Yes, we believe you may issue a stop payment order on the money order, provided the money order is not signed by a representative of your bank. Although money orders are not clearly addressed in the Uniform Commercial Code, state and federal courts in Illinois have determined that money orders are subject to stop payment orders.

One Illinois appellate court has noted that unlike cashier’s checks (which are not subject to stop payment orders), “personal money orders have been described as similar to checks in that the purchaser signs as drawer, a blank space is provided for the name of the payee, and the order must be endorsed. Since a personal money order is not signed by an authorized representative of the issuing bank, it is more in the nature of an ordinary check than a bank obligation, and, thus, subject to stop-payment orders.”

We are not aware of any law or rule requiring your bank to demand an indemnity bond if you stop payment on the money order. However, we note that you do have the option of requiring your customer who purchased the money order to contractually indemnify your bank in an indemnity agreement for stopping payment, and also that you do have the option of requiring the customer to purchase an indemnity bond (either of which could be desirable when dealing with a high dollar money order).

For resources related to our guidance, please see:

• Illinois appellate court case, Chicago Cicero Currency Exch., Inc. v. Contl. Illinois Nat. Bank & Trust Co. of Chicago, 545 N.E.2d 250 (Ill. App. 1st Dist. 1989) (holding a personal money order is subject to stop-payment orders, unlike cashier's or certified checks; personal money orders are not signed by authorized representative of issuing bank and thus are more in nature of ordinary check than bank obligation.)

• Illinois appellate court case, Duggan v. State Bank of Antioch, 540 N.E.2d 1111, 1113 (Ill. App. 2d Dist. 1989) (“…a personal money order functions as a personal check and not as a banker's or cashier's or traveler's check. Since the only signature on a personal money order is that of the purchaser, since the instrument takes the form of an order to pay, and since it is drawn on a bank and payable on demand, it is within the classification of a check.”) (internal citation omitted)

• Federal court case, Ctr. Video Indus. Co., Inc. v. Roadway Package System, Inc., 90 F.3d 185, 189 (7th Cir. 1996)  (acknowledging that money orders are subject to stop orders)

• Uniform Commercial Code, Official Comment 4 to Section 4-403 (“A cashier’s check or teller's check purchased by a customer whose account is debited in payment for the check is not a check drawn on the customer’s account within the meaning of subsection (a) [the section on a customer’s right to stop payment]; hence, a customer purchasing a cashier’s check or teller's check has no right to stop payment of such a check under subsection (a).”)