Stop Pays Subject to Reg E
Answer by John Burnett, BOL Guru Guru Bio
Question: I know this is a basic question but can someone explain stop payments that are subject to Reg E?
Answer: The question is not so basic as you might think. Regulation E has rules relating to stop payments on some types of EFT transactions, and there is an interpretation of the regulation that addresses authorization revocations.
Stop payment right under Reg E
Regulation E, in subsection http://www.bankersonline.com/regs/205/205-10.html 205.10(c), provides consumers a right to stop payment on an individual preauthorized EFT from a consumer account. By definition, a preauthorized EFT from an account is one that is part of a series of recurring transfers authorized as a group, and not requiring individual approval by the consumer. Examples are recurring monthly EFT debits for health club dues, insurance premiums, utility payments, ISP fees, etc. A consumer's oral stop payment order on such a payment is valid for 14 days unless it is confirmed in writing (a bank can accept the oral order as final if it wishes). A stop must be accepted and acted on if it is received at least three business days prior to the date the subject transaction is due (banks may decide to accept and act on stop orders received later, if received in time for the bank to act). Unlike the UCC's treatment of stop orders on checks, there is no expiration period given for Reg. E stop orders. Regulation E stop payment orders apply to all forms of EFT debits to consumer accounts, including reauthorized (recurring) debits via a debit card. If a stopped EFT is resubmitted, the bank must continue to block it, even if to do so it must block all debits from the same Originator.
Stops and revocations
In the Official Staff Interpretations to subsection 205.10(c), banks are reminded that a stop payment applies only to an individual future transfer from the consumer's account (presumably, a bank could agree to accept a "serial" stop order covering more than one such transfer).
If the bank learns that the consumer has revoked the authorization for all future EFTs in the series, the bank must block all such transfers, but may require the consumer to provide documentation of the revocation (such as a copy of the consumer's written revocation notice to the Originator). Revocations can't be delivered to the bank; they must be sent or given to the Originator. If the consumer fails to provide the documentation within 14 days, the bank can lift its block on future debits from the Originator.
Other stops
Even though Reg E doesn't provide stop payment rights for other EFTs, NACHA does. Any ACH entry can be stopped if the order to stop payment is received in time for the bank to act on it (banks can require three days' notice before Settlement Date for a limited list of ACH types which approximate those described by Reg E as preauthorized EFTs from an account).
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