I've been asked to do some research on the collection process. Where can I read up on this? Is it addressed in one of the regs?

Thanks,
Lisa

This is a physical process and rather than send an item through transit. It is mailed to the bank of account for special handling. There should be a log of all incoming and outgoing items for collection.

The procedurs are generally covered in the banks Policy and Procedures manual.

I know of no federal regulation regarding how to send items for collection.

There are transmittal instructions that accompany the item. The transmittal can request that the bank hold the item for up to 10 days to see if they can clear it. This is useful in the event you are collecting an NSF item that has been presented through transit a couple times. Each day the bank looks to see if the collection item can be paid.

If the item is paid the bank cuts a cashiers check for the amount and mails it to you. If not paid it returns the item with an indication of why it was not paid.

Don - Can the payee bank charge a fee for items it receives for collection? We have one they want held for up to 30 days. What's our liability if we don't immediately return it and then the account has enough funds but we don't pay the collection item?

Not only can they charge a fee for the collection, most do. They consider this to be a "special handling" charge, and the bank also incurs a fee by processing a cashier's check to pay the item. I don't know why someone would delay the processing by 30 days, generally if there are funds in the account, and they verify with the customer that the original check is valid, they should pay the item.

Usually this means that you can hold it up to 30 days because usually customers have a deposit at least once every 30 days; you still process as soon as the funds are available anytime within the 30 days. You may not get a deposit in 10 days but should within 30 days. This keeps the sending bank from having to resubmit the collection item more than once to get it paid.

You are requesting the payee bank to hold the item for a specified time in case funds are not on deposit to clear the item when the collection is received. Each day the payee bank will check to see if the item can be paid. At ANYTIME during the collection period you have requested the bank to hold the collection, they will pay if funds are available to pay it. It doesn't mean the payee bank will hold payment for a 30 day period before they send you the money. Its only the time period they will check to see if the item can be paid.

Just a word of caution - 30 days is a long time to keep a customer waiting if the check is coming back NSF. It may even effect the customers ability to take action quick enough to use other means to get their money.

Requesting the payee bank to hold the collection for a 10 day period IMO is more reasonable.

What is a typical amount to charge for holding a check for collection?

Don - you can request the paying bank to take action within 10 days, but there is nothing to compel them to do so - or am I missing something?

When you send a check for collection you do not have to specify that they hold the item for any period of time. If you do not, the day the item comes in, the payee bank looks to see if they can pay it, and do so if they can. Paid or unpaid they return the item via next days mail to you.

If you ask them to hold the item for 10 days that means each day for 10 days they will look to see if the item can be paid. If the item can be paid on the day the collection item is received, or on day 3 or 5 or what ever, they pay the collection that day and mail you a cashiers check.

Its only held for the full 10 days if the item cannot be paid on any previous day. At the end of the 10 days they return the iten as Unpaid to you. They have looked each of the 10 days to see if the item could be paid.

As a collection item you are actually presenting the item each day for payment. They only hold the item until it is paid, or the 10 day requested period has expired.

Look at the Collection Transmittal that is filled out and goes with the item to the paying bank. It may clarify the process for you.