(1) of this sec- partment, agency, instrumentality, tion determine the relationships and independent establishment, or office of the rights and liabilities of the parties the United States, or a wholly owned under this subpart, part 229 of this or controlled Government corporation, chapter (Regulation CC), section 13(1) that maintains or uses an account with and section 16(13) of the Federal Re- a Reserve Bank. serve Act, and the Uniform Commer- (e) Foreign items. A Reserve Bank also cial Code. An initial sender’s Adminis- may receive and handle certain items trative Reserve Bank that is deemed to payable outside a Federal Reserve Dis- accept an item for deposit or handle an trict, as provided in its operating cir- item is also deemed to be a sender with culars. The handling of such items in a respect to that item. The Reserve state is governed by this subpart, and Banks that are deemed to handle an the handling of such items outside a item are deemed to be agents or sub- state is governed by the local law. agents of the owner of the item, as pro- (f) Relation to other law. The provi- vided in § 210.6(a). sions of this subpart supersede any in- (c) Checks received at par. The Reserve consistent provisions of the Uniform Banks shall receive cash items and Commercial Code, of any other state other checks at par. law, or of part 229 of this title, but only to the extent of the inconsistency. [Reg. J, 77 FR 21858, Apr. 12, 2012; 83 FR 61518, Nov. 30, 2018] [45 FR 68634, Oct. 16, 1980, as amended at 51 FR 21744, June 16, 1986; 53 FR 21984, June 13, § 210.5 Sender’s agreement; recovery 1988; Reg. J, 59 FR 22965, May 4, 1994; 62 FR 48171, Sept. 15, 1997; Reg. J, 69 FR 62558, Oct. by Reserve Bank. 27, 2004; 77 FR 21858, Apr. 12, 2012; 83 FR 61518, (a) Sender’s agreement. The warran- Nov. 30, 2018] ties, indemnities, authorizations, and agreements made pursuant to this § 210.4 Sending items to Reserve Banks. paragraph (a) may not be disclaimed and are made whether or not the item (a) Sending of items. A sender’s Ad- bears an indorsement of the sender. By ministrative Reserve Bank may direct sending an item to a Reserve Bank, the a sender other than a Reserve Bank to sender does all of the following. send any item to a specified Reserve (1) Authorization to handle item. The Bank, whether or not the item is pay- sender authorizes the sender’s Admin- able in the Reserve Bank’s district. istrative Reserve Bank and any other (b) Handling of items. (1) The fol- Reserve Bank or collecting bank to lowing parties, in the following order, which the item is sent to handle the are deemed to have handled an item item (and authorizes any Reserve Bank that is sent to a Reserve Bank for col- that handles settlement for the item to lection: make accounting entries), subject to (i) The initial sender; this subpart and to the Reserve Banks’ (ii) The initial sender’s Administra- operating circulars, and warrants its tive Reserve Bank (which is deemed to have accepted deposit of the item from authority to give this authorization. the initial sender); (2) Warranties for all items. The sender (iii) The Reserve Bank that receives warrants to each Reserve Bank han- the item from the initial sender (if dif- dling the item that— ferent from the initial sender’s Admin- (i) The sender is a person entitled to istrative Reserve Bank); and enforce the item or authorized to ob- (iv) Another Reserve Bank, if any, tain payment of the item on behalf of that receives the item from a Reserve a person entitled to enforce the item; Bank. (ii) The item has not been altered; (2) A Reserve Bank that is not de- and scribed in paragraph (b)(1) of this sec- (iii) The item bears all indorsements aworley on LAPBH6H6L3 with DISTILLER tion is not a person that handles an applied by parties that previously han- item and is not a collecting bank with dled the item for forward collection or respect to an item. return. 268 VerDate Sep2014 15:34 Mar 13, 2024 Jkt 262036 PO 00000 Frm 00278 Fmt 8010 Sfmt 8010 Q:\12\12V2.TXT PC31  Federal Reserve System § 210.5 (3) Warranties and indemnities as set tation of a substitute check under sub- forth in Regulation CC and U.C.C. As ap- part D of part 229 of this chapter, or a plicable and unless otherwise provided, sender of an electronic check under the sender of an item makes to each § 229.34 of this chapter. Reserve Bank that handles the item all (iii) A sender shall not be liable for the warranties and indemnities set any amount that the Reserve Bank forth in and subject to the terms of pays under this subpart or part 229 of subparts C and D of part 229 of this this chapter that is attributable to the chapter (Regulation CC) and Article 4 Reserve Bank’s own lack of good faith of the U.C.C. The sender makes all the or failure to exercise ordinary care. warranties set forth in and subject to (b) Sender’s liability under other law. the terms of 4–207 of the U.C.C. for an Nothing in paragraph (a) of this section electronic check as if it were an item limits any warranty or indemnity by a subject to the U.C.C. sender (or a person that handled an (4) Warranties and indemnities as set item prior to the sender) arising under forth in Reserve Bank operating circulars. state law or regulation (such as the The sender makes any warranties and U.C.C.), other federal law or regulation indemnities regarding the sending of (such as part 229 of this chapter), or an items as set forth in an operating cir- agreement with a Reserve Bank. cular issued in accordance with (c) Recovery by Reserve Bank. (1) A Re- § 210.3(a). serve Bank that has handled an item (5) Sender’s liability to Reserve Bank. may recover as provided in paragraph (i) Except as provided in paragraphs (c)(2) of this section if an action or pro- (a)(5)(ii) and (iii) of this section, the ceeding is brought against (or if de- sender agrees to indemnify each Re- fense is tendered to) the Reserve Bank serve Bank for any loss or expense sus- based on— tained (including attorneys’ fees and (i) The alleged failure of the sender expenses of litigation) resulting from— to have the authority to make the war- (A) The sender’s lack of authority to ranty and agreement in paragraph make the warranty in paragraph (a)(1) (a)(1) of this section; of this section; (ii) Any action by the Reserve Bank (B) Any action taken by the Reserve within the scope of its authority in Bank within the scope of its authority handling the item; or in handling the item; or (iii) Any warranty or indemnity (C) Any warranty or indemnity made made by the Reserve Bank under by the Reserve Bank under § 210.6(b), § 210.6(b), part 229 of this chapter, or the part 229 of this chapter, the U.C.C., or, U.C.C. regarding the sending of items, an op- (2) Upon entry of a final judgment or erating circular issued in accordance decree in an action or proceeding de- with § 210.3(a). scribed in paragraph (c)(1) of this sec- (ii) A sender’s liability for warranties tion, a Reserve Bank may recover from and indemnities that the Reserve Bank the sender the amount of attorneys’ makes for a substitute check, a paper fees and other expenses of litigation in- or electronic representation thereof, or curred, as well as any amount the Re- for an electronic check is subject to serve Bank is required to pay because the following conditions and limita- of the judgment or decree or the tender tions— of defense, together with interest (A) A sender of an original check thereon. shall not be liable under paragraph (d) Methods of recovery. (1) The Re- (a)(5)(i) of this section for any amount serve Bank may recover the amount that the Reserve Bank pays under sub- stated in paragraph (c) of this section part D of part 229 of this chapter, or by charging any account on its books under § 229.34 of this chapter with re- that is maintained or used by the send- spect to an electronic check, absent er (or by charging a Reserve Bank the sender’s agreement to the con- sender), if— trary; and (i) The Reserve Bank made season- aworley on LAPBH6H6L3 with DISTILLER (B) Nothing in this subpart alters the able written demand on the sender to liability of a sender of a substitute assume defense of the action or pro- check or paper or electronic represen- ceeding; and 269 VerDate Sep2014 15:34 Mar 13, 2024 Jkt 262036 PO 00000 Frm 00279 Fmt 8010 Sfmt 8010 Q:\12\12V2.TXT PC31  § 210.6 12 CFR Ch. II (1–1–24 Edition) (ii) The sender has not made any lected funds, a Reserve Bank makes other arrangement for payment that is the proceeds available for use by the acceptable to the Reserve Bank. sender, and the time for commencing (2) The Reserve Bank is not respon- all actions against the Reserve Bank sible for defending the action or pro- has expired. ceeding before using this method of re- (2) Limitations on Reserve Bank liabil- covery. A Reserve Bank that has been ity. A Reserve Bank shall not have or charged under this paragraph (d) may assume any liability with respect to an recover from its sender in the manner item or its proceeds except— and under the circumstances set forth (i) For the Reserve Bank’s own lack in this paragraph (d). of good faith or failure to exercise ordi- (3) A Reserve Bank’s failure to avail nary care; itself of the remedy provided in this (ii) As provided in paragraph (b) of paragraph (d) does not prejudice its en- this section; forcement in any other manner of the (iii) As provided in an operating cir- indemnity agreement referred to in cular issued in accordance with paragraph (a)(5) of this section. § 210.3(a) regarding the sending of (e) Security interest. When a sender items; and sends an item to a Reserve Bank, the (iv) As provided in subparts C and D sender and any prior collecting bank of part 229 of this chapter (Regulation grant to the sender’s Administrative CC). Reserve Bank a security interest in all (3) Reliance on routing designation ap- of their respective assets in the posses- pearing on item. A Reserve Bank may sion of, or held for the account of, any present or send an item based on the Reserve Bank to secure their respec- routing number or other designation of tive obligations due or to become due a paying bank or nonbank payor ap- to the Administrative Reserve Bank pearing in any form on the item when under this subpart or subpart C or D of the Reserve Bank receives it. A Re- part 229 of this chapter (Regulation serve Bank shall not be responsible for CC). The security interest attaches any delay resulting from its acting on when a warranty is breached or any any designation, whether inscribed by other obligation to the Reserve Bank is magnetic ink or by other means, and incurred. If the Reserve Bank, in its whether or not the designation acted sole discretion, deems itself insecure on is consistent with any other des- and gives notice thereof to the sender ignation appearing on the item. or prior collecting bank, or if the send- (b) Warranties and liability. The fol- er or prior collecting bank suspends lowing provisions apply when a Reserve payments or is closed, the Reserve Bank presents or sends an item. Bank may take any action authorized (1) Warranties for all items. The Re- by law to recover the amount of an ob- serve Bank warrants to a subsequent ligation, including, but not limited to, collecting bank and to the paying bank the exercise of rights of set off, the re- and any other payor that— alization on any available collateral, (i) The Reserve Bank is a person enti- and any other rights it may have as a tled to enforce the item (or is author- creditor under applicable law. ized to obtain payment of the item on behalf of a person that is either enti- [45 FR 68634, Oct. 16, 1980, as amended at 51 FR 21745, June 16, 1986; Reg. J, 59 FR 22965, tled to enforce the item or authorized May 4, 1994; 62 FR 48171, Sept. 15, 1997, Reg. to obtain payment on behalf of a per- J, 69 FR 62558, Oct. 27, 2004; 70 FR 71224, Nov. son entitled to enforce the item); 28, 2005; 83 FR 61518, Nov. 30, 2018] (ii) The item has not been altered; and § 210.6 Status, warranties, and liability (iii) The item bears all indorsements of Reserve Bank. applied by parties that previously han- (a)(1) Status. A Reserve Bank that dled the item for forward collection or handles an item shall act as agent or return. subagent of the owner with respect to (2) Warranties and indemnities as set aworley on LAPBH6H6L3 with DISTILLER the item. This agency terminates when forth in Reserve Bank operating circulars. a Reserve Bank receives final payment The Reserve Bank makes any warran- for the item in actually and finally col- ties and indemnities regarding the 270 VerDate Sep2014 15:34 Mar 13, 2024 Jkt 262036 PO 00000 Frm 00280 Fmt 8010 Sfmt 8010 Q:\12\12V2.TXT PC31  Federal Reserve System § 210.7 sending of items as set forth in an op- sonably should have learned, of the erating circular issued in accordance facts and circumstances giving rise to with § 210.3(a). the claim. (3) Warranties and indemnities as set (3) This paragraph (c) does not alter forth in Regulation CC and U.C.C. As ap- the time limit for claims under plicable and unless otherwise provided, § 229.38(g) of this chapter (which include the Reserve Bank makes all the war- claims for breach of warranty under ranties and indemnities set forth in § 229.34 of this chapter) or subpart D of and subject to the terms of subparts C part 229 of this chapter. and D of part 229 of this chapter (Regu- [45 FR 68634, Oct. 16, 1980, as amended at 51 lation CC) and Article 4 of the U.C.C. FR 21745, June 16, 1986; 53 FR 21984, June 13, The Reserve Bank makes all the war- 1988; Reg. J, 59 FR 22966, May 4, 1994; 62 FR ranties set forth in and subject to the 48172, Sept. 15, 1997; Reg. J, 69 FR 62559, Oct. terms of 4–207 of the U.C.C. for an elec- 27, 2004; 70 FR 71225, Nov. 28, 2005; 83 FR 61519, tronic check as if it were an item sub- Nov. 30, 2018] ject to the U.C.C. (4) Indemnity for substitute check cre- § 210.7 Presenting items for payment. ated from an electronic check. (i) Except (a) Presenting or sending. As provided as provided in paragraph (b)(4)(ii) of under State law or as otherwise per- this section, the Reserve Bank shall in- mitted by this section: demnify the bank to which it transfers (1) A Reserve Bank or a subsequent or presents an electronic check (the re- collecting bank may present an item cipient bank) for the amount of any for payment or send the item for pre- losses that the recipient bank incurs sentment and payment; and under subpart D of part 229 of this (2) A Reserve Bank may send an item chapter (Regulation CC) for an indem- to a subsequent collecting bank with nity that the recipient bank was re- authority to present it for payment or quired to make under subpart D of part to send it for presentment and pay- 229 of this chapter in connection with a ment. substitute check later created from the (b) Place of presentment. A Reserve electronic check. Bank or subsequent collecting bank (ii) The Reserve Bank shall not be may present an item— liable under paragraph (b)(4)(i) of this (1) At a place requested by the paying section for any amount that the recipi- bank; ent bank pays under subpart D of part (2) In accordance with § 229.36 of this 229 of this chapter that is attributable chapter (Regulation CC); to the lack of good faith or failure to (3) At a place requested by the exercise ordinary care of the recipient nonbank payor, if the item is payable bank or a person that handled the by a nonbank payor other than through item, in any form, after the recipient or at a paying bank; bank. (4) Under a special collection agree- (c) Time for commencing action against ment consistent with this subpart; or Reserve Bank. (1) A claim against a Re- (5) Through a clearinghouse and sub- serve Bank for lack of good faith or ject to its rules and practices. failure to exercise ordinary care shall (c) Presenting or sending direct. A Re- be barred unless the action on the serve Bank or subsequent collecting claim is commenced within two years bank may, with respect to an item that after the claim accrues. Such a claim may be sent to the paying bank or accrues on the date when a Reserve nonbank payor in the Reserve Bank’s Bank’s alleged failure to exercise ordi- District— nary care or to act in good faith first (1) Present or send the item direct to results in damages to the claimant. the paying bank, or to a place re- (2) A claim that arises under para- quested by the paying bank; or graph (b)(3) of this section shall be (2) If the item is payable by a barred unless the action on the claim is nonbank payor other than through a commenced within one year after the paying bank, present it direct to the aworley on LAPBH6H6L3 with DISTILLER claim accrues. Such a claim accrues as nonbank payor. Documents, securities, of the date on which the claimant first or other papers accompanying a learns, or by which the claimant rea- noncash item shall not be delivered to 271 VerDate Sep2014 15:34 Mar 13, 2024 Jkt 262036 PO 00000 Frm 00281 Fmt 8010 Sfmt 8010 Q:\12\12V2.TXT PC31  § 210.8 12 CFR Ch. II (1–1–24 Edition) the nonbank payor before the item is holding the settlement account, and paid unless the sender specifically au- the account-holder. The paying bank thorizes delivery. remains responsible for settlement if (d) Item sent to another district. A Re- the Reserve Bank holding the settle- serve Bank receiving an item that may ment account does not, for any reason, be sent to a paying bank or nonbank obtain settlement in that account. payor in another District ordinarily (b) Cash items—(1) Settlement obliga- sends the item to the Reserve Bank of tion. On the day a paying bank re- the other District, but with the agree- ceives 2 a cash item from a Reserve ment of the other Reserve Bank, may Bank, it shall settle for the item such present or send the item as if it were that the proceeds of the settlement are sent to a paying bank or nonbank available to its Administrative Reserve payor in its own District. Bank by the close of Fedwire on that day, or it shall return the item by the [45 FR 68634, Oct. 16, 1980, as amended at 53 later of the close of its banking day or FR 21985, June 13, 1988; 62 FR 48172, Sept. 15, the close of Fedwire. If the paying 1997; Reg. J, 83 FR 61520, Nov. 30, 2018] bank fails to settle for or return a cash § 210.8 Presenting noncash items for item in accordance with this paragraph acceptance. (b)(1), it is accountable for the amount of the item as of the close of its bank- (a) A Reserve Bank or a subsequent ing day or the close of Fedwire on the collecting bank may, if instructed by day it receives the item, whichever is the sender, present a noncash item for earlier. acceptance in any manner authorized (2) Time of settlement. (i) On the day a by law if— paying bank receives a cash item from (1) The item provides that it must be a Reserve Bank, it shall settle for the presented for acceptance; item so that the proceeds of the settle- (2) The item may be presented else- ment are available to its Administra- where than at the residence or place of tive Reserve Bank, or return the item, business of the payor; or by the latest of— (3) The date of payment of the item (A) The next clock hour or clock depends on presentment for accept- half-hour that is at least one half-hour ance. after the paying bank receives the (b) Documents accompanying a item; noncash item shall not be delivered to (B) 8:30 a.m. eastern time; or the payor upon acceptance of the item (C) Such later time as provided in the unless the sender specifically author- Reserve Banks’ operating circulars. izes delivery. A Reserve Bank shall not (ii) If the paying bank fails to settle have or assume any other obligation to for or return a cash item in accordance present or to send for presentment for with paragraph (b)(2)(i) of this section, acceptance any noncash item. it shall be subject to any applicable [62 FR 48172, Sept. 15, 1997] overdraft charges. Settlement under paragraph (b)(2)(i) of this section satis- § 210.9 Settlement and payment. fies the settlement requirements of (a) Settlement through Administrative paragraph (b)(1) of this section. Reserve Bank. A paying bank shall set- (3) Paying bank closes voluntarily. (i) If tle for an item under this subpart with a paying bank closes voluntarily so its Administrative Reserve Bank, that it does not receive a cash item on whether or not the paying bank re- a day that is a banking day for a Re- ceived the item from that Reserve serve Bank, and the Reserve Bank Bank. A paying bank’s settlement with makes a cash item available to the its Administrative Reserve Bank is 2 A paying bank is deemed to receive a cash deemed to be settlement with the Re- serve Bank from which the paying item on its next banking day if it receives the item— bank received the item. A paying bank (1) On a day other than a banking day for may settle for an item using any ac- it; or aworley on LAPBH6H6L3 with DISTILLER count on a Reserve Bank’s books by (2) On a banking day for it, but after a agreement with its Administrative Re- ‘‘cut-off hour’’ established by it in accord- serve Bank, any other Reserve Bank ance with state law. 272 VerDate Sep2014 15:34 Mar 13, 2024 Jkt 262036 PO 00000 Frm 00282 Fmt 8010 Sfmt 8010 Q:\12\12V2.TXT PC31  Federal Reserve System § 210.9 paying bank on that day, the paying day on the day it receives the item); bank shall either— and (A) On that day, settle for the item (ii) Settle for the item so that the so that the proceeds of the settlement proceeds of the settlement are avail- are available to its Administrative Re- able to its Administrative Reserve serve Bank, or return the item, by the Bank by 8:30 a.m. eastern time on the latest of the next clock hour or clock Reserve Bank’s next banking day or half-hour that is at least one half-hour such later time as provided in the Re- after it ordinarily would have received serve Bank’s operating circular, or re- the item, 8:30 a.m. eastern time, or turn the item by midnight of the day it such later time as provided in the Re- receives the item. If the paying bank serve Banks’ operating circulars; or fails to settle for or return a cash item (B) On the next day that is a banking in accordance with this paragraph day for both the paying bank and the (b)(4)(ii), it shall be subject to any ap- Reserve Bank, settle for the item so plicable overdraft charges. Settlement that the proceeds of the settlement are under this paragraph (b)(4)(ii) satisfies available to its Administrative Reserve the settlement requirements of para- Bank by 8:30 a.m. eastern time on that graph (b)(4)(i) of this section. day or such later time as provided in (5) Manner of settlement. Settlement the Reserve Banks’ operating circulars; with a Reserve Bank under paragraphs and compensate the Reserve Bank for (b)(1) through (4) of this section shall the value of the float associated with be made by debit to an account on the the item in accordance with procedures Reserve Bank’s books or other form of provided in the Reserve Bank’s oper- settlement to which the Reserve Bank ating circular. agrees, except that the Reserve Bank (ii) If a paying bank closes volun- may, in its discretion, obtain settle- tarily so that it does not receive a cash ment by charging the paying bank’s ac- item on a day that is a banking day for count. A paying bank may not set off a Reserve Bank, and the Reserve Bank against the amount of a settlement makes a cash item available to the under this section the amount of a paying bank on that day, the paying claim with respect to another cash bank is not considered to have received item, cash letter, or other claim under the item until its next banking day, § 229.34 of this chapter (Regulation CC) but it shall be subject to any applicable or other law. overdraft charges if it fails to settle for (6) Notice in lieu of return. If a cash or return the item in accordance with item is unavailable for return, the pay- paragraph (b)(3)(i) of this section. The ing bank may send a notice in lieu of settlement requirements of paragraphs return as provided in § 229.31(f) of this (b)(1) and (2) of this section do not chapter (Regulation CC). apply to a paying bank that settles in (c) Noncash items. A Reserve Bank accordance with paragraph (b)(3)(i) of may require the paying or collecting this section. bank to which it has presented or sent (4) Reserve Bank closed. If a paying a noncash item to pay for the item by bank receives a cash item from a Re- a debit to an account maintained or serve Bank on a banking day that is used by the paying or collecting bank not a banking day for the Reserve on the Reserve Bank’s books or by any Bank, the paying bank shall— other form of settlement acceptable to (i) Settle for the item so that the the Reserve Bank. proceeds of the settlement are avail- (d) Nonbank payor. A Reserve Bank able to its Administrative Reserve may require a nonbank payor to which Bank by the close of the Fedwire Funds it has presented an item to pay for it Service on the Reserve Bank’s next by debit to an account on the Reserve banking day, or return the item by Bank’s books or other form of settle- midnight of the day it receives the ment acceptable to the Reserve Bank. item (if the paying bank fails to settle (e) Liability of Reserve Bank. Except for or return a cash item in accordance as set forth in § 229.35(b) of this chapter aworley on LAPBH6H6L3 with DISTILLER with this paragraph (b)(4)(i), it shall (Regulation CC), a Reserve Bank shall become accountable for the amount of not be liable for the failure of a col- the item as of the close of its banking lecting bank, paying bank, or nonbank 273 VerDate Sep2014 15:34 Mar 13, 2024 Jkt 262036 PO 00000 Frm 00283 Fmt 8010 Sfmt 8010 Q:\12\12V2.TXT PC31  § 210.10 12 CFR Ch. II (1–1–24 Edition) payor to pay for an item, or for any § 210.11 Availability of proceeds of loss resulting from the Reserve Bank’s noncash items; time schedule. acceptance of any form of payment (a) Availability of credit. A Reserve other than cash authorized in para- Bank shall give credit to the sender for graphs (b), (c), and (d) of this section. A the proceeds of a noncash item when it Reserve Bank that acts in good faith receives payment in actually and fi- and exercises ordinary care shall not be nally collected funds (or advice from liable for the nonpayment of, or failure another Reserve Bank of such payment to realize upon, any non-cash form of to it). The amount of the item is count- payment that it accepts under para- ed toward the balance maintained to graphs (b), (c), and (d) of this section. satisfy a reserve balance requirement for purposes of part 204 of this chapter [45 FR 68634, Oct. 16, 1980, as amended at 49 (Regulation D) and becomes available FR 4200, Feb. 3, 1984; 51 FR 21745, June 16, for use by the sender when the Reserve 1986; 53 FR 21985, June 13, 1988; 57 FR 46955, Bank receives the payment or advice, Oct. 14, 1992; Reg. J, 59 FR 22966, May 4, 1994; 62 FR 48172, Sept. 15, 1997; 70 FR 71225, Nov. except as provided in paragraph (b) of 28, 2005; 79 FR 72111, Dec. 5, 2014; 83 FR 61520, this section. Nov. 30, 2018]