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Stop Payments on Bank-Issued Money Orders
by John Burnett, BOL Guru
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Question: If a money order is drawn on your bank, can a stop payment be placed for any reason, or is it treated like a bank check where a stop payment can be only placed if the check is lost or stolen? Is there a UCC ruling on this issue?

Answer: The term money order isn't well-defined in the UCC. However, the general understanding is that there are two types of money orders sold by banks.

The first, termed by some a "bank money order," is really a form of cashier's check or teller's check. It is sold to the public, but signed by a bank official, rather than by the customer. It is typically sold in a completed (payee and remitter information filled in) condition.

The second, often called a "personal money order," is the more commonly sold. It's sold without remitter or payee information, generally (some banks will complete this information as a courtesy to their customers), and signed by the customer, rather than a banker.

Generally speaking, the bank money order is treated as an official check, subject to the sanctions against banks that stop payment on, or refuse to honor them when presented.

However, the personal money order is usually considered a special one-time personal deposit, subject to stop payment rights just as a regular checking account. This, of course, presents logistical problems if a check is lost or stolen in an incompleted state.

First published on BankersOnline.com 4/4/05


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