Country Clearing Houses—Organization The collection of items through so many banks individually in the large cities, and by such circuitous routing, was not econom ical. Efforts were made in various places to introduce the clearing of country items. In London country clearings were established in 1858 through the enterprise of Sir John Lubbock, and about 1872 spread to other English cities. But the scheme made no progress in the United States until about 1895, when Sedalia, Missouri, devised a scheme quite identical with the London scheme but without knowledge of the London precedent.
The Sedalia collection area included thirteen towns on its par list. By the Sedalia plan the country banks were required to keep balances with some Sedalia correspondent bank; interest was allowed on this balance, and checks as received were debited or credited to this account. When a check on the out-of-town bank was received by its Sedalia correspondent, it was charged to its account and mailed that afternoon. If the check was received by some other Sedalia bank in the morning mail, it was presented to the drawee's correspondent through the clearing house and paid there as if it were the correspondent's own check; the correspon dent then charged it to the drawee's account and sent it by the afternoon mail. If the Sedalia bank had received it late in the day, it was held over and put through the clearing house the following business day. The correspondent credited the out-of town bank's account with any items returned unpaid, and col lected same from the other Sedalia bank that had put those items through.
But the most important step in the development of country clearing houses was the establishment in 1899 by the Boston Clearing House of its country collection department. It was introduced against serious opposition of certain local and country banks, some of which refused to enter the scheme.
The country collection department of a clearing house is simply a co-operative arrangement among the members of the clearing house for the collection of their out-of-town items. The manager is given power to arrange with banks in the district to act as collection agents for the country clearing house. These correspondents are selected on the same considerations as any member would select correspondents, the clearing house choosing agents having strength and offering service at reasonable After a sufficient number of connections have been arranged, the banks of the district are informed that the country clearing house is ready to receive and collect items on the listed banks and at specified rates. Notice is given from time to time of any changes
in the list and rates.
Method of Making Country Collections A member having items for collection indorses them to and for the clearing house, and such items are listed on foreign slips attached to the package made up; these slips give also the name and number of the collecting bank, the date of the indorsement, and the name of the bank and town to which the items are to be sent, in accordance with the clearing house list. The packages are delivered to the clearing house and a due bill is given as receipt. These clue bills arc clearable after a number of days, determined by the average time required to obtain returns for collections. At the clearing house these items are proved and sorted according to the banks to which they are to be sent; packages and cash letters arc prepared and transmitted, the total of these packages or cash letters being proved against the total of the incoming packages or cash letters. Remittances are made directly to the manager of the clearing house; the refused or protested items and the ex change charges are deducted by the correspondent in making these remittances. The country clearing house is a member of the city clearing house and in this way distributes returns to the members and receives credits; these returns are cleared against the due bills on the agreed clearing day. If all remittances are duly received according to the estimated time and in agreement with the due bills, the offsetting will be nearly perfect and very small balances will have to be charged back or carried over until the returns come in. The overhead expenses of the country clearing house are prorated monthly or oftener, according to the average daily volume of checks submitted for collection.
The country clearing house does not necessarily supplant or in terfere with the arrangements which individual banks may make with correspondents for the collection of its checks; it simply gives those banks wishing it this additional means of collecting.