Fed Seeks to Improve the Quality of Return Items:
What You'll Notice on Your Billing Statements

The purpose of the Federal Reserve's Quality of Return Items initiative is to improve the efficiency and effectiveness of the payments system and to reduce risks to payments system participants. The spring issue of Payments Quarterly outlined the various surcharges that are now being assessed for certain improperly qualified return items. The focus of this article is to help clarify the changes you'll see on your upcoming billing statements.


Return Items

To prepare you for the upcoming billing changes, your local Federal Reserve office has been inserting sample reports in your cash letters that detail which exceptions were found in your deposits. The reports are broken down by exception types and include detailed cash letter information, including cash letter totals, bundle totals and the items before and after each exception. The billing service areas and product codes are also reflected on the reports.

If you send deposits directly to other Federal Reserve Banks, you should have received reports from those offices as well. The reports should look identical, except for the footer, which indicates the Reserve Bank that generated the report. Billing for exception pricing began June 1. Therefore, the billing statement you receive in early July will include line items for the four return-related exception types. The billing statement will reflect a line item charge by exception type. You may want to cross-reference your billing statement with your customer reports to validate the information.


Large-Dollar-Value Checks

Starting July 2, financial institutions that deposit a forward or return check that exceeds $10 million will be charged $50 to cover the cost of special handling that this type of check requires. The primary difference between the large-dollar exception type and the exception types mentioned above is that both forward and return checks are included.

Reports similar to those described above were sent during April and May to customers who had items meeting the large-dollar criteria. This information was included on the same sample report, along with the other exception types.

The billing statement you receive in early August will reflect large-dollar charges if you deposited any items meeting the $10 million threshold.

The Federal Reserve System expects that this initiative will compel financial institutions' customers to use electronic methods when making payments that exceed $10 million.

Please contact your local account executive if you have any questions regarding our Quality of Return Items initiative.