Mutilated Currency

Arnold Ramirez
August 16, 2010 | COMMENTS

In 2000 the United States Mint introduced the Sacagawea dollar. The coin was supposed to replace the largely unpopular Susan B. Anthony dollar and usher in a new era in U.S. currency. It succeeded in replacing the Susan B. Anthony coins—but a new era? Not quite. In fact, not even close. The American public continues using dollar bills while shunning any form of coined denomination exceeding the value of 25 cents.

More recently, the U.S. Mint introduced presidential dollar coins in an attempt to piggyback on the popularity of the state quarter program introduced several years back. The reason the effort to produce a dollar coin that's widely accepted hasn't been laid to rest is simple: dollar coins last longer than dollar bills, translating into a potential savings of up to $500 million, according to a U.S. Government Accountability Office report issued in September 2002.

The short life span of paper currency (21 months for $1 notes, and 18 months for $10 notes) led me to ponder the question of what happens to that money when it gets too worn or damaged to stay in circulation, and what about the holder of the unfit currency?

When currency becomes unsuitable for circulation, it is destroyed and replaced with new currency by the Bureau of Engraving and Printing (BEP). Some of the currency is even made available for purchase as bags of shredded money on the BEP's website, www.bep.gov.

Typically when we think of mutilated currency, we think of dirty old worn bills, perhaps held together with a piece of tape. Credit unions generally place them aside to be returned to the local branch of the Federal Reserve Bank, along with any excess coins that may have accumulated in the cash vault.

While we commonly refer to this currency as mutilated or “mute” cash, BEP doesn't consider it mutilated. The Federal Reserve Bank will determine which notes are no longer suitable for circulation and remove them as needed. As defined by the BEP, mutilated currency is when about 50 percent of the original note is gone, or when currency is so badly soiled, burned, decomposed (a common occurrence when buried), or worn that determining the value of the note requires special examination by trained experts of the BEP. In other words, if a member presents less than 50 percent of a note—or the credit union cannot determine the value of the note presented—the member should be directed to mail or deliver that mutilated currency to the BEP. The member should include a letter stating the estimated value of the currency submitted and a description of how it became mutilated. The BEP director has the final authority for the settlement of mutilated currency claims.

If the examiners are able to determine the value, and that the currency is not counterfeit, the BEP will issue a check for the determined value of the currency submitted. In some instances determining the value can take longer than eight weeks, in which case the BEP will issue a written confirmation of receipt.

Members who wish to submit a claim for mutilated currency may do so at the following address:

Bureau of Engraving and Printing
MCD/OFM, BEPA
Room 344A
P.O. Box 37048
Washington, D.C. 20013

For more information, and for complete instructions for filing a claim for mutilated currency, visit www.bep.gov.

Arnold Ramirez is a research and information consultant for the California and Nevada Credit Union Leagues. This article was reprinted with permission from Credit Union Digest, the publication of the California and Nevada Credit Union Leagues.