Topic: Stop Payment Orders
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Is there any Illinois law that addresses stop payment requests received orally?
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Yes, the Illinois Uniform Commercial Code (Illinois UCC) addresses stop payment requests received orally. The Illinois UCC generally provides that a stop payment order for any item drawn on a customer’s account is effective for six months. However, an oral stop payment order lapses after fourteen calendar days if it is not confirmed in writing…
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We sold a personal money order to a customer who lost it before filling in the payee line and signing it. Can we place a stop payment on the money order?
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Yes, we believe you may place a stop payment on a personal money order that your bank did not sign. While the UCC does not define a personal “money order,” Illinois courts have interpreted this term to apply to checks that are not signed by an authorized representative of the issuing bank and are not obligations of…
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We have an attorney customer who issues checks to his clients drawn on his client trust account. When the clients (who are not customers) come to our bank to cash the checks, we have been issuing them personal money orders signed by a bank employee with the bank listed as the remitter. We do not want to list the clients as the remitter since our BSA policy prevents us from selling monetary instruments to noncustomers. We also do not want to issue cashier’s checks to the clients because we would like to be able to put a stop payment on an item if it is lost. Will this work, or will signing the money orders cause them to function like cashier’s checks?
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We believe that having your bank representative sign the customer’s personal money orders would cause them to be treated like cashier’s checks, in which case you would not be able to place a stop payment order on these items. A cashier’s check is defined in the Uniform Commercial Code (UCC) as “a draft with respect…
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Are we authorized to put a stop payment on a cashier’s check payable by our bank that has not yet been submitted for payment? We discovered that one of our customers had purchased the cashier’s check as the result of a scam.
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No, we do not believe that your bank may stop payment on the cashier’s check without risking liability for the check. The Illinois Supreme Court has held that a cashier’s check is the equivalent of cash. As a general rule, once a cashier’s check enters the stream of commerce, the issuer (your bank) is liable…
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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?
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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…
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An elderly customer purchased a $9,000 cashier’s check. She came in the next day to request a stop payment, as she now believes that she was defrauded — she had received a telephone call from someone claiming to be with Publisher’s Clearinghouse, who told her that she had won and needed to send in a $9,000 cashier’s check to withdraw her winnings. Can we stop payment?
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No, we do not believe that you should stop payment on the cashier’s check. The Illinois Supreme Court has held that a cashier’s check is the equivalent of cash. As a general rule, once a cashier’s check enters the stream of commerce, the issuer (your bank) is liable under the Uniform Commercial Code (UCC) if…
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A customer submitted a stop payment order using an incorrect check number. As a result, we paid the check. We are attempting a manual return today. What is our potential liability if the return is rejected?
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We cannot predict how a court would allocate liability between your bank and the customer without additional facts. It may be possible to argue that your bank should not be held liable due to the customer’s failure to provide the correct check number, but it will depend on the facts of the situation. The Uniform…
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Do we need to obtain ink or wet signatures on stop payment orders? Do we need a written acknowledgment of stop payment orders?
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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. No, we believe that you may accept electronic signatures for stop payment orders. Both Illinois…
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What is your recommended record retention period for stop payment orders on checks? My opinion is that we need to retain them for six months after they expire, but we have been holding them for six years.
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We believe that the standard industry practice is to retain stop payment orders on checks for six months after the order has terminated. This corresponds with the IBA Guide to Record Retention, which recommends retaining stop payment orders for six months after termination (unless the stop payment relates to a preauthorized electronic fund transfer, in…
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A customer purchased a cashier’s check seven years ago. The named payee has not cashed the check, and we do not even know whether the customer has delivered the check to the payee. Can we contact the customer before remitting the check as unclaimed property? And can the customer place a stop payment order on the check and request that the check be reissued?
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Yes, you are required to contact your customer before reporting the cashier’s check as unclaimed property. And no, the customer cannot issue a stop payment order on the cashier’s check if it already has been presented to the payee. However, if the cashier’s check has not been presented to the payee, the customer can surrender…