Can we allow clients to request stop payments through an online system or do we need to obtain a hard copy of the form?

Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA.

We do not believe that your organization needs hard copies of stop payment orders before it can comply with such requests. The Uniform Commercial Code (UCC) states that customers can request a stop payment by “an order to the bank describing the item or account with reasonable certainty . . .” 810 ILCS 5/4-403(a). An initial stop payment order may be oral, provided that it is renewed “in writing” within fourteen days. 810 ILCS 5/4-403(b). While the stop payment order must be in writing after fourteen days have passed, there is no requirement that it be signed.

While the UCC does not address whether an electronic stop payment order would be sufficient, we believe that both federal and Illinois laws would authorize the use of electronic stop payment orders.

The federal Electronic Signatures in Global and National Commerce (ESIGN) Act states that “a signature, contract, or other record . . . may not be denied legal effect, validity, or enforceability solely because it is in electronic form.” 15 USC 7001(a)(1).

The Illinois Financial Institutions Electronic Documents and Digital Signature Act states that if a bank stores documents in electronic form in the regular course of business, then an electronic version of a document has “the same force and effect under the laws of this State as one comprised, recorded, or created on paper . . .” 205 ILCS 705/10(a).

The Illinois Electronic Commerce Security Act (“ECSA”) is similar to the ESIGN in that it states as a general rule that “information, records, and signatures shall not be denied legal effect, validity, or enforceability solely on the grounds that they are in electronic form.” 5 ILCS 175/5-110. However, ESCA also has several exceptions relating to negotiable instruments or instruments of title. As those exceptions to not relate to stop payment orders, ESCA strengthens the position that an electronic order is sufficient. 5 ILCS 175/5-115(b)(3).

Therefore, as long as the positive pay system fulfills the UCC requirements for a valid stop payment order (such as adequately identifying the check), we don’t see any issues with honoring electronic stop payment orders.