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#111820 - 09/03/03 10:26 PM Money Orders & Reg CC
Maria Offline
Platinum Poster
Joined: Apr 2001
Posts: 502
Sylacauga, Al, United States
I need help quick please.

I have a customer that has two established accounts with us and I would almost guarantee is kiting. This individual works in the office of a retail store. He/she writes checks from his/her account with us and uses the checks to buy money orders purchased from his/her place of employment. The money orders are deposited into his/her account at the bank.

Also, he/she writes checks that are cashed at his/her place of employment, then brings the cash and deposits into his/her account at the bank.

I know to file a SAR, but I would really like to place a hold on the money orders.

According to Reg CC, Postal Money orders are next day availability, but it does not address other types of money orders. Am I permitted to place a hold on these money orders? And must it be a local/non-local hold or can I use the exception for reasonable doubt of collectability?

I don't want to give him/her an opportunity to attempt legal action against the bank but I want to try to stop them. It is a great deal of money "floating" since deposits are made daily, sometimes twice a day.

Thanks so much for your opinion.

Requests are mine not my employer.

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Operations Compliance
#111821 - 09/04/03 02:23 AM Re: Money Orders & Reg CC
JacF Offline

Power Poster
Joined: Nov 2001
Posts: 6,719
PA
The fact that the customer works in a retail store, and is purchasing money orders there rules out the possibility of these being next day items. As you mentioned, postal money orders are next day items. The other 'money orders' that would meet the next day item test are bank money orders signed by a bank employee rather than the remitter. By UCC definition, such money orders are actually cashier's checks. It appears that this does not apply, so you are free to use exception holds on these items.

Of course, the above only applies if you want to actually keep the accounts. Personally, I do not see any reason to maintain these accounts any longer, and I strongly recommend starting your closeout process. Just make sure you stop accepting check/money order deposits, then allow enough time for any return items to come back before closing the account.

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#111822 - 09/04/03 03:21 PM Re: Money Orders & Reg CC
Elwood P. Dowd Offline
10K Club
Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
I agree with JacFSB, "money order" is not a defined term in either Regulation CC or the UCC. Although postal money orders may be entitled to next day availability, consider money orders drawn on a retailer as just another check, local or nonlocal. (I actually had a call this week from a bank who had a money order returned "NSF.")

If you want to use exception holds, I would encourage you to consider "reasonable cause to doubt collectibility based on confidential information." Keep a memorandum as to your concerns related to kiting. However, the keystone of JacFSB's response is the encouragement to close the account. You are in business to make money and that doesn't happen when you spend your time monitoring a customer who is constantly churning an account that never has a collected balance.
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