Federal Register/Vol. 76, No. 58/Friday, March 25, 2011
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16862 Federal Register / Vol. 76, No. 58 / Friday, March 25, 2011 / Proposed Rules FEDERAL RESERVE SYSTEM Reserve System, 20th Street and Board authority to regulate any aspect of Constitution Avenue, NW., Washington, the payment system and any related 12 CFR Part 229 DC 20551. function of the payment system with 4 [Regulation CC; Docket No. R–1409] All public comments are available respect to checks. Subpart C includes from the Board’s Web site at http:// rules to speed the collection and return RIN No. 7100–AD68 www.federalreserve.gov/generalinfo/ of checks, such as rules covering the foia/ProposedRegs.cfm as submitted, expeditious return responsibilities of Availability of Funds and Collection of paying and returning banks, Checks except as necessary for technical reasons. Accordingly, your comments authorization of direct returns, AGENCY: Board of Governors of the will not be edited to remove any notification of nonpayment of large- Federal Reserve System. identifying or contact information. dollar returns, check indorsement ACTION: Proposed rule, request for Public comments may also be viewed standards, and same-day settlement of comment. electronically or in paper in Room MP– checks presented to the paying bank. 500 of the Board’s Martin Building (20th Subpart C’s provisions presume that SUMMARY: The Board of Governors and C Streets, NW.) between 9 a.m. and banks generally handle checks in paper (Board) is proposing amendments to 5 p.m. on weekdays. form. Since the provisions were adopted in 1988, however, banks have largely facilitate the banking industry’s ongoing FOR FURTHER INFORMATION CONTACT: migrated to an electronic interbank transition to fully-electronic interbank Dena L. Milligan, Attorney, (202/452– check collection and return system.5 check collection and return, including 3900), Legal Division; or Joseph P. proposed amendments to condition a This migration was facilitated by the Baressi, Financial Services Project Check 21 Act,6 which became effective depositary bank’s right of expeditious Leader (202/452–3959), Division of return on the depositary bank agreeing in October 2004 and is implemented in Reserve Bank Operations and Payment subparts A and D of Regulation CC. The to accept returned checks electronically Systems; for users of either directly or indirectly from the Check 21 Act permits banks to use a Telecommunication Devices for the Deaf properly prepared substitute check in paying bank. The Board also is (TDD) only, contact 202/263–4869. proposing amendments to the funds place of the original check, which SUPPLEMENTARY INFORMATION: availability schedule provisions to enables banks to take the original check reflect the fact that there are no longer Background out of the collection and return process and to handle check images for much of any nonlocal checks. The Board Regulation CC (12 CFR part 229) proposes to revise the model forms that the check collection and return process implements the Expedited Funds without having to retain the original banks may use in disclosing their funds- Availability Act (EFA Act) and the availability policies to their customers check. The Check 21 Act has been a Check Clearing for the 21st Century Act catalyst for rapid growth in banks’ and to update the preemption 1 (Check 21 Act). The Board electronic handling of checks over the determinations. Finally, the Board is implemented the EFA Act in subparts requesting comment on whether it last 5 years. For example, at year-end A, B, and C of Regulation CC. The EFA 2005, the Reserve Banks received about should consider future changes to the Act was enacted to provide depositors regulation to improve the check 4 percent of checks deposited with them of checks with prompt funds availability for collection in electronic form and collection system, such as decreasing and to foster improvements in the check the time afforded to a paying bank to presented approximately 28 percent of collection and return processes. Subpart their checks in electronic form.7 In decide whether to pay a check in order A of Regulation CC contains general to reduce the risk to a depositary bank December 2010, the Reserve Banks information, such as definitions of received about 99.7 percent of checks of having to make funds available for terms. Subpart B of Regulation CC withdrawal before learning whether a deposited for forward collection specifies availability schedules within electronically, and presented about 98.4 deposited check has been returned which banks must make funds available unpaid. percent of checks electronically. In for withdrawal. Subpart B also includes addition, at the end of 2005 virtually all DATES: Comments on the proposed rule rules regarding exceptions to the returned checks handled by the Reserve must be received not later than June 3, schedules, disclosure of funds Banks were sent to and from the Reserve 2011. availability policies, and payment of Banks in paper form. By December ADDRESSES: You may submit comments, interest. These provisions implement 2010, the Reserve Banks received 97.1 identified by Docket No. R–1409 and specific requirements set forth in the percent of returned checks RIN No. 7100–AD68, by any of the EFA Act. The provisions of subpart C following methods: were adopted by the Board pursuant to regulation, that * * * the Federal Reserve banks • Agency Web Site: http:// the authority granted to it in §§ 609(b) and depository institutions take such actions as are www.federalreserve.gov. Follow the and (c) of the EFA Act.2 Section 609(b) necessary to automate the process of returning instructions for submitting comments at directs the Board to consider requiring unpaid checks.’’ 12 U.S.C. 4008(b)(4). 4 Section 609(c)(1) states that ‘‘[i]n order to carry http://www.federalreserve.gov/ that depository institutions and Federal out the provisions of this title, the Board of generalinfo/foia/ProposedRegs.cfm. Reserve Banks take certain steps to Governors of the Federal Reserve System shall have • Federal eRulemaking Portal: http:// improve the check-processing system, the responsibility to regulate—(A) any aspect of the www.regulations.gov. Follow the such by taking steps necessary to payment system, including the receipt, payment, collection, or clearing of checks.’’ 12 U.S.C. instructions for submitting comments. automate the check-return process 4008(c)(1). • 3 E-mail: (§ 609(b)(4)). Section 609(c) grants the 5 Certain provisions, such as the same-day [email protected]. settlement provisions in § 229.36(f), were adopted Include docket number in the subject 1 Expedited Funds Availability Act, 12 U.S.C. at later times. line of the message. 4001 et seq.; Check Clearing for the 21st Century 6 Public Law 108–100, 117 Stat. 1177 (codified at • FAX: 202/452–3819 or 202/452– Act, 12 U.S.C. 5001 et seq. 12 U.S.C. 5001–5018) (2003). 2 12 U.S.C. 4008 (b) and (c). 7 Prior to the Check 21 Act, the Reserve Banks 3102. 3 • Section 609(b)(4) states that ‘‘[i]n order to presented about 20 to 25 percent of their check Mail: Jennifer J. Johnson, Secretary, improve the check processing system, the Board volume electronically, primarily under MICR- Board of Governors of the Federal shall consider (among other proposals) requiring, by presentment programs. VerDate Mar<15>2010 15:17 Mar 24, 2011 Jkt 223001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4702 E:\FR\FM\25MRP2.SGM 25MRP2 erowe on DSK5CLS3C1PROD with PROPOSALS2 Federal Register / Vol. 76, No. 58 / Friday, March 25, 2011 / Proposed Rules 16863 electronically, and delivered about 76.7 collection test’’ ((§ 229.30(a)(2)).10 To expense to deliver returned checks to percent of returned checks to depositary meet the two-day/four-day test, a paying the banks that continue to require that banks electronically.8 Based on bank must send a returned local check paper checks be returned. Moreover, as information from banking industry in a manner such that the check would technology has improved, the Board sources, the Board believes that these normally be received by the depositary understands that the initial trends with respect to checks handled bank not later than 4 p.m. local time of implementation and ongoing costs by the Reserve Banks are representative the depositary bank on the second incurred by a depositary bank to receive of trends nationwide.9 business day following the banking day returned items electronically have on which the check was presented to decreased substantially. For example, Overview of the Proposal the paying bank. For nonlocal checks, a the Reserve Banks now provide I. Amendments To Encourage paying bank must send a returned check electronic copies of returned checks in Electronic Check Clearing and Check in a manner such that the check would .pdf files to small depositary banks, Return normally be received by the depositary which can use the .pdf file to print bank not later than 4 p.m. local time of substitute checks on their own premises As a general matter, the Board the depositary bank on the fourth if necessary. Compared to alternative believes that electronic check-clearing business day following the banking day means of receiving electronic returns, and check-return methods improve the on which the check was presented to this approach involves only minimal efficiency of the check system. the paying bank. Because there now is upfront costs to a depositary bank, such Electronic methods are faster and more only one Federal Reserve Bank check- as the purchase of a printer capable of resilient, and, at the same time, they are processing region, there are no longer double-sided printing and magnetic-ink less costly and less error prone. Despite any nonlocal checks, and the four-day toner cartridges.13 After printing the the increasing number of checks test applies to a null set of checks.11 electronic copies, the depositary bank presented and returned electronically, The forward-collection test is satisfied can process them in the same way it some banks continue to demand paper if a paying bank sends the returned processes paper checks that are returned checks or present paper checks check in a manner that a similarly physically delivered to it.