Can anyone tell me where I can find the permissable reasons for a customer to place a stop payment on a check. What if the amount of the check being stopped is more than the balance in the account at the time of the request. Do we have any obligations at that point if the customer has a valid reason for the stop?

No reason is required. As a matter of fact, I seem to remember one state that prohibits fees that exceed the amount of the check as it abridges the customsr's right to place the stop.

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Al Miller, CRCM
Fremont Bank (CA)
(510) 790-5825
(510) 505-5211 FAX

Opinions expressed are my own and not necessarily shared by my employer.

The customer's stop payment order is nothing more, really, than a revocation of the customer's original order to pay. The customer has an absolute right to issue a stop order, and it's really not a bank's business why the order is placed. One could argue that, if the "reason" is somehow passed along to the disgruntled payee by the drawee bank, Privacy will have been breached.

An interesting related issue -- Those check conversion processes that convert a customer's check into an EFT at the point of payment are now clearly swept under the Regulation E rules. As one-time authorizations they will not be subject to stop-payment rights under Regulaton E. But NACHA rules on these "POP" entries preserves a right to stop payment if it is received by the RDFI (that's the drawee bank in this case) in time.

[This message has been edited by John Burnett (edited 04-17-2001).]

I understand when a customer does a s/p they
have to state a reason. Can someone tell me
if this is correct and if so where can it be
found.
Thanks

Some descretion needs to be used in accepting a stop payment. While its the customers right to stop payment, the bank has a right to know the reason. The reason is placed on the stop payment order along with items that identify the check to be stopped, and the date and time. Its the banks authorization to overide normal transactional events,(paying the check) and the reason is supposed to justify the overides.

I can't see how the stop payment reason is a privacy issue, as you are not disclosing information about the customer. Besides, the payee already knows the customers name,address, bank name and address, account number, account rating, and probably drivers license number and birthdate.

If you find you have paid a check over a stop payment order the reason for the stop payment can help in preventing a loss. I.E. "Purchased a TV and dealer will not make cable hook up like he promised" or "The drapes were 1/8 of an inch too short" If the customer demands money because the stop was paid, ask them for the TV or the drapes. They are not entitled to both. Odds are they will not give up the merchandise,and don't refund the money until they do. This always worked for me.

[This message has been edited by Don Narup (edited 08-01-2001).]

[This message has been edited by Don Narup (edited 08-01-2001).]

[This message has been edited by Don Narup (edited 08-01-2001).]

And I don't understand why, unless it's "the way we've always done it," a bank needs a reason for the customer's stop payment. It's none of our d**ned business!

The customer's right to stop the payment is absolute and is not dependent upon the reason, so why bother to ask? Certainly it cannot matter to the bank that I have a dispute with the merchant to whom I gave the check. The bank can't do anything with that information, especially pass it along to the merchant when the inevitable "Why did you bounce this check?" question arises.

End of rant. I feel better now. Time to go home for the night.

John, if the reason is "lost" you know you will have a "suspect" when the replacement comes through for the exact $ amount (and the payee matches, too). It helps to confirm that the customer didn't give the incorrect number.

True, it is their responsibility, but could save customer embarassment.

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Al Miller, CRCM
Fremont Bank (CA)
(510) 790-5825
(510) 505-5211 FAX

Opinions expressed are my own and not necessarily shared by my employer.

If the bank knows the reason, it could be a detriment to the bank. The stop payment form should include the reason option, but not as main part of information needed to stop the item.

I do know that your stop payment form should state how your bank reviews the stop payment item within your processing systems. As this could cause legal actions if the check is paid and not stopped with the information given by the customer.

Always have an idemnification section as this could be very important in a legal action. Plus review your state laws on this subject as mention in a number of comments.

What if a customer is using stop payments to cover nsf checks ?

understand ucc-4-403-however when does it get to the "worthless check" act?

[This message has been edited by bfoa (edited 10-25-2001).]

In a prior life, we had that problem a lot. It was cheaper to stop payment than to pay the NSF fee. We stopped the practice by raising the Stop fee to more (significantly more) than the NSF fee. It was no longer cheaper and most of that behavior stopped. We still had a few customers that did it, but it was fee income, so ...

You really should take a look at UCC, section 4-403, which oulines the payors right to stop payment.

Here's a link for you: http://www.law.cornell.edu/ucc/4/4-403.html

The customer does not have to provide a reason, and they can place a stop on anything they want. If it's an electronic transaction, be sure to review the provisions in Reg E.

Hope this helps!

if the customer knew there were no funds to cover a check and did the stop to prevent posting. doesn't this fall into the ucc "worthless check" act?

bfoa: When you say the "UCC worthless check act", to what are you referring?

My thinking about "worthless" checks relates to the criminality of issuing a check the drawer knows isnt going to be paid upon presentment (ie. a theft offense). This would be contained in a state's crimial code, rather than the UCC.

Pls let me know if you have a UCC cite (Article 3 or 4) on "worthless" checks.

I AM NOT ENGAGED IN PROVIDING LEGAL ADVICE AND THE VIEWS EXPRESSED ARE NOT THOSE OF MY EMPLOYER

In a previous life, we had the same issue. Customers complained that they were imbarrassed because the check was returned NSF instead of Payment Stopped. (Which I NEVER understood, because one could be blamed on the bank and the other the customer did on purpose.) We solved it by putting a clause in our disclosure that explained our hierarchy in the inclearing process. 1) balance; 2) stops; etc. Although it didn't fix everything, it was very effective. The old "where is it in writing?" was answered. Usually, it stopped them in their tracks.