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Stop Payments on Money Orders
Question: I found information on BankersOnline.com concerning stop payments on bank money orders and it says "a bank should generally NOT put stop payments on these items". Can I ask what "generally NOT" means? I had a customer that claims her money order was stolen and we put a stop on it. Is this legal?
Answer: There are two types of money orders - personal money orders, and bank money orders.
A personal money order is the same as a one-check-checking-account. You can put a stop payment on those with no difficulty.
But a bank money order is just like an official or cashier's check - it's an obligation on the bank itself. Therefore, putting a stop payment on it does not relieve the bank from the liability of the check. If it is presented by a holder in due course, you'd have to pay it even if it had been replaced. You could fall back to the 90 day claim form and then replace it.
However, I know from past experience that many bankers put stops on bank money orders.
Should they?
No.
Will that stop the practice?
Probably not!
Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 3, 7/05
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