MEMORANDUM OF LAW

Warrant of payment From Wikipedia, the free encyclopedia Finance In financial transactions, a warrant is a written order from a first person that instructs a second person to pay a specified recipient a specific amount of money or goods at a specific time.[1] The warrant may or may not be negotiable and may authorize payment to the warrant holder on demand or after a maturity date. Governments may choose to pay wages and other accounts payable by issuing warrants instead of checks. Contents [hide] 1 History 2 Modern warrants 3 In the United Kingdom 4 In Canada 5 See also 6 References 7 External links History In the 18th century, warrants were used by the military to authorize payments to soldiers and suppliers. George Washington, for example, signed warrants that ordered quartermasters to deliver money or acquire supplies. [2] These warrants were used by quartermasters to issue vouchers to acquire food, supplies, munitions, clothing, transportation, etc. for the use of the American military and to maintain Washington's headquarters. Warrants could be redeemed by the army paymasters, but most often they were used like cash by the recipient. Warrants, like bills of exchange and vouchers, were often heavily discounted and depreciated in value. The fortunes of war could be traced through the discount rates on warrants, vouchers, and Continental dollars. In the early days of the colony at Sydney Cove in Australia, the merchant Robert Campbell was one of the first merchants to attempt to trade, but lacked sufficient currency. When he first sailed into Sydney aboard his company's ship the Hunter in 1798,[3] Campbell was forced to sell his first consignment of goods to a syndicate of military officers in return for Paymaster's Bills drawn on London, which were like warrants.[4] The term warrant may continue to be used broadly as an order to pay or an order to deliver goods. [citation needed] Modern warrants

Sample Registered Warrant In government finance, a warrant is an order to pay that instructs a federal, state, or county government treasurer to pay the warrant holder on demand or after a maturity date. Such warrants look like checks and clear through the banking system like checks, but are not drawn against cleared funds in a checking account (demand deposit account). Instead they may be drawn against "available funds" or "out of fund 0027" so that the issuer can collect interest on the float or delay redemption. If the warrant is conditional on funds being available, the warrant is not a negotiable debt instrument. In the U.S., warrants are issued by government entities such as the military and state and county governments. Warrants are issued for payroll to individual employees, accounts payable to vendors, to local governments, to taxpayers receiving tax refunds, to recipients of unemployment benefits, and to owners of unclaimed money. A warrant differs from a check in that the warrant is not drawn on a checking account, is not necessarily payable on demand, and may not be negotiable.[5] [6] Warrants deposited in a bank are routed (based on the MICR routing number) to a collecting bank which processes them as collection items like maturing treasury bills and presents the warrants to the government entity's treasury department for payment to the bank each business day. Regular warrants are redeemable by the government treasurer after they are issued. "Registered Warrants" bear interest and need not be redeemed by the treasurer until the warrant maturity date.[7] If warrants cannot be immediately redeemed by the issuing entity, the collecting bank may accept the warrants as short term debt instruments and collect interest when redeemed in accordance with a prior agreement. The collecting bank may refuse to accept a warrant issue, in which case other banks may also refuse to accept them. [8] "The warrants of a municipal corporation are not negotiable instruments. They do not constitute a new debt, or evidence of a new debt, but are only the prescribed means devised by law for drawing money from the treasury."[9] The U.S. Securities and Exchange Commission said on July 9, 2009 that California's Registered Warrants are "securities" under federal securities law and will be regulated as municipal securities by the Municipal Securities Rulemaking Board.[10] Under these regulations anybody who profits by buying and reselling warrants must be registered as a municipal securities brokerdealer.[11] Although Registered Warrants are evidence of a municipality's obligation to pay, because they demonstrate an intent to disburse funds when those funds become available, the US Supreme Court has ruled that a holder of a valid warrant cannot obtain a writ of mandamus for specific performance of the obligation to pay, enforced against a treasurer or other employee of the municipality.[12]

Warrants can be replaced with substitute checks under the Check 21 Act.[13] Such substitute checks show the MICR routing numbers that identify them as warrants. [edit] In the United Kingdom In the UK, warrants are issued as payment by the NS&I when a Premium Bond is chosen. The difference between a warrant and a cheque is that a cheque usually places no explicit time frame on when the amount is to be paid. [edit] In Canada Main article: Governor General's Warrant [edit] See also Government debt [edit] References 1.^ Oxford English Dictionary, 1971. 2.^ Revolutionary War Warrant Books of George Washington, 1775-1776 3.^ Steven, Margaret (2006). "Campbell, Robert senior (1769 - 1846)". Australian Dictionary of Biography, ANU. Retrieved 7 June 2010. 4.^ Binney, Keith Robert (2005). "The Merchants". Horsemen of the first frontier (1788-1900) and the Serpent's legacy. Volcanic Productions. pp. 72. ISBN 0-646-44865-X. Retrieved 201006-28. 5.^ "Check". Glossary of Accounting terms. A-Z-Dictionaries.com. 2005. Retrieved 26 May 2009. See also "Warrant" 6.^ "Warrant". Glossary of Accounting terms. A-Z-Dictionaries.com. 2005. Retrieved 26 May 2009. See also "Check" 7.^ Frequently Asked Questions about Registered Warrants 8.^ California IOU holders 9.^ First National Bank v. Cook, 43 Neb. 318, 61 N.W. Rep. 693. 12 B.L.J. 151. 10.^ SEC press release 11.^ California IOUs considered securities SEC says 12.^ Raton Waterworks Co. v. Raton, 174 US 360. 13.^ Substitute Checks - Frequently Asked Questions - Section B.8 SEE External links California law on Registered Warrants Country regulations for Registered Warrants Frequently Asked Questions about Registered Warrants (IOUs) Responses to questions from California banks SEE ATTACHED ALSO

Check 21 Act From Wikipedia, the free encyclopedia This article may require cleanup to meet Wikipedia's quality standards. The specific problem is: incoherent and political. Please improve this article if you can. The talk page may contain suggestions. (January 2011)

The Check Clearing for the 21st Century Act (or Check 21 Act) is a United States federal law, Pub.L. 108-100, that was enacted on October 28, 2003 by the 108th Congress. The Check 21 Act took effect one year later on October 28, 2004. The law allows the recipient of the original paper check to create a digital version of the original checkcalled a "substitute check," thereby eliminating the need for further handling of the physical document. Consumers are most likely to see the effects of this act when they notice that certain checks (or image of) are no longer being returned to them with their monthly statement, even though other checks are still being returned. Another side effect of the law is that it is now legal for anyone to use a computer scanner or mobile phone to capture images of checks and deposit them electronically, a process known as remote deposit. Check 21 is not subject to ACH (Automated Clearing House) rules, therefore transactions are not subject to NACHA (The Electronic Payments Association) rules, regulations, fees and fines. Contents 1 Truncation 2 Implications 3 Technical Details 4 Patents 5 See also 6 References 7 External links Truncation The process of removing the paper check from its processing flow is called truncation. Paper checks continue to transition to electronic images at an extraordinary rate, with almost 70% of all institutions now receiving images.[1] In truncation, both sides of the paper check are scanned to produce digital images. If a paper document is still needed, these images are inserted into specially formatted documents containing a photo-reduced copy of the original checks called a "substitute check". Once a check is truncated, businesses and banks can work with either the digital image or a print reproduction of it. Images can be exchanged between member banks, savings and loans, credit unions, servicers, clearinghouses, and the Federal Reserve Bank.

Not all banks have the ability to receive image files, so there are companies who offer the service. At the item processing center, the checks are sorted by machine according to the routing/transit (RT) number as presented by the magnetic ink character recognition (MICR) line, and scanned to produce a digital image. A batch file is generated and sent to the Federal Reserve Bank or presentment point for settlement or image replacement. If a substitute check is needed, the transmitting bank is responsible for the cost of generating and transporting it from the presentment point to the Federal Reserve Bank or other corresponding bank. Check 21 has also spawned a new bank treasury management product known as remote deposit. This process allows depositing customers the ability to capture front and rear images of checks along with their respective MICR data for those being deposited. This data is then uploaded to their depositing institution, and the customer's account is then credited. Remote deposit therefore precludes the need for merchants and other large depositors to travel to the bank (or branch) to physically make a deposit. In addition to remote deposit, other such electronic depositing options are available to qualifying bank customers through NACHA-The Electronic Payments Association. These options include "Point of Purchase" (POP) for retailers and "Accounts Receivable Conversion" (ARC) for high volume remittance receivers. These transactions are not covered under the Check 21 legislation, but rather are electronic conversions of the checks' MICR data into an ACH (Automated Clearing House) debit. This can help the depositor save on the costs of transporting checks and in bank fees. However, the liability changes from Regulation CC of the Federal Reserve to Regulation E, which provides much more protection for the account being debited and therefore more risk to the merchant and originating bank. Recently, Check 21 software providers have developed a [2]"Virtual Check 21" system which allows online and offline merchants to create and submit demand draft documents to the bank of deposit. This process which combines remotely created checks (RCC) and Check 21 X9.37 files enables merchants to benefit from direct merchant-to-bank relationships, lower NSFs, and lower chargebacks. Check writers may no longer be able to obtain original autographs from cancelled checks endorsed by celebrity recipients. This practice may have been used by some charities to encourage donations [3] and may have also been used in other contexts as well. Note to international readers: The North American terminology "cancelled check" is the British equivalent of a "paid cheque". The rationale is that the cheque has been paid or drawn, and is therefore cancelled so it cannot be presented for payment again. In North America and elsewhere, paid checks, or scanned images of the checks, are returned to the payer (or made available on a bank website) so as to provide the payer with proof of payment. Implications

This section may require cleanup to meet Wikipedia's quality standards. Please improve this section if you can. The talk page may contain suggestions. (January 2011)

The act greatly reduces check processing cost for banks (in part, by eliminating the need for the costly transportation of physical checks), and speeds up the fund transfers. The bank customer benefits from free or lower-cost checking. While the bank of deposit clears and receives the funds associated with a deposited transaction sooner than before, it may still legally hold them for a period of days specified by Expedited Funds Availability Act. During that period the funds are essentially in the bank's possession; accumulated across all the bank customers on any given day, such funds earn the bank a large amount of interest. With some Check 21 providers, retailers will find this system to be faster, as funds may be transferred much quicker than ACH. EChecks processed using a Check 21 solution are typically accepted in 13 seconds and clear the same day or overnight compared to typical Automated Clearing House system (ACH) time frames of 3 to 5 days. And certain Check 21 providers can debit every US checking account, even accounts that ACH cannot such as many Credit Unions, S&Ls, small banks, brokerage accounts, business accounts and credit card check accounts. ACH transactions take several days to clear through the system. During the clearing period the recipient has no way to determine if the transaction will clear or result in an administrative return. ACH has more than 60 reasons why a transaction can fail. Many times it is because the consumers bank has chosen not to participate in ACH, or hasnt performed the correct system integration. Additionally, the fact that the funds are debited from the check issuer's account much faster than before may catch the issuer by surprise, resulting in non-sufficient funds, overdraft and a penalty in the form of NSF fee. Check processing rooms and equipment started to be phased out after the passage of Check 21. Reduced cost of checking for consumers: Most people no longer pay a monthly fee for checking, or have a small maximum number of checks they can write. New security risks: Bank employees were screened, and the security risk was minimal with a physical check. It is physically impossible to gain much information from boxes and boxes of checks. The central virtual storage of checks (at the exchanges), has created a new security risk which is compounded by the exchanges offshoring the technical tasks. Check information can even harm national security, if these archives were searched for key records by a country hostile towards the USA. The information might also be used for insider-trading.

New Privacy concerns: Prior to Check-21, a bank would pay a storage company to hold the checks for seven years, and then to destroy the checks. Today, every check you write can potentially be retained in digital format indefinitely.

[edit] Technical Details Virtual Exchanges were created: There are several large "check exchanges" where banks can send and receive files. These "exchanges" also provide other services for banks. One of which is provided by the Federal Reserve Banks, IBM and the large investment banks own the other exchanges. File format: Banks are exchanging checks (virtually), and therefore must use the same file format. They use a subset of the Ansi Standard X9.37-DSTU which is given the new standard name: X9.100-187 (which is almost identical to the UCD standard). The X9.37 standard had too many extras and the "exchanges" defined their own standards limiting the options available. Two exchanges used a subset of the X9.37 standard, and called it the UCD standard and the Federal Reserve created the "Federal Reserve Adoption" standard. At that point the ANSI standard was being usurped by these other standards created by the exchanges. So ANSI tried to tweak their standard, but didn't include any members of the "exchanges", and the result was the X9.100-180 standard. The result was widely ignored. So the ANSI standards incorporated the standards used by the exchanges (The UCD and the Federal Reserve Adoption of ...), and called it X9-100.187. (And nothing has changed from the UCD). X9.37 Card Trick dates to the 1950s: X9.37 standard has its roots in code written by IBM in the 1950s using punched cards. A stack of cards could be reused by replacing the top card. This "trick" was in place until recently, and now has been discouraged with the X9.100-187 standard. Old tax refund checks came on printed punched cards, so, nothing is new about an electronic check record. What is new, is the ability to destroy the original check as long as an electronic version is retained. USA: Clearly, Check 21, and X9.37 are for American checks and American Currency, and there are very little provisions in the X9.37 standard for any other currency or bank numbering scheme. Although most of the programming is now being done by programmers in other countries. One of the largest exchanges with 17 petabytes of check images, has no programmers on staff anymore. Federal Reserve Banks: The Federal Reserve bank is also one of the virtual "Exchanges" for checks. They still have the ability to handle a physical paper check. Check Volume: The number of checks written in the USA is declining rapidly. Customers are using other payment methods to pay their bills. Databases are growing: Despite the fact that check volumes are decreasing, check archives are growing by petabytes every year. This is because banks are opting to hold virtual checks longer and longer, and potentially, forever in some cases. Why longer retention? Because of frauds that spanned longer than 7 or 10 years (Enron, and more recently Madoff), banks are now required to store certain check images for 100 years. As a result some systems (including the Federal Reserve Banks), now are set up to retain check images for any amount of time.

Postal Money Orders: A Postal money order is an obscure form of a check also covered under check-21, with unique requirements. [edit] Patents There are a number of patents relating to "check collection systems",[4] including some owned by DataTreasury.[5] Section 14 of the Patent Reform Act of 2007 includes provisions eliminating the right of patent holders to prevent financial institutions from using their inventions.[4] There are fractious lobbying efforts on both sides of the debate[6] and it is feared that enacting Section 14 would result in litigation against the federal government seeking compensation for a taking of private property.[4] The current court victories of the patent holders are "payment" based, and not "royalty" based. Although the patents are currently being upheld, the court has sold the method to the infringing bank and also set the fee. The courts have also decided that one exchange was created to shield multiple banks from lawsuit, and therefore have nullified the claim that an exchange should only pay once (but allow multiple banks to exchange). Electronic records of checks have existed since the 1950s, and tax refund checks were even printed on punched cards, yet the banks never thought to patent the idea. DataGeneral's patent would suggest that the Federal Reserve Banks are aiding and abetting all the banks in breaking DataGeneral's patent, and have been for years before the patent was issued. (The Federal Reserve Bank is both a bank and an exchange). This "infringement" would also apply to every US post office, since postal money orders are also checks that are submitted to the FED. [edit] See also Substitute check [edit] References 1.^ http://www.checkimagecentral.org/ 2.^ http://www.check21.com/virtual-check-21-processing.html 3.^ http://www.jimmyfund.org/abo/red/tedwilliams/facts.asp 4.^ a b c Congressional Budget Office Cost Report, pages 2, 5 and 11 5.^ Lisa Lerer, "Senate, old legal woes drawn into patent fight", politico.com, March 25, 2008 6.^ Jeffrey H. Birnbaum, "Lawmakers Move to Grant Banks Immunity Against Patent Lawsuit", Washington Post, February 14, 2008 [edit] External links Full Text of the Check 21 Act Accredited Standards Committee (ASC) X9 Financial Industry Standards: Statement on Check 21 adoption (October 23, 2004) Check 21 Return Codes

Categories: 2003 in law | Federal Reserve | Negotiable instrument law | United States federal banking legislation | Banking | 108th United States Congress | Payment systems This page was last modified on 28 April 2011 at 18:54.