[Code of Federal Regulations]
[Title 12, Volume 3]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR229.31]

[Page 537-538]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 229--AVAILABILITY OF FUNDS AND COLLECTION OF CHECKS (REGULATION CC)--Table of Contents
 
                     Subpart C--Collection of Checks
 
Sec. 229.31  Returning bank's responsibility for return of checks.

    (a) Return of checks. A returning bank shall return a returned check 
in an expeditious manner as provided in either paragraph (a)(1) or 
(a)(2) of this section.
    (1) Two-day/four-day test. A returning bank returns a check in an 
expeditious manner if it sends the returned check in a manner such that 
the check would normally be received by the depositary bank not later 
than 4:00 p.m. (local time) of--
    (i) The second business day following the banking day on which the 
check was presented to the paying bank if the paying bank is located in 
the same check processing region as the depositary bank; or
    (ii) The fourth business day following the banking day on which the 
check was presented to the paying bank if the paying bank is not located 
in the same check processing region as the depositary bank.


If the last business day on which the returning bank may deliver a 
returned check to the depositary bank is not a banking day for the 
depositary bank, the returning bank meets this requirement if the 
returned check is received by the depositary bank on or before the 
depositary bank's next banking day.
    (2) Forward collection test. A returning bank also returns a check 
in an expeditious manner if it sends the returned check in a manner that 
a similarly situated bank would normally handle a check--
    (i) Of similar amount as the returned check;
    (ii) Drawn on the depositary bank; and
    (iii) Received for forward collection by the similarly situated bank 
at the time the returning bank received the returned check, except that 
a returning bank may set a cut-off hour for the receipt of returned 
checks that is earlier than the similarly situated bank's cut-off hour 
for checks received for forward collection, if the cut-off hour is not 
earlier than 2:00 p.m.

Subject to the requirement for expeditious return, the returning bank 
may send the returned check to the depositary bank, or to any bank 
agreeing to handle the returned check expeditiously under 
Sec. 229.31(a). The returning bank may convert the returned check to a 
qualified returned check. A qualified returned check must be encoded in 
magnetic ink with the routing number of the depositary bank, the amount 
of the returned check, and a ``2'' in position 44 of the MICR line as a 
return identifier, in accordance with the American National Standard 
Specification for Placement and Location of MICR Printing, X9.13 (Sept. 
1983). The time for expeditious return under the forward collection 
test, and the deadline for return under the U.C.C. and

[[Page 538]]

Regulation J (12 CFR part 210), are extended by one business day if the 
returning bank converts a returned check to a qualified returned check. 
This extension does not apply to the two-day/four-day test specified in 
paragraph (a)(1) of this section or when a returning bank is returning a 
check directly to the depositary bank.
    (b) Unidentifiable depositary bank. A returning bank that is unable 
to identify the depositary bank with respect to a returned check may 
send the returned check to--
    (1) Any collecting bank that handled the check for forward 
collection if the returning bank was not a collecting bank with respect 
to the returned check; or
    (2) A prior collecting bank, if the returning bank was a collecting 
bank with respect to the returned check;

even if that collecting bank does not agree to handle the returned check 
expeditiously under Sec. 229.31(a). A returning bank sending a returned 
check under this paragraph must advise the bank to which the check is 
sent that the returning bank is unable to identify the depositary bank. 
The expeditious return requirements in paragraph (a) of this section do 
not apply to return of a check under this paragraph. A returning bank 
that receives a returned check from a paying bank under Sec. 229.30(b), 
or from a returning bank under this paragraph, but that is able to 
identify the depositary bank, must thereafter return the check 
expeditiously to the depositary bank.
    (c) Settlement. A returning bank shall settle with a bank sending a 
returned check to it for return by the same means that it settles or 
would settle with the sending bank for a check received for forward 
collection drawn on the depositary bank. This settlement is final when 
made.
    (d) Charges. A returning bank may impose a charge on a bank sending 
a returned check for handling the returned check.
    (e) Depositary bank without accounts. The expeditious return 
requirements of paragraph (a) of this section do not apply to checks 
deposited with a depositary bank that does not maintain accounts.
    (f) Notice in lieu of return. If a check is unavailable for return, 
the returning bank may send in its place a copy of the front and back of 
the returned check, or, if no copy is available, a written notice of 
nonpayment containing the information specified in Sec. 229.33(b). The 
copy or notice shall clearly state that it constitutes a notice in lieu 
of return. A notice in lieu of return is considered a returned check 
subject to the expeditious return requirements of this section and to 
the other requirements of this subpart.
    (g) Reliance on routing number. A returning bank may return a 
returned check based on any routing number designating the depositary 
bank appearing on the returned check in the depositary bank's 
indorsement or in magnetic ink on a qualified returned check.

[53 FR 19433, May 27, 1988, as amended at 53 FR 31292, Aug. 18, 1988; 
Reg. CC, 54 FR 13850, Apr. 6, 1989]