Exchange And Collection Charges Distinguished

A bill made payable with collection charges is not a negotiable instrument, though the negotiable instruments law provides that an instrument payable with exchange does not lose its negotiability. Exchange is usually ascertainable in advance while collection charges are not so ascertainable.

Charges Before And After Maturity

A bill containing a provision for payment of the cost of collection and attorney's fees if it is dis honored at maturity is a valid negotiable instrument. It must be drawn so as to show that no collection charges are to be included unless the bill is dishonored at maturity.

Evidence Of Eligibility And Requirement Of Statements Regulations Of The Federal Reserve Board

Evidence Of Eligibility

A Federal Reserve bank must be satisfied by reference to the note or otherwise that it is eligible for rediscount. Compliance of a note may be evidenced by a statement of the borrower showing a reasonable excess of quick assets over current liabilities. The member bank shall certify in its application whether the note offered for rediscount has been discounted for a depositor or for another member bank, or whether it has been purchased for a non-depositor. It must also certify whether a financial statement of the borrower is on file.

Financial Statements

Such financial statements must be on file with respect to all notes offered for rediscount, which have been purchased from sources other than a depositor or a member bank. With respect to any other note offered for rediscount, if no statement is on file, a Federal Reserve bank can use its discretion in taking the steps necessary to satisfy itself as to eligibility. It is authorized also to waive the requirement of a statement with respect to any note discounted by a member bank for a depositor or another member bank, in accordance with the following:

(1) If it is secured by a warehouse, terminal or other similar receipt covering goods in storage;

(2) If the aggregate of obligations of the borrower rediscounted and offered for rediscount at the Federal Reserve bank is less than a sum equal to ten per cent. of the paid in capital of the member bank and does not exceed Five Thousand Dollars.

Opinions And Rulings

Relating to Evidence of Eligibility and Requirement of Statements

Paper Of Cotton Mills

Authorization is given to banks to discount paper of cotton mills indorsed by member banks where general condi-tions are satisfactory, and where the statement of the cotton mill indicates that the plant is not mortgaged and that the deficiency between capital and plant account does not amount to more than five dollars per spindle.

Unmined minerals are not regarded as quick assets; standing timber not regarded as quick assets. - The Federal Reserve Board regards it as an unsafe policy for Federal Reserve banks to treat timber standing upon tracts of land as quick assets, similar to manufactured goods in the hands of the manufacturer or jobber. The same applies to unmined minerals.

Maturity Of Notes Eligible For Rediscount

General Statutory Provisions