Check Paid on Old Stop Pay

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Question:

Is the bank liable for a check that it has paid on its customer's account twelve months after the stop payment order was dropped from the system? The check was returned for "Payment Stopped in January, 2008".

Answer:

Under the model version of the UCC, a written stop payment is valid for only six months. The stop payment lapses after that time. Review the language on your stop payment form.

Technically, if the customer wants to continue the stop payment after six months, he or she can sign a new stop payment order. If you paid a check after the first order expired you have no liability under the language in the UCC.

At one time, this structure made sense, because a check that was more than six months old was "stale dated" and not properly payable anyway. It made no difference that the stop payment had expired, the bank would not pay the item. Now, banks may pay stale dated checks if they choose to do so, so the situation can be a bit unfair to the customer.

First published on BankersOnline.com 10/26/09