1. Arrangements For Collections

Bank collections may be divided into three classes: first, checks on home banks that are paid through the clearing house, or in the smaller places by direct exchange; second, checks on out-of-town banks; third, notes, drafts, and other instruments. The collection of checks and other instruments falling within the second and third classes will now be considered. Almost every bank in the principal cities has an arrangement with a bank in every other place of much importance in the United States. These arrangements are varied, depending on distance and other conditions. In general, it may be said, that the arrangement consists of an agreement on the part of a New York bank, for example, to send all of its collections to the First National Bank, we will say, in St. Claire, Wisconsin, received for collection, which are drawn on the banks in that place and vicinity, while the First National Bank agrees to send all the checks received and drawn on banks in New York and vicinity to the New York bank for collection. Furthermore it is agreed that a statement of the account between them shall be sent once in two weeks, or once a week, or oftener, and the balance be remitted in some definite manner. If the account is between two banks in two large cities, the statement is sent oftener than in the case of an account between a bank in a large city and another in a very small place. Then there are arrangements for allowing interest on balances from the time of making collections until the transmitting of the balances due. Perhaps the best idea of these arrangements can be obtained by giving examples.1

2. Transfer Of Checks

In collecting checks, the first step is to have them properly transferred to the bank. This transfer may be absolute or only conditional. A depositor who wishes to retain control of his checks in-iorses them "for deposit" or "for collection." The legal effect of such an indorsement is, he can at any time before the money thereon has been collected withdraw them; if they have been collected, the money belongs to him unless its identity has become lost by admixture with other moneys. In such a case the first bank and every other through which checks go in the process of collection is the agent or sub-agent of the depositor; so long as the agency is preserved the principal can control his check, or the proceeds.

1 A Missouri l>ank gave credit "on the day of receipt, for cash items and checks," to its depositors, and permitted them to draw at once against the credit thus given. This is a common practice, though its unwisdom is often apparent. A depositor may in this way virtually obtain a free loan from his bank.

A Boston bank received checks, drafts, etc, from another bank, credited the tender with the amount, and, after collecting them, allowed the sending bank interest at an agreed rate on the sum collected while in its possession.

Two banks outside New york city made the following arrangement: Each bank was to charge all checks, etc., sent to the other, which it in turn was to credit and collect, and send a draft on a New York city bank once a week for the balance due on mutual account.

A bank in North Carolina agreed with another bank in the same state to collect checks, notes, drafts, and other evidences of debt received from it, to charge one eighth of one per cent for making collections in its own city, and one quarter of one per cent on all other collections, and to remil the amount of collections daily.

The last example that we shall give is an arrangement made between two banks by telegraph. A Memphis bank telegraphed a bank at New Orleans " Please write us best terms handle our N. O., La., and So. Miss, business."

The reply was sent in the same manner: "Will credit cash items on points named, also Texas at par on receipt. Start the account." This offer was accepted..