In this instance, most people would simply ask the shop to destroy the original check and write an amended check for $400.
Unfortunately, the customer decides to initiate a stop payment on the $4,000 check at his bank instead of contacting the shop for resolution. The bank charges him a $35 stop-payment fee and the shop now possesses a check with no apparent value. What recourse does the shop have?
The answer is CrossCheck’s Stop Payment protection service that provides auto repair shops and other businesses with coverage in these situations.
Without getting too deep into the weeds, CrossCheck will cover the $4,000 check and eventually resolve the situation so that the consumer is not charged an extra $3,600.
How Do Banks Conduct Stop Payment?
The stop payment process can only happen before funds are cleared, and will result in checks being returned to check writers as if they are bounced items.
Funds are considered cleared when the receiving bank successfully removes them from the check writer's account and they are able to be withdrawn or used in transactions by the party accepting payment. Deposited funds that have not cleared are pending.
Banks require minimal information to initiate stop payments (proper identification, account number, recipient name and the check number, date and amount) while the request may be made in person, in writing, online or via phone. Stop payment orders expire after six months, but they can be renewed.
Parties depositing checks that have been successfully stopped will be charged a bank fee for non-sufficient funds, so common courtesy dictates that check writers make full disclosure if they request a stop payment.
Reasons to Stop Payment
Consumers and businesses may request stop payment on checks for a number of reasons, including error, fraud or dispute:
- Checks mailed to wrong addresses or made out for incorrect amounts.
- Insufficient funds.
- Lost or stolen checks or checkbooks.
- Disputes over purchases such as defective merchandise or poorly written service agreements.
Interestingly, financial institutions sometimes initiate a stop payment on behalf of account holders, but without their permission. Banks can be held liable for the cost of damages to account holders if it is proven that a stop payment was wrongfully dishonored.
What Can Businesses Do About Stop Payments?
Legitimate businesses experiencing financial harm due to stop payments have options.
First, they should contact the check writer to request proper payment in the form of an amended check that includes relevant fees such as non-sufficient funds prompted by no fault of their own.
If the check writer does not make restitution within 30 days, businesses can file a small claims suit in an attempt to recover damages. They (the plaintiff) must appear at a scheduled appearance in civil court where they can present their case before a judge and request compensation from the check writer (the defendant) for the check amount as well as relevant bank or court fees. Attorneys are banned from small claims court in many states, but parties may seek legal advice in advance of their appearance.
Finally, businesses can secure Stop Payment protection service from CrossCheck.
They simply submit the disputed check to CrossCheck for reimbursement up to an agreed upon dollar amount.
The CrossCheck Stop Payment service eliminates awkward contact with check writers and time spent tracking them down. The service approves out-of-town and out-of-state checks as well as those from Canada and U.S. territories. Businesses of all types benefit from CrossCheck’s Stop Payment service and it always includes free 24/7 customer service, tech support, loaner equipment, account setup and staff training.
Download our free guide to learn how Stop Payment can save time and money at your business.