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Legality of Printing Money Orders

Question: 
Please define "money orders." Is it illegal for a check printer to print money orders for a consumer? (Information being printed on the money order reflects the consumer's individual banking account number, such as John Doe Company, 123 Any Street, USA, with account numbers being the individual's personal account number.)
Answer: 

Answer by Ken Golliher: "Money order" is not a defined term in the Uniform Commercial Code or in the Expedited Funds Act as interpreted by Regulation CC. In short, it has no specific legal meaning. So, it is doubtful that there is any legal prohibition against anyone using that term on their checks.

I have had calls from community banks where a local convenience store opened an account, called it "Money Orders" and began issuing checks against that account imprinted "Money Order." When one banker called, she was wondering how to handle the items that were being presented against insufficient funds. The answer was, "Like you would any other check, pay it or send it back, NSF."

As your question suggests, it's just a check with a name on it. The name has a connotation of value that can be misleading. As a matter of personal opinion, I would not allow a customer to have the term printed on their checks. If they ordered their checks from another source and they included the term, I would suggest they close their account. There may be a certain amount of moralizing in such a policy, but my concern would be that people could easily be defrauded by purchasing such an item. They might even reach the conclusion that the bank should be held accountable for their loss and I would not care to argue over it.

Answer: 

Answer by Mary Beth Guard: The person "issuing" such items would probably also be in violation of state law. Most states have something like a "Sale of Checks Act" that requires money order issuers to be licensed and regulated. As part of the licensing requirement, a bond is required to protect purchasers and payees. A check printer should be savvy enough about the law to not print items bearing the phrase "Money Order" unless they are to be issued by a licensed money order issuer. It's scary to think otherwise.

First published on BankersOnline.com 08/02/04

First published on 08/02/2004

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