A group of Washington business owners, who sell their own money orders mostly in lower income neighborhoods have claimed that a new law regulating the money order business may penalize the purchasers it is intended to protect.

The law, passed by the D.C. City Council last fall, would require businesses that sell their own money orders to first post at least a $50,000 surety bond, which many of the retailers say they are unable to get.

The law, which becomes effective on March 2, is intended to protect money order purchasers from fly-by-night outfits that sell money orders, "take the money and then go on vacation," said Chester McKenzie, chief of the District's business license and permits division.

"A lot of people set up money order companies and then close up," McKenzie said, others go bankrupt. The law will affect 34 businesses, mostly liquor stores, that sell their own money orders. Neither McKenzie nor several stareowners interviewed could estimate the dollar impact of the independent money order business.

Banks, credit unions, savings and loans and trust companies are exempt from the law, McKenzie said, because the city council felt these businesses were either federally controlled or reputable.

"Many poor people don't have checking accounts so they go to a store and buy a money order," McKenzie said. "Were trying to assure the public that the money will be there" when the money order is finally cashed, McKenzie said.

"The law is strictly for the big supplier of money orders," said William Orlove, owner of Al's Liquors, 4009 South Capitol St. "I have a small independent money order company. We sell our own money orders cheaper than the banks and we never had a failure."

Orlove said he sells money orders for 35 cents up to $200 and most of his business is in $100 money orders or less. Orlove said the banks sell money orders for about 75 cents for money order to $500.

Orlove said the law will affect "the people who can least afford it." Most of the independent money order companies are "in the ghetto and a few pennies make a big difference," Orlove said.

Most of the patrons of the independent sellers use the money orders to pay utility and rent bills. "In the ghetto areas people don't always rely on checking accounts," Orlove said.

Orlove and Bill Rozansky, owner of F.W. Money Order Co., said that insurance companies will not write the necessary surety bonds for them and they don't have the required cash or government securities to post instead.

"I don't know any retailer who has been able to get a bond," Rozansky said. "I don't know any businessmen who would have $50,000 or $75,000 hanging around."