Topic: Stop Payment Orders
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Can we allow clients to request stop payments through an online system or do we need to obtain a hard copy of the form?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021.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. We do not believe that your organization needs hard copies of stop payment orders…
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Can a customer order a stop payment on a cashiers check?
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Generally, a customer may not order a stop payment on a cashier’s check, because a cashier’s check is really the bank’s check — not the customer’s check. Under the Uniform Commercial Code, only a “customer” can stop payment on “any item drawn on the customer’s account.” 810 ILCS 5/4-403(a). According to the official UCC commentary,…
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We have been reading a court case regarding cashier’s checks (MidAmerica Bank v Charter One Bank), which states you cannot issue a stop payment on a cashier’s check. We thought that we could place a stop payment after 90 days. Can you clarify?
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As a general rule, a customer cannot place a stop payment order on a cashier’s check, because the customer is no longer the drawer on the check (the issuing bank is). The bank can only place the stop order in very limited circumstances, such as when it suspects fraud. Another exception applies to destroyed, lost…
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Where can I find information about Bank Drafts? We are hearing that some banks are using drafts as opposed to Cashier’s Checks so that stop payments can be placed on the items.
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We do not have any specific information regarding banks using bank drafts instead of cashier’s checks, but it may be a result of the recent Illinois Supreme Court decision in MidAmerican Bank, FSB, v. Charter One Bank, FSB. The court in MidAmerican held that stop payment orders are prohibited on cashier’s checks. The use of…
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A customer placed a stop payment order on a check that later was cashed by a currency exchange. Our bank dishonored the check, and now the currency exchange is claiming through its lawyer that the bank is liable for payment under the “holder in due course” rule. Does a stop payment order on a check trump the “holder in due course” rule? And, is the answer the same for a cashier’s check?
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Yes. If your customer (the “drawer”) has properly stopped payment of a check drawn on his or her account, you should not pay the check even if a holder in due course presents the check for payment. Notwithstanding the general rule that a holder in due course takes a negotiable instrument free from all contrary…