Stop Payment Signature
Question: Does a customer have to sign a stop payment request form? One of our people who attended your seminar thought he heard you say that signatures were not required. But, every stop payment form I see says a signature is required according to UCC4-403. Will you please confirm if a signature is required or not? We're trying to streamline operations but don't want to streamline too much.
Answer: This question has come up more than a few times. UCC 4-403 (b) reads: A stop-payment order is effective for six months, but it lapses after 14 calendar days if the original order was oral and was not confirmed in a record within that period. A stop-payment order may be renewed for additional six-month periods by a record given to the bank within a period during which the stop-payment order is effective. (Emphasis is the editor's) The section does say that the signature of any account signer can put on a stop. But it doesn't say that a signature is required for the stop to be effective. Only that the stop must be confirmed in a record.
In addition, UCC 4-104 (a) reads: The effect of the provisions of this Article may be varied by agreement , but the parties to the agreement cannot disclaim a bank's responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack or failure. However, the parties may determine by agreement the standards by which the bank's responsibility is to be measured if those standards are not manifestly unreasonable.
In other words, you may make your own agreement with your customer, as long as it meets industry standards and is not unreasonable. More than a few financial institutions are varying their stop payment agreement, so that it states that if you put a stop payment on a check, the bank will send you a verification form within ten days, informing you that "...this is the information on the stop payment. If it is NOT correct, you must notify the bank immediately. Otherwise the stop is valid for 6 months."
By doing this, your people no longer have to "follow-up" verbal stops that are not verified in 14 days. And it also relieves you of "wrongful dishonor" if you should stop a check that comes in after the 14 day grace period, when the stop has never been verified because the customer changed his/her mind. The customer could rightfully assume that because they did not verify it, the stop was dropped.
If you vary your agreement, and change your stop order forms, you can streamline a little. Please note - there is nothing in the UCC that says you can do this. There is also nothing in there that says you can't. Many large banks have already made the change. Probably form suppliers have not.
Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 4, 5/05
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