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FDICLaw,Regulations,RelatedActsConsumerProtection

FDICLaw,Regulations,RelatedActs

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6500ConsumerProtection

C.229.30(c)ExtensionofDeadline
1.Thisparagraphpermitsextensionofthedeadlinesforreturningacheckfor
whichthepayingbankpreviouslyhassettled(generallymidnightofthebanking
dayfollowingthebankingdayonwhichthecheckisreceivedbythepayingbank)
andforreturningacheckwithoutsettlingforit(generallymidnightofthebanking
dayonwhichthecheckisreceivedbythepayingbank,orsuchothertime
providedby210.9ofRegulationJ(12CFRpart210)or229.36(f)(2)ofthispart),butnotoftheduty
ofexpeditiousreturn,intwocircumstances:
a.Apayingbankmayhaveacourierthatleavesaftermidnight(orafteranyotherapplicabledeadline)todeliverits
forwardcollectionchecks.Thisparagraphremovestheconstraintofthemidnightdeadlineforreturnedchecksifthe
returnedcheckreachesthereceivingbankonorbeforethereceivingbank'snextbankingdayfollowingtheotherwise
applicabledeadlinebytheearlierofthecloseofthatbankingdayoracutoffhourof2p.m.orlatersetbythereceiving
bankunderU.C.C.4108.Theextensionalsoappliesifthecheckreachesthebanktowhichitissentlaterthanthetime
describedintheprevioussentenceifhighlyexpeditiousmeansoftransportationareused.Forexample,aWestCoast
payingbankmayusethisfurtherextensiontoshipareturnedcheckbyaircourierdirectlytoanEastCoastreturningbank
evenifthecheckarrivesafterthereturningbank'scutoffhour.Thisparagraphappliestotheextensionofallmidnight
deadlinesexceptSaturdaymidnightdeadlines(seeparagraphXVI.C1.bofthisappendix).
b.Apayingbankmayobserveabankingday,asdefinedintheapplicableU.C.C.,onaSaturday,whichisnotabusiness
dayandthereforenotabankingdayunderRegulationCC.Insuchacase,theU.C.C.deadlineforreturningchecks
receivedandsettledforonFriday,orforreturningchecksreceivedonSaturdaywithoutsettlingforthem,mightrequirethe
banktoreturnthechecksbymidnightSaturday.However,thebankmaynothavecouriersleavingonSaturdaytocarry
returnedchecks,andevenifitdid,thereturningordepositarybanktowhichthereturnedchecksweresentmightnotbe
openuntilSundaynightorMondaymorningtoreceiveandprocessthechecks.Thisparagraphextendsthemidnight
deadlineifthereturnedchecksreachthereturningbankbyacutoffhour(usuallyonSundaynightorMondaymorning)
thatpermitsprocessingduringitsnextprocessingcycleorreachthedepositarybankbythecutoffhouronitsnextbanking
dayfollowingtheSaturdaymidnightdeadline.ThisparagraphappliesexclusivelytotheextensionofSaturdaymidnight
deadlines.
2.Thetimelimitsthatareextendedineachcasearethepayingbank'smidnightdeadlineforreturningacheckforwhichit
hasalreadysettledandthepayingbank'sdeadlineforreturningacheckwithoutsettlingforitinU.C.C.4301and4302,
210.9and210.12ofRegulationJ(12CFR210.9and210.12),and229.36(f)(2)ofthispart.Astheseextensionsare
designedtospeed(229.30(c)(1)),oratleastnotslow(229.30(c)(2)),theoverallreturnofchecks,nomodificationor
extensionoftheexpeditiousreturnrequirementsin229.30(a)isrequired.
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3.Thepayingbanksatisfiesitsmidnightorotherreturndeadlinebydispatchingreturnedcheckstoanotherbankby
courier,includingacourierundercontractwiththepayingbank,priortoexpirationofthedeadline.
4.ThisparagraphdirectlyaffectsU.C.C.4301and4302and210.9and210.12ofRegulationJ(12CFR210.9and
210.12)totheextentthatthisparagraphappliesbyitsterms,andmayaffectotherprovisions.
D.229.30(d)IdentificationofReturnedCheck
1.Thereasonforthereturnmustbeclearlyindicated.Acheckisidentifiedasareturnedcheckifthefrontofthatcheck
indicatesthereasonforreturn,eventhoughitdoesnotspecificallystatethatthecheckisareturnedcheck.Areasonsuch
as"RefertoMaker"ispermissibleinappropriatecases.Ifthereturnedcheckisasubstitutecheck,thereasonforreturn
mustbeplacedwithintheimageoftheoriginalcheckthatappearsonthefrontofthesubstitutechecksothatthe
informationisretainedonanysubsequentsubstitutecheck.Ifthepayingbankplacesthereturnedcheckinacarrier
envelope,thecarrierenvelopeshouldindicatethatitisareturnedcheckbutneednotrepeatthereasonforreturnstated
onthecheckifitinfactappearsonthecheck.
E.229.30(e)DepositaryBankWithoutAccounts
1.SubpartBofthisregulationappliesonlyto"checks"depositedintransactiontype"accounts."Thus,adepositarybank
withonlytimeorsavingsaccountsneednotcomplywiththeavailabilityrequirementsofsubpartB.Collectingbankswillnot
havecouriersdeliveringcheckstothesebanksaspayingbanks,becausenochecksaredrawnonthem.Consequently,
thecostsofusingacourierorotherexpeditedmeanstodeliverreturnedchecksdirectlytosuchadepositarybankmaynot
bejustified.Thus,theexpeditedreturnrequirementof229.30(a)andthenoticeofnonpaymentrequirementof229.33
donotapplytochecksbeingreturnedtobanksthatdonotholdaccounts.Thepayingbank'smidnightdeadlineinU.C.C.4
301and4302and210.12ofRegulationJ(12CFR210.12)wouldcontinuetoapplytothesechecks.Returningbanks
alsowouldberequiredtoactonsuchcheckswithintheirmidnightdeadline.Further,inordertoavoidcomplicatingthe
processofreturningchecksgenerally,bankswithoutaccountsarerequiredtousethestandardindorsement,andtheir
checksarereturnedbyreturningbanksandpaidforbythedepositarybankunderthesamerulesaschecksdepositedin
otherbanks,withtheexceptionoftheexpeditiousreturnandnoticeofnonpaymentrequirementsof229.30(a),
229.31(a),and229.33.
2.Theexpeditiousreturnrequirementsalsoapplytoacheckdepositedinabankthatisnotadepositoryinstitution.
FederalReservebanks,FederalHomeLoanbanks,privatebankers,andpossiblycertainindustrialbanksarenot
depositoryinstitutionswithinthemeaningoftheEFAAct,andthereforearenotsubjecttotheexpeditedavailabilityand
disclosurerequirementsofsubpartB.Thesebanksdo,however,maintainaccountsasdefinedin229.2(a),anda

payingbankreturningachecktooneofthesebankswouldberequiredtoreturn
thechecktothedepositarybank,inaccordancewiththerequirementsofthis
section.
F.229.30(f)NoticeinLieuofReturn
1.Acheckthatislostorotherwiseunavailableforreturnmaybereturnedby
sendingalegiblecopyofbothsidesofthecheckor,ifsuchacopyisnotavailable
tothepayingbank,awrittennoticeofnonpaymentcontainingtheinformation
specifiedin229.33(b).Thecopyorwrittennoticemustclearlyindicateitisanotice
inlieuofreturnandmustbehandledinthesamemannerasotherreturned
checks.Noticebytelephone,telegraph,orotherelectronictransmission,otherthan
alegiblefacsimileorsimilarimagetransmissionofbothsidesofthecheck,does
notsatisfytherequirementsforanoticeinlieuofreturn.Therequirementfora
writingandtheindicationthatthenoticeisasubstituteforthereturnedcheckis
necessarysothatthereturninganddepositarybanksareinformedthatthenotice
carriesvalue.Noticeinlieuofreturnispermittedonlywhenabankdoesnothave
andcannotobtainpossessionofthecheckormustretainpossessionofthecheck
forprotest.Acheckisnotunavailableforreturnifitismerelydifficulttoretrieve
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fromafilingsystemorfromstoragebyakeeperofchecksinatruncationsystem.
Anoticeinlieuofreturnmaybeusedbyabankhandlingareturnedcheckthathas
beenlostordestroyed,includingwhentheoriginalreturnedcheckhasbeen
chargedbackaslostordestroyedasprovidedin229.35(b).Abankusinganotice
inlieuofreturngivesawarrantyunder229.34(a)(4)thattheoriginalcheckhas
notbeenandwillnotbereturned.
2.TherequirementofthisparagraphsupersedestherequirementofU.C.C.4
301(a)astotheformandinformationrequiredofanoticeofdishonoror
nonpayment.Referenceintheregulationandthiscommentarytoareturnedcheck
includesanoticeinlieuofreturnunlessthecontextindicatesotherwise.
3.Thenoticeinlieuofreturnissubjecttotheprovisionsof229.30andistreated
likeareturnedcheckforsettlementpurposes.Iftheoriginalcheckisover$2,500,
thenoticeofnonpaymentunder229.33isstillrequired,butmaybesatisfiedby
thenoticeinlieuofreturnifthenoticeinlieumeetsthetimeandinformation
requirementsof229.33.
4.Ifnotalloftheinformationrequiredby229.33(b)isavailable,thepayingbank
maymakeaclaimagainstanypriorbankhandlingthecheckasprovidedin
229.35(b).
G.229.30(g)RelianceonRoutingNumber
1.Although229.35andappendixDrequirethatthedepositarybankindorsement
containitsninedigitroutingnumber,itispossiblethatareturnedcheckwillbear
theroutingnumberofthedepositarybankinfractional,ninedigit,orotherform.
Thisparagraphpermitsapayingbanktorelyontheroutingnumberofthe
depositarybankasitappearsonthecheck(inthedepositarybank'sindorsement)whenitisreceivedbythe
payingbank.
2.Ifthereareinconsistentroutingnumbers,thepayingbankmayrelyonanyroutingnumberdesignatingthedepositary
bank.Thepayingbankisnotrequiredtoresolvetheinconsistencypriortoprocessingthecheck.Thepayingbankremains
subjecttotherequirementtoactingoodfaithanduseordinarycareunder229.38(a).

XVII.Section229.31ReturningBank'sResponsibilityforReturnofChecks
A.229.31(a)ReturnofChecks
1.Thestandardsforreturnofchecksestablishedbythissectionaresimilarto
thoseforpayingbanksin229.30(a).Thissectionrequiresareturningbankto
returnareturnedcheckexpeditiouslyifitagreestohandlethereturnedcheckfor
expeditiousreturnunderthisparagraph.Ineffect,thereturningbankisanagentor
subagentofthepayingbankandasubagentofthedepositarybankforthe
purposesofreturningthecheck.
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2.Areturningbankagreestohandleareturnedcheckforexpeditiousreturntothe
depositarybankifit:
a.Publishesordistributesavailabilityschedulesforthereturnofreturnedchecks
andacceptsthereturnedcheckforreturn
b.Handlesareturnedcheckforreturnthatitdidnothandleforforwardcollection
or
c.Otherwiseagreestohandleareturnedcheckforexpeditiousreturn.
3.Twoday/fourdaytest.Asinthecaseofapayingbank,areturningbank's
returnofareturnedcheckisexpeditiousifitmeetseitheroftwotests.Underthe
"twoday/fourday"test,thecheckmustbereturnedsothatitwouldnormallybe
receivedbythedepositarybankby4:00p.m.eithertwoorfourbusinessdaysafter
thecheckwaspresentedtothepayingbank,dependingonwhetherornotthe
payingbankislocatedinthesamecheckprocessingregionasthedepositary
bank.Thisisthesametestasthetwoday/fourdaytestapplicabletopaying
banks.(SeeCommentaryto229.30(a).)Whileareturningbankwillnothavefirst
handknowledgeofthedayonwhichacheckwaspresentedtothepayingbank,
returningbanksmay,byagreement,allocatewithpayingbanksliabilityforlate
returnbasedonthedelayscausedbyeach.Ineffect,thetwoday/fourdaytest
protectsallpayingandreturningbanksthatreturnchecksfromclaimsthatthey
failedtoreturnacheckexpeditiously,wherethecheckisreturnedwithinthe
specifiedtimefollowingpresentmenttothepayingbank,oralatertimeaswould
resultfromunforeseendelays.
4.Forwardcollectiontest.
a.The"forwardcollection"testissimilartotheforwardcollectiontestforpaying
banks.Underthistest,areturningbankmusthandleareturnedcheckinthesame
mannerthatasimilarlysituatedcollectingbankwouldhandleacheckofsimilar
sizedrawnonthedepositarybankforforwardcollection.Asimilarlysituatedbank
isabank(otherthanaFederalReservebank)thatisofsimilarassetsizeand
checkhandlingactivityinthesamecommunity.Abankhassimilarcheckhandling
activityifithandlesasimilarvolumeofchecksforforwardcollectionastheforward
collectionvolumeofthereturningbank.
b.Undertheforwardcollectiontest,areturningbankmustacceptreturned
checks,includingbothqualifiedandotherreturnedchecks("rawreturns"),at
approximatelythesametimesandprocessthemaccordingtothesamegeneral
schedulesascheckshandledforforwardcollection.Thus,areturningbank
generallymustprocessevenrawreturnsonanovernightbasis,unlessitstimelimit
isextendedbyonedaytoconvertarawreturntoaqualifiedreturnedcheck.
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5.Cutoffhours.Areturningbankmayestablishearliercutoffhoursforreceiptof
returnedchecksthanforreceiptofforwardcollectionchecks,butthecutoffhour
forreturnedchecksmaynotbeearlierthan2:00p.m.Thereturningbankalsomay
setdifferentsortingrequirementsforreturnedchecksthanthoseapplicableto
otherchecks.Thus,areturningbankmayallowitselfmoreprocessingtimefor
returnsthanforforwardcollectionchecks.Allreturnedchecksreceivedbyacutoff
hourforreturnedchecksmustbeprocessedanddispatchedbythereturningbank
bythetimethatitwoulddispatchforwardcollectionchecksreceivedatacorrespondingforward
collectioncutoffhourthatprovidesforthesameorfasteravailabilityforchecksdestinedforthesamedepositarybanks.
6.Examples.
a.IfareturningbankreceivesareturnedcheckbyitscutoffhourforreturnedchecksonMondayandthedepositarybank
andthereturningbankareparticipantsinthesameclearinghouse,thereturningbankshouldarrangetohavethereturned
checkreceivedbythedepositarybankbyTuesday.Thiswouldbethesamedaythatitwoulddeliveraforwardcollection
checkdrawnonthedepositarybankandreceivedbythereturningbankatacorrespondingforwardcollectioncutoffhour
onMonday.
b.i.Ifareturningbankreceivesareturnedcheck,andthereturningbanknormallywouldcollectaforwardcollectioncheck
drawnonthedepositarybankbysendingtheforwardcollectionchecktoacorrespondentoraFederalReservebankby
courier,thereturningbankcouldsendthereturnedcheckinthesamemannerifthecorrespondenthasagreedtohandle
returnedchecksexpeditiouslyunder229.31(a).Thereturningbankwouldhavetodeliverthecheckbythe
correspondent'sorFederalReservebank'scutoffhourforreturnedchecksthatcorrespondstoitscutoffhourforforward
collectionchecksdrawnonthedepositarybank.Areturningbankmaytakeadaytoconvertachecktoaqualifiedreturned
check.Wheretheforwardcollectionchecksaredeliveredbycourier,mailingthereturnedcheckswouldnotmeettheduty
establishedbythissectionforreturningbanks.
ii.Areturningbankmustreturnachecktothedepositarybankbycourierorothermeansasfastasacourier,ifsimilarly
situatedreturningbanksusecourierstodelivertheirforwardcollectioncheckstothedepositarybank.
iii.Forsomedepositarybanks,nocommunitypracticeexistsastodeliveryofchecks.Forexample,acreditunionwhose
customersusepayablethroughdraftsnormallydoesnothavecheckspresentedtoitbecausethedraftsarenormallysent
tothepayablethroughbankforcollection.Inthesecircumstances,thecommunitystandardisestablishedbytakinginto
accountthedollarvolumeofthechecksbeingsenttothedepositarybankandthelocationofthedepositarybank,and
determiningwhethersimilarlysituatedbanksnormallywoulddeliverforwardcollectioncheckstothedepositarybank,
takingintoaccounttheparticularrisksassociatedwithreturnedchecks.Wherethecommunitystandarddoesnotrequire
courierdelivery,othermeansofdelivery,includingmail,areacceptable.
7.Qualifiedreturnedchecks.
a.Theexpeditiousreturnrequirementforareturningbankinthisregulationismorestringentinmanycasesthantheduty
ofacollectingbanktoexerciseordinarycareunderU.C.C.4202inreturningacheck.Areturningbankisunderadutyto
actasexpeditiouslyinreturningacheckasitwouldintheforwardcollectionofacheck.Notwithstandingitsdutyof
expeditiousreturn,itsmidnightdeadlineunderU.C.C.4202and210.12(a)ofRegulationJ(12CFR210.12(a)),under
theforwardcollectiontest,areturningbankmaytakeanextradaytoqualifyareturnedcheck.Aqualifiedreturnedcheck
willbehandledbysubsequentreturningbanksmoreefficientlythanarawreturn.Thisparagraphgivesareturningbankan
extrabusinessdaybeyondthetimethatwouldotherwiseberequiredtoreturnthereturnedchecktoconvertareturned
checktoaqualifiedreturnedcheck.Thequalifiedreturnedcheckmustincludetheroutingnumberofthedepositarybank,
theamountofthecheck,andareturnidentifierencodedonthecheckinmagneticink.Acheckthatisconvertedtoa
qualifiedreturnedcheckmustbeencodedinaccordancewithANSX9.13fororiginalchecksorANSX9.100140for
substitutechecks.
b.Ifthereturningbankissendingthereturnedcheckdirectlytothedepositarybank,thisextradayisnotavailable
becausepreparingaqualifiedreturnedcheckwillnotexpeditehandlingbyotherbanks.Ifthereturningbankmakesan
encodingerrorincreatingaqualifiedreturnedcheck,itmaybeliableunder229.38forlossescausedbyanynegligence
orunder229.34(c)(3)forbreachofanencodingwarranty.Thereturningbankwouldnotlosetheonedayextension
availabletoitforcreatingaqualifiedreturnedcheckbecauseofanencodingerror.
8.Routingofreturnedcheck.
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a.Under229.31(a),thereturningbankisauthorizedtoroutethereturnedcheckinavarietyofways:
i.Itmaysendthereturnedcheckdirectlytothedepositarybankbycourierorotherexpeditiousmeansofdeliveryor
ii.Itmaysendthereturnedchecktoanyreturningbankagreeingtohandlethereturnedcheckforexpeditiousreturntothe
depositarybankunderthissectionregardlessofwhetherornotthereturningbankhandledthecheckforforwardcollection.
b.Ifthereturningbankelectstosendthereturnedcheckdirectlytothedepositarybank,itisnotrequiredtosendthe
checktothebranchofthedepositarybankthatfirsthandledthecheck.Thereturnedcheckmaybesenttothedepositary
bankatanylocationpermittedunder229.32(a).
9.Responsibilitiesofreturningbank.Inmeetingtherequirementsofthissection,thereturningbankisresponsibleforits
ownactions,butnotthoseofthepayingbank,otherreturningbanks,orthedepositarybank.(SeeU.C.C.4202(c)
regardingtheresponsibilityofcollectingbanks.)Forexample,ifthepayingbankhasdelayedthestartofthereturn
process,butthereturningbankactsinatimelymanner,thereturningbankmaysatisfytherequirementsofthissection
evenifthedelayedreturnresultsinalosstothedepositarybank.(See229.38.)Areturningbankmust

handleanoticeinlieuofreturnasexpeditiouslyasareturnedcheck.
10.U.C.C.sectionsaffected.Thisparagraphdirectlyaffectsthefollowing
provisionsoftheU.C.C.,andmayaffectothersectionsorprovisions:
a.Section4202(b),inthattimelimitsrequiredbythatsectionmaybeaffectedby
theadditionalrequirementtomakeanexpeditiousreturn.
b.Section4214(a),inthatsettlementforreturnedchecksismadeunder
229.31(c)andnotbychargebackofprovisionalcredit,andinthatthetimelimits
maybeaffectedbytheadditionalrequirementtomakeanexpeditiousreturn.
B.229.31(b)UnidentifiableDepositaryBank
1.Thissectionissimilarto229.30(b),butappliestoreturningbanksinsteadof
payingbanks.Insomecasesareturningbankwillbeunabletoidentifythe
depositarybankwithrespecttoacheck.Returningbanksagreeingtohandle
checksforreturntodepositarybanksunder229.31(a)areexpectedtobeexpert
inidentifyingdepositarybankindorsements.Inthelimitedcaseswherethe
returningbankcannotidentifythedepositarybank,thereturningbankmaysend
thereturnedchecktoareturningbankthatagreestohandlethereturnedcheckfor
expeditiousreturnunder229.31(a),oritmaysendthereturnedchecktoabank
thathandledthecheckforforwardcollection,evenifthatbankdoesnotagreeto
handlethereturnedcheckexpeditiouslyunder229.31(a).
2.Ifthereturningbankitselfhandledthecheckforforwardcollection,itmaysend
thereturnedchecktoacollectingbankthatwaspriortoitintheforwardcollection
process,whichwillbebetterabletoidentifythedepositarybank.Ifthereareno
priorcollectingbanks,thereturningbankmustresearchthecollectionofthecheck
andidentifythedepositarybank.Asinthecaseofpayingbanksunder229.30(b),a
returningbank'ssendingofachecktoabankthathandledthecheckforforward
collectionunder229.31(b)isnotsubjecttotheexpeditiousreturnrequirementsof
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229.31(a).
3.Thereturningbank'sreturnofacheckunderthisparagraphissubjecttothe
midnightdeadlineunderU.C.C.4202(b).(Seedefinitionofreturningbankin
229.2(cc).)
4.Whereareturningbankreceivesacheckthatitdoesnotagreetohandle
expeditiouslyunder229.31(a),suchasachecksenttoitunder229.30(b),but
thereturningbankisabletoidentifythedepositarybank,thereturningbankmust
thereafterreturnthecheckexpeditiouslytothedepositarybank.Thereturning
bankreturnsacheckexpeditiouslyunderthisparagraphifitreturnsthecheckby
thesamemeansitwouldusetoreturnacheckdrawnonittothedepositarybank
orbyotherreasonablypromptmeans.
5.Asinthecaseofapayingbankreturningacheckunder229.30(b),areturning
bankreturningacheckunderthisparagraphtoabankthathasnotagreedto
handlethecheckexpeditiouslymustadvisethatbankthatitisunabletoidentify
thedepositarybank.Thisadvicemustbeconspicuous,suchasastamponeach
checkforwhichthedepositarybankisunknownifsuchchecksarecommingled
withotherreturnedchecks,or,ifsuchchecksaresentinaseparatecashletter,byonenoticeonthe
cashletter.Thereturnedcheckmaynotbepreparedforautomatedreturn.
C.229.31(c)Settlement
1.UndertheU.C.C.,acollectingbankreceivessettlementforacheckwhenitispresentedtothepayingbank.Thepaying
bankmayrecoverthesettlementwhenthepayingbankreturnsthechecktothepresentingbank.Underthisregulation,
however,thepayingbankmayreturnthecheckdirectlytothedepositarybankorthroughreturningbanksthatdidnot
handlethecheckforforwardcollection.Onthesemoreefficientreturnpaths,thepayingbankdoesnotrecoverthe
settlementmadetothepresentingbank.Thus,thisparagraphrequiresthereturningbanktosettleforareturnedcheck
(eitherwiththepayingbankoranotherreturningbank)inthesamewaythatitwouldsettleforasimilarcheckforforward
collection.Toachieveuniformity,thisparagraphappliesevenifthereturningbankhandledthecheckforforwardcollection.
2.Anyreturningbank,includingonethathandledthecheckforforwardcollection,mayprovideavailabilityforreturned
checkspursuanttoanavailabilityscheduleasitdoesforforwardcollectionchecks.Thesesettlementsbyreturningbanks,
aswellassettlementsbetweenbanksmadeduringtheforwardcollectionofacheck,areconsideredfinalwhenmade
subjecttoanydefermentofavailability.(See229.36(d)andCommentaryto229.35(b).)

3.Areturningbankmayvarythesettlementmethoditusesbyagreementwith
payingbanksorotherreturningbanks.Specialrulesapplyinthecaseof
insolvencyofbanks.(see229.39.)Ifpaymentcannotbeobtainedfromadepositary
orreturningbankbecauseofitsinsolvencyorotherwise,recoverycanbehadby
returning,paying,andcollectingbanksfrompriorbanksonthisbasisoftheliability
ofpriorbanksunder229.35(b).
4.ThisparagraphaffectsU.C.C.4214(a)inthatapayingorcollectingbankdoes
notordinarilyhavearighttochargebackagainstthebankfromwhichitreceived
thereturnedcheck,althoughitisentitledtosettlementifitreturnsthereturned
checktothatbank,andmayaffectothersectionsorprovisions.Under229.36(d),
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abankcollectingacheckremainsliabletopriorcollectingbanksandthe
depositarybank'scustomerundertheU.C.C.
D.229.31(d)Charges
1.Thisparagraphpermitsanyreturningbank,evenonethathandledthecheckfor
forwardcollection,toimposeafeeonthepayingbankorotherreturningbankfor
itsserviceinhandlingareturnedcheck.Whereaclaimismadeunder229.35(b),
thebankonwhichtheclaimismadeisnotauthorizedbythisparagraphtoimpose
achargefortakingupacheck.Thisparagraphpreemptsstatelawstotheextent
thattheselawspreventreturningbanksfromchargingfeesforhandlingreturned
checks.
E.229.31(e)DepositaryBankWithoutAccounts
1.Thisparagraphissimilarto229.30(e)andrelievesareturningbankofits
obligationtomakeexpeditiousreturntoadepositarybankthatdoesnotmaintain
anyaccounts.(SeetheCommentaryto229.30(e).)
F.229.31(f)NoticeinLieuofReturn
1.Thisparagraphissimilarto229.30(f)andauthorizesareturningbankto
originateanoticeinlieuofreturnifthereturnedcheckisunavailableforreturn.
Noticeinlieuofreturnispermittedonlywhenabankdoesnothaveandcannot
obtainpossessionofthecheckormustretainpossessionofthecheckforprotest.
Acheckisnotunavailableforreturnifitismerelydifficulttoretrievefromafiling
systemorfromstoragebyakeeperofchecksinatruncationsystem.(Seethe
Commentaryto229.30(f).)
G.229.31(g)RelianceonRoutingNumber
1.Thisparagraphissimilarto229.30(g)andpermitsareturningbanktorelyon
routingnumbersappearingonareturnedchecksuchasroutingnumbersinthe
depositarybank'sindorsementoronqualifiedreturnedchecks.(Seethe
Commentaryto229.30(g).)
XVIII.Section229.32DepositaryBank'sResponsibilityforReturnedChecks

A.229.32(a)AcceptanceofReturnedChecks
1.Thisregulationseekstoencouragedirectreturnsbypayingandreturningbanks
andmayresultinanumberofbankssendingcheckstodepositarybankswithno
preexistingarrangementsastowherethereturnedchecksshouldbedelivered.
Thisparagraphstateswherethedepositarybankisrequiredtoacceptreturned
checksandwrittennoticesofnonpaymentunder229.33.(Theselocationsdiffer
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fromlocationsatwhichadepositarybankmustacceptelectronicnotices.)Itis
derivedfromU.C.C.3111,whichspecifiesthatpresentmentforpaymentmaybe
madeattheplacespecifiedintheinstrumentor,ifthereisnone,attheplaceof
businessofthepartytopay.Inthecaseofreturnedchecks,thedepositarybank
doesnotprintthecheckandcanonlyspecifytheplaceof"payment"ofthe
returnedcheckinitsindorsement.
2.Theparagraphspecifiesfourlocationsatwhichthedepositarybankmust
acceptreturnedchecks:
a.Thedepositarybankmustacceptreturnedchecksatanylocationatwhichit
requestspresentmentofforwardcollectioncheckssuchasaprocessingcenter.A
depositarybankdoesnotrequestpresentmentofforwardcollectionchecksata
branchofthebankmerelybypayingcheckspresentedoverthecounter.
b.i.Ifthedepositarybankindorsementstatesthenameandaddressofthe
depositarybank,itmustacceptreturnedchecksatthebranch,headoffice,orother
location,suchasaprocessingcenter,indicatedbytheaddress.Iftheaddressis
toogeneraltoidentifyaparticularlocation,thenthedepositarybankmustaccept
returnedchecksatanybranchorheadofficeconsistentwiththeaddress.If,for
example,theaddressis"NewYork,NewYork,"eachbranchinNewYorkCitymust
acceptreturnedchecks.
ii.Ifnoaddressappearsinthedepositarybank'sindorsement,thedepositary
bankmustacceptreturnedchecksatanybranchorheadofficeassociatedwiththe
depositarybank'sroutingnumber.Theofficesassociatedwiththeroutingnumber
ofabankarefoundinAmericanBankersAssociationKeytoRoutingNumbers,
publishedbyanagentoftheAmericanBankersAssociation,whichlistsacityand
stateaddressforeachroutingnumber.
iii.Thedepositarybankmustacceptreturnedchecksattheaddressinits
indorsementandatanaddressassociatedwithitsroutingnumberinthe
indorsementifthewrittenaddressintheindorsementandtheaddressassociated
withtheroutingnumberintheindorsementarenotinthesamecheckprocessing
region.Under229.30(g)and229.31(g),apayingorreturningbankmayrelyonthe
depositarybank'sroutingnumberinitsindorsementinhandlingreturnedchecks
andisnotrequiredtosendreturnedcheckstoanaddressinthedepositarybank's
indorsementthatisnotinthesamecheckprocessingregionastheaddress
associatedwiththeroutingnumberintheindorsement.
iv.Ifnoroutingnumberoraddressappearsinitsindorsement,thedepositarybank
mustacceptareturnedcheckatanybranchorheadofficeofthebank.The
indorsementrequirementof229.35andappendixDrequiresthatthe
indorsementcontainaroutingnumber,aname,andalocation.Consequently,this
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provision,aswellasparagraph(a)(2)(ii)ofthissection,onlyapplieswherethe
depositarybankhasfailedtocomplywiththeindorsementrequirement.
3.Foreaseofprocessing,adepositarybankmayrequirethatreturningorpaying
banksreturningcheckstoitseparatereturnedchecksfromforwardcollection
checksbeingpresented.
4.Under229.33(d),adepositarybankreceivingareturnedcheckornoticeof
nonpaymentmustsendnoticetoitscustomerbyitsmidnightdeadlineorwithina
longerreasonabletime.
B.229.32(b)Payment
1.Asdiscussedinthecommentaryto229.31(c),underthisregulationapaying
orreturningbankdoesnotobtaincreditforareturnedcheckbychargebackbut
by,ineffect,presentingthereturnedchecktothedepositarybank.Thisparagraph
imposesanobligationto"pay"areturnedcheckthatissimilartotheobligationtopayaforwardcollectioncheck
byapayingbank,exceptthatthedepositarybankmaynotreturnareturnedcheckforwhichitisthedepositarybank.Also,
certainmeansofpayment,suchasremittancedrafts,maybeusedonlywiththeagreementofthereturningbank.
2.Thedepositarybankmustpayforareturnedcheckbythecloseofthebankingdayonwhichitreceivedthereturned
check.ThedayonwhichareturnedcheckisreceivedisdeterminedpursuanttoU.C.C.4108,whichpermitsthebankto
establishacutoffour,generallynotearlierthan2:00p.m.,andtreatchecksreceivedafterthathourasbeingreceivedon
thenextbankingday.Ifthedepositarybankisunabletomakepaymenttoareturningorpayingbankonthebankingday
thatitreceivesthereturnedcheck,becausethereturningorpayingbankisclosedforaholidayorbecausethetimewhen
thedepositarybankreceivedthecheckisafterthecloseofFedwire,e.g.,westcoastbankswithlatecutoffhours,payment
maybemadeonthenextbankingdayofthebankreceivingpayment.
3.Paymentmustbemadesothatthefundsareavailableforusebythebankreturningthechecktothedepositarybank
onthedaythecheckisreceivedbythedepositarybank.Forexample,adepositarybankmeetsthisrequirementifitsends
awiretransferoffundstothereturningorpayingbankonthedayitreceivesthereturnedcheck,evenifthereturningor
payingbankhasclosedfortheday.Awiretransfershouldindicatethepurposeofthepayment.
Abankmustidentifyanitemofinformationifthebankisuncertainastothatitem'saccuracy.Abankmaymakethis
identificationbysettingtheitemoffwithquestionmarks,asterisks,orothersymbolsdesignatedforthispurposeby
generallyapplicableindustrystandards.
4.Thedepositarybankuseanetsettlementarrangementtosettleforareturnedcheck.Bankswithnetsettlement
agreementscouldnettheappropriatecreditsanddebitsforreturnedcheckswiththeaccountingentriesforforward
collectionchecksiftheysodesired.If,forpurposesofestablishingadditionalcontrolsorforotherreasons,thebanks
involveddesiredaseparatesettlementforreturnedchecks,aseparatenetsettlementagreementcouldbeestablished.
5.Thebanksendingthereturnedchecktothedepositarybankmayagreetoacceptpaymentatalaterdateif,for
example,itdoesnotbelievethattheamountofthereturnedcheckorcheckswarrantsthecostsofsamedaypayment.
Thus,areturningorpayingbankmayagreetoacceptpaymentthroughanACHcreditordebittransferthatsettlestheday
afterthereturnedcheckisreceivedinsteadofawiretransferthatsettlesonthesameday.
6.Thisparagraphandthissubpartdonotaffectthedepositarybank'srighttorecoveraprovisionalsettlementwithits
nonbankcustomerforacheckthatisreturned.(Seealso229.19(c)(2)(ii),229.33(d)and229.35(b).)

C.229.32(c)MisroutedReturnedChecks
1.Thisparagraphpermitsabankreceivingacheckonthebasisthatitisthe
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depositarybanktosendthemisroutedreturnedchecktothecorrectdepositary
bank,ifitcanidentifythecorrectdepositarybank,eitherdirectlyorthrougha
returningbankagreeingtohandlethecheckexpeditiouslyunder229.30(a).Inthese
cases,thebankreceivingthecheckisactingasareturningbank.Alternatively,the
bankreceivingthemisroutedreturnedcheckmustsendthecheckbacktothebank
fromwhichitwasreceived.Ineithercasethebanktowhichthereturnedcheck
wasmisroutedcouldreceivesettlementforthecheck.Thedepositarybankwould
berequiredtopayforthereturnedcheckunder229.32(b),andanyotherbankto
whichthecheckissentunderthisparagraphwouldberequiredtosettleforthe
checkasareturningbankunder229.31(c).Ifthecheckwasoriginallyreceived
"free,"thatis,withoutachargeforthecheck,thebankincorrectlyreceivingthe
checkwouldhavetoreturnthecheck,withoutacharge,tothebankfromwhichit
came.Thebanktowhichthereturnedcheckwasmisroutedisrequiredtoact
promptlybutisnotrequiredtomeettheexpeditiousreturnrequirementsof
229.31(a)however,itmustactwithinitsmidnightdeadline.Thisparagraphdoes
notaffectabank'sdutiesunder229.35(b).
D.229.32(d)Charges
1.Thisparagraphprohibitsadepositarybankfromchargingtheequivalentofapresentmentfeeforreturnedchecks.A
returningbank,however,maychargeafeeforhandlingreturnedchecks.Ifthereturningbankreceivesamixedcashletter
ofreturnedchecks,whichincludessomechecksforwhichthereturningbankalsoisthedepositarybank,thefeemaybe
appliedtoallthereturnedchecksinthecashletter.Inthecaseofasortedcashlettercontainingonlyreturnedchecksfor
whichthereturningbankisthedepositarybank,however,nofeemaybecharged.
XIX.Section229.33NoticeofNonpayment

A.229.33(a)Requirement
1.Noticeofnonpaymentasrequiredbythissectionandwrittennoticeinlieuof
returnasprovidedin229.30(f)and229.31(f)servedifferentfunctions.Thetwokinds
ofnotice,however,mustmeetthecontentrequirementsofthissection.Thepaying
bankmustsendanoticeofnonpaymentifitdecidesnottopayacheckof$2,500
ormore.Apayingbankmayrelyonanamountencodedonthecheckinmagnetic
inktodeterminewhetherthecheckisintheamountof$2,500ormore.Thenotice
ofnonpaymentcarriesnovalue,andthecheckitself(orthenoticeinlieuofreturn)
mustbereturned.Thepayingbankmustensurethatthenoticeofnonpaymentis
receivedbythedepositarybankby4:00p.m.localtimeonthesecondbusiness
dayfollowingpresentment.Abankidentifiedbyroutingnumberasthepayingbank
isconsideredthepayingbankunderthisregulationandwouldberequiredto
createanoticeofnonpaymenteventhoughthatbankdeterminedthatthecheck
wasnotdrawnbyacustomerofthatbank.(SeeCommentarytothedefinitionof
payingbankin229.2(z).)
2.Thepayingbankshouldnotsendanoticeofnonpaymentuntilithasfinally
determinednottopaythecheck.Under229.34(b),bysendingthenoticethepaying
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bankwarrantsthatithasreturnedorwillreturnthecheck.Ifapayingbanksendsa
noticeandsubsequentlydecidestopaythecheck,thepayingbankmaymitigate
itsliabilityonthiswarrantybynotifyingthedepositarybankthatthecheckhas
beenpaid.
3.Becausethereturnofthecheckitselfmayserveastherequirednoticeof
nonpayment,inmanycasesnonoticeotherthanthereturnofthecheckwillbe
necessary.Forexample,inmanycasesthereturnofacheckthrougha
clearinghousetoanotherparticipantoftheclearinghousewillbemadeintimeto
meetthetimerequirementsofthissection.Ifthechecknormallywillnotbe
receivedbythedepositarybankwithinthetimelimitsfornotice,thereturnofthe
checkwillnotsatisfythenoticerequirement.Indeterminingwhetherthereturned
checkwillsatisfythenoticerequirement,thepayingbankmayrelyonthe
availabilityschedulesofreturningbanksasthetimethatthereturnedcheckis
expectedtobedeliveredtothedepositarybankunlessthepayingbankhasreason
toknowtheavailabilityschedulesareinaccurate.
4.Unlessthereturnedcheckisusedtosatisfythenoticerequirement,the
requirementfornoticeisindependentofanddoesnotaffecttherequirementsfor
timelyandexpeditiousreturnofthecheckunder229.30andtheU.C.C.(See
229.30(a).)Ifapayingbankfailsbothtocomplywiththissectionandtocomplywith
therequirementsfortimelyandexpeditiousreturnunder229.30andtheU.C.C.
andRegulationJ(12CFRpart210),thepayingbankshallbeliableundereither
thissectionorsuchotherrequirements,butnotboth.(See229.38(b).)Apaying
bankisnotresponsibleforfailuretogivenoticeofnonpaymenttoapartythathas
breachedapresentmentwarrantyunderU.C.C.4208,notwithstandingthatthe
payingbankmayhavereturnedthecheck.(SeeU.C.C.4208and4302.)
B.229.33(b)ContentofNotices
1.Thisparagraphprovidesthatthenoticemustataminimumcontaineight
elementswhicharespecificallyenumerated.Inthecaseofwrittennotices,the
nameandroutingnumberofthedepositarybankalsoarerequired.
2.Ifthepayingbankcannotidentifythedepositarybankfromthecheckitself,itmaywishtosendthenoticetotheearliest
collectingbankitcanidentifyandindicatethatthenoticeisnotbeingsenttothedepositarybank.Thecollectingbankmay
beabletoidentifythedepositarybankandforwardthenotice,butisundernodutytodoso.Inaddition,thecollectingbank
mayactuallybethedepositarybank.
C.229.33(c)AcceptanceofNotice
1.Inthecaseofawrittennotice,thedepositarybankisrequiredtoacceptnoticesatthelocationsspecifiedin229.32(a).
Inthecaseoftelephonenotices,thebankmaynotrefusetoacceptnoticesatthetelephonenumbersidentifiedinthis
section,butmaytransfercallsorusearecordingdevice.Banksmayvarybyagreementthelocationandmannerinwhich
noticesarereceived.
D.229.33(d)NotificationtoCustomer

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1.Thisparagraphrequiresadepositarybanktonotifyitscustomerofnonpaymentuponreceiptofareturnedcheckor
noticeofnonpayment,regardlessoftheamountofthecheckornotice.Thisrequirementissimilartotherequirementunder
theU.C.C.asinterpretedinApplianceBuyersCreditCorp.v.ProspectNationalBank,708F.2d290(7thCir.1983),thata
depositarybankmaybeliablefordamagesincurredbyitscustomerforitsfailuretogiveitscustomertimelyadvicethatit
hasreceivedanoticeofnonpayment.Noticealsomustbegivenifadepositarybankreceivesanoticeofrecoveryunder
229.35(b).Abankthatchoosestoprovidethenoticerequiredby229.33(d)in

writingmaysendthenoticebyemailorfacsimileifthebanksendsthenoticeto
theemailaddressorfacsimilenumberspecifiedbythecustomerforthatpurpose.
Thenoticetothecustomerrequiredunderthisparagraphalsomaysatisfythe
noticerequirementof229.13(g)ifthedepositarybankinvokesthereasonable
causeexceptionof229.13(e)duetothereceiptofanoticeofnonpayment,
providedthenoticemeetsalltherequirementsof229.13(g).Thenoticetothe
customerrequiredunderthisparagraphalsomaysatisfythenoticerequirementof
229.13(g)ifthedepositarybankinvokesthereasonablecauseexceptionof
229.13(e)duetothereceiptofanoticeofnonpayment,providedthenotice
meetstheotherrequirementsof229.13(g).
XX.Section229.34Warranties
A.229.34(a)WarrantyofReturnedCheck
1.Thisparagraphincludeswarrantiesthatareturnedcheck,includinganoticein
lieuofreturn,wasreturnedbythepayingbank,orinthecaseofacheckpayable
byabankandpayablethroughanotherbank,thebankbywhichthecheckis
payable,withinthedeadlineundertheU.C.C.(subjecttoanyclaimsordefenses
undertheU.C.C.,suchasbreachofapresentmentwarranty),RegulationJ(12
CFRpart210),or229.30(c)thatthepayingorreturningbankisauthorizedtoreturn
thecheckthatthereturnedcheckhasnotbeenmateriallyalteredandthat,inthe
caseofanoticeinlieuofreturn,theoriginalcheckhasnotbeenandwillnotbe
returnedforpayment.Thewarrantydoesnotincludeawarrantythatthebank
compliedwiththeexpeditiousreturnrequirementsof229.30(a)and229.31(a).These
warrantiesdonotapplytochecksdrawnontheUnitedStatesTreasury,toU.S.
PostalServicemoneyorders,ortochecksdrawnonastateoraunitofgeneral
localgovernmentthatarenotpayablethroughoratabank.(See229.42.)
B.229.34(b)WarrantyofNoticeofNonpayment
1.Thisparagraphprovidesforwarrantiesfornoticesofnonpayment.This
warrantydoesnotincludeawarrantythatthenoticeisaccurateandtimelyunder
229.33.Therequirementsof229.33thatarenotcoveredbythewarrantyare
subjecttotheliabilityprovisionsof229.38.Thesewarrantiesaredesignedtogive
thedepositarybankmoreconfidenceinrelyingonnoticesofnonpayment.This
paragraphimposesliabilityonapayingbankthatgivesnoticeofnonpaymentand
thensubsequentlyreturnsthecheck.(SeeCommentaryon229.33(a).)
C.229.34(c)WarrantyofSettlementAmount,Encoding,andOffset
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1.Paragraph(c)(1)providesthatabankthatpresentsandreceivessettlementforcheckswarrantstothepayingbankthat
thesettlementitdemands(e.g.,asnotedonthecashletter)equalsthetotalamountofthechecksitpresents.This
paragraphgivesthepayingbankawarrantyclaimagainstthepresentingbankfortheamountofanyexcesssettlement
madeonthebasisoftheamountdemanded,plusexpenses.Iftheamountdemandedisunderstated,apayingbank
dischargesitssettlementobligationunderU.C.C.4301bypayingtheamountdemanded,butremainsliableforthe
amountbywhichthedemandisunderstatedthepresentingbankisneverthelessliableforexpensesinresolvingthe
adjustment.
2.Whenchecksorreturnedchecksaretransferredtoacollecting,returning,ordepositarybank,thetransferbankisnot
requiredtodemandsettlement,asisrequireduponpresentmenttothepayingbank.However,oftenthechecksorreturned
checkswillbeaccompaniedbyinformation(suchasacashletterlisting)thatwillindicatethetotalofthechecksorreturned
checks.Paragraph(c)(2)providesifthetransferorbankincludesinformationindicatingthetotalamountofchecksor
returnedcheckstransferred,itwarrantsthattheinformationiscorrect(i.e.,equalstheactualtotaloftheitems).
3.Paragraph(c)(3)providesthatabankthatpresentsortransfersacheckorreturnedcheckwarrantstheaccuracyofthe
magneticinkencodingthatwasplacedontheitemafterissue,andthatexistsatthetimeofpresentmentortransfer,toany
bankthatsubsequentlyhandlesthecheckorreturnedcheck.UnderU.C.C.4209(a),onlytheencoder(ortheencoder
andthedepositarybank,iftheencoderisacustomerofthedepositarybank)warrantstheencodingaccuracy,thusany
claimsonthewarrantymustbedirectedtotheencoder.Paragraph(c)(3)expandsontheU.C.C.byprovidingthatallbanks
thattransferorpresentacheckorreturnedcheckmaketheencodingwarranty.Inaddition,undertheU.C.C.,theencoder
makesthewarrantytosubsequentcollectingbanksandthepayingbank,whileparagraph(c)(3)providesthatthewarranty
ismadetobanksinthereturnchainaswell.Paragraph(c)(3)appliestoallMICRlineencodingonasubstitutecheck.
4.Apayingbankthatsettlesforanoverstatedcashletterbecauseofamisencodedcheckmaymakeawarrantyclaim
againstthepresentingbankunderparagraph(c)(1)(whichwouldrequirethepayingbanktoshowthatthecheckwaspart
oftheoverstatedcashletter)oranencodingwarrantyclaimunderparagraph(c)(3)againstthepresentingbankorany
precedingbankthathandledthemisencodedcheck.
5.Paragraph(c)(4)providesthatapayingbankoradepositarybankmaysetoffexcesssettlementpaidtoanotherbank
againstsettlementowedtothatbankforcheckspresentedorreturnedchecksreceived(forwhichitisthedepositarybank)
subsequenttotheexcesssettlement.
D.229.34(d)TransferandPresentmentWarranties
1.Abankthattransfersorpresentsaremotelycreatedcheckandreceivesasettlementorotherconsiderationwarrants
thatthepersononwhoseaccountthecheckisdrawnauthorizedtheissuanceofthecheckintheamountstatedonthe
checkandtothepayeestatedonthecheck.Thewarrantiesaregivenonlybybanksandonlytosubsequentbanksinthe
collectionchain.Thewarrantiesultimatelyshiftliabilityforthelosscreatedbyanunauthorizedremotelycreatedcheckto
thedepositarybank.Thedepositarybankcannotassertthetransferandpresentmentwarrantiesagainstadepositor.
However,adepositarybankmay,byagreement,allocateliabilityforsuchanitemtothedepositorandalsomayhavea
claimunderotherlawsagainstthatperson.
2.ThetransferandpresentmentwarrantiesforremotelycreatedcheckssupplementtheFederalTradeCommission's
TelemarketingSalesRule,whichrequirestelemarketersthatsubmitchecksforpaymenttoobtainthecustomer's"express
verifiableauthorization"(theauthorizationmaybeeitherinwritingortaperecordedandmustbemadeavailableupon
requesttothecustomer'sbank).16CFR310.3(a)(3).Thetransferandpresentmentwarrantiesshiftliabilitytothe
depositarybankonlywhentheremotelycreatedcheckisunauthorized,andwouldnotapplywhenthecustomerinitially
authorizesacheckbutthenexperiences"buyer'sremorse"andsubsequentlytriestorevoketheauthorizationbyasserting
aclaimagainstthepayingbankunderU.C.C.4401.Ifthedepositarybanksuspects"buyer'sremorse,"itmayobtainfrom
itscustomertheexpressverifiableauthorizationofthecheckbythepayingbank'scustomer,requiredundertheFederal
TradeCommission'sTelemarketingSalesRule,andusethatauthorizationasadefensetothewarrantyclaim.
3.Thescopeofthetransferandpresentmentwarrantiesforremotelycreatedchecksdiffersfromthatofthecorresponding
U.C.C.warrantyprovisionsintworespects.TheU.C.C.warrantiesdifferfromthe229.34(d)warrantiesinthattheyare
givenbyanyperson,includinganonbankdepositor,thattransfersaremotelycreatedcheckandnotjusttoabank,asis
thecaseunder229.34(d).Inaddition,theU.C.C.warrantiesstatethatthepersononwhoseaccounttheitemisdrawn
authorizedtheissuanceoftheitemintheamountforwhichtheitemisdrawn.The229.34(d)warrantiesspecificallycover
theamountaswellasthepayeestatedonthecheck.NeithertheU.C.C.warranties,northe229.34(d)warrantiesapply
tothedatestatedontheremotelycreatedcheck.
4.Abankmakingthe229.34(d)warrantiesmaydefendaclaimassertingviolationofthewarrantiesbyprovingthatthe
customerofthepayingbankisprecludedbyU.C.C.4406frommakingaclaimagainstthepayingbank.Thismaybethe
case,forexample,ifthecustomerfailedtodiscovertheunauthorizedremotelycreatedcheckinatimelymanner.
5.Thetransferandpresentmentwarrantiesforaremotelycreatedcheckapplytoaremotelycreatedcheckthathasbeen
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reconvertedtoasubstitutecheck.
E.229.34(d)Damages
1.Thisparagraphadoptsforthewarrantiesin229.34(a),(b),and(c)thedamagesprovidedinU.C.C.4207(c)and4A
506(b).(Seedefinitionofinterestcompensationin229.2(oo).)

F.229.34(e)TenderofDefense
1.ThisparagraphadoptsforthisregulationthevouchinginprovisionsofU.C.C.3
119.
G.F.229.34(f)NoticeofClaim
1.ThisparagraphadoptsthenoticeprovisionsofU.C.C.sections4207(d)and4
208(e).Thetimelimitsetforthinthisparagraphappliestonoticesofclaimsfor
warrantybreachesonly.Asprovidedin229.38(g),allactionsunderthissection
mustbebroughtwithinoneyearafterthedateoftheoccurrenceoftheviolation
involved.
XXI.Section229.35Indorsements
A.229.35(a)IndorsementStandards
1.ThissectionandappendixDrequirebankstouseastandardformof
indorsementwhenindorsingchecksduringtheforwardcollectionandreturn
process.Thestandardprovidesforindorsementsbyallcollectingandreturning
banks,plusauniquestandardfordepositorybankindorsements.Itisdesignedto
facilitatetheidentificationofthedepositarybankandthepromptreturnofchecks.
Theregulationplacesadutyonbankstoensurethattheirindorsementscanbe
interpretedbyanyperson.Theindorsementstandardspecifiestheinformation
eachindorsementmustcontainanditslocationandinkcolor.
2.Banksgenerallyapplyindorsementstoapapercheckinoneoftwoways:(1)
banksprintor"spray"indorsementsontoacheckwhenthecheckisprocessed
throughthebanks"automatedchecksorters(regardlessofwhetherthechecksare
originalchecksorsubstitutechecks),and(2)reconvertingbanksprintor"overlay"
previouslyappliedelectronicindorsementsandtheirownindorsementsand
identificationsontoasubstitutecheckatthetimethatthesubstitutecheckis
created.Ifasubsequentsubstitutecheckiscreatedinthecourseofcollectionor
return,thatsubstitutecheckwillcontain,initsimageofthebackoftheprevious
substitutecheck,reproductionsofindorsementsthatweresprayedoroverlaidonto
thepreviousitem.Forpurposesoftheindorsementstandardsetforthinappendix
D,areproductionofapreviouslyappliedsprayedoroverlaidindorsement
containedwithinanimageofacheckdoesnotconstitute"anindorsementthat
previouslywasappliedelectronically."Toaccommodatethesetwoindorsementscenarios,theappendixincludestwo
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indorsementlocationspecifications:onestandardappliestobankssprayingindorsementsontoexistingpaperoriginal
checksandsubstitutechecks,andanotherappliestoreconvertingbanksoverlayingindorsementsthatpreviouslywere
appliedelectronicallyandtheirownindorsementsontosubstitutechecksatthetimethesubstitutechecksarecreated.
3.Abankmightusecheckprocessingequipmentthatcapturesanimageofacheckpriortosprayinganindorsementonto
thatitem.Ifthebanktruncatesthatitem,itshouldensurethatitalsoappliesanindorsementtotheitemelectronically.A
reconvertingbanksatisfiesitsobligationtopreserveallpreviouslyappliedindorsementsbyoverlayingabank's
indorsementthatpreviouslywasappliedelectronicallyontoasubstitutecheckthatthereconvertingbankcreates.
4.ThelocationofanindorsementappliedtoanoriginalpapercheckinaccordancewithappendixDmayshiftifthatcheck
istruncatedandlaterreconvertedtoasubstitutecheck.Ifanindorsementappliedtotheoriginalcheckinaccordancewith
appendixDisoverwrittenbyasubsequentindorsementappliedtothesubstitutecheckinaccordancewithappendixD,
thenoneorbothofthoseindorsementscouldberenderedillegible.Asexplainedin229.38(d)andthecommentary
thereto,areconvertingbankisliableforlossesassociatedwithindorsementsthatarerenderedillegibleasaresultofcheck
substitution.
5.Toensurethatindorsementscanbeeasilyreadandwouldremainlegibleafteranimageofacheckiscaptured,the
standardrequiresallindorsementsappliedtooriginalchecksandsubstitutechecktobeprintedinblackinkasofJanuary
1,2006.
6.Thestandardrequiresthedepositarybank'sindorsementtoinclude(1)itsninedigitroutingnumbersetoffbyanarrow
ateachendoftheroutingnumberand,ifthedepositarybankisareconvertingbankwithrespecttothecheck,anasterisk
outsidethearrowateachendoftheroutingnumbertoidentifythebankasareconvertingbank(2)theindorsementdate
and(3)iftheindorsementisappliedphysically,nameorlocationinformation.Thestandardalsopermitsbutdoesnot
requiretheindorsementtoincludeotheridentifyinginformation.Thestandardrequiresacollectingbank'sorreturning
bank'sindorsementtoincludeonly(1)thebank'sninedigitroutingnumber(withoutarrows)and,ifthecollectingbankor
returningbankisareconvertingbankwithrespecttothecheck,anasteriskateachendofthenumbertoidentifythebank
asareconvertingbank,(2)theindorsementdate,and(3)anoptionaltraceorsequencenumber.
7.Depositarybanksshouldnotincludeinformationthatcanbeconfusedwithrequiredinformation.Forexampleanine
digitzipcodecouldbeconfusedwiththeninedigitroutingnumber.
8.Adepositarybankmaywanttoincludeanaddressinitsindorsementinordertolimitthenumberoflocationsatwhichit
mustreceivereturnedchecks.Ininstanceswherethisaddressisnotconsistentwiththeroutingnumberinthe
indorsement,thedepositarybankisrequiredtoreceivereturnedchecksatabranchorheadofficeconsistentwiththe
routingnumber.Banksshouldnote,however,that229.32requiresadepositarybanktoreceivereturnedchecksatthe
location(s)atwhichitreceivesforwardcollectionchecks.
9.InadditiontoindorsingasubstitutecheckinaccordancewithappendixD,areconvertingbankmustidentifyitselfand
thetruncatingbankbyapplyingitsroutingnumberandtheroutingnumberofthetruncatingbanktothefrontofthecheckin
accordancewithappendixDandANSX9.100140.Further,ifthereconvertingbankisthepayingbank,italsomust
identifyitselfbyapplyingitsroutingnumbertothebackofthecheckinaccordancewithappendixD.Intheseinstances,the
reconvertingbankandtruncatingbankroutingnumbersareforidentificationpurposesonlyandarenotindorsementsor
acceptances.
10.UndertheU.C.C.,aspecificguaranteeofpriorindorsementisnotnecessary.(SeeU.C.C.4207(a)and4208(a).
Useofguaranteelanguageinindorsements,suchas"P.E.G."("priorindorsementsguaranteed"),mayresultinreducingthe
typesizeusedinbankindorsements,therebymakingthemmoredifficulttoread.Useofthislanguagemaymakeitmore
difficultforotherbankstoidentifythedepositarybank.Subsequentcollectingbankindorsementsmaynotincludethis
language.
11.Ifthebankmaintainingtheaccountintowhichacheckisdepositedagreeswithanotherbank(acorrespondent,ATM
operator,orlockboxoperator)tohavetheotherbankacceptreturnsandnoticesofnonpaymentforthebankofaccount,
theindorsementplacedonthecheckasthedepositarybankindorsementmaybetheindorsementofthebankthatactsas
correspondent,ATMoperator,orlockboxoperatorasprovidedinparagraph(d)ofthissection.
12.Thebacksofmanychecksbearpreprintedinformationorblackedoutareasforvariousreasons.Forexample,some
checksareprintedwithacarbonbandacrossthebackthatallowsthetransferofinformationfromthechecktoaledger
withonewriting.Also,contractsorloanagreementsareprintedoncertainchecks.Otherchecksthataremailedto
recipientsmaycontainareasonthebackthatareblackedoutsothattheymaynotbereadthroughthemailer.Onthe
depositside,thepayeeofthecheckmayplaceitsindorsementorinformationidentifyingthedrawerofthecheckinthe
areaspecifiedforthedepositarybankindorsement,thusmakingthedepositarybankindorsementunreadable.
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13.Theindorsementstandarddoesnotprohibittheuseofacarbonbandorotherprintedorwrittenmatteronthebacksof
checksanddoesnotrequirebankstoavoidplacingtheirindorsementsintheseareas.Nevertheless,checkswillbe
handledmoreefficientlyifdepositarybanksdesignindorsementstampssothattheninedigitroutingnumberavoidsthe
carbonbandarea.Indorsingpartiesotherthanbanks,e.g.,corporations,willbenefitfromthefasterreturnofchecksifthey
protecttheidentifiabilityandlegibilityofthedepositarybankindorsementbystayingclearoftheareareservedforthe
depositarybankindorsement.
14.Section229.38(d)allocatesresponsibilityforlossresultingfromadelayinreturnofa

checkduetoindorsementsthatareunreadablebecauseofmaterialonthebackof
thecheck.Thedepositarybankisresponsibleforalossresultingfromadelayin
returncausedbytheconditionofthecheckarisingafteritsissuanceuntilits
acceptancebythedepositarybankthatmadethedepositarybank'sindorsement
illegible.Thepayingbankisresponsibleforlossresultingfromadelayinreturn
causedbyindorsementsthatarenotreadablebecauseofothermaterialonthe
backofthecheckatthetimethatitwasissued.Depositaryandpayingbanksmay
shifttheseriskstotheircustomersbyagreement.
15.Thestandarddoesnotrequirethepayingbanktoindorsethecheckhowever,
ifapayingbankdoesindorseacheckthatisreturned,itshouldfollowthe
indorsementstandardforcollectingbanksreturningbanks.Thestandardrequires
collectingandreturningbankstoindorsethecheckfortracingpurposes.With
respecttotheidentificationofapayingbankthatisalsoareconvertingbank,see
thecommentaryto229.51(b)(2).
B.229.35(b)LiabilityofBankHandlingCheck
1.Whenacheckissentforforwardcollection,thecollectionprocessresultsina
chainofindorsementsextendingfromthedepositarybankthroughanysubsequent
collectingbankstothepayingbank.Thissectionextendstheindorsementchain
throughthepayingbanktothereturningbanks,andwouldpermiteachbankto
recoverfromanypriorindorseriftheclaimantbankdoesnotreceivepaymentfor
thecheckfromasubsequentbankinthecollectionorreturnchain.Forexample,if
areturningbankreturnedachecktoaninsolventdepositarybank,anddidnot
receivethefullamountofthecheckfromthefailedbank,thereturningbankcould
obtaintheunrecoveredamountofthecheckfromanybankpriortoitinthe
collectionandreturnchainincludingthepayingbank.Becauseeachbankinthe
collectionandreturnchaincouldrecoverfromapriorbank,anylosswouldfallon
thefirstcollectingbankthatreceivedthecheckfromthedepositarybank.Toavoid
circuitryofactions,thereturningbankcouldrecoverdirectlyfromthefirstcollecting
bank.UndertheU.C.C.,thefirstcollectingbankmightultimatelyrecoverfromthe
depositarybank'scustomerorfromtheotherpartiesonthecheck.
2.Whereacheckisreturnedthroughthesamebanksusedfortheforward
collectionofthecheck,priorityduringtheforwardcollectionprocesscontrolsover
priorityinthereturnprocessforthepurposeofdeterminingpriorandsubsequent
banksunderthisregulation.
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3.Whereareturningbankisinsolventandfailstopaythepayingbankorapriorreturningbankforareturnedcheck,
229.39(a)requiresthereceiverofthefailedbanktoreturnthechecktothebank

thattransferredthechecktothefailedbank.Thatbanktheneithercouldcontinue
thereturntothedepositarybankorrecoverbasedonthisparagraph.Wherethe
payingbankisinsolvent,andfailstopaythecollectingbank,thecollectingbank
alsocouldrecoverfromapriorcollectingbankunderthisparagraph,andthebank
fromwhichitrecoveredcouldinturnrecoverfromitspriorcollectingbankuntilthe
losssettledonthedepositarybank(whichcouldrecoverfromitscustomer).
4.Abankisnotrequiredtomakeaclaimagainstaninsolventbankbefore
exercisingitsrighttorecoveryunderthisparagraph.Recoverymaybemadeby
chargebackorbyothermeans.Thisrightofrecoveryalsoispermittedevenwhere
nonpaymentofthecheckistheresultoftheclaimingbank'snegligencesuchas
failuretomakeexpeditiousreturn,buttheclaimingbankremainsliableforits
negligenceunder229.38.
5.Thisliabilityisimposedonabankhandlingacheckforcollectionorreturn
regardlessofwhetherthebank'sindorsementappearsonthecheck.Noticemust
besentunderthisparagraphtoapriorbankfromwhichrecoveryissought
reasonablypromptlyafterabanklearnsthatitdidnotreceivepaymentfrom
anotherbank,andlearnstheidentityofthepriorbank.Writtennoticereasonably
identifyingthecheckandthebasisforrecoveryissufficientifthecheckisnot
available.Receiptofnoticebythebankagainstwhichtheclaimismadeisnota
preconditiontorecoverybychargebackorothermeanshowever,abankmaybe
liablefornegligenceforfailuretoprovidetimelynotice.Apayingorreturningbank
alsomayrecoverfromapriorcollectingbankasprovidedin229.30(b)and229.31(b).
Thisprovisionisnotasubstituteforapayingorreturningbankmakingexpeditious
returnunder229.30(a)or229.31(b).Thisparagraphdoesnotaffectapaying
bank'saccountabilityforacheckunderU.C.C.4215(a)and4302.Nordoesthis
paragraphaffectacollectingbank'saccountabilityunderU.C.C.4213and4
215(d).Acollectingbankbecomesaccountableuponreceiptoffinalsettlementas
providedintheforegoingU.C.C.sections.Thetermfinalsettlementin229.31(c)
and229.32(b),and229.36(d)isintendedtobeconsistentwiththeuseoftheterm
finalsettlementintheU.C.C.(e.g.,U.C.C.4213,4214,and4215).(Seealso
229.2(cc)andCommentary).
6.Thisparagraphalsoprovidesthatabankmayhavetherightsofaholderbased
onthehandlingofthecheckforcollectionorreturn.Abankmaybecomeaholder
oraholderinduecourseregardlessofwhetherpriorbankshavecompliedwiththe
indorsementstandardin229.35(a)andappendixD.
7.ThisparagraphaffectsthefollowingprovisionsoftheU.C.C.,andmayaffect
otherprovisions:
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a.Section4214(a),inthattherighttorecoveryisnotbasedonprovisional
settlement,andrecoverymaybehadfromanypriorbank.Section4214(a)would
continuetopermitadepositarybanktorecoveraprovisionalsettlementfromits
customer.(See229.33(d).)
b.Section3415andrelatedprovisions(suchassection3503),inthatsuch
provisionswouldnotapplyasbetweenbanks,orasbetweenthedepositarybank
anditscustomer.
C.229.35(c)IndorsementbyBank
1.Thissectionprotectstherightsofacustomerdepositingacheckinabank
withoutrequiringthewords"payanybank,"asrequiredbytheU.C.C.(SeeU.C.C.
4201(b).)Useofthislanguageinadepositarybank'sindorsementwillmakeit
moredifficultforotherbankstoidentifythedepositarybank.Theindorsement
standardinappendixDprohibitssuchmaterialinsubsequentcollectingbank
indorsements.Theexistenceofabankindorsementprovidesnoticeofthe
restrictiveindorsementwithoutanyadditionalwords.
D.229.35(d)IndorsementforDepositaryBank
1.Thissectionpermitsadepositarybanktoarrangewithanotherbanktoindorse
checks.Thispracticemayoccurwhenacorrespondentindorsesforarespondent,
orwhenthebankservicinganATMorlockboxindorsesforthebankmaintaining
theaccountinwhichthecheckisdepositedi.e.,thedepositarybank.Ifthe
indorsingbankappliesthedepositarybank'sindorsement,checkswillbereturnedtothedepositarybank.If
theindorsingbankdoesnotapplythedepositarybank'sindorsement,byagreementwiththedepositarybankitmayapply
itsownindorsementasthedepositarybankindorsement.Inthatcase,thedepositarybank'sownindorsementonthe
check(ifany)shouldavoidthelocationreservedforthedepositarybank.Theactualdepositarybankremainsresponsible
fortheavailabilityandotherrequirementsofSubpartB,butthebankindorsingasdepositarybankisconsideredthe
depositarybankforpurposesofsubpartC.Thecheckwillbereturned,andnoticeofnonpaymentwillbegiven,tothebank
indorsingasdepositarybank.
2.BecausethedepositarybankforSubpartBpurposeswilldesirepromptnoticeofnonpayment,itsarrangementwiththe
indorsingbankshouldprovideforpromptnoticeofnonpayment.Thebankindorsingasdepositarybankmayrequirethe
depositarybanktoagreetotakeupthecheckifthecheckisnotpaidevenifthedepositarybank'sindorsementdoesnot
appearonthecheckanditdidnothandlethecheck.Thearrangementbetweenthebanksmayconstituteanagreement
varyingtheeffectofprovisionsofsubpartCunder229.37.

XXII.Section229.36PresentmentandIssuanceofChecks
A.229.36(a)PayableThroughandPayableatChecks
1.ForpurposesofsubpartC,theregulationdefinesapayablethroughorpayable
atbank(whichwouldbedesignatedthecollectiblethroughorcollectibleatbank)
asapayingbank.Therequirementsof229.30(a)andthenoticeofnonpayment
requirementsof229.33areimposedonapayablethroughorpayableatbankand
arebasedonthetimeofreceiptoftheforwardcollectioncheckbythepayable
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throughorpayableatbank.Thisprovisionisintendedtospeedthereturnof
checksthatarepayablethroughoratabanktothedepositarybank.
B.229.36(b)ReceiptatBankOfficeorProcessingCenter
1.Thisparagraphseekstofacilitateefficientpresentmentofcheckstopromote
earlyreturnornoticeofnonpaymenttothedepositarybankandclarifiesthelawas
totheeffectofpresentmentbyroutingnumber.Thisparagraphdiffersfrom
229.32(a)becausepresentmentofchecksdiffersfromdeliveryofreturned
checks.
2.Theparagraphspecifiesfourlocationsatwhichthepayingbankmustaccept
presentmentofchecks.Wherethecheckispayablethroughabankandthecheck
issenttothatbank,thepayablethroughbankisthepayingbankforpurposesof
thissubpart,regardlessofwhetherthepayingbankmustpresentthecheckto
anotherbankortoanonbankpayorforpayment.
a.Deliveryofchecksmaybemade,andpresentmentisconsideredtooccur,ata
location(includingaprocessingcenter)requestedbythepayingbank.Thisisthe
waymostchecksarepresentedbybankstoday.Thisprovisionadoptsthecommon
lawruleofanumberoflegaldecisionsthattheprocessingcenteractsastheagent
ofthepayingbanktoacceptpresentmentandtobeginthetimeforprocessingof
thecheck.(SeealsoU.C.C.4204(c).)Ifabankdesignatesdifferentlocationsfor
thepresentmentofforwardcollectionchecksbearingdifferentroutingnumbers,for
purposesofthisparagraphitrequestspresentmentofchecksbearingaparticular
routingnumberonlyatthelocationdesignatedforreceiptofforwardcollection
checksbearingthatroutingnumber.
b.i.Deliverymaybemadeatanofficeofthebankassociatedwiththerouting
numberonthecheck.Theofficeassociatedwiththeroutingnumberofabankis
foundinAmericanBankersAssociationKeytoRoutingNumbers,publishedbyan
agentoftheAmericanBankersAssociation,whichlistsacityandstateaddressfor
eachroutingnumber.Checksgenerallyarehandledbycollectingbanksonthe
basisoftheninedigitroutingnumberencodedinmagneticink(oronthebasisof
thefractionalformroutingnumberifthemagneticinkcharactersareobliterated)on
thecheck,ratherthantheprintednameoraddress.Thedefinitionofapayingbank
in229.2(z)includesabankdesignatedbyroutingnumber,whetherornotthereisa
nameonthecheck,andwhetherornotanynameisconsistentwiththeroutingnumber.
Whereacheckispayablebyonebank,butpayablethroughanother,theroutingnumberisthatofapayablethroughbank,
notthatofthepayorbank.Asthepayorbankhasselectedthepayablethroughbankasthepointthroughwhich
presentmentistobemade,itispropertotreatthepayablethroughbankasthepayingbankforpurposesofthissection.
ii.Thereisnorequirementintheregulationthatthenameandaddressonthecheckagreewiththeaddressassociated
withtheroutingnumberonthecheck.Abankgenerallymaycontroltheuseofitsroutingnumber,justasitdoestheuseof
itsname.Theaddressassociatedwiththeroutingnumbermaybeaprocessingcenter.
iii.Insomecases,apayingbankmayhaveseveralofficesinthecityassociatedwiththeroutingnumber.Insuchcase,it
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wouldnotbereasonableorefficienttorequirethepresentingbanktosortthechecksbymorespecificbranchaddresses
thatmightbeprintedonthechecks,andtodeliverthecheckstoeachbranch.Acollectingbanknormallywoulddeliverall
checkstoonelocation.Incaseswherechecksaredeliveredtoabranchotherthanthebranchonwhichtheymaybe
drawn,computerandcouriercommunicationamongbranchesshouldpermitthepayingbanktodeterminequicklywhether
topaythecheck.
c.Ifthecheckspecifiesthenameofthepayingbankbutnoaddress,thebankmustacceptdeliveryatanyoffice.Where
deliveryismadebyapersonotherthanabank,orwheretheroutingnumberisnotreadable,deliverywillbemadebased
onthenameandaddressofthepayingbankonthecheck.Ifthereisnoaddress,deliverymaybemadeatanyofficeofthe
payingbank.ThisprovisionisconsistentwithU.C.C.3111,whichstatesthatpresentmentforpaymentmaybemadeat
theplacespecifiedintheinstrument,or,ifthereisnone,attheplaceofbusinessofthepartytopay.Thus,thereisatrade
offforapayingbankbetweenspecifyingaparticularaddressonachecktolimitlocationsofdelivery,andsimplystatingthe
nameofthebanktoencouragewidercurrencyforthecheck.
d.Ifthecheckspecifiesthenameandaddressofabranchorheadoffice,orotherlocation(suchasaprocessingcenter),
thecheckmaybedeliveredbydeliverytothatofficeorotherlocation.Iftheaddressistoogeneraltoidentifyaparticular
office,deliverymaybemadeatanyofficeconsistentwiththeaddress.Forexample,iftheaddressis"SanFrancisco,
California,"eachofficeinSanFranciscomustacceptpresentment.Thedesignationofanaddressonthecheckgenerallyis
inthecontrolofthepayingbank.
3.ThisparagraphmayaffectU.C.C.3111totheextentthattheU.C.C.requirespresentmenttooccurataplacespecified
intheinstrument.
C.229.36(c)Truncation
1.Truncationincludesavarietyofproceduresinwhichthephysicalcheckisheldordelayedbythedepositaryorcollecting
bank,andtheinformationfromthecheckistransmittedtothepayingbankelectronically.Presentmenttakesplacewhen
thepayingbankreceivestheelectronictransmission.Thisprocesshasthepotentialtoimprovetheefficiencyofcheck
processing,andexpressprovisionfortruncationandelectronicpresentmentismadeinU.C.C.4110and4406(b).This
paragraphallowstruncationbyagreementwiththepayingbankhowever,suchagreementmaynotprejudicetheinterests
ofpriorpartiestothecheck.Forexample,atruncationagreementmaynotextendthepayingbank'stimeforreturn.Such
anextensioncoulddamagethedepositarybank,whichmustmakefundsavailabletoitscustomersundermandatory
availabilityschedules.
D.229.36(d)LiabilityofBankDuringForwardCollection
1.Thisparagraphmakessettlementbetweenbanksduringforwardcollectionfinalwhenmade,subjecttoanydeferment
ofcredit,justassettlementsbetweenbanksduringthereturnofchecksarefinal.Inaddition,thisparagraphclarifiesthat
thischangedoesnotaffecttheliabilityschemeunderU.C.C.4201duringforwardcollectionsofacheck.ThatU.C.C.
sectionprovidesthat,unlessacontraryintentclearlyappears,abankisanagentorsubagentoftheownerofacheck,but
thatArticle4oftheU.C.C.applieseventhoughabankmayhavepurchasedanitemandistheownerofit.Thisparagraph
preservestheliabilityofacollectingbanktopriorcollectingbanksandthedepositarybank'scustomerfornegligence
duringtheforwardcollectionofacheckundertheU.C.C.,eventhoughthisparagraphprovidesthatsettlementbetween
banksduringforwardcollectionisfinalratherthanprovisional.Settlementbyapayingbankisnotconsideredtobefinal
paymentforthepurposesofU.C.C.4215(a)(2)or(3),becauseapayingbankhastherighttorecoversettlementfroma
returningordepositarybanktowhichitreturnsacheckunderthissubpart.OtherprovisionsoftheU.C.C.notsuperseded
bythissubpart,suchassection4202,alsocontinuetoapplytotheforwardcollectionofacheckandmayapplytothe
returnofacheck.(Seedefinitionofreturningbankin229.2(cc).)

E.229.36(e)IssuanceofPayableThroughChecks
1.Ifabankarrangesforcheckspayablebyittobepayablethroughanotherbank,
itmustrequireitscustomerstousechecksthatcontainconspicuouslyontheirface
thename,location,andfirstfourdigitsoftheninedigitroutingnumberofthebank
bywhichthecheckispayableandthelegend"payablethrough"followedbythe
nameandlocationofthepayablethroughbank.Thefirstfourdigitsofthenine
digitroutingnumberandthelocationofthebankbywhichthecheckispayable
mustbeassociatedwiththesamecheckprocessingregion.(Thissectiondoesnot
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affect229.36(b).)Therequiredinformationisdeemedconspicuousifitisprinted
inatypesizenotsmallerthansixpointtypeandifitiscontainedinthetitleplate,
whichislocatedinthelowerleftquadrantofthecheck.Therequiredinformation
maybeconspicuousifitislocatedelsewhereonthecheck.
2.Ifapayablethroughcheckdoesnotmeettherequirementsofthisparagraph,
thebankbywhichthecheckispayablemaybeliabletothedepositarybankor
othersasprovidedin229.38.Forexample,abankbywhichapayablethrough
checkispayablecouldbeliabletoadepositarybankthatsuffersaloss,suchas
lostinterestorliabilityunderSubpartB,thatwouldnothaveoccurredhadthe
checkmettherequirementsofthisparagraph.Similarly,abankmaybeliable
under229.38ifacheckpayablebyitthatisnotpayablethroughanotherbankis
labeledasprovidedinthissection.Forexample,abankthatholdschecking
accountsandprocesseschecksatacentrallocationbuthaswidelydispersed
branchesmaybeliableunderthissectionifitlabelsallofitschecksas"payable
through"asinglebranchandincludesthename,address,andfourdigitrouting
symbolofanotherbranch.Thesecheckswouldnotbepayablethroughanother
bankandshouldnotbelabeledaspayablethroughchecks.(Allofabank'soffices
withintheUnitedStatesareconsideredpartofthesamebanksee229.2(e).)In
thisexample,thebankbywhichthechecksarepayablecouldbeliabletoa
depositarybankthatsuffersaloss,suchaslostinterestorliabilityunderSubpart
B,duetothemislabeledcheck.Thebankbywhichthecheckispayablemaybe
liableforadditionaldamagesifitfailstoactingoodfaith.
F.229.36(f)SameDaySettlement
1.Thisparagraphprovidesthat,undercertainconditions,apayingbankmust
settlewithapresentingbankforacheckonthesamedaythecheckispresented
inordertoavailitselfoftheabilitytoreturnthecheckonitsnextbankingdayunder
U.C.C.4301and4302.Thisparagraphdoesnotapplytocheckspresentedfor
immediatepaymentoverthecounter.Settlingforacheckunderthisparagraph
doesnotconstitutefinalpaymentofthecheckundertheU.C.C.Thisparagraph
doesnotsupersedeorlimittherulesgoverningcollectionandreturnofchecks
throughFederalReservebanksthatarecontainedinsubpartAofRegulationJ(12
CFRpart210).
2.Presentmentrequirements.
a.Locationandtime.
i.Forpresentedcheckstoqualifyformandatorysamedaysettlement,information
accompanyingthechecksmustindicatethatpresentmentisbeingmadeunderthis
paragraphe.g."thesechecksarebeingpresentedforsamedaysettlement"and
mustincludeademandforpaymentofthetotalamountofthecheckstogetherwith
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appropriatepaymentinstructionsinordertoenablethepayingbanktodischarge
itssettlementresponsibilitiesunderthisparagraph.Inaddition,thecheckorchecksmustbepresentedatalocation
designatedbythepayingbankforreceiptofchecksforsamedaysettlementby8:00a.m.localtimeofthatlocation.The
designatedpresentmentlocationmustbealocationatwhichthepayingbankwouldbeconsideredtohavereceiveda
checkunder229.36(b).Thepayingbankmaynotdesignatealocationsolelyforpresentmentofcheckssubjectto
settlementunderthisparagraphbydesignatingalocationforthepurposesof229.36(f),thepayingbankagreesto
acceptchecksatthatlocationforthepurposesof229.36(b).
ii.Thedesignatedpresentmentlocationalsomustbewithinthecheckprocessingregionconsistentwiththeninedigit
routingnumberencodedinmagneticinkonthecheck.Apayingbankthatusesmorethanoneroutingnumberassociated
withasinglecheckprocessingregionmaydesignate,forpurposesofthisparagraph,oneormorelocationsinthatcheck
processingregionatwhichcheckswillbeaccepted,butthepayingbankmustacceptanycheckswitharoutingnumber
associatedwiththatcheckprocessingregionateachdesignatedlocation.Apayingbankmaydesignateapresentment
locationfortraveler'scheckswithan8000seriesroutingnumberanywhereinthecountrybecausethesetraveler'schecks
arenotassociatedwithanycheckprocessingregion.Thepayingbank,however,mustacceptatthatpresentmentlocation
anyotherchecksforwhichitispayingbankthathavearoutingnumberconsistentwiththecheckprocessingregionofthat
location.
iii.Ifthepayingbankdoesnotdesignateapresentmentlocation,itmustacceptpresentmentforsamedaysettlementat
anylocationidentifiedin229.36(b),i.e.,atanaddressofthebankassociatedwiththeroutingnumberonthecheck,at
anybranchorheadofficeifthebankisidentifiedonthecheckbynamewithoutaddress,oratabranch,headoffice,or
otherlocationconsistentwiththenameandaddressofthebankonthecheckifthebankisidentifiedonthecheckbyname
andaddress.Apayingbankandapresentingbankmayagreethatcheckswillbeacceptedforsamedaysettlementatan
alternativelocation(e.g.,ataninterceptprocessorlocatedinadifferentcheckprocessingregion)orthatthecutofftimefor
samedaysettlementbeearlierorlaterthan8:00a.m.localtime.
iv.Inthecaseofacheckpayablethroughabankbutpayablebyanotherbank,thisparagraphdoesnotauthorizedirect
presentmenttothebankbywhichthecheckispayable.Therequirementsofsamedaysettlementunderthisparagraph
wouldapplytoapayablethroughorpayableatbanktowhichthecheckissentforpaymentorcollection.
b.Reasonabledeliveryrequirements.Acheckisconsideredpresentedwhenitisdeliveredtoandpaymentisdemanded
atalocationspecifiedinparagraph(f)(1).Ordinarily,apresentingbankwillfinditnecessarytocontactthepayingbankto
determinetheappropriatepresentmentlocationandanydeliveryinstructions.Further,becausepresentmentmightnottake
placeduringthepayingbank'sbankingday,apayingbankmayestablishreasonabledeliveryrequirementstosafeguard
thecheckspresented,suchasuseofanightdepository.Ifapresentingbankfailstofollowreasonabledelivery
requirementsestablishedbythepayingbank,itrunstheriskthatitwillnothavepresentedthechecks.However,ifno
reasonabledeliveryrequirementsareestablishedorifthepayingbankdoesnotmakeprovisionsforacceptingdeliveryof
checksduringitsnonbusinesshours,leavingthechecksatthepresentmentlocationconstituteseffectivepresentment.
c.Sortingofchecks.Apayingbankmayrequirethatcheckspresentedtoitforsamedaysettlementbesortedseparately
fromotherforwardcollectionchecksitreceivesasacollectingbankorreturnedchecksitreceivesasareturningor
depositarybank.Forexample,ifabankprovidescorrespondentcheckcollectionservicesandreceivesunsortedchecks
fromarespondentbankthatincludechecksforwhichitisthepayingbankandthatwouldotherwisemeettherequirements
forsamedaysettlementunderthissection,thecollectingbankneednotmakesettlementinaccordancewithparagraph(f)
(2).Ifthecollectingbankreceivessortedchecksfromitsrespondentbank,consistingonlyofchecksforwhichthe
collectingbankisthepayingbankandthatmeettherequirementsforsamedaysettlementunderthisparagraph,the
collectingbankmaynotchargeafeeforhandlingthosechecksandmustmakesettlementinaccordancewiththis
paragraph.
3.Settlement
a.Ifabankpresentsacheckinaccordancewiththetimeandlocationrequirementsforpresentmentunderparagraph(f)
(1),thepayingbankeithermustsettleforthecheckonthebusinessdayitreceivesthecheckwithoutcharginga
presentmentfeeorreturnthecheckpriortothetimeforsettlement.(Thisreturndeadlineissubjecttoextensionunder
229.30(c).Thesettlementmustbeintheformofacredittoanaccountdesignated

bythepresentingbankataFederalReservebank(e.g.,aFedwiretransfer).The
presentingbankmayagreewiththepayingbanktoacceptsettlementinanother
form(e.g.,credittoanaccountofthepresentingbankatthepayingbankordebit
toanaccountofthepayingbankatthepresentingbank).Thesettlementmust
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occurbythecloseofFedwireonthebusinessdaythecheckisreceivedbythe
payingbank.Undertheprovisionsof229.34(c),asettlementowedtoapresenting
bankmaybesetoffbyadjustmentsforprevioussettlementswiththepresenting
bank.(Seealso229.39(d).)
b.Checksthatarepresentedafterthe8a.m.(localtime)presentmentdeadlinefor
samedaysettlementandbeforethepayingbank'scutoffhouraretreatedasif
theywerepresentedunderotherapplicablelawandsettledfororreturned
accordingly.However,forpurposesofsettlementonly,thepresentingbankmay
requirethepayingbanktotreatsuchchecksaspresentedforsamedaysettlement
onthenextbusinessdayinlieuofacceptingsettlementbycashorothermeanson
thebusinessdaythechecksarepresentedtothepayingbank.Checkspresented
afterthepayingbank'scutoffhouroronnonbusinessdays,butotherwisein
accordancewiththisparagraph,areconsideredpresentedforsameday
settlementonthenextbusinessday.
4.ClosedPayingBank
a.Theremaybecertainbusinessdaysthatarenotbankingdaysforthepaying
bank.Somepayingbanksmaycontinuetosettleforcheckspresentedonthese
days(e.g.,byopeningtheirbackofficeoperationsorbyusinganintercept
processor).Inothercases,apayingbankmaybeunabletosettleforchecks
presentedonadayitisclosed.
Ifthepayingbankclosesonabusinessdayandchecksarepresentedtothe
payingbankinaccordancewithparagraph(f)(1),thepayingbankisaccountable
forthechecksunlessitsettlesfororreturnsthechecksbythecloseofFedwireon
itsnextbankingday.Inaddition,checkspresentedonabusinessdayonwhichthe
payingbankisclosedareconsideredreceivedonthepayingbank'snextbanking
dayforpurposesoftheU.C.C.midnightdeadline(U.C.C.4301and4302)and
thisregulation'sexpeditiousreturnandnoticeofnonpaymentprovisions.
b.Ifthepayingbankisclosedonabusinessdayvoluntarily,thepayingbankmust
payinterestcompensation,asdefinedin229.2(oo),tothepresentingbankfor
thevalueofthefloatassociatedwiththecheckfromthedayofthevoluntary
closinguntilthedayofsettlement.Interestcompensationisnotrequiredinthe
caseofaninvoluntaryclosingonabusinessday,suchasaclosingrequiredby
statelaw.Inaddition,ifthepayingbankisclosedonabusinessdaydueto
emergencyconditions,settlementdelaysandinterestcompensationmaybe
excusedunder229.38(e)orU.C.C.4109(b).
5.Goodfaith.Under229.38(a),bothpresentingbanksandpayingbanksareheld
toastandardofgoodfaith,definedin229.2(nn)tomeanhonestyinfactandthe
observanceofreasonablecommercialstandardsoffairdealing.Forexample,
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designatingapresentmentlocationorchangingpresentmentlocationsforthe
primarypurposeofdiscouragingbanksfrompresentingchecksforsameday
settlementmightnotbeconsideredgoodfaithonthepartofthepayingbank.
Similarly,presentingalargevolumeofcheckswithoutpriornoticecouldbeviewed
asnotmeetingreasonablecommercialstandardsoffairdealingandthereforemay
notconstitutepresentmentingoodfaith.Inaddition,ifbanks,inthegeneralcourse
ofbusiness,regularlyagreetocertainpracticesrelatedtosamedaysettlement,it
mightnotbeconsideredconsistentwithreasonablecommercialstandardsoffair
dealing,andthereforemightnotbeconsideredgoodfaith,forabanktorefuseto
agreetothosepracticesifagreeingwouldnotcauseitharm.
6.U.C.C.sectionsaffected.Thisparagraphdirectlyaffectsthefollowingprovisions
oftheU.C.C.andmayaffectothersectionsorprovisions:
a.Section4204(b)(1),inthatapresentingbankmaynotsendacheckforsamedaysettlementdirectlytothepaying
bank,ifthepayingbankdesignatesadifferentlocationinaccordancewithparagraph(f)(1).
b.Section4213(a),inthatthemediumofsettlementforcheckspresentedunderthisparagraphislimitedtoacredittoan
accountataFederalReservebankandthat,forcheckspresentedafterthedeadlineforsamedaysettlementandbefore
thepayingbank'scutoffhour,thepresentingbankmayrequiresettlementonthenextbusinessdayinaccordancewith
thisparagraphratherthanacceptsettlementonthebusinessdayofpresentmentbycash.
c.Section4301(a),inthat,topreservetheabilitytoexercisedeferredposting,thetimelimitspecifiedinthatsectionfor
settlementorreturnbyapayingbackonthebankingdayacheckisreceivedissupersededbytherequirementtosettlefor
checkspresentedunderthisparagraphbythecloseofFedwire.
d.Section4302(a),inthat,toavoidaccountability,thetimelimitspecifiedinthatsectionforsettlementorreturnbya
payingbankonthebankingdayacheckisreceivedissupersededbytherequirementtosettleforcheckspresentedunder
thisparagraphbythecloseofFedwire.

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