What Is a Stop Payment Order?

A stop payment order is an instruction from a checking account owner to the account's issuing bank not to honor a specific issued check or automatic debt when it is presented for payment. Depending on the country where the bank is located, it may be possible to give this order orally, by telephone, although it may be necessary to follow this with written notification. In the US, for example, a telephone stop payment order extends for only 14 days; for enforcement beyond this time limit, an account owner would need to go to the bank and sign a written stop payment order to obtain enforcement for six months. These steps must typically be taken regardless of the reasons why the account owner no longer desires the goods or services.

The banking laws in most countries allow for stop payment orders. It is often important that such an order be made quickly, so telephone or Internet requests are often accepted. In some locations, however, a written request or written follow-up to an oral request is required.

In the United States, the steps to have an issuing bank not honor a check are regulated by Section 4 of the Uniform Commercial Code (UCC). This section lists the steps and the bank's responsibilities to the account owner to honor the request. The UCC section also essentially says that such stop payment orders must be received by the bank within a reasonable period of time and accompanied by as full as possible a description of the particular check the bank is not to honor. If a bank pays the check over a stop payment order, its reasons for doing so must meet the reasons stated in said UCC section. The checking account owner's remedies, in such case, are also listed there.

When the written stop payment order is given to the bank, the account owner may state the reason or reasons why the order was requested. It may be that the account owner found out after issuing the check that the services company has a bad reputation or engages in fraudulent practices. Perhaps an account owner is notified of a check lost in the mail, and before reissuing another check for a purchase or service, the account owner wants the first one stopped. The account owner should understand that the merchant or service company owner may sue for damages if the check is not honored; however, that would be a civil matter. It is also possible for a merchant to hold a check beyond the usual six-month stop payment order period and then resubmit for payment, assuming that the account owner has not renewed the stop payment order after the first expiration.

The fees that banking institutions charge for a stop payment order usually are higher than overdraft fees and can vary from bank to bank. Additionally, that same fee amount may be charged every time the account owner contacts the bank to renew the stop payment order and block a merchant or service company owner from resubmitting and gaining payment. Though many banks claim that seldom happens, some people pay the fee on a regular basis or close accounts.