Labeling "Payable Through" Checks

Effective February 1, 1991, institutions which arrange for checks payable by them to be payable through a different institution will have to require their customers to use checks with certain information printed on them. These “payable through” checks will have to contain the following information, printed conspicuously:
  1. The name, location, and first four digits of the nine-digit routing number of the bank by which the check is payable; and
  2. The words “payable through” followed by the name of the payable through bank.

[12 CFR 229.36(e)(1)]

The first four digits of the routing number of the bank by which the check is payable and the printed location of that bank must be associated with the same check-processing region. [Commentary, 12 CFR 229.36(e)-1] In other words, the printed location cannot be in check-processing region A while the routing number is associated with a location in check-processing region B.

The required information will be deemed conspicuous if it is printed in at least six-point type and is located in the title plate of the check that is located in the lower-left quadrant of the check. If the information is located elsewhere, it may still be conspicuous, but placing it in the title plate will guarantee that. [Commentary, 12 CFR 229.36(e)-1]

The purpose of this rule is to make it easier for depositary banks to: (1) identify payable through checks; and (2) determine the check-processing region of the bank by which a payable through check is payable. The problem for depositary banks is that payable through checks are generally MICR-encoded with the routing number of the payable through institution. However, the local or nonlocal nature of the check is determined by the location of the bank by which the check is payable rather than the location of the payable through institution. [12 CFR 229.2(r) and (s)] The depositary bank cannot, therefore, rely on the MICR encoding on a payable through check to ascertain the local or nonlocal nature of the check and thereby determine the availability time frame to which the check is subject. This means the depositary bank must first visually identify and sort out payable through checks and must then manually determine the check-processing region of the bank by which the check is payable. The regulation attempts to ease the burden of this manual process by requiring that payable through checks be conspicuously labeled as payable through checks so that they can be more easily identified and sorted out. [12 CFR 229.36(e)(1)] Regulation CC goes on to require that the first four digits of the routing number of the bank by which the check is payable also appear conspicuously (which enables the depositary bank to identify that bank’s check-processing region).

[12 CFR 229.36(e)(1)]

Prior to 1997, number “2.” above also required the location of the payable through bank. The Board eliminated the requirement on the grounds that it served no Regulation CC purpose. The Board pointed out, however, that a paying bank using a payable through institution may still want to include the location since it would limit the locations at which the payable through institution must accept checks for presentment. See the previous section and 12 CFR 229.36(b)(3).