(a) Return of checks.
(1) Subject to the requirement of expeditious
return under paragraph (b) of this section, a paying bank may send
a returned check to the depositary bank, to any other bank agreeing
to handle the returned check, or as provided in paragraph (a)(2) of
this section.
(2) A
paying bank that is unable to identify the depositary bank with respect
to a check may send the returned check to any bank that handled the
check for forward collection and must advise the bank to which the
check is sent that the paying bank is unable to identify the depositary
bank.
(3) A paying bank
may convert a check to a qualified returned check. A qualified returned
check shall be encoded in magnetic ink with the routing number of
the depositary bank, the amount of the returned check, and a “2” in
the case of an original check (or a “5” in the case of a substitute
check) in position 44 of the qualified return MICR line as a return
identifier. A qualified returned original check shall be encoded in
accordance with ANS X9.13, and a qualified returned substitute check
shall be encoded in accordance with ANS X9.100-140.
(4) Except as provided in paragraph (g)
of this section, this section does not affect a paying bank’s responsibility
to return a check within the deadlines required by the UCC or Regulation
J (12 CFR part 210).
(b) Expeditious return of checks.
(1) Except as provided in paragraph (d)
of this section, if a paying bank determines not to pay a check, it
shall return the check in an expeditious manner such that the check
would normally be received by the depositary bank not later than 2
p.m. (local time of the depositary bank) on the second business day
following the banking day on which the check was presented to the
paying bank.
(2) If
the second business day following the banking day on which the check
was presented to the paying bank is not a banking day for the depositary
bank, the paying bank satisfies the expeditious return requirement
if it sends the returned check in a manner such that the depositary
bank would normally receive the returned check not later than 2 p.m.
(local time of the depositary bank) on the depositary bank’s next
banking day.
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(c) Notice
of nonpayment.
(1) If a paying bank determines not to
pay a check in the amount of $5,000 or more, it shall provide notice
of nonpayment such that the notice would normally be received by the
depositary bank not later than 2 p.m. (local time of the depositary
bank) on the second business day following the banking day on which
the check was presented to the paying bank. If the day the paying
bank is required to provide notice is not a banking day for the depositary
bank, receipt of notice not later than 2 p.m. (local time of the depositary
bank) on the depositary bank’s next banking day constitutes timely
notice. Notice may be provided by any reasonable means, including
the returned check, a writing (including a copy of the check), or
telephone.
(2) (i) To the extent available
to the paying bank, notice must include the information contained
in the check’s MICR line when the check is received by the paying
bank, as well as—
(A) name of the payee(s);
(B) amount;
(C) date of the indorsement of the depositary
bank;
(D) the bank name,
routing number, and trace or sequence number associated with the indorsement
of the depositary bank; and
(E) reason for nonpayment.
(ii) If the paying bank is not sure
of the accuracy of an item of information, it shall include the information
required by this paragraph to the extent possible, and identify any
item of information for which the bank is not sure of the accuracy.
(iii) The notice may include
other information from the check that may be useful in identifying
the check being returned and the customer.
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(d) Exceptions to the expeditious
return of checks and notice of nonpayment requirements. The expeditious
return and notice of nonpayment requirements of paragraphs (b) and
(c) of this section do not apply if—
(1) the check is deposited in a depositary
bank that is not subject to subpart B of this part; or
(2) a paying bank is unable
to identify the depositary bank with respect to the check.
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(e) Identification of returned
check. A paying bank returning a check shall clearly indicate
on the front of the check that it is a returned check and the reason
for return. If the paying bank is returning a substitute check or
an electronic returned check, the paying bank shall include this information
such that the information would be retained on any subsequent substitute
check.
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(f) Notice in lieu of return. If a check is unavailable for return, the paying bank may send in
its place a copy of the front and back of the returned check, or,
if no such copy is available, a written notice of nonpayment containing
the information specified in paragraph (c)(2) of this section. The
copy or written 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 requirements of this subpart.
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(g) Extension of deadline. The deadline
for return or notice of dishonor or nonpayment under the UCC or Regulation
J (12 CFR part 210), or section 229.36(d)(3) and (4) is extended to
the time of dispatch of such return or notice if the depositary bank
(or the receiving bank, if the depositary bank is unidentifiable)
receives the returned check or notice—
(1) on or before the depositary bank’s
(or receiving bank’s) next banking day following the otherwise applicable
deadline by the earlier of the close of that banking day or a cutoff
hour of 2 p.m. (local time of the depositary bank or receiving bank)
or later set by the depositary bank (or receiving bank) under UCC
4-108, for all deadlines other than those described in paragraph (g)(2)
of this section; or
(2) prior to the cut-off hour for the next processing cycle (if sent
to a returning bank), or on the next banking day (if sent to the depositary
bank), for a deadline falling on a Saturday that is a banking day
(as defined in the UCC) for the paying bank.
(h) Payable-through and payable-at
checks. A check payable at or through a paying bank is considered
to be drawn on that bank for purposes of the expeditious return and
notice of nonpayment requirements of this subpart.
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(i) Reliance on routing number. A
paying 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.
