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FEDERAL RESERVE BANK
OF NEW YORK
r Circular No. 2 3 5 4 ~
1
L January 10, 1942 J

COLLECTION OF POSTAL MONEY ORDERS
To the Member Banks and Nonmember Clearing Banks
of the Second Federal Reserve District:

This is to advise you that on and after February 2, 1942, this bank and its Buffalo Branch will not accept
for collection, as either cash or noncash items, any postal money orders except those which are drawn on or
issued by (1) the New York Post Office or the Brooklyn Post Office, both located in New York, N. Y., (2) the
Buffalo Post Office, Buffalo, New York, (3) a post office in another Federal Reserve city or Federal Reserve
Branch city, or (4) the "Washington Post Office, Washington, D. C. The other Federal Reserve banks are also
issuing circulars limiting the postal money orders which they will accept for collection, either as cash or noncash items, on and after February 2, 1942.
Consistent with the foregoing, we request direct-sending member banks and nonmember clearing banks not
to send to any other Federal Reserve bank, or to any branch of another Federal Reserve bank, any postal money
orders except those which are drawn on or issued by (1) the post offices in the respective cities in which such
other Federal Reserve banks or branches are located or (2) the "Washington Post Office, "Washington, D. C.
For the information of member banks and nonmember clearing banks we quote below paragraphs 1 and 2
of section 1429 of the Postal Laws and Regulations, which section is contained in Title VIII, Chapter 3, entitled
"Payment of Domestic Money Orders".
"Under such rules and regulations as the Postmaster General shall prescribe, postal money orders may be issued
payable at any money-order post office, and on and after the date upon which such rules and regulations become effective
all money orders shall be legally payable at any money-order post office, although drawn on a specified office; and as
compensation for the extra labor involved in paying a money order at an office other than that on which the order is
drawn the Postmaster General is authorized to exact a fee of the same amount as that charged for the issue of the order.
"2. An original domestic money order shall be paid at its full face value if presented at the office on which drawn
or at the office of issue at any time within the period of its validity, which is 1 year from the last day of the month in
which issued. For the first 30 days after issue any domestic money order issued in the continental United States (except
Alaska) and drawn on an office located therein, may be paid for its face value, less the fee prescribed by the law quoted
above, at an office other than that of issue or that on which drawn, provided the office at which presented is located within
the continental United States (except Alaska)."

Prior to August 1, 1934, when the revised Regulations of the Post Office Department became effective,
Federal Reserve banks could collect all postal money orders at their local post offices without the payment of a
fee, regardless of where such orders were issued or where they were payable. "When the Post Office Department
revised its Regulations to provide a fee for cashing any postal money order when presented at an office other
than that of issue or that on which drawn, Federal Reserve banks, as a general rule, began sending money orders
not drawn on or issued by postmasters in Federal Reserve bank and branch cities to member or par nonmember
banks located at the points on which the orders were drawn or at which issued as cash items for collection and
remittance. This practice has not proved entirely satisfactory since many member and par nonmember banks
feel that they are entitled to make a charge for their services in presenting the money orders to their local post
offices for payment, and some banks have declined to handle postal money orders for the Federal Reserve banks
unless permitted to make such a charge.
In view of these developments and since the payees or holders of postal money orders can (under the terms
of the above-quoted provisions of the Postal Laws and Regulations) collect domestic money orders from their
local post offices, and make such collections without the payment of any fees in cases of money orders drawn on
or issued by such local post offices, Federal Reserve banks have, as indicated in the first paragraph of this circular,
decided to limit the money orders which they will accept for collection, either as cash or noncash items, on and
after February 2, 1942.




ALLAN SPROUL,

President.

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