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Preauthorized Check, Stop Payment, and Liability

Question: We had a customer give out his checking account number over the phone for the purchase of books. He later changed his mind and put a stop payment on the item. He did receive the books but returned them. The phone merchant sent through a preauthorized check from our customers account and it was returned "Stop payment."

The book company then created a new check, changed the check number and added a $25 returned check fee to the original amount. Of course it was paid and posted to our customer's account. When our customer got his statement he saw this item and is now saying we are liable. The company he did business with over the phone is nowhere to be found. Can this check be returned as an unauthorized transaction since the company willfully changed the check number and dollar amount?

Answer: No, you can't return the check at this late date for unauthorized amount. For starters, you have no idea of the agreement or arrangement between your customer and the book company. The battle is strictly between them because by giving out his account number, the Uniform Commercial Code says he "authorized" payment of the check submitted by the book company. Obviously, they could not have submitted the second check without the number given over the phone. So, to answer your question, should you be liable? The answer is no, you should not be. But of course, as we well know, the answer on whether you WILL be liable depends on the amount of the check, how good a customer you have, and how much damage he or she will do you with bad publicity if you don't pay it. Basically, the customer would be considered to be negligent for giving out the information over the phone.

Copyright © 2004 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 13, No. 12, 2/04

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