Putting Holds on Money Orders.

At my most recent fraud prevention seminar, I was asked about putting holds on money orders.  As I stood there, I wasn’t sure how to answer.  When that happens, I’ll usually have people contact me by email after the seminar and then I can get back to them on the issue.  In this case, it also makes great blog fodder.

Money orders are strange birds.  Some are treated like cashiers checks and others are treated like ordinary checks.

U.S. Postal Service money orders are straight-forward because they come from a government agency.  Regulation CC requires that funds from U.S. Postal Service money orders must be made available on the first business day following the banking day of deposit (“next-day availability”).  This doesn’t help if you are faced with bogus Postal money orders.  Any instrument requires close scrutiny nowadays.

UCC 3-104(f) says that a check might still be just a check even if it says “money order” on it.  The comment to this section makes the distinction between a money order as a normal check or a money order as a certified, cashier’s or teller check by who the parties are to the instrument.  If the purchaser of the money order is the drawer, then it’s a normal check and you can follow the normal Regulation CC holds.  If the drawer and the drawee are the same bank or branches of the same bank, then the money order is treated as a cashier’s or certified check.  If the money order is drawn by a bank on another bank or payable at or through a bank, it’s treated as a teller check.  Cashier’s, certified and teller’s checks have the same availability requirements as U.S. Postal Service money orders, that is, next-day availability.

In the face of bogus instruments of all kinds that credit unions face today, this is small comfort.  A credit union needs to examine these types of instruments that it receives over the counter very carefully.

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2 thoughts on “Putting Holds on Money Orders.

  1. What a credit union needs to do “these days” is twofold:
    To follow the law- noting that hold times are “maximum limits” not carved in stone-

    And, to serve their customers better than a bank- which is their only reason to exist.

    My credit union has a nice little flyer on check holds which explains their policy, at least indirectly recites “requirements” due to 9-11 (which do not exist) and does not invite members to seek exceptions if necessary. After all, whose money is it, yours or the CU’s? Why should they benefit from holding on to money as long as possible?

    They lie. Is this an institution you would want to do business with? If not, be a client, and vote with your feet. Other institutions are very straightfoward about procedures and policies and invite requests for exceptions.

  2. This apparently shows how much the last guy happens to know about the workings of a financial institution. I happen to work at a Credit Union. I wake up every morning praying that I get to hold funds on a check just to tick off my customer…seriously come on. What people don’t seem to realize is it’s a hassel for the financial institution just as much as it is for the customer. I would much rather cash your check and let you on your way. But then I wouldnt be doing my job which is to PROTECT my customer and my Credit Union. Who exactly does he think is going to take the loss if that check he cashes is deemed NSF or Fraud? Not the financial institution…..once you deposit something into your account you are now the owner of it. Credit Unions and Banks take these measures so that the funds are collected and the account holder has no liability once the check has cleared. People seem to think they will never “get a bad check” well I hate to enlighten everyone but if I’ve seen a McDonald’s check come back I’m not releasing any funds when a hold is required!

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