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FED ER A L RESERVE BA N K OF DALLAS

DALLAS. TEXAS 75222

Circular No. 70-56
March 5 9 1970

To All Banks in the
Eleventh Federal Reserve District:

The Post Office Department has requested that you be
advised of new rules adopted by it concerning refunds on stolen
or defective postal money orders.
For your information a reproduction of the notice
which appeared in the Federal Register dated December 6 , 19&9»
appears on the following pages.
Yours very truly,
P. E. Coldwell
President

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

TITLE 39--POSTAL SERVICE
Chapter 1— Post Office Department
Part 171--Money Orders
Payments to Banks Through Federal Reserve System

In the daily issue of Saturday, October 26, 1968 (33 F.R.
15877), the Department published a notice of proposed rule making
consisting of the addition of a new §171.8 to Title 39, Code of
Federal Regulations.
The new section proposed to give the Postmaster
General the right to demand refund from the presenting bank for the
amount of a paid money order if, after payment, the money order was
found to have been stolen, or to bear a forged or unauthorized endorse­
ment, or to contain any material defect or alteration which was not
discovered upon initial examination.
In addition, it was proposed
that if refund was not made by the presenting bank within 60 days
after demand, the Postmaster General would be authorized to take such
action as necessary to protect the interests of the United States.
Interested persons were given 30 days within which to submit
comments on the proposed regulations. After consideration of all com­
ments received, it has been determined to adopt the proposed regula­
tions with the following changes:
1.

A definition of a stolen money order is added;

2.

The definition of "Examination" of a money order is
revised for clarification;

3.

The right to demand a refund from a bank would have
to be exercised within a reasonable period after the
facts are discovered.

Accordingly, the following amendment to Title 39, Code of
Federal Regulations is hereby made, to be effective on the 30th day
after the date of this publication in the FEDERAL REGISTER.
In Part 171 new §171.8 is added, reading as follows:
§171.8 Payments to banks through
Federal Reserve System.
(a)

Presentation for payment. Banks may present money
orders for payment through the Federal Reserve
System.

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(b)

Definitions.
(1)

"Money order" means a U.S. Postal Money Order.

(2)

"Federal Reserve Bank" means a Federal Reserve
Bank or branch thereof which presents a money
order for payment by the Postmaster General.

(3)

"Presenting bank" means a bank which presents
a money order to, and receives credit therefor
from a Federal Reserve Bank.

(4)

"Reclamation" means the action taken by the
Postmaster General to obtain refund of the
amounts of paid money orders.

(5)

"Examination" includes examination of money orders
for indicia of theft, forged endorsements, forged
signatures or initials of issuing personnel,
raised amounts, and other material defects by
means of electronic methods and also visual
inspection for discovery of defects which cannot
be electronically discovered.

(6)

"Stolen money order" means a U.S. Postal Money
Order which has been stolen from a post office,
classified or contract station or branch or
postal employee before it has been officially
issued by the post office, classified or con­
tract station or branch or by a postal employee
in the course of discharging his official duties.

(c)

Payment. The Postmaster General has the usual right of
a drawee to examine money orders presented for payment
by banks through the Federal Reserve System and to refuse
payment of money orders and shall have a reasonable time
after presentation to make such examination.
Provisional
credit shall be given to the Federal Reserve Bank when it
furnishes the money orders for payment by the Postmaster
General. Money orders shall be deemed to be paid only
after examination has been fully completed subject to the
right of the Postmaster General to make reclamation as
provided for in paragraph (e) of this section.

(d)

Endorsements. The presenting bank and the endorser of a
money order presented for payment are deemed to guarantee
to the Postmaster General that all prior endorsements are*

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genuine, whether or not an express guarantee to that
effect has been placed on the money order. When an
endorsement has been made by a person other than the
payee personally, the presenting bank and the endorser
are deemed to guarantee to the Postmaster General, in
addition to other warranties, that the person who so
endorsed had unqualified capacity and authority to
endorse the money order on behalf of the payee.
(e)

Reclamation. The Postmaster General shall have the
right to demand refund from the presenting bank of the
amount of a paid money order if, after payment, the
money order is found to have been stolen, or to bear
a forged or unauthorized endorsement, or to contain
any material defect or alteration which was not dis­
covered upon examination.
Such right includes, but is
not limited to, the right to make reclamation of the
amount by which a genuine money order bearing a proper
and an authorized endorsement has been raised.
Such
right shall be exercised within a reasonable time after
the Postmaster General discovers that the money order
has been stolen, or bears a forged or unauthorized
endorsement, or is otherwise defective.
If refund is
not made by the presenting bank within 60 days after
demand, the Postmaster General shall take such action
as may be necessary to protect the interests of tfhe
United States.

(5 U.S.C. 301, 39 U.S.C. 501, 5101)

David A. Nelson,
General Counsel.

[F.R. Doc. 69— 14523; Filed, Dec. 5, 1969; 8:47 a.m.]

Source: FEDERAL REGISTER, Vol. 34, Number 234.

Saturday, December 6, 1969.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102