Skip to main content
No. of Recommendations: 1
vkg,

You wrote, A stop payment does not mean that the check won't be paid or that it ends his liability for the check.

Well... Actually, it sort of does. If the bank takes payment for a stop and the check clears after the stop was placed, the bank is liable for the check.

They're liable because they've taken a payment to stop payment. They can't simply take money from you for a service and fail to deliver. And because they're doing this to make a profit, they're not just liable for the $10-20 they took in payment. Instead they're liable for any damages you incurred.

When I was very young I had this argument with a large local bank. After a lot of yelling and complaining, a manager refunded the stop payment fee; but I was still stuck with the loss. (I don't think it was very much, nor do I remember the exact circumstances behind it now.)

I later discovered that Texas banking laws specificaly cover this case [Section 4.403 of the Texas Business and Commerce Code ( http://tlo2.tlc.state.tx.us/statutes/docs/BC/content/htm/bc.001.00.000004.00.htm#4.403.00 ) (full text is below)] and requires the bank to indemnify you against a stopped check, so what the bank had done to me was a direct violation of state banking law; but by then I think it was too late for me to sue them for it.

To quote 4.403 of the Texas Commercial Code:
	§ 4.403. CUSTOMER'S RIGHT TO STOP PAYMENT;  BURDEN OF 
PROOF OF LOSS. (a) A customer or any person authorized to draw on
the account if there is more than one person may stop payment of any
item drawn on the customer's account or close the account by an
order to the bank describing the item or account with reasonable
certainty received at a time and in a manner that affords the bank a
reasonable opportunity to act on it before any action by the bank
with respect to the item described in Section 4.303. If the
signature of more than one person is required to draw on an account,
any of those persons may stop payment or close the account.
(b) A stop-payment order is effective for six months and is
binding on the bank only if it is in a dated, authenticated record
that describes the item with certainty. A stop-payment order may be
renewed for additional six-month periods by an authenticated record
given to the bank within a period during which the stop-payment
order is effective.
(c) The burden of establishing the fact and amount of loss
resulting from the payment of an item contrary to a stop-payment
order or order to close an account is on the customer. The loss from
payment of an item contrary to a stop-payment order may include
damages for dishonor of subsequent items under Section 4.402.

Unfortunately, the next section allows a Texas bank to refuse payment on a check that is more than six months old; but it also effectively allows a Texas bank to pay old checks regardless of the date...

- Joel
Print the post  

Announcements

UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.