Could someone provide me with a good understanding of the following section of UCC law related to stop payments. Specifically, the scenario goes something like this: Our Customer A deposited a check into their account at 10:00 a.m. The check is drawn on our Customer B's account. Customer B comes into our bank at 2:00 p.m. same day and wants to place a stop payment on the check. I know if the check had been cashed or converted to an official check Customer B would have no right to stop payment. Does the fact that it was deposited into our Customer A's account and memo posted to Customer B's account (in order to hold the funds) imply that it has been "finally" paid? The wording in (a)(1) says the bank "accepts" the item - would depositing the check and holding the funds be considered acceptance and allow us to refuse the stop payment?

§ 4-303. WHEN ITEMS SUBJECT TO NOTICE, STOP-PAYMENT ORDER, LEGAL PROCESS, OR SETOFF; ORDER IN WHICH ITEMS MAY BE CHARGED OR CERTIFIED.
(a) Any knowledge, notice, or stop-payment order received by, legal process served upon, or setoff exercised by a payor bank comes too late to terminate, suspend, or modify the bank's right or duty to pay an item or to charge its customer's account for the item if the knowledge, notice, stop-payment order, or legal process is received or served and a reasonable time for the bank to act thereon expires or the setoff is exercised after the earliest of the following:
(1) the bank accepts or certifies the item;
(2) the bank pays the item in cash;
(3) the bank settles for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement;
(4) the bank becomes accountable for the amount of the item under Section 4-302 dealing with the payor bank's responsibility for late return of items; or
(5) with respect to checks, a cutoff hour no earlier than one hour after the opening of the next banking day after the banking day on which the bank received the check and no later than the close of that next banking day or, if no cutoff hour is fixed, the close of the next banking day after the banking day on which the bank received the check.
(b) Subject to subsection (a), items may be accepted, paid, certified, or charged to the indicated account of its customer in any order.

Did both of these actions occur in your own branches? If so, I'm wondering why "hold" the funds on Customer B vs. posting it immediately? Posting it as an on-us check (or the equivalent) rather than "holding" probably would've removed all doubt. My interpretation of UCC has always been that a consumer can't stop pay something that has already occurred. We don't memo post our own checks in our own branches so I'm interested to hear if someone else that does has any input on this.

Yes, both transactions occurred within our own branches. We are not a real-time processor, so the transactions do not "hard post" to either customer's account until the nightly processing. The transactions show in "presentments" until the nightly processing.

Because the check was not actually posted to the issuer's account, I'd say that the stop payment order was timely, and you have to charge the check back to Customer A's account.

Long ago and not so far away, when I'd take such a check into one of the local savings banks to deposit it to my account, and the teller recognized the check as an on-us (NOW account) check, he or she would post the withdrawal to the issuer's account in real time before posting the credit to my account. In that scenario, the stop payment order would not have been timely.