To collect out-of-town items, one system is to effect arrangements whereby the correspondent acts as agent, collecting items on banks in its city through the clearing house and on banks in its vicinity through subcollecting agents. Since checks are payable at the drawee bank's window, the drawee bank remits for the proceeds after deducting exchange charges presumably to cover the expense of maintaining a balance with the sending bank against which drafts may be drawn to make remittances. The law holds a bank to the exercise of due care in choosing collection agents and to reasonable promptness in sending and remitting for items. Sending an item directly to the drawee bank, however, unless the principal bank expressly permits it, is held to be negligence, and therefore the collecting bank sends the item to sub-agents in the same city as the drawee bank. The terms of agreement between the depositor and the collecting bank as to collection charges, the time when items are credited to the account, and the reciprocity of collection services, are various. This system results in indirect routing of items to save collection charges, and therefore in too large an amount of funds being afloat in the mails.
To cut down the expense of this system of out-of-town collections, co-operative "country" clearing houses have been established in some of the chief cities as adjuncts to the city clearing house. A member sends to the country clearing house such of its out-of-town items as it desires and is permitted to send. All items on one drawee bank, or on the banks of one city, are put into one envelope and mailed to that bank or the agent of the clearing house in that city. The bank or agent makes out one lump remittance to the clearing house, which settles with its members. This system of co-operative collections may go further and require all drawee banks to remit at par for all items sent to them, and then assess the expense of the country clearing house upon the depositing banks at so much per item or per dollar collected.