[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: 12CFR229.35]

[Page 541]
 
                       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. 229.35  Indorsements.

    (a) Indorsement standards. A bank (other than a paying bank) that 
handles a check during forward collection or a returned check shall 
legibly indorse the check in accordance with the indorsement standard 
set forth in appendix D to this part.
    (b) Liability of bank handling check. A bank that handles a check 
for forward collection or return is liable to any bank that subsequently 
handles the check to the extent that the subsequent bank does not 
receive payment for the check because of suspension of payments by 
another bank or otherwise. This paragraph applies whether or not a bank 
has placed its indorsement on the check. This liability is not affected 
by the failure of any bank to exercise ordinary care, but any bank 
failing to do so remains liable. A bank seeking recovery against a prior 
bank shall send notice to that prior bank reasonably promptly after it 
learns the facts entitling it to recover. A bank may recover from the 
bank with which it settled for the check by revoking the settlement, 
charging back any credit given to an account, or obtaining a refund. A 
bank may have the rights of a holder with respect to each check it 
handles.
    (c) Indorsement by a bank. After a check has been indorsed by a 
bank, only a bank may acquire the rights of a holder--
    (1) Until the check has been returned to the person initiating 
collection; or
    (2) Until the check has been specially indorsed by a bank to a 
person who is not a bank.
    (d) Indorsement for depositary bank. A depositary bank may arrange 
with another bank to apply the other bank's indorsement as the 
depositary bank indorsement, provided that any indorsement of the 
depositary bank on the check avoids the area reserved for the depositary 
bank indorsement as specified in appendix D. The other bank indorsing as 
depositary bank is considered the depositary bank for purposes of 
subpart C of this part.

[53 FR 19433, May 27, 1988, as amended by Reg. CC, 55 FR 21855, May 30, 
1990]