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Consumer Banking and Payments Law: 6.2.6 Money Order Drawee’s Insolvency

If the money order issuer becomes insolvent, the payee may refuse to accept the money order. Meanwhile, the consumer has paid the issuer for the money order. The consumer will have to pay the payee again. Alternatively, the payee may accept the money order, not knowing of the issuer’s insolvency, but then demand payment from the consumer when the issuer is unable to honor the money order.

Consumer Banking and Payments Law: 6.2.8 State Regulation of Issuers of Money Orders

Issuers of money orders may be governed by state money transmitter laws.68 Those laws regulate entities that forward money for others. The laws are designed primarily to ensure the safety and soundness of the issuers and to provide bonding and other mechanisms to reimburse consumers in the event of the company’s insolvency. However, some laws contain other provisions.

Consumer Banking and Payments Law: 6.2.10 U.S. Postal Money Orders

The U.S. Postal Service sells money orders that are subject to federal regulations, not the UCC.71 Postal money orders are similar to other money orders, except “the postmaster general has the usual right of a drawee” and “[m]oney orders are deemed paid only after examination [by the postmaster general] is completed.”72

Consumer Banking and Payments Law: 6.3.1 Overview

When a consumer uses a cashier’s or teller’s check, they will normally pay for the check before it is issued by the bank.75 With cashier’s and teller’s checks the drawer is not the person who purchased the check, but the bank from which the check is purchased. The drawee is either the same bank, or another bank.

Consumer Banking and Payments Law: 6.3.3 Stop Payment of Cashier’s and Teller’s Checks

When a consumer pays for something with a check from the consumer’s bank account, the consumer has a certain period of time between the issuance of that check and the time when the check is presented to stop payment on the check, thereby preventing a defrauding payee from being paid.87 So long as the stop payment order is given before the check is presented, the consumer drawer will not have the money taken out of his/her bank account.

Consumer Banking and Payments Law: 6.3.5 Replacing or Getting a Refund on a Lost or Stolen Cashier’s or Teller’s Checks

When a cashier’s or teller’s check is lost or stolen, the purchaser is likely to want a replacement cashier’s or teller’s check or a refund from the issuing bank. The problem for the bank is that if the cashier’s or teller’s check is presented for payment by someone entitled to enforce the cashier’s or teller’s check, the bank will be obligated to pay the cashier’s or teller’s check, which has been pre-accepted by the bank.

Consumer Banking and Payments Law: 6.5.2.1 Introduction to Federal Protections for Remittances

In the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), Congress amended the Electronic Fund Transfer Act (EFTA) to create an entirely new regulatory regime for international remittance transfers originating in the United States.147 Remittances are now subject to disclosure requirements, error resolution procedures, and, particularly importantly, protections against loss through error or theft.

Consumer Banking and Payments Law: 6.5.2.2 Scope of Regulation E Protections and Definitions

The Regulation E protections for international remittances apply to any “remittance transfer,” defined as “the electronic transfer of funds requested by a sender to a designated recipient that is sent by a remittance transfer provider.”169 However, small dollar transactions—those for $15 or less—are excluded from the definition,170 as are securities and commodities.171 There are four components of the definition of

Consumer Banking and Payments Law: 6.5.2.4.1 Errors covered

While disclosures will be helpful to remittance senders in evaluating the cost of using different remittance providers, the error resolution procedures should be invaluable to senders whose funds are lost or not paid in full to the recipient. The types of error that are subject to the error resolution procedure include:

Consumer Banking and Payments Law: 6.5.2.4.2 Procedures required

The error resolution requirements are triggered by oral or written notice from the sender, within 180 days of the “promised date of delivery,” that an error occurred.272 The provider is required to investigate promptly and determine, within ninety days after receiving notice of the error, whether an error occurred and report all results to the sender.273 If an error is found to have occurred, the provider is required, within one business day of receiving the sender’s instructions regarding the a

Consumer Banking and Payments Law: 6.5.2.5 Effective Date

The original regulations were due to become effective on February 7, 2013.287 However, the CFPB first extended the effective date indefinitely288 and then set the effective date for October 28, 2013.289 The effective date for the amendments to the final rule issued in May 2020 was July 21, 2020.290

Consumer Banking and Payments Law: 6.5.3.2 State and Local Remittance Laws

Remittance providers are subject to state money transmitter statutes, except when those statutes are preempted by federal law.305 Money transmitter statutes primarily deal with matters such as licensing, bonding, and permissible investments rather than with the types of disputes which involve consumers, although some provide consumers with limited protection.306

Consumer Banking and Payments Law: 6.6.1 Overview

Many of the same services that are used to remit funds internationally can also be used to send money within the United States.318 In addition, a growing number of other services enable individuals to transfer money person-to-person (known as “P2P” transfers).319 PayPal, which owns Venmo, is the largest nonbank provider of P2P services.