6. Entering Checks

After a bank has received checks they are assorted for the purpose of sending them to their respective correspondents for collection. The next step is to enter them in the ledger to the debit of the accounts of the banks to which they are transmitted. They are now ready to be sent away. Those sent to each bank are accompanied with a letter briefly describing them. If any special directions are needful, these are added. A copy of this letter is kept and forms a part of the record relating to them.

7. Two Banks For Collecting

Very often checks are sent to a bank to collect which it can not collect so conveniently itself as another bank nearer to the residence or place of business of the drawer. Collecting banks then employ a second bank to complete the work. In selecting a second bank great care must be exercised, for if one should be selected not in good standing, and a loss should occur, the first bank would be liable. But if the second bank was in every way worthy of confidence, the other would escape all liability should a loss happen to the depositor through the use of such a sub-agency. This is the law in many states.

But not in all. In some of them the first bank is liable for the collection in any event. And if a sub-agent is employed, the first bank is still liable for any loss that may thereby be incurred whether it was justified in employing the sub-agent or not. In other words, good faith, diligence, will not protect the first bank. The negligence of the second bank is imputed to the first, and it must bear the loss. This rule was established by the courts in New York many years ago, and is held by a smaller number of states than the other. It is also the federal rule.

8. Collection Of Notes

Notes that are received for collection are treated in a different manner. After a careful examination they are entered in the customer's pass book. The receiving teller must always require the indorsement of the owner, so that the amount may be placed to the proper credit. Banks generally will not receive notes for collection that have been disfigured or changed, and rarely from strangers.

The clerk marks on each note the date of its maturity. If he should mark it one day too late and the drawer should fail to pay, the bank would be liable to the owner, because the notice of the protest to the indorsers would be too late to hold them.

After the notes have been timed on the back and end, they are recorded in the Collection Register. From this book they are copied into the Tickers.

Notes should be deposited ten days or longer before maturity, so that there may be time enough to pass them through the several books in the bank. Merchants, however, constantly receive short time drafts which can not be deposited long before the time of payment. Other circumstances often prevent their deposit until very near the time of maturity, as the pledging of them to secure loans.

Notes or drafts payable in another place are in some banks recorded in a Foreign Collection Register. In the smaller banks a single book is enough with a special column for foreign notes