If a commercial customer issues a written stop payment order with respect to a recurring preauthorized ACH debit entry, does that stop payment order apply to all future recurring transfers indefinitely? Or does it apply only to one specific transfer and only for a period of six months? Also, can a consumer customer stop payment on a preauthorized electronic transfer any time before it posts on their account? Or can our bank require three business days’ notice?

In our view, a commercial customer’s written stop payment order regarding a preauthorized recurring ACH transaction applies only to a single transfer and is limited in duration to six months, unless it is renewed in writing.

The NACHA rules distinguish between consumer and non-consumer stop payment orders. With respect to consumer stop payment orders, the rules require a Receiving Depository Financial Institution (RDFI) to accept stop payments for recurring entries, and such a stop payment is effective for future debits. However, the rules do not include this same language for non-consumer accounts. Consequently, we interpret the NACHA rules to limit a non-consumer’s stop payment order to a single transaction, rather than to future transactions. A non-consumer’s written stop payment order will be effective for six months, unless renewed in writing (or the customer withdraws the order, or the entry is returned).

We also note that according to NACHA, the preferred method for a customer to prevent future recurring preauthorized ACH debit entries is to revoke the authorization directly with the Receiver, rather than relying on stop payment orders.

Regarding consumer stop payment requests, Regulation E requires a consumer to request a stop payment of a preauthorized electronic funds transfer at least three business days before the scheduled date of the transfer. This requirement does not apply to commercial customers.

For resources related to our guidance, please see:

NACHA Rules, Subsection 3.7.1.4 [consumer accounts], RDFI Obligation to Stop Payment of Recurring Entries (“An RDFI must honor a stop payment order provided by a Receiver, either verbally or in writing, to the RDFI at least three Banking Days before the scheduled date of any debit Entry to a Consumer Account other than a Single Entry. . . .”)

NACHA, ACH Operations Bulletin #1-2014: Questionable ACH Debit Origination (September 30, 2014) (“RDFI Responsibilities and Practices . . . . . If a consumer disputes a transaction and wishes to place a stop payment order, an RDFI must honor the stop payment order in accordance with the Rules. Furthermore, if the consumer’s dispute relates to future debits from the same Originator, the consumer may place a stop payment order to prevent all future debits to his/her account. While consumers should contact the Originator to revoke the authorization directly with the Originator, implementation of the stop payment order at the RDFI level helps prevent continued impact to the consumer.”)

NACHA Rules, Subsection 3.7.2.1 [non-consumer accounts], Effective Period of Stop Payment Orders (“A written stop payment order regarding any debit Entry initiated or to be initiated to a Non-Consumer Account will remain in effect until the earliest of: (a) the withdrawal of the stop payment order by the Receiver; (b) the return of the debit Entry; or (c) six months from the date of the stop payment order, unless it is renewed in writing.”)

NACHA ACH Operations Bulletin #1-2014 (September 30, 2014) (“If a consumer disputes a transaction and wishes to place a stop payment order, an RDFI must honor the stop payment order in accordance with the Rules. Furthermore, if the consumer’s dispute relates to future debits from the same Originator, the consumer may place a stop payment order to prevent all future debits to his/her account. While consumers should contact the Originator to revoke the authorization directly with the Originator, implementation of the stop payment order at the RDFI level helps prevent continued impact to the consumer.”)

Regulation E, 12 CFR 1005.10(c)(1) (“A consumer may stop payment of a preauthorized electronic fund transfer from the consumer’s account by notifying the financial institution orally or in writing at least three business days before the scheduled date of the transfer.”)

Regulation E, 12 CFR 1005.3(a) (“This part applies to any electronic fund transfer that authorizes a financial institution to debit or credit a consumer’s account.”)